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<SEC-DOCUMENT>0000944075-10-000041.txt : 20101115
<SEC-HEADER>0000944075-10-000041.hdr.sgml : 20101115
<ACCEPTANCE-DATETIME>20101115154523
ACCESSION NUMBER:		0000944075-10-000041
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20100930
FILED AS OF DATE:		20101115
DATE AS OF CHANGE:		20101115

FILER:

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

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25904
		FILM NUMBER:		101192108

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

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOCKET COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19950418
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q3-2010.htm
<DESCRIPTION>10-Q
<TEXT>
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_06_Q\q2-2002.htm -->
<!-- saved from url=(0042)file://N:\STMNTS\SEC\2002_03_Q\q1-2002.htm --><HTML><HEAD><TITLE>10q doc</TITLE>

<META content="MSHTML 5.50.4522.1800" name=GENERATOR></HEAD>
<BODY bgColor=white>
<DIV align=left> </DIV>
<DIV align=left> </DIV>
<P align=center><font face="Times New Roman, Times, serif" size="3">UNITED STATES<BR>
  SECURITIES AND EXCHANGE COMMISSION<BR>
  WASHINGTON, D.C. 20549<BR>
  </font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>FORM
  10-Q</STRONG></font></P>
<TABLE cols=2 width="100%">
  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER>
        <font face="Times New Roman, Times, serif"> [X] </font>
      </CENTER>
      </STRONG></FONT></TD>
    <TD vAlign=top width="95%"><font size="3" face="Times New Roman, Times, serif"><b>QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934.</b></font></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>&nbsp;&nbsp;For
  the quarterly period ended September 30, 2010</STRONG></font></P>
<P align=center><font size="3" face="Times New Roman, Times, serif"><STRONG>OR</STRONG></font></P>
<TABLE cols=2 width="100%">
  <TR>
    <TD vAlign=top width="5%"><FONT size=3><STRONG>
      <CENTER>
        <FONT face="Times New Roman, Times, serif">[&nbsp;&nbsp;&nbsp;] </FONT>
      </CENTER>
      </STRONG></FONT></TD>
    <TD vAlign=top width="95%"><FONT face="Times New Roman, Times, serif"
      size=3><b>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.<BR>
      </b><BR>
      For the transition period ____________ to ____________ </FONT></TD>
  </TR>
</TABLE>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>Commission
  file number 1-13810</b></font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG><b><font size="6">SOCKET
  MOBILE, INC.</font></b></STRONG><BR>
  (Exact name of registrant as specified in its charter)</font></P>
<P>&nbsp;
<TABLE cols=2 width="100%">
  <TR>
    <td width="47%"><font size=3><strong>
      <center>
        <font face="Times New Roman, Times, serif" size="3">Delaware </font>
      </center>
      </strong></font></td>
    <TD width="17%"><font face="Times New Roman, Times, serif"></font></TD>
    <TD width="36%"><FONT size=3><STRONG>
      <CENTER>
        <font face="Times New Roman, Times, serif" size="3">94-3155066 </font>
      </CENTER>
      </STRONG></FONT></TD>
  </TR>
  <TR>
    <td width="47%"><font size=2>
      <center>
        <font size="3" face="Times New Roman, Times, serif">(State of incorporation)</font>
      </center>
      </font></td>
    <TD width="17%"><font face="Times New Roman, Times, serif"></font></TD>
    <TD width="36%"><FONT size=2>
      <CENTER>
        <font size="3" face="Times New Roman, Times, serif">(IRS Employer Identification
        No.) </font>
      </CENTER>
      </FONT></TD>
  </TR>
</TABLE>
<font face="Times New Roman, Times, serif" size="3"><BR>
</font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>39700
  Eureka Drive, Newark, CA 94560</STRONG><BR>
  (Address of principal executive offices including zip code)</font></P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><STRONG>(510)
  933-3000</STRONG><BR>
  (Registrant's telephone number, including area code)<BR>
  </font></P>
<P><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp; </font>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
  of the Securities Exchange Act of 1934 during the preceding 12 months (or for
  such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. YES
  [ X ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant has submitted electronically and posted on its corporate Web site,
  if any, every Interactive Data File required to be submitted and posted pursuant
  to Rule 405 of Regulation S-T (&sect;232.405 of this chapter) during the preceding
  12 months (or for such shorter period that the registrant was required to submit
  and post such files). YES [ ] NO [ ]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant is a large accelerated filer, an accelerated filer, a non-accelerated
  filer, or a smaller reporting company. See the definitions of &quot;large accelerated
  filer,&quot; &quot;accelerated filer,&quot; and &quot;smaller reporting company&quot;
  in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer
  [ ] Non-accelerated filer [ ] Smaller reporting company [X]</font></P>
<P><font face="Times New Roman, Times, serif">Indicate by check mark whether the
  registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
  YES [ ] NO [X]</font></P>
<P>The number of shares of Common Stock ($0.001 par value) outstanding as of October
  29, 2010 was 3,801,991 shares.<br>
  <br>
</P>
<hr width="100%">
<div align="center"></div>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a name="tab"></a></font></P>
<table width="879" border="0" cellspacing="0" cellpadding="0" align="center">
  <tr>
    <td colspan="3">
      <div align="center"></div>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><strong>INDEX
        </strong></font></p>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3"><u>PAGE
        <br>
        NO.</u></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Part I. Financial
      Information</font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif">Item 1. Financial
      Statements (Unaudited):</font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#bs">Condensed Balance Sheets - September 30, 2010 and December 31, 2009
      </a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">1</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27" height="10"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807" height="10"><font face="Times New Roman, Times, serif" size="3"><a
  href="#ops">Condensed Statements of Operations - Three Months and Nine Months
      Ended September 30, 2010 and 2009</a></font></td>
    <td width="56" height="10" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif"> 2</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#flows">Condensed Statements of Cash Flows - Nine Months Ended September
      30, 2010 and 2009</a></font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">3</font></div>
    </td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56" align="center" valign="bottom"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="27"><font face="Times New Roman, Times, serif"></font></td>
    <td width="807"><font face="Times New Roman, Times, serif" size="3"><a
  href="#notes">Notes to Condensed Financial Statements</a> </font></td>
    <td width="56" align="center" valign="bottom">
      <div align="center"><font face="Times New Roman, Times, serif">4</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#mda">Item 2. Management's Discussion and Analysis of Financial Condition
      and Results of Operations</a> </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">15</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#qqd">Item 3. Quantitative and Qualitative Disclosures about Market Risk</a>
      </font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">25</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#item4">Item 4. Controls and Procedures</a></font> </td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">26</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="3"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="3">
      <div align="left"> <font face="Times New Roman, Times, serif" size="3"><a
href="#oth">Part II. Other Information</a></font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#risk">Item 1A. Risk Factors</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">27</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#item6">Item 6. Exhibits</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">39</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#sig">Signatures</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif">40</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif"></font></td>
    <td width="56"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td colspan="2"><font face="Times New Roman, Times, serif" size="3"><a
href="#ind">Index to Exhibits</a></font></td>
    <td width="56">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">41</font></div>
    </td>
  </tr>
</table>
<P align=left>&nbsp; </P>
<P align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  <BR>
  </font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a>
<a
name=bs></a> <BR>
<BR>
</font>
<P align=left><font face="Times New Roman, Times, serif" size="3"><b>Item 1. Financial
  Statements</b></font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><font face="Times New Roman, Times, serif"><b>SOCKET
  MOBILE, INC.</b> <br>
  <b>CONDENSED BALANCE SHEETS</b> </font></div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr style="font-size: 8.0pt;">
      <td colspan="2" align="left" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">September
        30,<br>
        2010<br>
        (unaudited)<br>
        </font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td colspan="2" align="center" valign="top" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><br>
        December 31,<br>
        2009*</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>ASSETS</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Current
        assets:</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Cash
          and cash equivalents</font></div>
      </td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">1,449,598</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3">1,940,295</font></td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          receivable, net</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">1,453,221</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">1,659,383</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Inventories</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,437,279</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,044,119</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Prepaid
          expenses and other current assets</font></div>
      </td>
      <td>&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">481,264</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">415,102</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF" height="18">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</font></div>
      </td>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">4,821,362</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,058,899</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF">&nbsp;</td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#CCEEFF" height="8"><font face="Times New Roman, Times, serif" size="3">Property
        and equipment:</font></td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
      <td width="10" height="8" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff" height="8">&nbsp;</td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Machinery
          and office equipment</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,185,893</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">2,165,775</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Computer
          equipment</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,285,467</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,253,511</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,471,360</font></td>
      <td><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,419,286</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accumulated
          depreciation</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,914,689</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(2,631,822</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#FFFFFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment, net</font></div>
      </td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">556,671</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">787,464</font></td>
      <td bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">Intangible
        assets, net</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">225,000</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td width="10" height="8">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#FFFFFF" height="8">&nbsp;</td>
      <td align="right" nowrap bgcolor="#FFFFFF" height="8"><font face="Times New Roman, Times, serif" size="3">270,000</font></td>
      <td bgcolor="#FFFFFF" height="8">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Goodwill</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,427,000</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,427,000</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#FFFFFF"><font face="Times New Roman, Times, serif" size="3">Other
        assets</font></td>
      <td bgcolor="#FFFFFF">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">170,465</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap bgcolor="#FFFFFF" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">199,834</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></div>
      </td>
      <td bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">
        <font face="Times New Roman, Times, serif" size="3">10,200,498</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">11,743,197</font></td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top" bgcolor="#cceeff"> <font face="Times New Roman, Times, serif" size="3"><b>LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="14"><font face="Times New Roman, Times, serif" size="3">Current
        liabilities:</font></td>
      <td height="14">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
      <td height="14" width="10">&nbsp;</td>
      <td align="left" valign="bottom" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14">&nbsp;</td>
      <td height="14">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          payable</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,705,287</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,902,294</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accrued
          payroll and related expenses</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">597,524</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">806,750</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Bank
          line of credit</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">788,028</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" bgcolor="#cceeff" nowrap><font face="Times New Roman, Times, serif" size="3">1,002,088</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Deferred
          income on shipments to distributors</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">850,191</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">917,756</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Short
          term portion of deferred service revenue</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">339,709</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" bgcolor="#cceeff" nowrap><font face="Times New Roman, Times, serif" size="3">304,193</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Short
          term portion of capital leases and deferred rent</font></div>
      </td>
      <td>&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">12,878</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">42,491</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF" height="18">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</font></div>
      </td>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,293,617</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">5,975,572</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Long
        term portion of deferred service revenue</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">227,903</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">282,840</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Long
        term portion of capital leases and deferred rent</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">128,211</font></td>
      <td valign="bottom">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">96,785</font></td>
      <td valign="bottom">&nbsp;</td>
    </tr>
    <tr>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="top" bgcolor="#CCEEFF" height="18"><font face="Times New Roman, Times, serif" size="3">Deferred
        income taxes</font></td>
      <td bgcolor="#CCEEFF" height="18">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">7,531</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000">&nbsp;</td>
      <td width="10" height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">---</font></td>
      <td bgcolor="#CCEEFF" height="18" style="border-bottom: 1px solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td height="18">&nbsp;</td>
      <td align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities</font></div>
      </td>
      <td height="18">&nbsp;</td>
      <td align="left" valign="bottom" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,657,262</font></td>
      <td height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" height="18">&nbsp;</td>
      <td align="left" valign="bottom" height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">6,355,197</font></td>
      <td height="18" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="10"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Commitments
        and contingencies</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top" height="8"><font size="3" face="Times New Roman, Times, serif">&nbsp;</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Stockholders'
        equity:</font></td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Common
          stock, $0.001 par value: Authorized shares&#151;10,000,000,</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap>&nbsp;</td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Issued
          and outstanding shares&#151;3,801,718 at September 30, 2010 and 3,788,767
          at December 31, 2009</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,802</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,789</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional
          paid-in capital</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">56,726,952</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom">&nbsp;</td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">56,190,112</font></td>
      <td>&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated
          deficit</font></div>
      </td>
      <td>&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(53,187,518</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">(50,805,901</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr bgcolor="#cceeff">
      <td>&nbsp;</td>
      <td align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;Total
          stockholders&#146; equity</font></div>
      </td>
      <td>&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">3,543,236</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" valign="bottom"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">5,388,000</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td>&nbsp;</td>
      <td align="left" valign="top"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
        liabilities and stockholders&#146; equity</font></td>
      <td>&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">10,200,498</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">11,743,197</font></td>
      <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="left" valign="top" height="8">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
          * Derived from audited financial statements.</font></div>
      </td>
    </tr>
  </table>
</center>
<P align=left>&nbsp;
<P align=center>
<P align=center>
<P></P>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes.<BR>
  <BR>
  1</font>
<HR width="100%">
<font face="Times New Roman, Times, serif" size="3"><BR>
<a href="#TAB">(Index)</a> <a name=ops></a><BR>
</font>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "><font face="Times New Roman, Times, serif"><b><font size="3">SOCKET
  MOBILE, INC.</font></b> <font size="3"><br>
  <b>CONDENSED STATEMENTS OF OPERATIONS<br>
  </b>(Unaudited)</font><br>
  </font></div>
<div align="center" style="font-size: 12.0pt;color: #000000; background: #ffffff; margin-top: 2pt; margin-left: 0; margin-right: 0; margin-bottom: 0; "></div>
<center>
  <table width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 12pt; ">
    <tr>
      <td colspan="3"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="center" nowrap colspan="6" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3" >Three
        Months Ended<br>
        September 30,</font></td>
      <td align="center" nowrap style="border-bottom: 1px solid #000000">&nbsp;</td>
      <td align="center" nowrap>&nbsp;</td>
      <td align="center" nowrap colspan="6" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Nine
        Months Ended<br>
        September 30,</font></td>
      <td align="center" nowrap style="border-bottom: 1px solid #000000">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" nowrap><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font size="3">2010</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2010</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%">&nbsp;</td>
      <td colspan="3" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Revenues</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">3,414,063</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">4,574,325</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">10,875,319</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap bgcolor="#cceeff" width="10%"><font face="Times New Roman, Times, serif" size="3">13,489,371</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Cost of revenues</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">2,051,964</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">2,507,929</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">6,402,428</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td width="3%">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">7,482,639</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Gross profit</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,362,099</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,066,396</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">4,472,891</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">6,006,732</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating expenses:</font></div>
      </td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#CCEEFF"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
          and development</font></div>
      </td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="10%"><font face="Times New Roman, Times, serif" size="3">581,019</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="10%"><font face="Times New Roman, Times, serif" size="3">664,336</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="10%"><font face="Times New Roman, Times, serif" size="3">1,821,076</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td height="18" width="3%">&nbsp;</td>
      <td align="left" valign="bottom" height="18" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="18" width="10%"><font face="Times New Roman, Times, serif" size="3">2,167,418</font></td>
      <td height="18" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
          and marketing</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">972,594</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,207,767</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,172,335</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,930,931</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
          and administrative</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">515,162</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">504,396</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" nowrap width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">1,668,280</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" nowrap width="3%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">1,695,120</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
          of intangible assets</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">45,000</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">61,787</font></td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="2%">&nbsp;</td>
    </tr>
    <tr>
      <td width="5%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Total operating expenses</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">2,083,775</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">2,391,499</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">6,706,691</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">7,855,256</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating income (loss)</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="10%"><font face="Times New Roman, Times, serif" size="3">(721,676</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="10%"><font face="Times New Roman, Times, serif" size="3">(325,103</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="10%"><font face="Times New Roman, Times, serif" size="3">(2,233,800</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td align="right" valign="bottom"  width="2%">
        <div align="right"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td align="right" valign="bottom" nowrap  width="10%"><font face="Times New Roman, Times, serif" size="3">(1,848,524</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Gain on sale of product line assets</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">---</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">450,000</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">---</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3">450,000</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest income and other</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">25</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">10</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">85</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">379</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest expense</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(37,872</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(67,764</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(140,371</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(185,040</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="14" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></div>
      </td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" height="14" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="14">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net income (loss) before deferred taxes</font></div>
      </td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(759,523</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">57,143</font></td>
      <td height="14" width="1%">&nbsp;</td>
      <td height="14" width="3%">&nbsp;</td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(2,374,086</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="3%">&nbsp;</td>
      <td align="left" height="14" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap height="14" width="10%"><font face="Times New Roman, Times, serif" size="3">(1,583,185</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Deferred tax expense</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(7,531</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(7,531</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(23,955</font></td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="16">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net income (loss)</font></div>
      </td>
      <td width="1%" height="16"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(767,054</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3">)</font></td>
      <td width="3%" height="16"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">49,158</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom">&nbsp;</td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">(2,381,617</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" valign="bottom"><font face="Times New Roman, Times, serif" size="3">(1,607,140</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          </font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left width="2%" bgcolor="#cceeff" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="10%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net income (loss) per share:</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.20</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">0.01</font></td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.63</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(0.46</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff"><font size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.20</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font size="3">)</font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">0.01</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.63</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font size="3">)</font></td>
      <td width="3%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">(0.46</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%"><font size="3">)</font></td>
    </tr>
    <tr>
      <td colspan="3" bgcolor="#cceeff"><font style="font-size: 10pt" face="Times New Roman, Times, serif" size="3">&nbsp;</font><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Weighted average shares outstanding:</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" valign="bottom" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" valign="bottom" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="3%">&nbsp;</td>
      <td align="left" width="2%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="right" nowrap width="10%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
          </font></div>
      </td>
      <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,797,988</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,786,702</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,793,582</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td width="3%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,486,894</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" height="10">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted</font></div>
      </td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,797,988</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,950,643</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,793,582</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td width="3%">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" width="10%"><font face="Times New Roman, Times, serif" size="3">3,486,894</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
    </tr>
  </table>
</center>
<P align=center>
<p>&nbsp;</p>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes. <BR>
  <BR>
  </font>
<P align=center>
<P align=center><font face="Times New Roman, Times, serif" size="3"> 2</font>
<HR width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=flows></a></font> </p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif"><b>SOCKET MOBILE,
  INC.<br>
  CONDENSED STATEMENTS OF CASH FLOWS<br>
  </b>(Unaudited)</font></p>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 9.6pt" cellspacing=0 cellpadding=0
width="100%" align=center border=0>
  <tr style="FONT-SIZE: 10pt">
    <td colspan=4>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=middle colspan=7>
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Nine
        Months Ended September&nbsp;30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 10pt">
    <td noWrap align=left colspan=4 bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2010</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=middle colspan=2 style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="center"><font face="Times New Roman, Times, serif" size="3">2009</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Operating
        activities</b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Net loss</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(2,381,617</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(1,607,140</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Adjustments to reconcile net loss to net cash provided by operating activities:</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based
        compensation</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">509,036</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">522,712</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
        and amortization</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">358,418</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">374,025</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
        of intangible assets</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">45,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">61,787</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        tax expense</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">7,531</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">23,955</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change
        in deferred rent</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">10,978</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(12,831</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain
        on sale of product line assets</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(450,000</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Changes in operating assets and liabilities:</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        receivable</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">206,162</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,294,408</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">606,840</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">1,635,277</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
        expenses and other current assets</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(66,162</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(67,729</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        assets </font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">29,369</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">36,667</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        payable</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">802,992</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(838,996</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
        payroll and related expenses</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(209,226</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">13,172</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        income on shipments to distributors</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(67,565</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(806,568</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff"><font size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        service revenue</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(19,421</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" ><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">196,783</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by (used in ) operating activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(167,665</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">375,522</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Investing
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Purchases of equipment</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left  width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp;</font></td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(127,625</font></td>
    <td noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(213,578</font></td>
    <td noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Gain on sale of product line assets</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">450,000</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &nbsp;&nbsp; Net cash provided by (used in) investing activities</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(127,625</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">236,422</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Financing
        activities</b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Payments on capital leases</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(9,165</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(8,441</font></td>
    <td width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Proceeds from borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">5,161,910</font></td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">7,354,839</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Repayments of borrowings under bank line of credit agreement</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(5,375,969</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(7,072,194</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Proceeds from the issuance of common stock</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">884,728</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="22" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Stock options exercised</font></div>
    </td>
    <td height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">27,817</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td height="22" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="22" width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by (used in) financing activities</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align=left style="border-bottom: 1px solid #000000" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(195,407</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td align=left width="1%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">1,158,932</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b>
        &nbsp; </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Net
        increase (decrease) in cash and cash equivalents</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(490,697</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">1,770,876</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &nbsp; </font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%" >&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff" >&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" >&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff" >&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at beginning of period</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">1,940,295</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">757,342</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="12" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at end of period</font></div>
    </td>
    <td height="12" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="12" style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td valign=bottom noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,449,598</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td height="12" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left height="12" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">2,528,218</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 height="16">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">
        </font></div>
    </td>
    <td height="16" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="16" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right height="16" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left height="16" width="1%">&nbsp;</td>
    <td height="16" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="16" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right height="16" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left height="16" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Supplemental
        cash flow information </b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Cash paid for interest</font></div>
    </td>
    <td>&nbsp;</td>
    <td align=left height="12" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">139,595</font></td>
    <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left height="12" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">185,242</font></td>
    <td align="left" style="border-bottom: 3px double #000000">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp;
      </font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Supplemental
        non-cash disclosure </b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Warrants issued in conjunction with common stock financing</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left height="12" style="border-bottom: 3px double #000000" bgcolor="#cceeff" width="1%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left height="12" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">107,034</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><BR>
  </font> </p>
<P align=center><font face="Times New Roman, Times, serif" size="3">See accompanying
  notes. <BR>
  <BR>
  3 <BR>
  </font>
<P align=center>
<HR width="100%">
<P align=left>
<P align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a name=notes></a></font>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif" size="3"><b><br>
  NOTE 1 - Basis of Presentation</b></font></p>
<p> The accompanying unaudited condensed financial statements of Socket Mobile,
  Inc. (the &quot;Company&quot;) have been prepared in accordance with accounting
  principles generally accepted in the United States for interim financial information
  and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
  they do not include all of the information and footnotes required by accounting
  principles generally accepted in the United States for complete financial statements.
  In the opinion of management, all adjustments, consisting only of normal recurring
  accruals considered necessary for fair presentation have been included. Certain
  information and footnote disclosures normally included in financial statements
  prepared in accordance with accounting principles generally accepted in the
  United States have been condensed or omitted.</p>
<p>These condensed financial statements should be read in conjunction with the
  audited financial statements and notes included in the Company's Annual Report
  on Form 10-K for the year ended December 31, 2009. The financial statements
  in the Company's annual report on Form 10-K were prepared on a going concern
  basis. The accompanying financial statements have been prepared assuming that
  the Company will continue as a going concern, which contemplates the realization
  of assets and the settlement of liabilities and commitments in the normal course
  of business. These financial statements do not include any adjustments to reflect
  the possible future effects on the recoverability and classification of assets
  or the amounts and classification of liabilities that may result from uncertainty
  related to the Company's ability to continue as a going concern.</p>
<p><i>Liquidity and Going Concern</i><br>
  The Company's cash balances at September 30, 2010 were $1.4 million, including
  cash of $0.8 million drawn against its bank lines of credit. The Company's cash
  balances at September 30, 2010, reflect a net decrease of $224,000 in amounts
  drawn on its bank lines of credit and $168,000 of net cash used in operating
  activities in the nine months ended September 30, 2010. On March 3, 2010, the
  Company agreed with its bank to extend the term of the existing credit facility
  to March 23, 2011, to amend the terms of the credit facility with a minimum
  cash deposit requirement of $1.0 million and minimum quarterly revenue requirements
  for fiscal 2010. The Company failed to meet the minimum revenue covenant for
  the quarter ended March 31, 2010, however, the bank agreed to waive the events
  of default and to replace the quarterly minimum revenue requirements with quarterly
  net income targets commencing in the quarter ended June 30, 2010. The Company
  failed to meet its quarterly net income covenant for the quarter ended June
  30, 2010 and received a waiver from the bank for such failure. On November 2,
  2010, the Company terminated its bank line of credit in conjunction with the
  planned issuance of a senior secured convertible note of $1.0 million in November
  2010 (see &quot;NOTE 11 - Subsequent Events&quot; for additional information).</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">4<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left>
<p>The Company's balance sheet at September 30, 2010 has a current ratio (current
  assets divided by current liabilities) of 0.77 to 1.0, a working capital deficit
  of $1.5 million (current assets less current liabilities), and no material long
  term debt. The Company has taken actions to reduce expenses to reduce its operating
  losses. The Company has the ability to reduce expenses further if necessary.
  If the Company can return to revenue growth and attain profitability, the Company
  anticipates requirements for cash will include funding of higher receivable
  and inventory balances, and increased expenses, including an increase of costs
  relating to new employees to support its growth and increases in salaries, benefits,
  and related support costs for existing employees. If the Company cannot attain
  profitability, the Company will not be able to support its operations from positive
  cash flows, and the Company will use its existing cash to support operating
  losses. The Company may also find it necessary to raise additional capital to
  fund its operations, however, there can be no assurance that additional capital
  will be available on acceptable terms, if at all, and any such terms may be
  dilutive to existing stockholders. If the Company is unable to secure the necessary
  capital for its business, the Company may need to suspend some or all of its
  current operations.</p>
<p>The Company's continuing operating losses and declines in its working capital
  balances are conditions that raise doubt about the Company's ability to continue
  as a going concern. The Company's ability to continue as a going concern is
  dependent upon its ability to establish profitable operations and to increase
  its capital. Management has been taking steps intended to reduce operating losses
  and achieve profitability including the introduction of new products, continued
  close support of the Company's distributors and its application partners as
  they establish their mobile applications in key vertical markets, and management
  of the Company's costs. Management believes that it will be able to improve
  the Company's liquidity and secure additional sources of financing by managing
  its working capital balances, and raising additional capital as needed including
  development funding from development partners and the issuance of additional
  equity securities. There can be no assurance that management will be successful
  in achieving these steps, and there can be no assurance that additional financing
  will be available on acceptable terms, if at all, and any such terms may be
  dilutive to existing stockholders. The Company's inability to secure and maintain
  the necessary liquidity would have a material adverse effect on the Company's
  financial condition and results of operations.</p>
<p><b>NOTE 2 - Summary of Significant Accounting Policies</b></p>
<p><i>Use of Estimates</i><br>
  The preparation of financial statements in conformity with accounting principles
  generally accepted in the United States requires management to make estimates
  and assumptions that affect the reported amounts of assets and liabilities,
  the disclosure of contingent assets and liabilities at the date of the financial
  statements, and the reported amounts of revenue and expense during the reporting
  period. Actual results could differ from those estimates, and such differences
  may be material to the financial statements.</p>
<p><i>Recent Accounting Standards</i><br>
  In January 2009, the Securities and Exchange Commission (&quot;SEC&quot;) issued
  Release No. 33-9002, &quot;Interactive Data to Improve Financial Reporting.&quot;
  The final rule requires companies to provide their financial statements and
  financial statement schedules to the SEC and on their corporate websites in
  interactive data format using the eXtensible Business Reporting Language (&quot;XBRL&quot;).
  The rule was adopted by the SEC to improve the ability of financial statement
  users to access and analyze financial data. The SEC adopted a phase-in schedule
  indicating when registrants must furnish interactive data. Under this schedule,
  the Company will be required to submit filings with financial statement information
  using XBRL commencing with its June 30, 2011 quarterly report on Form 10-Q.
  The Company is currently evaluating the impact of XBRL reporting on its financial
  reporting process.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">5<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left>
<p>In October 2009, the FASB amended revenue recognition guidance for arrangements
  with multiple deliverables. The guidance eliminates the residual method of revenue
  recognition and allows the use of management's best estimate of selling price
  for individual elements of an arrangement when vendor specific objective evidence
  (&quot;VSOE&quot;), vendor objective evidence (&quot;VOE&quot;) or third-party
  evidence (&quot;TPE&quot;) is unavailable. This guidance should be applied on
  a prospective basis for revenue arrangements entered into or materially modified
  in fiscal years beginning on or after June 15, 2010, with early adoption permitted.
  Full retrospective application of the guidance is optional. The Company is currently
  evaluating the impact of adopting this guidance on its financial statements.</p>
<p>In October 2009, the FASB issued guidance which amends the scope of existing
  software revenue recognition accounting. Tangible products containing software
  components and non-software components that function together to deliver the
  product's essential functionality would be scoped out of the accounting guidance
  on software and accounted for based on other appropriate revenue recognition
  guidance. This guidance should be applied on a prospective basis for revenue
  arrangements entered into or materially modified in fiscal years beginning on
  or after June 15, 2010, with early adoption permitted. Full retrospective application
  of the new guidance is optional. This guidance must be adopted in the same period
  that the Company adopts the amended accounting for arrangements with multiple
  deliverables described in the preceding paragraph. The Company is currently
  evaluating the impact of adopting this guidance on its financial statements.</p>
<p>In January 2010, the FASB issued guidance which clarifies and provides additional
  disclosure requirements related to recurring and non-recurring fair value measurements.
  The Company implemented these new requirements in the first quarter of fiscal
  2010. Certain additional disclosures about purchases, sales, issuances and settlements
  in the roll forward of activity in Level 3 fair value measures are not effective
  until fiscal years beginning after December 15, 2010. Other than requiring additional
  disclosures, implementation of this new guidance will not have a material impact
  on the Company's financial statements.</p>
<p><i>Cash Equivalents and Fair Value of Financial Instruments</i><br>
  The Company considers all highly liquid investments purchased with an original
  maturity date of 90 days or less at date of purchase to be cash equivalents.
  At September 30, 2010 and December 31, 2009, all of the Company's cash and cash
  equivalents consisted of amounts held in demand and money market deposits in
  banks. The carrying value of the Company's cash and cash equivalents, accounts
  receivable, accounts payable, debt and foreign exchange contracts approximate
  fair value due to the relatively short period of time to maturity.</p>
<p><i>Derivative Financial Instruments</i><br>
  The Company regularly enters into forward foreign currency contracts to reduce
  exposures related to rate changes in certain foreign currencies. The Company's
  forward foreign currency contracts are recorded at fair value and are included
  within current assets at September 30, 2010. At September 30, 2010, these derivative
  instruments were not designated as hedges, and accordingly, changes in the fair
  value of the forward foreign currency contracts were recorded in net income.
  At September 30, 2010, contracts with a notional amount of $170,625 to hedge
  Euros were recorded as assets with an aggregate fair value that was insignificant
  based on quotations from financial institutions, and had maturity dates in October
  2010. At December 31, 2009, contracts with a notional amount of $721,500 to
  hedge Euros were recorded as assets with an aggregate fair value of $5,175 based
  on quotations from financial institutions, and had maturity dates in January
  2010.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">6<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left>
<p><i>Goodwill and Other Intangible Assets Review</i><br>
  Goodwill is tested for impairment annually as of September 30th or more frequently
  when events or circumstances indicate that the carrying value of the Company's
  single reporting unit more likely than not exceeds its fair value.<br>
</p>
<p>The Company performed its annual goodwill impairment analysis as of September
  30, 2010. The Company used the two-step test as required to assess goodwill
  for impairment. The first step of the goodwill impairment test consisted of
  comparing the carrying value of the reporting unit to its fair value. Management
  estimated the fair value of the Company's reporting unit using various methods
  and compared the fair value to the carrying amount (net book value) to ascertain
  if potential goodwill impairment existed. The Company utilized methods that
  focused on its ability to produce income (&quot;Income Approach&quot;) and the
  estimated consideration it would receive if there were a sale of the Company
  (&quot;Market Approach&quot;). Key assumptions utilized in the determination
  of fair value in step one of the test included the following: the Company's
  market capitalization; market multiples of comparable companies within its industry;
  revenue and expense forecasts used in the evaluation were based on trends of
  historical performance and management's estimate of future performance; cash
  flows utilized in the discounted cash flow analysis were estimated using a weighted
  average cost of capital determined to be appropriate for the Company. The fair
  value of the Company's reporting unit exceeded its carrying value and as a result,
  goodwill is considered not impaired as of September 30, 2010. </p>
<p>As December 31, 2009, the Company recorded $5,370,946 goodwill impairment.
  In the quarter ended March 31, 2010, the Company finalized the impairment analysis
  without adjustment to the estimated impairment recorded at December 31, 2009.</p>
<p><font face="Times New Roman, Times, serif"><b>NOTE 3 - Inventories</b></font></p>
<p><font face="Times New Roman, Times, serif">Inventories are stated at the lower
  of cost (first-in, first-out) or market, and consist of the following:<br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">September
      30,<br>
      2010</font></td>
    <td align="center" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%" align="center">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">December
      31,<br>
      2009</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
        Raw materials and sub-assemblies</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,370,071</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,939,416</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">Finished
        goods</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">67,208</font></td>
    <td align="left" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">104,703</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"> </div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">1,437,279</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">2,044,119</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">7<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif" size="3"><b>NOTE 4 - Bank Financing
  Arrangements</b></font></p>
<p>The Company has a credit facility with Silicon Valley Bank which allows the
  Company to borrow up to $2,500,000 based on the level of qualified domestic
  and international receivables, up to a maximum of $1,500,000 and $1,000,000,
  respectively. Borrowings under the lines bear an annual interest rate equal
  to the greater of (i) the Lender's prime rate plus 2%, or (ii) 6%. The annual
  interest rate in effect at September 30, 2010 and December 31, 2009 was 6%.
  The borrowings under the credit facility are secured by a first priority security
  interest in the assets of the Company. The advance rate for receivables is 50%
  from distributors and 70% for all other receivables. The agreement also specifies
  a collateral handling fee of 0.62% per month. The applicable interest and fees
  are calculated based on the full amount of the accounts receivable provided
  as collateral, rather than on the actual amounts borrowed. The outstanding amounts
  borrowed under the domestic and international lines at December 31, 2009 were
  $649,905 and $352,183, respectively, and the full amounts of accounts receivable
  provided as collateral were $1,124,770, and $678,794, respectively. The Company
  was out of compliance with the minimum revenue covenant for the quarter ended
  December 31, 2009. Silicon Valley Bank agreed to forbear any actions relating
  to the event of default through March 24, 2010.</p>
<p>On March 3, 2010, the Company agreed with Silicon Valley Bank to extend the
  term of the existing credit facility to March 23, 2011 and to amend its other
  terms. Under the terms of the amendment the Company was required to maintain
  at all times a minimum cash deposit balance at Silicon Valley Bank of no less
  than $1,000,000, and to achieve minimum quarterly revenue requirements for fiscal
  2010. The Company failed to meet the minimum revenue covenant for the quarter
  ended March 31, 2010, however, the bank agreed to waive the events of default
  and to replace the quarterly minimum revenue requirements with quarterly net
  income targets for the remaining quarters of fiscal 2010. The Company failed
  to meet its quarterly net income covenant for the quarter ended June 30, 2010
  and received a waiver from the bank. The outstanding amounts borrowed under
  the domestic and international lines at September 30, 2010 were $413,461 and
  $374,567, respectively, and the full amounts of accounts receivable provided
  as collateral were $794,253 and $626,972, respectively.</p>
<p>On November 2, 2010, the Company terminated the credit facility in conjunction
  with entering into a security purchase agreement which is expected to close
  in November 2010 (see &quot;NOTE 11 - Subsequent Events&quot; for more information).</p>
<p> <b>NOTE 5 - Intangible Assets</b></p>
<p>Intangible assets consist of a patent purchased in 2004 for $600,000 covering
  the design and functioning of plug-in bar code scanners, bar code imagers, and
  radio frequency identification products, which is being amortized on a straight
  line basis over its estimated life of ten years. Intangible assets of $570,750
  remaining from a prior acquisition in 2000 consisting of developed software
  and technology with estimated lives at the time of acquisition of 8.5 years
  was fully amortized in the quarter ended June 30, 2009.</p>
<p>Amortization of all intangible assets for the three and nine months ended September
  30, 2010 was $15,000 and $45,000, respectively, compared to $15,000 and $61,787,
  respectively, for the same periods in 2009. Intangible assets as of September
  30, 2010 consisted of the following:</p>
<p align=left>&nbsp;
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="70%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp;</td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Gross</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2>
      <div align="center"></div>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Patent</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">600,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">(375,000)</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">225,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Project
        management tools </font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(570,750)</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Total intangible
        assets</font></div>
    </td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(945,750)</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">225,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p align=center><font face="Times New Roman, Times, serif" size="3">8<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><font face="Times New Roman, Times, serif"><br>
  Based on definite lived intangible assets recorded at September 30, 2010, and
  assuming no subsequent impairment of the underlying assets, the annual amortization
  expense is expected to be as follows:<br>
  </font></p>
<table style="MARGIN-TOP: 3pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="60%" align=center border=0>
  <tr>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">
      Year</font></td>
    <td width="4%">&nbsp;</td>
    <td colspan="4" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amount</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2010
        (three months remaining)</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%" align="right"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3" face="Times New Roman, Times, serif">15,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2011</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left bgcolor="#cceeff" width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2012</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td bgcolor="#cceeff" width="3%">&nbsp;</td>
    <td valign=bottom align=right bgcolor="#cceeff" colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2013</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=right colspan="2"><font size="3" face="Times New Roman, Times, serif">60,000</font></td>
    <td valign=bottom noWrap align=left width="10%">&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">2014</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">30,000</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left width="71%">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td width="3%" align="right" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right colspan="2" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">225,000</font></td>
    <td valign=bottom noWrap align=left width="10%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
</table>
<p><br>
  Intangible assets as of December 31, 2009 consisted of the following:<br>
  <br>
</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="70%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=04 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=04 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=04 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp;</td>
    <td  valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Gross</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Accumulated</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2>
      <div align="center"></div>
    </td>
    <td>&nbsp;</td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left>
      <div
     ></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Assets</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Amortization</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=2>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Net</font></div>
    </td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Patent</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">600,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">(330,000)</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">270,000</font></td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Project
        management tools </font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">570,750</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">(570,750)</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Total intangible
        assets</font></div>
    </td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,170,750</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(900,750)</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">270,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p align=center><font face="Times New Roman, Times, serif"><b> </b></font>
<p><b>NOTE 6 - Commitments</b></p>
<p>On August 30, 2010, the Company amended its commercial building lease agreement.
  The amendment is effective as of August 23, 2010 and extends the lease termination
  date from June 30, 2012 to June 30, 2018. The Company's base rent under the
  facilities lease is abated in its entirety in the amount of $31,983 for the
  months of September through December 2010. In addition, the base rent for the
  months of January 2011 through June 2012 is reduced by $1,278 per month. The
  base rent under the facilities lease shall be $29,705 per month for the period
  from July 1, 2012 through June 30, 2013. The base rent increases annually thereafter
  at a rate of four percent per year for the remaining five years under the facilities
  lease.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">9<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited)</font>
<p><b>NOTE 7 - Segment Information and Concentrations</b></p>
<p><i>Segment Information</i><br>
  The Company operates in one segment-mobile systems solutions for businesses.
  Mobile systems solutions typically consist of a handheld computer, data collection
  and connectivity peripherals, and third-party vertical applications software.
  The Company markets its products in the United States and foreign countries
  through its sales personnel, distributors, and vertical industry partners. Revenues
  for the geographic areas for the three and nine months ended September 30, 2010
  and 2009 were as follows:</p>
<p>&nbsp;</p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="30%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right>&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="7%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="7%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="6%">&nbsp;</td>
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="30%"><font size="3"></font>
    </td>
    <td height="13" width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="6" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" style="border-bottom: 1px solid #000000" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" width="4%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3" >Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="30%" height="15">
      <div
      ><font size="3">Revenues:</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="4%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="1%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">United
        States</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">2,505,229</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">2,737,113</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">8,185,737</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">7,792,964</font></td>
    <td noWrap align=right width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">Europe</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">742,570</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">1,449,129</font></td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">2,286,143</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">4,195,249</font></td>
    <td noWrap align=right width="2%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td align=left width="30%">
      <div><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp; </font><font size="3">Asia
        and rest of world</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">166,264</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">388,083</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">403,440</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">1,501,158</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp
      </font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3"><font style="FONT-SIZE: 10pt" size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font>Total revenues<font size="3"></font></font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">3,414,063</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">4,574,325</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">10,875,320</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">13,489,371</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  Export revenues are attributable to countries based on the location of the Company's
  customers. The Company does not hold long-lived assets in foreign locations.</font></p>
<p>Major customers who accounted for at least 10% of the Company's total revenues
  were as follows:</p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="38%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Tech Data
        Corporation </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">11</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">16</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">13</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">18</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Ingram Micro,
        Inc. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">14</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font></td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">16</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="6%"><font size="3">15</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">20</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Epocal Inc.</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">10</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">% </font></td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">BlueStar
        Inc. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%"><font size="3"> </font></td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">12</font></td>
    <td noWrap align=left width="6%"><font size="3">% </font></td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="17">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3"></font></div>
      __________________________________<br>
      * Customer accounted for less than 10% of total revenues for the period</td>
  </tr>
</table>
<p><i>Concentration of Credit Risk</i><br>
  Financial instruments that potentially subject the Company to significant concentrations
  of credit risk consist principally of cash, cash equivalents and accounts receivable.
  The Company invests its cash in demand and money market deposit accounts in
  banks. To date, the Company has not experienced losses on these investments.
  The Company's trade accounts receivables are primarily with distributors and
  OEMs. The Company performs ongoing credit evaluations of its customers' financial
  conditions but the Company generally requires no collateral. Reserves are maintained
  for potential credit losses, and such losses have been within management's expectations.
  At September 30, 2010 and December 31, 2009, customers with at least 10% of
  the Company's total accounts receivable balances were as follows: </p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">September 30, </font></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">December 31, </font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
  </tr>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Ingram Micro,
        Inc. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">23</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">18</font></td>
    <td noWrap align=left width="6%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Epocal Inc.</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">20</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">%</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Scansource,
        Inc </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="6%"><font size="3">16</font></td>
    <td valign=bottom noWrap align=left width="6%"><font size="3">% </font></td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">BlueStar
        Inc. </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">*</font></td>
    <td noWrap align=left width="6%"><font size="3"> </font></td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="6%"><font size="3">17</font></td>
    <td noWrap align=left width="6%"><font size="3">% </font></td>
    <td noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="9">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt">
        <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3"></font></div>
        __________________________________<br>
        * Customer accounted for less than 10% of total revenues for the period<font size="3">
        </font></div>
      </td>
  </tr>
</table>
<p align=center><font face="Times New Roman, Times, serif" size="3">10<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left><i>Concentration of Suppliers</i><br>
  Several of the Company's component parts are produced by a sole or limited number
  of suppliers. Shortages could occur in these essential materials due to an interruption
  of supply or increased demand in the industry. If the Company were unable to
  procure certain of such materials, it would be required to reduce its operations,
  which could have a material adverse effect upon its results. At September 30,
  2010 and December 31, 2009, 43% and 33%, respectively, of the Company's accounts
  payable balances were concentrated in a single supplier. For the three and nine
  months ended September 30, 2010, two suppliers accounted for 71% of the inventory
  purchases in each of the periods.
<p><b>NOTE 8 - Stock-Based Compensation</b></p>
<p>The Company recognizes stock-based compensation in the financial statements
  for all share-based awards to employees, including grants of employee stock
  options, based on their fair values. The Company uses a binomial lattice valuation
  model to estimate the fair value of stock option grants. The binomial lattice
  model incorporates calculations for expected volatility, risk-free interest
  rates, employee exercise patterns and post-vesting employment termination behavior,
  and these factors affect the estimate of the fair value of the Company's stock
  option grants.</p>
<p>Total stock-based compensation expense recognized in the Company's statements
  of operations for the three and nine months ended September 30, 2010 and 2009
  is shown below:<font face="Times New Roman, Times, serif"> </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="30%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right>&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="7%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="7%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="6%">&nbsp;</td>
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="30%"><font size="3"></font>
    </td>
    <td height="13" width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="6" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" style="border-bottom: 1px solid #000000" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" width="4%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7"  style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="30%" height="15" style="border-bottom: 1px solid #000000">
      <div
      ><font size="3">Income Statement Classification</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="4%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="1%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"> <font size="3">&nbsp&nbspCost
        of revenues </font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3">$</font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">14,588</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">18,303</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">42,633</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3">$</font> </td>
    <td noWrap align=right width="10%"><font size="3">45,099</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspResearch
        and development</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="10%"><font size="3">38,602</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">48,228</font></td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">114,188</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=right width="10%"><font size="3">116,003</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspSales
        and marketing </font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">50,900</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">74,971</font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">152,086</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp; </td>
    <td noWrap align=right width="10%"><font size="3">194,782</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp&nbspGeneral
        and administrative<font size="3"></font></font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">84,803</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">62,114</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=left width="4%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">200,129</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 1px solid #000000" width="10%"><font size="3">166,828</font></td>
    <td noWrap align=left style="border-bottom: 1px solid #000000" width="2%"><font size="3">&nbsp</font>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="30%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">&nbsp&nbspTotal</font></div>
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">188,893</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">203,616</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td noWrap align=left width="4%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">509,036</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="10%"><font size="3">522,712</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%">&nbsp;
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  In the three and nine months ended September 30, 2010, the Company granted stock
  options to purchase 705,950 and 849,950 shares of the Company's common stock,
  respectively, at a weighted average per share fair value estimated at $1.92
  in each of the periods. A majority of the options granted results from an option
  exchange completed in the third quarter 2010. In June 2010 the Company offered
  to exchange certain outstanding stock options granted under the Company's equity
  incentive plans for new options to purchase shares of the Company's common stock
  under modified vesting terms. On July 1, 2010, the Company completed the exchange
  offer and cancelled stock options to purchase 703,550 shares and reissued new
  stock options to purchase an equivalent number of shares at a per share price
  of $3.04, at a weighted average per share fair value estimated at $1.92, with
  a weighted average vesting period of 2.1 years. The option exchange was treated
  as a stock option modification for accounting purposes. At June 30, 2010, prior
  to the completion of the exchange offer, total remaining unrecognized compensation
  costs related to unvested stock options was approximately $0.86 million, which
  was scheduled to be amortized over the weighted average remaining requisite
  period of 2.4 years. On July 1, 2010, after the completion of the exchange offer,
  total remaining unrecognized compensation costs related to all unvested stock
  options was approximately $1.6 million, which is being amortized over the weighted
  average remaining requisite period of 2.4 years. At September 30, 2010, options
  held by employees for 1,268,930 shares were outstanding, of which options for
  305,437 shares were exercisable.</font></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">11<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>There were no options granted in the three months ended September 30, 2009.
  In the nine months ended September 30, 2009, 469,781 stock options were granted
  at weighted average per share fair value estimated at $1.62.</p>
<p>Weighted average assumptions for stock options granted during the three and
  nine months ended September 30, 2010 and 2009 are shown below:</p>
<p><font face="Times New Roman, Times, serif"> <br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="38%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="2%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="38%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Risk-free
        interest rate (%)</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="7%"><font size="3">2.96</font></td>
    <td valign=bottom noWrap align=left width="5%"><font size="3">%</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">n/a</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">3.04</font></td>
    <td noWrap align=left width="5%"><font size="3">%</font> </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">3.04</font></td>
    <td noWrap align=left width="5%"><font size="3">%</font> </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Dividend
        yield </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=right width="7%"><font size="3">---</font></td>
    <td valign=bottom noWrap align=left width="5%">&nbsp;</td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">n/a</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="7%"><font size="3">---</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">---</font></td>
    <td noWrap align=left width="5%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="38%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Volatility
        factor </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">0.87</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="7%"><font size="3">n/a</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td noWrap align=left width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="7%"><font size="3">0.88</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3"> </font></td>
    <td noWrap align=right width="7%"><font size="3">0.99</font></td>
    <td noWrap align=left width="5%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="38%" height="17">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Expected
        option life (years)</font></div>
    </td>
    <td width="1%" height="17"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%" height="17"><font size="3"></font>
    </td>
    <td valign=bottom noWrap align=right width="7%" height="17"><font size="3">3.9</font></td>
    <td valign=bottom noWrap align=left width="5%" height="17">&nbsp;</td>
    <td width="1%" height="17"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%" height="17"><font size="3">
      </font></td>
    <td noWrap align=right width="7%" height="17"><font size="3">n/a</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%" height="17"><font size="3"></font></td>
    <td noWrap align=left width="1%" height="17"><font size="3"></font> </td>
    <td noWrap align=right width="7%" height="17"><font size="3">4.0</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%" height="17">&nbsp;</td>
    <td noWrap align=left width="2%" height="17"><font size="3"> </font></td>
    <td noWrap align=right width="7%" height="17"><font size="3">4.0</font></td>
    <td noWrap align=left width="5%" height="17">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  <b>NOTE 9 - Net Income (Loss) Per Share Applicable to Common Stockholders</b></font></p>
<p>The following table sets forth the computation of basic and diluted net income
  (loss) per share:</p>
<p><font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<table
style="FONT-SIZE: 10pt; BACKGROUND: #ffffff; COLOR: #000000; FONT-FAMILY: 'Times New Roman', Times"
cellspacing=0 cellpadding=0 width="80%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="48%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="9%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="9%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="3%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="9%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="2%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <td align=left width="9%">&nbsp;</td>
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="40%"><font size="3"></font>
    </td>
    <td height="13" width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=middle height="13" colspan="6" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Three Months Ended<br>
        September 30, </font></div>
    </td>
    <td valign=bottom noWrap align=middle height="13" width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" width="3%" >&nbsp;</td>
    <td valign=bottom noWrap align=middle height="13" colspan="7" style="border-bottom: 1px solid #000000" >
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="40%" height="15">
      <div
      ></div>
    </td>
    <td width="1%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td width="3%" height="15"><font size="3"></font> </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=3 height="15">
      <div align="center"><font size="3">2010</font></div>
    </td>
    <td width="2%" height="15">&nbsp;</td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap colspan=2 height="15">
      <div align="center"><font size="3">2009</font></div>
    </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" noWrap width="1%" height="15">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"> <font size="3">Numerator:
        </font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td valign=bottom noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"> </font></td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=right width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3">Net
        income (loss)</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(767,054</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">49,158</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">
      </font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(2,381,617</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(1,607,140</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">Denominator:<font size="3"></font></font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%" height="21"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3">Weighted
      average common shares outstanding </font><font size="3">used </font><font size="3">in
      <br>
      </font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3">computing
      net income (loss) per share: </font></td>
    <td width="1%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td width="2%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=left width="3%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=left width="2%" height="21">&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
    <td noWrap align=right width="9%" height="21" >&nbsp;</td>
    <td noWrap align=left width="1%" height="21" >&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%"> <font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Basic</font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,797,988</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,786,702</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,793,582</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,486,894</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left width="40%"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Diluted</font></td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,797,988</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,950,643</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,793,582</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">3,486,894</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left width="40%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3">&nbsp</font></div>
    </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font></td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td noWrap align=left width="40%"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      &nbsp;&nbsp; </font><font size="3">Net income (loss) per share:</font></td>
    <td width="1%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%"><font size="3"></font> </td>
    <td noWrap align=left width="3%"><font size="3"></font> </td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp; </td>
    <td noWrap align=right width="9%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td noWrap align=left width="40%"> <font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font size="3"></font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
      </font><font size="3"></font><font size="3">Basic <font face="Times New Roman, Times, serif">and
      Diluted </font></font> </td>
    <td width="1%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.20</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)</font></td>
    <td width="2%"><font size="3"></font> </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">0.01</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td noWrap align=left width="3%"><font size="3"></font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.63</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
    <td noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">$</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="9%"><font size="3">(0.46</font></td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="1%"><font size="3">)
      </font> </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  </font> For the three and nine months ended September 30, 2010, and the nine
  months ended September 30, 2009, the diluted net loss per share is equal to
  the basic net loss per share because the Company experienced losses in these
  periods. Thus no potential common shares underlying stock options and warrants
  have been included in the net loss per share calculation, as their effect is
  anti-dilutive. Options and warrants to purchase 1,356,572 and 1,319,200 shares
  of common stock at September 30, 2010 and 2009, respectively, have been omitted
  from the net loss per share calculation.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">12<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><b>NOTE 10 - Income Taxes</b></p>
<p>Deferred tax expense in the three and nine months ended September 30, 2010
  and 2009 is related entirely to the deferred tax liability on the portion of
  the Company's goodwill amortized for tax purposes. Due to the indefinite characteristic
  of this deferred tax liability, it cannot be offset against deferred tax assets.
  Goodwill impairment charges recorded as of December 31, 2009 on that portion
  of the Company's goodwill being amortized for tax purposes, resulted in the
  reversal of accumulated deferred tax expense and the related deferred tax liability,
  temporarily eliminating the difference between financial and tax reporting at
  December 31, 2009 and for each of the first two quarters in 2010. Beginning
  in the quarter ended September 30, 2010, differences between financial and tax
  reporting resulted in deferred tax expense of $7,531 and the corresponding deferred
  tax liability on the Company's balance sheet. Deferred tax expense in the three
  and nine months ended September 30, 2009 was $7,985 and $23,955, respectively.</p>
<p>At December 31, 2009, the Company has an unrecognized tax benefit of approximately
  $599,000, which did not change significantly during the three and nine months
  ended September 30, 2010. Future changes in the unrecognized tax benefit will
  have no impact on the effective tax rate due to the existence of the valuation
  allowance. It is the Company's policy to include interest and penalties related
  to tax positions as a component of income tax expense. No interest was accrued
  for the three and nine months ended September 30, 2010.</p>
<p><b>NOTE 11 - Subsequent Events</b></p>
<p><i>Termination of Bank Lines of Credit</i><br>
  On November 2, 2010, the Company repaid in full its outstanding indebtedness
  to Silicon Valley Bank and terminated the lines of credit. All obligations of
  the Company under the credit facility and any other related loan and collateral
  security documents, except those which specifically survive the termination
  of such agreements, have been terminated. In conjunction with this termination
  the Company entered into a securities purchase agreement in conjunction with
  a note financing expected to close in November 2010, as described further in
  the following section.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">13<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><i>Convertible Note Financing</i><br>
  On October 27, 2010, the Company entered into a securities purchase agreement
  to issue a senior secured convertible note having a principal amount of $1,000,000
  in a private placement offering. The Company expects to close the note financing
  in November 2010. The proceeds will be used to increase the Company's working
  capital balances. The note to be issued in the financing is convertible into
  500,000 shares of common stock, at an initial conversion price of $2.00 per
  share. The conversion price will be subject to resets under certain market conditions.
  The convertible note will mature eighteen months from the date of issuance,
  and will bear interest at the rate of 10% per annum, which is payable quarterly
  in arrears. In conjunction with the convertible note, the Company intends to
  issue to the investor a five-year warrant to purchase 500,000 shares of common
  stock at $2.44 per share. The convertible note will be secured by all of the
  assets of the Company. In order to secure the note, the Company terminated its
  credit line facilities with Silicon Valley Bank, who then released its security
  interest in the assets of the Company (see &quot;Note 4 - Bank Financing Arrangements&quot;
  for more information). The Company will be required at all times to maintain
  collateralization of the convertible note with an amount equivalent to the unconverted
  principal plus accrued interest. Collateral will consist of qualified accounts
  receivables of the Company, plus cash to the extent qualified accounts receivables
  are less than the unconverted principal plus accrued interest. In connection
  with the note financing, the Company intends to issue to the private placement
  agent a five-year warrant to purchase 50,000 of common stock with terms that
  are substantially the same as the warrant to be issued to the investor, except
  that the private placement agent's warrant will allow for net exercise. The
  Company is obligated to register the shares issuable upon the conversion of
  the convertible notes and exercise of the warrants by the 60th calendar date
  after the closing date of the financing (or the 90th calendar day after the
  closing date, in the event the registration statement covering the resale of
  such shares is reviewed by the SEC).</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">14<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=mda></a></font>
<p><b>Item 2. Management's Discussion and Analysis of Financial Condition and
  Results of Operations </b></p>
<p><i>This Quarterly Report contains forward-looking statements within the meaning
  of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
  the Securities Exchange Act of 1934, as amended. These statements include statements
  forecasting our future financial condition and results, our future operating
  activities, market acceptance of our products, expectations for general market
  growth of handheld computers and other mobile computing devices, growth in demand
  for our products, expansion of the markets that we serve, expansion of the distribution
  channels for our products, adoption of our embedded products by third-party
  manufacturers of electronic devices, and the timing of the introduction and
  availability of new products, as well as other forecasts discussed under &quot;Management's
  Discussion and Analysis of Financial Condition and Results of Operations.&quot;
  Words such as &quot;may,&quot; &quot;will,&quot; &quot;predicts,&quot; &quot;anticipates,&quot;
  &quot;expects,&quot; &quot;intends,&quot; &quot;plans,&quot; &quot;believes,&quot;
  &quot;seeks,&quot; &quot;estimates,&quot; variations of such words, and similar
  expressions are intended to identify such forward-looking statements. Such forward-looking
  statements are based on current expectations, estimates, and projections about
  our industry, management's beliefs, and assumptions made by management. These
  forward-looking statements are not guarantees of future performance and are
  subject to certain risks, uncertainties, and assumptions that are difficult
  to predict; therefore, actual results and outcomes may differ materially from
  what is expressed or forecasted in any such forward looking statements. Factors
  that could cause actual results and outcomes to differ materially include, but
  are not limited to: continued weakness in the U.S. and world economy generally
  and in the markets we serve in particular; the risk of delays in the availability
  of our products due to technological, market or financial factors including
  the availability of necessary working capital; our ability to successfully develop,
  introduce and market future products; our ability to effectively manage and
  contain our operating costs; the availability of announced third-party handheld
  computer hardware and software that our products are intended to work with;
  product delays associated with new model introductions and product changeovers
  by the makers of products that our products are intended to work with; continued
  growth in demand for handheld computers; market acceptance of emerging standards
  such as Bluetooth and wireless LAN and of our related connection, data collection
  and mobile handheld computer products; the ability of our strategic relationships
  to benefit our business as expected; our ability to enter into additional distribution
  relationships; or other factors described in this Form 10-Q including &quot;Part
  II, Item 1A. Risk Factors&quot; and recent Form 8-K and Form 10-K reports filed
  with the Securities and Exchange Commission. We assume no obligation to update
  such forward-looking statements or to update the reasons why actual results
  could differ materially from those anticipated in such forward-looking statements.<br>
  </i></p>
<p><i>You should read the following discussion in conjunction with the interim
  condensed financial statements and notes included elsewhere in this report,
  the Company's annual financial statements in the Form 10-K, and other information
  contained in other reports and documents filed from time to time with the Securities
  and Exchange Commission.</i></p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Revenues<br>
  </b></font><font face="Times New Roman, Times, serif"><br>
  We are a producer of mobile computing hardware systems serving business mobility
  markets with an emphasis on healthcare and hospitality. We offer a family of
  handheld computer products and a wide range of data collection products. We
  also offer embedded Bluetooth and wireless LAN products. Our data collection
  peripheral products also work with many third-party mobile handheld devices
  including smartphones, handheld computers, tablet computers, ultra-mobile personal
  computers (UMPCs), and notebooks, adding data collection and connectivity capabilities
  to these devices. Our products are designed to run or enhance mobile applications
  that enable the accessing, collection and processing of data by employees while
  mobile. Our mobile computing products utilize popular Bluetooth and wireless
  LAN connection technologies. Our plug-in and cordless data collection products
  offer a variety of data collection technologies including one dimensional (1D)
  laser scanning and two dimensional (2D) barcode scanning, plus we offer RFID
  (radio frequency identification) and magnetic stripe readers. </font></p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">15<br>
  </font> </p>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font></p>
<p>More than 200 software integration companies are offering or developing vertical
  software applications for use with our handheld computers and data collection
  products. Healthcare and hospitality are two of the primary areas of focus for
  our software integration partners and more than half of our handheld computer
  sales now come from organizations within the healthcare and hospitality industries.
  Other vertical markets benefiting from our mobile solutions include 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 or medical enterprise, and then if required,
  back to the remote locations and mobile devices.</p>
<p> We believe growth in the mobile workforce along with 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 run or enhance mobile applications that allow
  access to business data files, or collect and process data while mobile, thereby
  enhancing their productivity and allowing them to exploit time sensitive opportunities
  and improve customer satisfaction. Overall, our hardware products enable mobile
  third-party software applications to become complete mobile data collection
  and connectivity solutions.</p>
<p>We also make available to Original Equipment Manufacturers (&quot;OEMs&quot;)
  our component Bluetooth and wireless LAN technologies. We develop these components
  for our own products and leverage that investment through the sale of modules
  and plug-in cards to OEM manufacturers to embed into their products, including
  driver and device management software that is designed to simplify the ability
  of mobile employees to get and stay connected with Wi-Fi as well as with Bluetooth.
</p>
<p>Our handheld computers and peripheral products are sold through a worldwide
  network of distributors and resellers, vertical industry partners, and value
  added resellers (VARs). Our OEM products are sold directly to the original equipment
  manufacturers. The geographic regions we serve include the Americas, Europe,
  the Middle East, Africa and Asia Pacific. Total revenues for the three and nine
  months ended September 30, 2010 were $3.4 million and $10.9 million, which represented
  decreases of 25% and 19%, respectively, from revenues of $4.6 million and $13.5
  million in the corresponding periods one year ago.</p>
<p>&nbsp; </p>
<p>&nbsp;</p>
<p>&nbsp; </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">16<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Our revenues in the comparable three and nine month periods are classified
  into three broad product families:</p>
<ul>
  <li>Mobile handheld computer products;</li>
  <li>Mobile peripheral products for data collection and connectivity; and</li>
  <li><font face="Times New Roman, Times, serif">OEM embedded products. </font></li>
</ul>
<p>Our <b><i>mobile handheld computer products</i></b> are designed to be durable,
  lightweight and dependable devices which meet the requirements of the healthcare
  and hospitality markets we serve. Our initial model, the SoMo&reg; 650 (SoMo
  is derived from Socket Mobile), was introduced in June 2007 with initial volume
  shipments in September 2007, and features the Microsoft Windows Mobile Classic
  operating system, Versions 5.0 and 6. Windows Mobile is the industry standard
  OS for mobile applications thereby ensuring that the SoMo is compatible with
  a large number of business applications and giving workers a familiar computing
  environment. Our mobile handheld computers are easy to customize for a particular
  application with peripherals and accessories. The SoMo products have an expected
  product life cycle of three to five years which meets the needs of our customers
  who are deploying mobile solutions. In order to extend the life of the current
  product family, we expect to upgrade components used in our SoMo products from
  time to time in response to decisions by component manufacturers to improve
  or replace their components. The SoMo's features include wireless LAN and Bluetooth,
  a fast processor, a large, bright screen display enabling its use outdoors,
  large amounts of SDRAM and flash memory, an extended battery, programmable action
  buttons to activate peripheral devices, reinforced CompactFlash and SDIO card
  slots, and a durable case. The SoMo is available with multiple language support.
  The SoMo 650 was specifically designed without an integrated mobile phone to
  serve the market for business mobility applications that are not mobile phone
  centric such as medication dispensing in the healthcare market or serving tables
  in the hospitality market, many of which use Bluetooth or wireless LAN connections
  for data communications. In late 2008, we introduced the SoMo 650 Rx model made
  with antimicrobial materials added to the case plastics to provide an extra
  layer of protection to the device to aid against the multiplication and spread
  of potentially harmful bacteria and microbes found in healthcare environments.
  We also introduced a SoMo 650 Dx model without Bluetooth or wireless LAN for
  high security environments. We have also developed accessory products such as
  our backpack to enable direct connections to mobile phone networks using network
  phone cards and a durable case to provide additional protection in the event
  the computer is dropped. In addition, we work with third-party accessory providers,
  who have qualified to make a number of accessory products that work with the
  SoMo family of products, including headsets, battery chargers, keyboards, mobile
  printers, and smartcard readers. Mobile handheld computer products, accessories
  and related service revenues represented approximately 54% and 50% of our revenues
  for the three and nine months ended September 30, 2010, respectively, compared
  to 36% and 37%, respectively, of our revenues in the same periods one year ago.</p>
<p>Our <i><b>mobile peripheral products</b></i> consist of data collection products
  and the related service revenues, connectivity products, and through September
  30, 2009, serial interface products, which together represented approximately
  40% of our revenues in each of the three and nine months ended September 30,
  2010, compared to 40% and 44% of our revenues in the same periods one year ago.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">17<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><br>
  <br>
  <i>Our data collection products</i> enable the electronic collection of data
  from barcodes, radio frequency identification (RFID) tags, or magnetic stripes
  and consist of: <br>
</p>
<ul>
  <li>barcode scanning products that plug into or connect wirelessly to handheld
    computers, tablet computers, ultra-mobile personal computers, notebook computers
    and smartphones that use Windows Mobile, Windows CE, Windows 7/Vista/XP/Embedded,
    RIM Blackberry, Apple iOS4, Android, or Nokia Symbian for E Series operating
    systems, and turn these devices into portable barcode scanners and RFID readers
    that can be used in various retail and industrial workplaces; our cordless
    hand scanner and cordless ring scanner may also be connected wirelessly to
    a desktop computer, enabling mobile barcode scanning around a fixed workstation;<br>
  </li>
  <li>RFID plug-in products that read radio frequency identification tags; <br>
  </li>
  <li>a combination plug-in barcode scanner and RFID reader; and <br>
  </li>
  <li>a plug-in magnetic stripe reader.</li>
</ul>
<p>&nbsp;</p>
<p>Our plug-in and Bluetooth cordless data collection products offer a variety
  of data collection price/performance levels. Our plug-in barcode scanners are
  available in both CompactFlash and SDIO form factors and we offer standalone
  cordless hand scanners that use Bluetooth as the connection interface. We also
  offer a ring scanner worn on the index finger which connects via Bluetooth to
  computing systems. During 2009 we realigned our data collection barcode scanning
  products to introduce an entry level laser barcode scanner, upgraded the durability
  of our ring scanner, and introduced both a CompactFlash and a Bluetooth cordless
  2D barcode scanner. 2D scanning enables larger amounts of data to be scanned
  compared to linear 1D barcodes, and the use of 2D scanning is becoming more
  widespread. In 2010 we introduced a line of low-cost barcode scanners for the
  Apple iPad, iPhone and iPod touch.</p>
<p>We have developed extensive barcode scanning and RFID reading software called
  SocketScan that supports our data collection products, and offer software developer
  kits that assist third-party developers in integrating our SocketScan software
  and our hardware products into their applications and solutions.</p>
<p><i>Our connectivity products</i> are connection devices that can be plugged
  into standard CompactFlash or Secure Digital SDIO expansion slots in handheld
  computers, tablet computers, ultra mobile personal computers, and notebook computers
  that use Windows Mobile, Windows XP/Vista, or Windows Tablet operating systems.
  These products allow users to connect their devices over a cable via Ethernet
  or telephone to communicate with other networks and devices such as desktop
  computers, other handheld computers, tablet computers, ultra-mobile personal
  computers, and notebook computers, smartphones and printers. Our connectivity
  products include:<br>
</p>
<ul>
  <li> a modem for telephone connections that connects over a cable; and<br>
  </li>
  <li> an Ethernet card for local area network connections that connects over
    a cable.</li>
</ul>
<p>Most users of mobile computing devices now connect to networks wirelessly,
  and we expect to phase out our connectivity products during 2010.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">18<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><i>Our serial interface products</i> enabled the connection of a mobile computer
  to electronic devices either by way of a plug-in card (one, two or four ports)
  connecting over cables, or wirelessly over a Bluetooth network. These products
  were legacy products first introduced in 1993, and we were selling them over
  the past several years under a SocketSerial brand name and logo. Serial technology
  has gradually been replaced by alternative technologies such as USB (Universal
  Serial Bus) and serial product revenue in 2009 had become less than 5 percent
  of our total quarterly revenues. On September 30, 2009, we sold our serial product
  technology and business to Quatech, Inc., who continues to offer the line under
  the SocketSerial brand, and we discontinued distributing the product line in
  our distribution channels. As a result of this sale there are no revenues related
  to these products beyond fiscal 2009.</p>
<p><br>
  Our <b><i>OEM embedded products</i></b> consist of Bluetooth and wireless LAN
  modules and plug-in cards used primarily by Original Equipment Manufacturers
  (OEMs) of industrial grade handheld computers and other devices to build wireless
  connection functions into their products using the Bluetooth and wireless LAN
  standards for wireless connectivity. Our plug-in cards and modules using the
  Bluetooth standard for short-range wireless connectivity include extensive communications
  software enabling the use of these products. Our Bluetooth products use the
  Bluetooth 2.1 + EDR standard, reflecting our continued commitment to keep our
  Bluetooth products current with evolving Bluetooth technology standards. Our
  plug-in cards for connecting wirelessly to local area networks have been upgraded
  to use the wireless LAN 802.11 a/b/g Wi-Fi standard, an upgrade from the previous
  wireless LAN 802.11b/g standard. Our wireless LAN products include extensive
  communications software with Cisco Compatible Extensions (CCX) designed to make
  these products easy to use. Our OEM product sales are primarily based on the
  acceptance of our designs by OEM customers (referred to as design-wins), and
  the above transitions in our product offerings have resulted in last-time buys
  by existing customers and reductions in ongoing revenue as we pursue new OEM
  customers for new design-wins. OEM embedded products represented approximately
  6% and 11% of our revenues for the three and nine months ended September 30,
  2010, compared to 24% and 20% of our revenues for the same periods one year
  ago.</p>
<p><br>
  Our <i><b>SocketCare services</b></i> provide extended warranty and accidental
  breakage coverage for selected products including our handheld computers and
  our ring and cordless hand scanners. Premium service purchased at the time of
  product purchase provides coverage for three years. Service revenues were approximately
  7% and 6% of our revenues in the three and nine months ended September 30, 2010.
  Service revenues were insignificant for the same periods a year ago. Service
  revenues are included within the related handheld computer and data collection
  revenues in the table that follows.</p>
<p><br>
  Our revenues by product family for the three and nine months ended September
  30, 2010 and 2009, and the corresponding increase or decrease in revenues for
  the comparable periods are shown in the following table:</p>
<p><font face="Times New Roman, Times, serif"><br>
  </font> </p>
<table style="MARGIN-TOP: 6pt; FONT-SIZE: 10pt" cellspacing=0 cellpadding=0
width="80%" align=center border=0>
  <tr class="border">
    <td colspan=2 height="24" valign="bottom"  ><font size="3"><i>(revenues in
      thousands)</i></font></td>
    <td height="24" valign="bottom" width="3%"  >&nbsp;</td>
    <td noWrap align=middle colspan=11 height="24" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Three Months Ended<br>
        September 30,</font></div>
      <font size="3"></font></td>
    <td width="5%" height="24"><font size="3"></font></td>
    <td noWrap align=middle colspan=11 height="24" style="border-bottom: 1px solid #000000">
      <div align="center"><font size="3">Nine Months Ended<br>
        September 30,</font><font size="3"></font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="29"style="border-bottom: 1px solid #000000"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3">Product
        family: </font></div>
    </td>
    <td height="29" width="3%">&nbsp;</td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2010</font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Increase<br>
      (Decrease) </font><font size="3"></font></td>
    <td width="5%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2010</font><font size="3"></font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2009</font><font size="3"></font></td>
    <td width="3%" height="29"><font size="3"></font></td>
    <td align="center" colspan="3" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">Increase<br>
      (Decrease) </font><font size="3"></font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Mobile handheld computer products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,855</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,653</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">12</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">%</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">5,387</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3">$</font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">4,932</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" bgcolor="#cceeff"><font size="3"></font></td>
    <td align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">9</font></td>
    <td width="1%" bgcolor="#cceeff"><font size="3">%</font></td>
  </tr>
  <tr>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3">Mobile peripheral products:</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%">&nbsp;</td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Data collection</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,251</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">1,463</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">(14</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td width="5%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">3,916</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">4,430</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">(14</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Connectivity</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%"><font size="3">98</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">166</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">(41</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">382</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">657</font></td>
    <td width="1%" valign="bottom"><font size="3"></font></td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td noWrap align=right width="5%"><font size="3">(42</font></td>
    <td width="1%"><font size="3">%)</font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        </font><font size="3"></font><font size="3">Serial interface products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">---</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">202</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">(100</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td width="5%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">---</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">792</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td width="3%" valign="bottom" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3">(100</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3">%)</font></td>
  </tr>
  <tr>
    <td colspan="2"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        OEM embedded products</font><font size="3"></font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">210</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">1,090</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%"><font size="3">(81</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
    <td width="5%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">1,190</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000"><font size="3">2,678</font></td>
    <td width="1%" valign="bottom" style="border-bottom: 1px solid #000000">&nbsp;</td>
    <td width="3%" valign="bottom"><font size="3"></font></td>
    <td valign=bottom align=left width="1%"><font size="3"></font></td>
    <td valign=bottom noWrap align=right width="5%"><font size="3">(56</font></td>
    <td width="1%" valign="bottom"><font size="3">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" bgcolor="#cceeff"><font size="3"></font>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3">Total</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td valign=bottom align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">3,414</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right  width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">4,574</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right  width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" height="14" bgcolor="#cceeff"><font size="3">(25</font></td>
    <td width="1%" height="14" bgcolor="#cceeff"><font size="3">%)</font></td>
    <td valign=bottom align=right width="5%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">10,875</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td valign=bottom align=right width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" ><font size="3">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" bgcolor="#cceeff" ><font size="3">13,489</font></td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff" >&nbsp;
    </td>
    <td align=right width="3%" bgcolor="#cceeff" ><font size="3"></font></td>
    <td align=left width="1%" height="14" bgcolor="#cceeff"><font size="3"></font></td>
    <td noWrap align=right width="5%" height="14" bgcolor="#cceeff"><font size="3">(19</font></td>
    <td width="1%" height="14" bgcolor="#cceeff"><font size="3">%)</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">19<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  Our mobile handheld computer product revenues in the three and nine months ended
  September 30, 2010 were $1.9 million and $5.4 million, an increase of 12% and
  9% compared to revenues of $1.7 million and $4.9 million in the corresponding
  periods one year ago. The increase in the comparable three and nine month periods
  was due to an increase in the volume of mobile handheld computer sales combined
  with an increase in service revenues due to an increased percentage of customers
  opting to purchase our SocketCare extended warranty and accidental breakage
  coverage in conjunction with their deployments.</font></p>
<p>Our data collection product revenues in the three and nine months ended September
  30, 2010 were $1.3 million and $3.9 million, decreases of 14% each compared
  to revenues of $1.5 million and $4.4 million in the corresponding periods one
  year ago. Revenue decreases of $0.2 million in the comparable three month periods
  were due to reduced sales of our Cordless Hand Scanner. Declines in sales of
  our SDIO In-Hand Scan card between the comparable three month periods were offset
  by increased sales of our CompactFlash In-Hand Scan card. Revenue decreases
  between the comparable nine month periods of $0.5 million in sales of our SDIO
  In-Hand Scan card and $0.2 million in sales of our Cordless Hand Scanner, were
  due to reduced sales volumes of these products. Partially offsetting these declines
  in the comparable nine month periods were increased sales of our CompactFlash
  In-Hand Scan card. Sales of our Cordless Ring Scanner were flat in the comparable
  three and nine month periods. Our data collection product revenues continue
  to be affected by the worldwide economic slowdown as customers defer their deployment
  decisions.</p>
<p>Our connectivity product revenues in the three and nine months ended September
  30, 2010 were $98,000 and $382,000, a decrease of 41% and 42% compared to revenues
  of $166,000 and $657,000 in the corresponding periods one year ago. The decline
  resulted from reduced sales volumes of our modem plug-in products and Ethernet
  plug-in products due to reduced corporate deployments of these wired connection
  solutions as customers move to more wireless connectivity.</p>
<p>As a result of the sale of our serial product technology and business on September
  30, 2009, there are no revenues from serial interface products recognized beyond
  fiscal 2009. Our serial interface product revenues in the three and nine months
  ended September 30, 2009, were $0.2 million and $0.8 million. The majority of
  our serial product sales in the three and nine month periods in 2009 were from
  our standard serial PC card products which were primarily sold to connect peripheral
  devices or other electronic equipment to notebook computers. Remaining serial
  revenues in the three and six months of 2009 were from sales of our CompactFlash
  card product and cordless Bluetooth serial adapter.</p>
<p>Our OEM embedded product revenues in the three and nine months ended September
  30, 2010 were $0.2 million and $1.2 million, a decrease of 81% and 56% compared
  to revenues of $1.1 million and $2.7 million in the corresponding periods one
  year ago. Approximately half of the revenue decreases in each of the periods
  was due to reduced sales of Bluetooth products. Sales of our Bluetooth modules
  to our OEM customers declined as a result of phasing out older Bluetooth technology
  and a last-buy purchase program through 2009. Sales of Bluetooth plug-in products
  declined in each of the periods due to last-buys of these products as we completed
  the phase out of these products in 2010. Remaining declines in the comparable
  three and nine month periods in 2010 were from reductions in sales of our wireless
  LAN plug-in cards.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">20<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><br>
  <br>
  <b>Gross Margins</b><br>
  Our gross margins in the three and nine months ended September 30, 2010 were
  40% and 41%, compared to margins of 45% in each of the corresponding periods
  one year ago. We generally price our products as a markup from our cost, and
  we offer discount pricing for higher volume purchases. Declines in margins between
  the comparable three and nine month periods were due to declines in sales of
  above average margin products combined with fixed overhead costs which comprised
  a greater portion of the overall cost of goods sold due to lower revenues compared
  to the same periods one year ago. Partially offsetting these margin declines
  in the three and nine month periods were increases in sales of our mobile handheld
  computer which comprised a greater portion of our overall revenues combined
  with improved margins on this particular product in the three and nine months
  of 2010 compared to the same periods one year ago.</p>
<p><b>Research and Development Expense</b><br>
  Research and development expense for the three months ended September 30, 2010
  was $0.6 million, a decrease of 13% compared to research and development expense
  of $0.7 million in the corresponding period one year ago. Research and development
  expense for the nine months ended September 30, 2010 was $1.8 million, a decline
  of 16% compared to research and development expense of $2.2 million in the corresponding
  period one year ago. Approximately 30% and 37% of the reduction in research
  and development expense in the three and nine months ended September 30, 2010
  was due to lower personnel costs primarily from salary reductions. Additional
  reductions in research and development expense in the comparable three and nine
  month periods were from reduced development costs due to a reduction in product
  development activities, and reduced equipment costs related to the reductions
  in product development activities. Research and development expense in the fourth
  quarter of 2010 is expected to continue at a level similar to the third quarter.</p>
<p><b>Sales and Marketing Expense</b><br>
  Sales and marketing expense for the three months ended September 30, 2010 was
  $1.0 million, a decrease of 19% compared to $1.2 million in the corresponding
  period one year ago. Sales and marketing expense for the nine month period ended
  September 30, 2010 was $3.2 million, a decrease of 19% compared to sales and
  marketing expense of $3.9 million in the corresponding period one year ago.
  Approximately half of the reduction in sales and marketing expense in the comparable
  three and nine month periods was from reduced personnel costs. Additional declines
  in the comparable periods were primarily from reduced advertising and promotion
  expense and travel costs. Sales and marketing expense in the fourth quarter
  of 2010 is expected to continue at a level similar to the third quarter.</p>
<p><b>General and Administrative Expense</b><br>
  General and administrative expense for the three months ended September 30,
  2010 was $515,000, an increase of 2% compared to general and administrative
  expense of $504,000 in the corresponding period one year ago. General and administrative
  expense for the nine month period ended September 30, 2010 was $1,668,000, a
  decrease of 2% compared to general and administrative expense of $1,695,000
  in the corresponding period one year ago. Reductions in general and administrative
  expense in the comparable periods are primarily from salary reductions, reduced
  occupancy costs and lower consulting and professional fees. Partially offsetting
  these reductions between the nine month comparable periods were increases in
  fees associated with our bank line of credit and an increase in stock compensation
  expense related to the stock exchange complete on July 1, 2010. In the three
  month comparable periods, increases in bank credit line fees and stock compensation
  expense were partially offset by the reductions mentioned previously. General
  and administrative expense in the third quarter of 2010 is expected to continue
  at a level similar to the third quarter.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">21<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><b>Amortization of Intangibles</b><br>
  Amortization charges for all acquired intangibles for the three and nine months
  ended September 30, 2010 were $15,000 and $45,000, respectively, compared to
  $15,000 and $62,000, respectively, in the comparable periods one year ago. Future
  intangible amortization charges are solely related to the patent acquired in
  2004, and will be $15,000 per quarter going forward until fully amortized.</p>
<p><b>Interest Income and Expense</b><br>
  Interest income reflects interest earned on cash balances. Interest income in
  the three and six months of 2010 and 2009 was immaterial in each of the periods,
  reflecting low average rates of return on cash balances. Interest expense of
  $38,000 and $140,000 in the three and nine months ended September 30, 2010 compares
  to interest expense of $68,000 and $185,000 in the comparable periods one year
  ago. Interest expense is related to interest on amounts drawn on our bank lines
  of credit and interest on equipment lease financing obligations. Lower interest
  expense in the three and nine months of 2010 is due to lower average balances
  outstanding on our bank lines of credit compared to the same period one year
  ago. Interest expense in the fourth quarter of 2010 is expected to continue
  at levels similar to the third quarter due to the interest payable on our convertible
  notes, expected to be issued in November 2010, replacing the interest formerly
  paid on our bank lines of credit which we terminated in early November 2010.</p>
<p><b>Taxes</b><br>
  Deferred income tax reflects the net tax effects of temporary differences between
  the carrying amount of assets and liabilities for financial reporting purposes
  and the amount used for income tax purposes. Deferred tax expense in the three
  and nine months of 2010 and 2009 is related entirely to the deferred tax liability
  on the portion of our goodwill amortized for tax purposes. Due to the indefinite
  characteristic of this deferred tax liability, it cannot be offset against deferred
  tax assets. Goodwill impairment charges recorded as of December 31, 2009 on
  that portion of our goodwill being amortized for tax purposes, resulted in the
  reversal of accumulated deferred tax expense and the related deferred tax liability,
  temporarily eliminating the difference between financial and tax reporting at
  December 31, 2009 through the first half of 2010. Beginning in the third quarter
  2010, differences between financial and tax reporting resulted in deferred tax
  expense of $7,531 and the corresponding deferred tax liability on our balance
  sheet. Deferred tax expense in the three and nine months ended of 2009 was $8,000
  and $24,000, respectively. We maintain a full valuation allowance for all other
  components of deferred tax assets. There can be no assurance that the deferred
  tax assets subject to the valuation allowance will be realized. We have not
  generated taxable income in any periods in any jurisdiction, foreign or domestic.</p>
<p><b>Liquidity and Capital Resources</b><br>
  We were unprofitable in the first nine months of 2010. We were profitable in
  the third quarter of 2009 due in part to the gain on the sale of our serial
  product line assets. We were unprofitable in each of the other three quarters
  of 2009, and unprofitable for fiscal year 2009. We have a history of operating
  losses and we may continue to be unprofitable in the foreseeable future. Historically
  we have financed our operations through the sale of equity securities, equipment
  financing, and revolving bank lines of credit. Since our inception we have raised
  approximately $41 million in equity capital to fund our operations.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">22<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><br>
  <br>
  As reflected in our Statements of Cash Flows, net cash used in operating activities
  was $168,000 in the first nine months of 2010 compared to cash provided by operating
  activities of $375,000 in the first nine months of 2009. We calculate net cash
  used in or provided by operating activities by reducing our net loss ($2.4 million
  and $1.6 million in the first nine months of 2010 and 2009, respectively) by
  those expenses that did not require the use of cash, and reversing gains or
  losses that did not generate or use cash. These items consist of stock based
  compensation expense, depreciation and amortization, amortization of intangible
  assets, deferred tax expense and changes in deferred rent. These amounts totaled
  $931,000 in the first nine months of 2010 and $520,000 in the first nine months
  of 2009. Also, in the first nine months of 2009 our net loss includes a gain
  of $450,000 from the sale of our serial product line assets in September of
  2009. We adjusted the net loss for the first nine months of 2009 to exclude
  this gain from our net loss in determining cash used in operating activities.
  In addition, we report increases in assets and reductions in liabilities as
  uses of cash and decreases in assets and increases in liabilities as sources
  of cash, together referred to as changes in operating assets and liabilities.
  In the first nine months of 2010 changes in operating assets and liabilities
  resulted in a net source of cash of $1.3 million and were primarily from increases
  in accounts payable due to timing of payments, reductions in inventory levels
  as a result of planned reductions from year end levels, and reductions in accounts
  receivable due to lower shipments in the third quarter of 2010 compared to the
  fourth quarter of 2009, partially offset by reductions in accrued payroll and
  related expenses due to lower personnel costs in 2010 compared to a year ago,
  as a result of salary reductions. In the first nine months of 2009 changes in
  operating assets and liabilities resulted in a net source of cash of $1.5 million
  and were primarily from reductions in inventory, due primarily to planned reductions
  in stocking levels of our mobile handheld computer from year end inventory levels,
  reductions in accounts receivable due to lower shipments in the third quarter
  of 2009 compared to the fourth quarter of 2008, partially offset by reductions
  in accounts payable due to reductions in overall expenses and inventory purchases
  in the third quarter that create those payables, and reductions in deferred
  income on shipments to distributors due to lower stocking levels of our products
  in the distribution channel.</p>
<p>Cash used in investing activities was $128,000 in the first nine months of
  2010 compared to cash provided of $214,000 in the first nine months of 2009.
  Reductions in equipment and tooling purchases in the first nine months of 2010
  reflected reductions in equipment and tooling purchases due to fewer projects
  requiring these expenditures. In the first nine months of 2009, proceeds of
  $450,000 from the sale of our serial product line assets in September 2009 were
  partially offset by cash used for equipment and tooling purchases the nine month
  period.</p>
<p>Cash used in financing activities was $195,000 in the first nine months of
  2010 compared to cash provided of $1,074,000 in the first nine months of 2009.
  Financing activities in the first nine months of 2010 consisted primarily of
  a net decrease in the amounts drawn on our bank lines of credit at the end of
  the third quarter partially offset by proceeds from the exercise of stock options.
  Financing activities in the first nine months of 2009 consisted primarily of
  net proceeds from the issuance of common stock and warrants, and a net increase
  in the amounts drawn on our bank lines of credit at the end of the third quarter.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">23<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p>Our cash balances at September 30, 2010 were $1.4 million, including cash of
  $788,000 drawn against our bank line of credit. Our cash balances at September
  30, 2010, reflect a net decrease of $214,000 in amounts drawn on our bank lines
  of credit and net cash used of $168,000 from operating activities in the first
  nine months of 2010. Our balance sheet at September 30, 2010 has a current ratio
  (current assets divided by current liabilities) of 0.77 to 1.0, a working capital
  deficit of $1.5 million (current assets less current liabilities), and no material
  long term debt. We have taken actions to reduce our expenses to reduce our operating
  losses. We have the ability to reduce expenses further if necessary. The terms
  of the amendment completed in August 2010 to our facilities lease provides for
  rent abatement totaling $96,000 in the fourth quarter 2010. In addition, on
  November 2, 2010, we terminated our bank line of credit in conjunction with
  the planned issuance of a senior secured convertible note of $1.0 million (see
  &quot;NOTE 11 - Subsequent Events&quot; for additional information).</p>
<p>Our continued operating losses and declines in our working capital balances
  are conditions that raise doubt about the Company's ability to continue as a
  going concern. Our ability to continue as a going concern is dependent upon
  our ability to establish profitable operations and to increase our capital.
  We have been taking steps intended to reduce operating losses and achieve profitability
  including the introduction of new products, continued close support of our distributors
  and of our application partners as they establish their mobile applications
  in key vertical markets, and management of our costs. We believe that we will
  be able to improve liquidity and secure additional sources of financing by managing
  our working capital balances, improving our operating results to cash positive
  levels, and raising additional capital as needed, including development funding
  from development partners and through the issuance of additional equity securities.
  There can be no assurance that we will be successful in achieving any of these
  steps, and there can be no assurance that additional financing will be available
  on acceptable terms, if at all, and any such terms may be dilutive to existing
  stockholders. Our inability to secure and maintain the necessary liquidity would
  have a material adverse effect on our financial condition and results of operations.
  If we are unable to secure the necessary capital for our business, we may need
  to suspend some or all of our current operations. The financial statements do
  not include any adjustments to reflect the possible future effects on the recoverability
  and classification of assets or the amounts and classification of assets and
  liabilities that may result from the outcome of this uncertainty. If we can
  return to revenue growth and attain profitability, we anticipate requirements
  for cash will include funding of higher receivable and inventory balances, and
  increased expenses, including more employees to support our growth and increases
  in salaries, benefits, and related support costs for employees.</p>
<p>Our contractual cash obligations at September 30, 2010 are outlined in the
  table below:</p>
<p><font face="Times New Roman, Times, serif"><br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td colspan="2" height="15">&nbsp;</td>
    <td width="4%" height="15">&nbsp;</td>
    <td colspan="18" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" height="15"><font size="3" face="Times New Roman, Times, serif">Payments
      Due by Period</font></td>
    <td width="1%" class="border" height="15">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Contractual
        Obligations</font></div>
    </td>
    <td valign="bottom"><font face="Times New Roman, Times, serif"><b><font size="3">&nbsp</font></b></font></td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">Total</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td class="border" valign="bottom">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">Less
      than<br>
      1 year</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">1
      to 3<br>
      years</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" style="border-bottom: 1px solid #000000" valign="bottom"><font size="3" face="Times New Roman, Times, serif">4
      to 5<br>
      years</font></td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td valign="bottom" class="border">&nbsp;</td>
    <td colspan="2" align="center" nowrap class="border" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">More
      than<br>
      5 years</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Capital leases</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">35,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">13,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">22,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Operating
        leases</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">2,934,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">284,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap ><font size="3" face="Times New Roman, Times, serif">735,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">764,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom">&nbsp;</td>
    <td align="right" width="8%" nowrap><font size="3" face="Times New Roman, Times, serif">1,151,000</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Bank line of credit</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">788,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">788,000</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Unconditional purchase obligations with contract manufacturers</font></div>
    </td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,439,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2,439,000</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td width="1%">&nbsp;</td>
    <td width="4%">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif"><b><font color="#000000">&nbsp</font></b></font></td>
    <td align="right" nowrap width="8%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Total contractual cash obligations </font></div>
    </td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">6,196,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">3,524,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">757,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">764,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" valign="bottom" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,151,000</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p><font face="Times New Roman, Times, serif" size="3"><b>Off-Balance Sheet Arrangements<br>
  </b></font>We have no off-balance sheet arrangements as defined in Item 303
  of Regulation S-K.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">24<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=qqd></a></font>
<p align=left><b>Recent Accounting Pronouncements</b><br>
  See Note 2 of &quot;Notes to Condensed Financial Statements&quot; of this Quarterly
  Report for additional information regarding the status of recent accounting
  pronouncements.
<p><b><br>
  Item 3. Quantitative and Qualitative Disclosures About Market Risk</b></p>
<p><b>Interest Rate Risk</b></p>
<p>Our exposure to market risk for changes in interest rates relates primarily
  to invested cash and our bank credit line facilities. Our cash is invested in
  short-term money market investments backed by U.S. Treasury notes and other
  investments that mature within one year and whose principal is not subject to
  market rate fluctuations. Accordingly, interest rate declines would adversely
  affect our interest income but would not affect the carrying value of our cash
  investments. Based on a sensitivity analysis of our cash investments during
  the quarter ended September 30, 2010, a decline of 1% in interest rates would
  not have had a material effect on our quarterly interest income.</p>
<p>On November 2, 2010, we terminated our bank credit line facility in conjunction
  with the planned issuance of a convertible note in the note financing expected
  to close in November 2010 (see &quot;Note 4 - Bank Financing Arrangements&quot;
  and &quot;Note 11 - Subsequent Events&quot; for more information). There is
  no interest rate risk from our credit line facility beyond the termination date.</p>
<p><b>Foreign Currency Risk</b></p>
<p>A substantial majority of our revenue, expense and purchasing activities are
  transacted in U.S. dollars. However, we require our European distributors to
  purchase our products in Euros, we pay the expenses of our European employees
  in Euros and British pounds, and we may enter into selected future purchase
  commitments with foreign suppliers that may be paid in the local currency of
  the supplier. We hedge a significant portion of our European receivables balance
  denominated in Euros to reduce the foreign currency risk associated with these
  assets, and we have not been subject to significant losses from material foreign
  currency fluctuations. Based on a sensitivity analysis of our net foreign currency
  denominated assets and expenses at the beginning, during and at the end of the
  quarter ended September 30, 2010, an adverse change of 10% in exchange rates
  would have resulted in an increase in our net loss for the third quarter 2010
  of approximately $24,000, if left unprotected. For the third quarter of 2010
  the total net adjustment for the effects of changes in foreign currency on cash
  balances, collections, payables, and derivatives was a net loss of $2,000. We
  will continue to monitor, assess, and mitigate through hedging activities, the
  risk associated with these exposures.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">25<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=item4></a></font><br>
  <b>Item 4. Controls and Procedures</b>
<p><i>Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  </i></p>
<p> Our management evaluated, with the participation of our Chief Executive Officer
  and our Chief Financial Officer, the effectiveness of our disclosure controls
  and procedures as of the end of the period covered by this Quarterly Report
  on Form 10-Q. Based on this evaluation, our Chief Executive Officer and our
  Chief Financial Officer have concluded that our disclosure controls and procedures
  are effective to ensure that information we are required to disclose in reports
  that we file or submit under the Securities Exchange Act of 1934 is (i) recorded,
  processed, summarized and reported within the time periods specified in Securities
  and Exchange Commission rules and forms, and (ii) accumulated and communicated
  to our management, including our Chief Executive Officer and our Chief Financial
  Officer, as appropriate to allow timely decisions regarding required disclosure.<br>
</p>
<p><i>Changes in Internal Control Over Financial Reporting</i><br>
</p>
<p>There was no change in our internal control over financial reporting that occurred
  during the period covered by this Quarterly Report on Form 10-Q that has materially
  affected, or is reasonably likely to materially affect, our internal control
  over financial reporting.</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">26<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=oth></a></font>
<p> </p>
<p><b>PART II. OTHER INFORMATION</b></p>
<p><b>Item 1A. Risk Factors<font face="Times New Roman, Times, serif" size="3"><a
name=risk></a></font></b></p>
<p><i>The risks described in this Quarterly Report on Form 10-Q are not the only
  risks facing our Company. Additional risks and uncertainties not currently known
  to us or that we currently deem to be immaterial also may materially adversely
  affect our business, financial condition, and operating results.</i></p>
<p><b>Our ability to continue as a going concern is dependent upon our ability
  to establish profitable operations and to raise additional capital.</b></p>
<p>The financial statements in our Annual Report on Form 10-K were prepared on
  a going concern basis. Our continued operating losses, declines in our working
  capital balances and our failure to achieve the revenue levels required to maintain
  compliance with our bank line covenants are conditions that raise doubt about
  the Company's ability to continue as a going concern. We terminated our bank
  line on November 2, 2010 in conjunction with the planned issuance of a $1.0
  million senior secured convertible note in the note financing that is expected
  to close in November 2010. Our ability to continue as a going concern is dependent
  upon our ability to establish profitable operations and to raise additional
  financing. We have been taking steps intended to reduce operating losses and
  achieve profitability including the introduction of new products, continued
  close support of our distributors and of our application partners as they establish
  their mobile applications in key vertical markets, and management of our costs.
  We believe that we will be able to improve our liquidity and secure additional
  sources of financing by managing our working capital balances, and raising additional
  capital as needed, including development funding from development partners and
  the issuance of additional equity securities. Nonetheless, there can be no assurance
  that we will be successful in achieving any of these steps, and there can be
  no assurance that additional financing will be available on acceptable terms,
  if at all, and any such terms may be dilutive to existing stockholders. Our
  inability to secure and maintain the necessary liquidity would have a material
  adverse effect on our financial condition and results of operations. Our financial
  statements do not include any adjustments to reflect the possible future effects
  on the recoverability and classification of assets or the amounts and classification
  of assets and liabilities that may result from the outcome of this uncertainty.</p>
<p><b>The global economic financial crisis may continue to have an impact on our
  business and financial condition in ways that we currently cannot predict, and
  may further limit our ability to raise additional funds.</b></p>
<p>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
  these conditions cause our revenues to be materially less than forecast, we
  may find it necessary to initiate further reductions in our expenses and defer
  additional product development programs. In addition, our ability to access
  the capital markets and raise funds required for our operations may be severely
  restricted at a time when we would like, or need, to do so, which could have
  an adverse effect on our ability to meet our current and future funding requirements
  and on our flexibility to react to changing economic and business conditions.<br>
  <b><br>
  </b></p>
<p align=center><font face="Times New Roman, Times, serif" size="3">27<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>We have a history of operating losses and may not achieve ongoing profitability.</b></p>
<p>We were unprofitable in the first nine months of 2010. We were profitable in
  the third quarter of 2009 due to the one time gain on the sale of our serial
  product line assets. We were unprofitable in each of other three quarters of
  2009, unprofitable for fiscal year 2009 as a whole, and unprofitable 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 as a whole. Fiscal
  year 2004 was the only profitable year in our history, and only to the extent
  of $288,000. Prior to 2004, we incurred significant operating losses in each
  financial period since our inception. To achieve ongoing profitability, we must
  accomplish numerous objectives, including growth in our business and the development
  of successful new products. We cannot foresee with any certainty whether we
  will be able to achieve these objectives in the future. Accordingly, we may
  not generate sufficient net revenue or manage our expenses sufficiently to achieve
  ongoing profitability. If we cannot achieve ongoing profitability, we will not
  be able to support our operations from positive cash flows, and we would use
  our existing cash to support operating losses. If we are unable to secure the
  necessary capital to replace that cash, we may need to suspend some or all of
  our current operations.</p>
<p><b>We may require additional capital in the future, but that capital may not
  be available on reasonable terms, if at all, or on terms that would not cause
  substantial dilution to your stock holdings.</b></p>
<p>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 deployments by businesses
  of applications that use our handheld computers and our data collection products.
  If capital requirements vary materially from those currently planned, we may
  require additional capital sooner than expected. There can be no assurance that
  such capital will be available in sufficient amounts or on terms acceptable
  to us, if at all. </p>
<p><b>Moreover, we may require additional capital in the future to repay our outstanding
  convertible notes, but that capital may not be available on reasonable terms,
  if at all, or available only on terms that result in substantial dilution to
  your stock holdings.</b></p>
<p>Although the convertible notes are priced to facilitate their conversion into
  equity over the eighteen-month term of the convertible notes, such conversion
  is at the option of the noteholder and any notes outstanding at the end of the
  eighteen-month period would require repayment by the Company. Our failure to
  repay any convertible notes outstanding at the end of their term would be an
  event of default. In addition, the convertible notes contain other events of
  default, including in the event the Company is unable to maintain the minimum
  cash and accounts receivables balance and the minimum current ratio required
  by the convertible notes. There can be no assurance that capital to refinance
  outstanding convertible notes at the end of their eighteen-month term or upon
  an event of default would be available on terms acceptable to the Company, if
  at all. The terms of our convertible note financing expected to close in November
  2010 contain certain anti-dilution provisions. Should we need to raise additional
  capital in the future at prices below the conversion price of the outstanding
  convertible notes at such future time, substantial dilution could result from
  such a financing.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">28<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p> <b>Our quarterly operating results may fluctuate in future periods, which
  could cause our stock price to decline.</b></p>
<p>We expect to experience quarterly fluctuations in operating results in the
  future. We generally ship orders as received, and as a result we may have little
  backlog. Quarterly revenues and operating results therefore depend on the volume
  and timing of orders received during the quarter, which are difficult to forecast.
  Historically, we have often recognized a substantial portion of our revenue
  in the last month of the quarter. This subjects us to the risk that even modest
  delays in orders may adversely affect our quarterly operating results. Our operating
  results may also fluctuate due to factors such as:</p>
<ul>
  <li>the demand for our products;<br>
  </li>
  <li>the size and timing of customer orders;<br>
  </li>
  <li>unanticipated delays or problems in our introduction of new products and
    product enhancements;<br>
  </li>
  <li>the introduction of new products and product enhancements by our competitors;<br>
  </li>
  <li>the timing of the introduction and deployments of new applications that
    work with our products;<br>
  </li>
  <li> changes in the revenues attributable to royalties and engineering development
    services;<br>
  </li>
  <li>product mix;<br>
  </li>
  <li>timing of software enhancements;<br>
  </li>
  <li>changes in the level of operating expenses;<br>
  </li>
  <li>competitive conditions in the industry including competitive pressures resulting
    in lower average selling prices;<br>
  </li>
  <li>timing of distributors' shipments to their customers; and<br>
  </li>
  <li>general economic conditions and conditions specific to our customers' industries.</li>
</ul>
<p>Because we base our staffing and other operating expenses on anticipated revenues,
  unanticipated declines or delays in the receipt of orders can cause significant
  variations in operating results from quarter to quarter. As a result of any
  of the foregoing factors, or a combination, our results of operations in any
  given quarter may be below the expectations of public market analysts or investors,
  in which case the market price of our Common Stock would be adversely affected.</p>
<p><b>If third-parties do not produce and sell innovative products with which
  our products are compatible, or if our own line of mobile handheld computers
  is not successful, we may not achieve our sales projections.</b></p>
<p>Our success has been dependent upon the ability of third-parties in the mobile
  computer industry to successfully develop products that include or are compatible
  with our technology and then to sell these products into the marketplace. Even
  if we are successful in marketing and selling our new line of mobile handheld
  computers, our ability to generate increased revenue depends significantly on
  the commercial success of other parties' Windows mobile products, particularly
  vertical market software applications for use with our handheld computer and
  peripheral products, and standard Pocket PC handhelds, phone-integrated devices,
  tablet computers, and other phone-integrated devices, including those from Palm,
  Nokia, Blackberry, and Apple, 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 they offer, 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 could be reduced and we
  may not be able to meet our sales expectations. </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">29<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>If we fail to develop and introduce new products rapidly and successfully,
  we will not be able to compete effectively, and our ability to generate sufficient
  revenues will be negatively affected.</b></p>
<p>The market for our products is prone to rapidly changing technology, evolving
  industry standards and short product life cycles. If we are unsuccessful at
  developing and introducing new products and services on a timely basis that
  include the latest technologies conforming to the newest standards and that
  are appealing to end users, we will not be able to compete effectively, and
  our ability to generate significant revenues will be seriously harmed.</p>
<p>The development of new products and services can be very difficult and requires
  high levels of innovation. The development process is also lengthy and costly.
  Short product life cycles expose our products to the risk of obsolescence and
  require frequent new product introductions. We will be unable to introduce new
  products and services into the market on a timely basis and compete successfully,
  if we fail to:<br>
</p>
<ul>
  <li>invest significant resources in research and development, sales and marketing,
    and customer support;<br>
  </li>
  <li>identify emerging trends, demands and standards in the field of mobile computing
    products;<br>
  </li>
  <li>enhance our products by adding additional features; <br>
  </li>
  <li>maintain superior or competitive performance in our products; and<br>
  </li>
  <li>anticipate our end users' needs and technological trends accurately.</li>
</ul>
<p>We cannot be sure that we will have sufficient resources to make adequate investments
  in research and development or that we will be able to identify trends or make
  the technological advances necessary to be competitive.</p>
<p><b>A significant portion of our revenue currently comes from two distributors,
  and any decrease in revenue from these distributors could harm our business.</b></p>
<p>A significant portion of our revenue comes from two distributors, Tech Data
  Corporation and Ingram Micro Inc., which together represented approximately
  25% and 35% of our worldwide revenues in the first nine months of 2010 and fiscal
  year 2009, respectively. We expect that a significant portion of our revenue
  will continue to depend on sales to Tech Data Corporation and Ingram Micro Inc.
  Additionally, 10% of our revenue in the third quarter 2010 came from Epocal
  Inc., an OEM customer, and 12% of our revenues in the first nine months of 2010
  came from our distributor BlueStar Inc. We do not have long-term commitments
  from Tech Data Corporation or Ingram Micro Inc. to carry our products. Each
  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 Corporation or Ingram Micro Inc., we would experience disruption
  and delays in marketing our products.<br>
  <br>
</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">30<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>If the market for mobile computers experiences delays, or fails to grow,
  we may not achieve our sales projections.</b></p>
<p>Substantially all of our peripheral products are designed for use with mobile
  computers, including handhelds, notebooks, tablets, and handhelds with integrated
  phones. If the mobile computer industry does not grow, if its growth slows,
  or if product or operating system changeovers by mobile computer manufacturers
  and partners cause delays in the market, or if the markets for our mobile handheld
  computers do not grow, or if the impact of the global economic financial crisis
  continues, we may not achieve our sales projections.</p>
<p><b>Our sales will be hurt if the new technologies used in our products do not
  become widely adopted, or are adopted slower than expected.</b></p>
<p>Many of our products use new technologies, such as two dimensional bar code
  scanning and radio frequency identification, which are not yet widely adopted
  in the market. If these technologies fail to become widespread, or are adopted
  slower than expected, our sales will suffer.</p>
<p><b>We could face increased competition in the future, which would adversely
  affect our financial performance.</b></p>
<p>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:</p>
<ul>
  <li>some of our competitors have greater financial, marketing, and technical
    resources than we do; <br>
  </li>
  <li>we periodically face intense price competition, particularly when our competitors
    have excess inventories and discount their prices to clear their inventories;
    and<br>
  </li>
  <li>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.</li>
</ul>
<p>Increased competition could result in price reductions, fewer customer orders,
  reduced margins, and loss of market share. Our failure to compete successfully
  against current or future competitors could harm our business, operating results
  and financial condition.</p>
<p><b>If we do not correctly anticipate demand for our products, our operating
  results will suffer.</b></p>
<p>The demand for our products depends on many factors and is difficult to forecast.
  We expect that it will become more difficult to forecast demand 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.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">31<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>If demand increases beyond forecasted levels, we would have to rapidly increase
  production at our third-party manufacturers. We depend on suppliers to provide
  additional volumes of components, and suppliers might not be able to increase
  production rapidly enough to meet unexpected demand. Even if we were able to
  procure enough components, our third-party manufacturers might not be able to
  produce enough of our devices to meet our customer demand. In addition, rapid
  increases in production levels to meet unanticipated demand could result in
  higher costs for manufacturing and supply of components and other expenses.
  These higher costs could lower our profit margins. Further, if production is
  increased rapidly, manufacturing yields could decline, which may also lower
  operating results.</p>
<p><b>We rely primarily on distributors, resellers, vertical industry partners,
  and OEMs to sell our products, and our sales would suffer if any of these third-parties
  stops selling our products effectively.</b></p>
<p>Because we sell our products primarily through distributors, resellers, vertical
  industry partners, and OEMs, we are subject to risks associated with channel
  distribution, such as risks related to their inventory levels and support for
  our products. Our distribution channels may build up inventories in anticipation
  of growth in their sales. If such growth in their sales does not occur as anticipated,
  the inventory build up could contribute to higher levels of product returns.
  The lack of sales by any one significant participant in our distribution channels
  could result in excess inventories and adversely affect our operating results
  and working capital liquidity.</p>
<p>Our agreements with distributors, resellers, vertical industry partners, and
  OEMs are generally nonexclusive and may be terminated on short notice by them
  without cause. Our distributors, resellers, vertical industry partners, and
  OEMs are not within our control, are not obligated to purchase products from
  us, and may offer competitive lines of products simultaneously. Sales growth
  is contingent in part on our ability to enter into additional distribution relationships
  and expand our sales channels. We cannot predict whether we will be successful
  in establishing new distribution relationships, expanding our sales channels
  or maintaining our existing relationships. A failure to enter into new distribution
  relationships or to expand our sales channels could adversely impact our ability
  to grow our sales.</p>
<p>We allow our distribution channels to return a portion of their inventory to
  us for full credit against other purchases. In addition, in the event we reduce
  our prices, we credit our distributors for the difference between the purchase
  price of products remaining in their inventory and our reduced price for such
  products. Actual returns and price protection may adversely affect future operating
  results and working capital liquidity by reducing our accounts receivable and
  increasing our inventory balances, particularly since we seek to continually
  introduce new and enhanced products and are likely to face increasing price
  competition.</p>
<p><b>We depend on alliances and other business relationships with a small number
  of third-parties, and a disruption in any one of these relationships would hinder
  our ability to develop and sell our products.</b></p>
<p>We depend on strategic alliances and business relationships with leading participants
  in various segments of the communications and mobile handheld computer markets
  to help us develop and market our products. Our strategic partners may revoke
  their commitment to our products or services at any time in the future or may
  develop their own competitive products or services. Accordingly, our strategic
  relationships may not result in sustained business alliances, successful product
  or service offerings, or the generation of significant revenues. Failure of
  one or more of such alliances could result in delay or termination of product
  development projects, failure to win new customers, or loss of confidence by
  current or potential customers.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">32<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>We have devoted significant research and development resources to design activities
  for Windows Mobile, Windows CE, Windows 7/Vista/XP, RIM Blackberry, and Nokia
  Symbian for E Series operating systems, and more recently, to develop our own
  family of mobile handheld computers. Such design activities have diverted financial
  and personnel resources from other development projects. These design activities
  are not undertaken pursuant to any agreement under which Microsoft, Research
  In Motion, or Symbian is obligated to continue the collaboration or to support
  the products produced from the collaboration. Consequently, these organizations
  may terminate their collaborations with us for a variety of reasons, including
  our failure to meet agreed-upon standards or for reasons beyond our control,
  such as changing market conditions, increased competition, discontinued product
  lines, and product obsolescence.</p>
<p><b>Our intellectual property and proprietary rights may be insufficient to
  protect our competitive position.</b></p>
<p>Our business depends on our ability to protect our intellectual property. We
  rely primarily on patent, copyright, trademark, trade secret laws, and other
  restrictions on disclosure to protect our proprietary technologies. We cannot
  be sure that these measures will provide meaningful protection for our proprietary
  technologies and processes. We cannot be sure that any patent issued to us will
  be sufficient to protect our technology. The failure of any patents to provide
  protection to our technology would make it easier for our competitors to offer
  similar products. In connection with our participation in the development of
  various industry standards, we may be required to license certain of our patents
  to other parties, including our competitors, that develop products based upon
  the adopted standards.</p>
<p>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.</p>
<p>Effective copyright, trademark, and trade secret protection may be unavailable
  or limited in certain foreign countries. Furthermore, certain of our customers
  have entered into agreements with us which provide that the customers have the
  right to use our proprietary technology in the event we default in our contractual
  obligations, including product supply obligations, and fail to cure the default
  within a specified period of time.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">33<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>We may become subject to claims of intellectual property rights infringement,
  which could result in substantial liability.</b></p>
<p>In the course of operating our business, we may receive claims of intellectual
  property infringement or otherwise become aware of potentially relevant patents
  or other intellectual property rights held by other parties. Many of our competitors
  have large intellectual property portfolios, including patents that may cover
  technologies that are relevant to our business. In addition, many smaller companies,
  universities, and individuals have obtained or applied for patents in areas
  of technology that may relate to our business. The industry is moving towards
  aggressive assertion, licensing, and litigation of patents and other intellectual
  property rights. In June 2007, we received a letter from Wi-LAN, Inc., claiming
  that certain of our wireless LAN products infringe on two U.S. and one Canadian
  patent held by Wi-LAN, Inc. In October 2007, Wi-LAN, Inc. filed patent infringement
  lawsuits against a number of companies alleging that those companies infringe
  the two U.S. patents by manufacturing, using, or offering for sale products
  with wireless capability compliant with the IEEE 802.11 standards. Wi-LAN, Inc.
  is asking for money damages and a court order barring the sale of products that
  use the patented technology. We have not been named in the lawsuit, and we do
  not plan to make any changes to our current business at this time. Nonetheless,
  we may be added to the lawsuit in the future, and even if we are not, the outcome
  of this lawsuit may result in future changes to our business, including potential
  increased costs for those of our products that make use of the related technology.</p>
<p>If we are unable to obtain and maintain licenses on favorable terms for intellectual
  property rights required for the manufacture, sale, and use of our products,
  particularly those products which must comply with industry standard protocols
  and specifications to be commercially viable, our results of operations or financial
  condition could be adversely impacted.</p>
<p>In addition to disputes relating to the validity or alleged infringement of
  other parties' rights, we may become involved in disputes relating to our assertion
  of our own intellectual property rights. Whether we are defending the assertion
  of intellectual property rights against us or asserting our intellectual property
  rights against others, intellectual property litigation can be complex, costly,
  protracted, and highly disruptive to business operations by diverting the attention
  and energies of management and key technical personnel. Plaintiffs in intellectual
  property cases often seek injunctive relief, and the measures of damages in
  intellectual property litigation are complex and often subjective or uncertain.
  Thus, any adverse determinations in this type of litigation could subject us
  to significant liabilities and costs.</p>
<p><b>New industry standards may require us to redesign our products, which could
  substantially increase our operating expenses.</b></p>
<p>Standards for the form and functionality of our products are established by
  standards committees. These independent committees establish standards, which
  evolve and change over time, for different categories of our products. We must
  continue to identify and ensure compliance with evolving industry standards
  so that our products are interoperable and we remain competitive. Unanticipated
  changes in industry standards could render our products incompatible with products
  developed by major hardware manufacturers and software developers. Should any
  major changes, even if anticipated, occur, we would be required to invest significant
  time and resources to redesign our products to ensure compliance with relevant
  standards. If our products are not in compliance with prevailing industry standards
  for a significant period of time, we would miss opportunities to sell our products
  for use with new hardware components from mobile computer manufacturers and
  OEMs, thus affecting our business.<br>
  <br>
</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">34<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>Undetected flaws and defects in our products may disrupt product sales and
  result in expensive and time-consuming remedial action.</b></p>
<p>Our hardware and software products may contain undetected flaws, which may
  not be discovered until customers have used the products. From time to time,
  we may temporarily suspend or delay shipments or divert development resources
  from other projects to correct a particular product deficiency. Efforts to identify
  and correct errors and make design changes may be expensive and time consuming.
  Failure to discover product deficiencies in the future could delay product introductions
  or shipments, require us to recall previously shipped products to make design
  modifications, or cause unfavorable publicity, any of which could adversely
  affect our business and operating results.</p>
<p><b>The loss of one or more of our senior personnel could harm our existing
  business.</b></p>
<p>A number of our officers and senior managers have been employed for fifteen
  to eighteen years by us, including our President, Executive Vice President,
  Chief Financial Officer, and Chief Technical Officer. Our future success will
  depend upon the continued service of key officers and senior managers. Competition
  for officers and senior managers is intense, and there can be no assurance that
  we will be able to retain our existing senior personnel. The loss of one or
  more of our officers or key senior managers could adversely affect our ability
  to compete.</p>
<p><b>The expensing of options will continue to reduce our operating results and
  may continue to cause us to incur net losses such that we may find it necessary
  to change our business practices to attract and retain employees.</b></p>
<p>Historically, we have used stock options as a key component of our employee
  compensation packages. We believe that stock options provide an incentive to
  our employees to maximize long-term stockholder value and, through the use of
  vesting, encourage valued employees to remain with us. Furthermore, on July
  1, 2010, we completed an exchange offer for certain of our outstanding options.
  As a result, the total remaining unrecognized compensation costs related to
  unvested stock options increased by $0.74 million, which is being amortized
  over the weighted average remaining requisite period of 2.4 years. The expensing
  of employee stock options adversely affected our net income and earnings per
  share in the first nine months of 2010 and in each of the quarters in fiscal
  2009, will continue to adversely affect future quarters, and will make profitability
  harder to achieve. In addition, we may decide in response to the effects of
  expensing stock options on our operating results to reduce the number of stock
  options granted to employees or to grant options to fewer employees. This could
  adversely affect our ability to retain existing employees and attract qualified
  candidates, and also could increase the cash compensation we would have to pay
  to them.</p>
<p><b>If we are unable to attract and retain highly skilled sales and marketing
  and product development personnel, our ability to develop and market new products
  and product enhancements will be adversely affected.</b></p>
<p>We believe our ability to achieve increased revenues and to develop successful
  new products and product enhancements will depend in part upon our ability to
  attract and retain highly skilled sales and marketing and product development
  personnel. Our products involve a number of new and evolving technologies, and
  we frequently need to apply these technologies to the unique requirements of
  mobile products. Our personnel must be familiar with both the technologies we
  support and the unique requirements of the products to which our products connect.
  Competition for such personnel is intense, and we may not be able to attract
  and retain such key personnel. In addition, our ability to hire and retain such
  key personnel will depend upon our ability to raise capital or achieve increased
  revenue levels to fund the costs associated with such key personnel. Failure
  to attract and retain such key personnel will adversely affect our ability to
  develop and market new products and product enhancements.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">35<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p><b>We may not be able to collect revenues from customers who experience financial
  difficulties.</b></p>
<p>Our accounts receivable are derived primarily from distributors and OEMs. We
  perform ongoing credit evaluations of our customers' financial conditions but
  generally require no collateral from our customers. Reserves are maintained
  for potential credit losses, and such losses have historically been within such
  reserves. However, many of our customers may be thinly capitalized and may be
  prone to failure in adverse market conditions. Although our collection history
  has been good, from time to time a customer may not pay us because of financial
  difficulty, bankruptcy or liquidation. The current global financial crisis may
  have an impact on our customers' ability to pay us in a timely manner, and consequently,
  we may experience increased difficulty in collecting our accounts receivable,
  and we may have to increase our reserves in anticipation of increased uncollectible
  accounts.</p>
<p><b>We may be unable to manufacture our products, because we are dependent on
  a limited number of qualified suppliers for our components.</b></p>
<p>Several of our component parts, including our serial interface chip, our Ethernet
  chip, our bar code scanning modules, and our new line of mobile handheld computers,
  are produced by one or a limited number of suppliers. Shortages could occur
  in these essential components due to an interruption of supply or increased
  demand in the industry. If we are unable to procure certain component parts,
  we could be required to reduce our operations while we seek alternative sources
  for these components, which could have a material adverse effect on our financial
  results. To the extent that we acquire extra inventory stocks to protect against
  possible shortages, we would be exposed to additional risks associated with
  holding inventory, such as obsolescence, excess quantities, or loss.</p>
<p><b>Our operating results could be harmed by economic, political, regulatory
  and other risks associated with export sales.</b></p>
<p>Export sales (sales to customers outside the United States) accounted for approximately
  25% and 42% of our revenue in the first nine months of 2010 and fiscal 2009,
  respectively. Accordingly, our operating results are subject to the risks inherent
  in export sales, including:<br>
</p>
<ul>
  <li>longer payment cycles;<br>
  </li>
  <li>unexpected changes in regulatory requirements, import and export restrictions
    and tariffs;<br>
  </li>
  <li>difficulties in managing foreign operations;<br>
  </li>
  <li>the burdens of complying with a variety of foreign laws;<br>
  </li>
  <li>greater difficulty or delay in accounts receivable collection;<br>
  </li>
  <li>potentially adverse tax consequences; and<br>
  </li>
  <li>political and economic instability.</li>
</ul>
<p align=center><font face="Times New Roman, Times, serif" size="3">36<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>Our export sales are primarily denominated in United States dollars and in
  Euros for our sales to European distributors. Accordingly, an increase in the
  value of the United States dollar relative to foreign currencies could make
  our products more expensive and therefore potentially less competitive in foreign
  markets. Declines in the value of the Euro relative to the United States dollar
  may result in foreign currency losses relating to collection of Euro denominated
  receivables if left unhedged.</p>
<p><b>Our operations are vulnerable to interruption by fire, earthquake, power
  loss, telecommunications failure, and other events beyond our control.</b></p>
<p>Our corporate headquarters is located near an earthquake fault. The potential
  impact of a major earthquake on our facilities, infrastructure, and overall
  business is unknown. Additionally, we may experience electrical power blackouts
  or natural disasters that could interrupt our business. Should a disaster be
  widespread, such as a major earthquake, or result in the loss of key personnel,
  we may not be able to implement our disaster recovery plan in a timely manner.
  Any losses or damages incurred by us as a result of these events could have
  a material adverse effect on our business.</p>
<p><b>Failure to maintain effective internal controls could have a material adverse
  effect on our business, operating results and stock price.</b></p>
<p>We have evaluated and will continue to evaluate our internal control procedures
  in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act,
  which requires an annual management assessment of the design and effectiveness
  of our internal control 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 control over financial reporting
  in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective
  internal controls, particularly those related to revenue recognition, are necessary
  for us to produce reliable financial reports and are important to helping prevent
  financial fraud. If we cannot provide reliable financial reports or prevent
  fraud, our business and operating results could be harmed, investors could lose
  confidence in our reported financial information, and the trading price of our
  stock could drop significantly.</p>
<p><b>The sale of a substantial number of shares of our Common Stock could cause
  the market price of our Common Stock to decline.</b></p>
<p>Sales of a substantial number of shares of our Common Stock in the public market
  could adversely affect the market price for our Common Stock. The market price
  of our Common Stock could also decline if one or more of our significant stockholders
  decided for any reason to sell substantial amounts of our Common Stock in the
  public market.</p>
<p>As of October 29, 2010, we had 3,801,991 shares of Common Stock outstanding.
  Substantially all of these shares are freely tradable in the public market,
  either without restriction or subject, in some cases, only to S-3 prospectus
  delivery requirements and, in other cases, only to manner of sale, volume, and
  notice requirements of Rule 144 under the Securities Act.</p>
<p>As of October 29, 2010, we had 1,243,397 shares of Common Stock subject to
  outstanding options under our stock option plans, and 119,636 shares of Common
  Stock were available for future issuance under the plans. We have registered
  the shares of Common Stock subject to outstanding options and reserved for issuance
  under our stock option plans. Accordingly, the shares of Common Stock underlying
  vested options will be eligible for resale in the public market as soon as the
  options are exercised.</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">37<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>As of October 29, 2010, we had 86,585 shares of Common Stock subject to outstanding
  warrants issued in a private placement. We have registered the resale of all
  shares of Common Stock subject to the warrants. Accordingly, the shares of Common
  Stock underlying these warrants will be eligible for resale in the public market
  as soon as the warrants are exercised, subject to S-3 prospectus delivery requirements.</p>
<p>Upon the closing of the planned convertible note financing in November 2010,
  the noteholder will have the right to convert the note into an aggregate of
  500,000 shares of common stock. The conversion price of the convertible note
  will be subject to resets on certain dates within the first year of the closing
  of the financing. The conversion price resets under the terms of the convertible
  notes, which depend upon the market price of the Company's common stock at the
  time of such resets, can result in an increase in the number of shares the Company
  is obligated to issue upon conversion of the convertible notes up to an additional
  260,343 shares in aggregate. In addition, upon the closing of the convertible
  note financing, the Company will issue warrants to purchase 550,000 shares of
  common stock (including warrants issued to the placement agent in the financing)
  at an exercise price of $2.44 per share. The warrants are not exercisable until
  the six month and one day anniversary of the closing of the financing. The Company
  is obligated to register the shares issuable upon the conversion of the convertible
  notes and exercise of the warrants by the 60th calendar date after the closing
  date of the financing (or the 90th calendar day after the closing date, in the
  event the registration statement covering the resale of such shares is reviewed
  by the SEC).</p>
<p><b>Volatility in the trading price of our Common Stock could negatively impact
  the price of our Common Stock.</b></p>
<p>During the period from January 1, 2009 through October 29, 2010, our Common
  Stock price fluctuated between a high of $5.44 and a low of $1.32. Following
  a one-for-ten reverse stock split effected on October 23, 2008, which significantly
  decreased the Company's share float, we have experienced low trading volumes
  in our stock, and thus relatively small purchases and sales can have a significant
  effect on our stock price. The trading price of our Common Stock could be subject
  to wide fluctuations in response to many factors, some of which are beyond our
  control, including general economic conditions and the outlook of securities
  analysts and investors on our industry. In addition, the stock markets in general,
  and the markets for high technology stocks in particular, have experienced high
  volatility that has often been unrelated to the operating performance of particular
  companies. These broad market fluctuations may adversely affect the trading
  price of our Common Stock.</p>
<p align=left><br>
  <br>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">38<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p> <font face="Times New Roman, Times, serif" size="3"><b>Item 6. Exhibits</b></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=item6></a></font> </p>
<p><font face="Times New Roman, Times, serif" size="3"> Exhibits</font></p>
<p><font face="Times New Roman, Times, serif">31.1 Certification of Chief Executive
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">31.2 Certification of Chief Financial
  Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
<p><font face="Times New Roman, Times, serif">32.1 Certification of Chief Executive
  Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
  Act of 2002.</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">39<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font><font face="Times New Roman, Times, serif" size="3"><a
name=sig></a></font><br>
  <br>
<div align="center"><font face="Times New Roman, Times, serif" size="3"><BR>
  </font></div>
<P align=center><font face="Times New Roman, Times, serif" size="3"><b>SIGNATURES</b></font></P>
<P>&nbsp;</P>
<P>Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
  has duly caused this report to be signed on its behalf by the undersigned thereunto
  duly authorized.</P>
<P>&nbsp;</P>
<P align=center><font face="Times New Roman, Times, serif" size="3"><U>SOCKET
  MOBILE, INC.<BR>
  </U>Registrant</font></P>
<P>&nbsp;
<TABLE cols=2 width="89%">
  <TR>
    <TD width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 15, 2010 </font></TD>
    <TD width="21%">
      <CENTER>
        <font face="Times New Roman, Times, serif"></font>
      </CENTER>
    </TD>
    <TD width="41%">
      <DIV align=left><font face="Times New Roman, Times, serif" size="3"><U>&nbsp;&nbsp;/s/
        Kevin J. Mills</U></font></DIV>
    </TD>
  </TR>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left>
        <p><font face="Times New Roman, Times, serif" size="3">Kevin J. Mills<br>
          President and Chief Executive Officer</font><font face="Times New Roman, Times, serif"><br>
          (Duly Authorized Officer and Principal Executive Officer)</font></p>
      </div>
    </td>
  </tr>
  <tr>
    <td width="38%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%" height="44"><font face="Times New Roman, Times, serif"></font></td>
    <td width="41%" height="44"><font face="Times New Roman, Times, serif"></font></td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 15, 2010 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>&nbsp;&nbsp;/s/
        David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">David
        W. Dunlap<br>
        Vice President of Finance and Administration and Chief Financial Officer
        <br>
        (Duly Authorized Officer and Principal Financial and Accounting Officer)
        </font></div>
    </td>
  </tr>
</TABLE>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">40<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
  <font face="Times New Roman, Times, serif" size="3"><a
name=ind></a></font>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>Index to
  Exhibits</b><br>
  <br>
  </font></p>
<table cellspacing=0 cellpadding=0 width=800 align=center border=0>
  <tr>
    <td valign=bottom width="10%" height=48>
      <p align=center><font face="Times New Roman, Times, serif" size="3">Exhibit
        <u>Number</u></font></p>
    </td>
    <td valign=bottom width="90%" height=48>
      <p align=center><font face="Times New Roman, Times, serif" size="3"><u>Description
        </u></font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=25>
      <p align=right><font face="Times New Roman, Times, serif"></font></p>
    </td>
    <td valign=top width="90%" height=25>
      <p><font face="Times New Roman, Times, serif"></font></p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">31.1&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Executive Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">31.2&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Financial Officer pursuant to Section 302 of the
        Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
  <tr>
    <td valign=top width="10%" height=30>
      <p align=center><font face="Times New Roman, Times, serif" size="3">32.1&nbsp;</font>
      </p>
    </td>
    <td valign=top width="90%" height=30>
      <p>Certification of Chief Executive Officer and Chief Financial Officer
        pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.</p>
    </td>
  </tr>
</table>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<P>&nbsp;</P>
<p align=center><font face="Times New Roman, Times, serif" size="3">41<br>
  </font>
<p align=center>
<hr width="100%">
</BODY></HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>2
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=left>
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.1
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font></p>
<p>I, Kevin J. Mills, certify that:</p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, Inc.;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report;</font></p>
<p>3. Based on my knowledge, the financial statements, and other financial information
  included in this report, fairly present in all material respects the financial
  condition, results of operations and cash flows of the registrant as of, and
  for, the periods presented in this report;</p>
<p>4. The registrant's other certifying officer and I are responsible for establishing
  and maintaining disclosure controls and procedures (as defined in Exchange Act
  Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
  (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
  and have:</p>
<p>(a) Designed such disclosure controls and procedures, or caused such disclosure
  controls and procedures to be designed under our supervision, to ensure that
  material information relating to the registrant is made known to us by others
  within those entities, particularly during the period in which this report is
  being prepared;</p>
<p>(b) Designed such internal control over financial reporting, or caused such
  internal control over financial reporting to be designed under our supervision,
  to provide reasonable assurance regarding the reliability of financial reporting
  and the preparation of financial statements for external purposes in accordance
  with generally accepted accounting principles;</p>
<p>(c) Evaluated the effectiveness of the registrant's disclosure controls and
  procedures and presented in this report our conclusions about the effectiveness
  of the disclosure controls and procedures, as of the end of the period covered
  by this report based on such evaluation; and</p>
<p>(d) Disclosed in this report any change in the registrant's internal control
  over financial reporting that occurred during the registrant's most recent fiscal
  quarter (the registrant's fourth fiscal quarter in the case of an annual report)
  that has materially affected, or is reasonably likely to materially affect,
  the registrant's internal control over financial reporting; and</p>
<p>5. The registrant's other certifying officer and I have disclosed, based on
  our most recent evaluation of internal control over financial reporting, to
  the registrant's auditors and the audit committee of the registrant's board
  of directors (or persons performing the equivalent functions):</p>
<p>(a) All significant deficiencies and material weaknesses in the design or operation
  of internal control over financial reporting which are reasonably likely to
  adversely affect the registrant's ability to record, process, summarize and
  report financial information; and</p>
<p>(b) Any fraud, whether or not material, that involves management or other employees
  who have a significant role in the registrant's internal control over financial
  reporting.</p>
<p><br>
  <font face="Times New Roman, Times, serif" size="3"> </font></p>
<table cols=2 width="97%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 15, 2010 </font></td>
    <td width="17%">
      <center>
      </center>
    </td>
    <td width="45%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>By:
        /s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%">&nbsp;</td>
    <td width="17%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="45%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">Name:
        Kevin J. Mills<br>
        Title: President and Chief Executive Officer (Principal Executive Officer)</font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
<p align=center>&nbsp;
</body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>3
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 31.2
  </font>
<p align="center"><font face="Times New Roman, Times, serif" size="3"><b>CERTIFICATION</b></font>
</p>
<p><font face="Times New Roman, Times, serif"><br>
  I, David W. Dunlap, certify that:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">1. I have reviewed this
  quarterly report on Form 10-Q of Socket Mobile, Inc.;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">2. Based on my knowledge,
  this report does not contain any untrue statement of a material fact or omit
  to state a material fact necessary to make the statements made, in light of
  the circumstances under which such statements were made, not misleading with
  respect to the period covered by this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">3. Based on my knowledge,
  the financial statements, and other financial information included in this report,
  fairly present in all material respects the financial condition, results of
  operations and cash flows of the registrant as of, and for, the periods presented
  in this report;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">4. The registrant's other
  certifying officer and I are responsible for establishing and maintaining disclosure
  controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
  and internal control over financial reporting (as defined in Exchange Act Rules
  13a-15(f) and 15d-15(f)) for the registrant and have:</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) Designed such disclosure
  controls and procedures, or caused such disclosure controls and procedures to
  be designed under our supervision, to ensure that material information relating
  to the registrant is made known to us by others within those entities, particularly
  during the period in which this report is being prepared;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Designed such internal
  control over financial reporting, or caused such internal control over financial
  reporting to be designed under our supervision, to provide reasonable assurance
  regarding the reliability of financial reporting and the preparation of financial
  statements for external purposes in accordance with generally accepted accounting
  principles;</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(c) Evaluated the effectiveness
  of the registrant's disclosure controls and procedures and presented in this
  report our conclusions about the effectiveness of the disclosure controls and
  procedures, as of the end of the period covered by this report based on such
  evaluation; and</font></p>
<p><font face="Times New Roman, Times, serif">(d) Disclosed in this report any
  change in the registrant's internal control over financial reporting that occurred
  during the registrant's most recent fiscal quarter (the registrant's fourth
  fiscal quarter in the case of an annual report) that has materially affected,
  or is reasonably likely to materially affect, the registrant's internal control
  over financial reporting; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">5. The registrant's other
  certifying officer and I have disclosed, based on our most recent evaluation
  of internal control over financial reporting, to the registrant's auditors and
  the audit committee of the registrant's board of directors (or persons performing
  the equivalent functions):</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(a) All significant deficiencies
  and material weaknesses in the design or operation of internal control over
  financial reporting which are reasonably likely to adversely affect the registrant's
  ability to record, process, summarize and report financial information; and</font></p>
<p><font face="Times New Roman, Times, serif" size="3">(b) Any fraud, whether
  or not material, that involves management or other employees who have a significant
  role in the registrant's internal control over financial reporting.<br>
  <br>
  </font></p>
<table cols=2 width="96%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      November 15, 2010 </font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif"><font face="Times New Roman, Times, serif"></font></font>
      </center>
    </td>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3"><u>By:
        /s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif"></font></td>
    <td width="21%">
      <center>
        <font face="Times New Roman, Times, serif" size="3">&nbsp; </font>
      </center>
    </td>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size="3">Name:
        David W. Dunlap<br>
        Title: Vice President of Finance and Administration and Chief Financial
        Officer (Principal Financial Officer) </font></div>
    </td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  </font></p>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>4
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<html>
<head>
<title>Untitled Document</title>
</head>

<body bgcolor="#FFFFFF">
<p align=right><font face="Times New Roman, Times, serif" size="3">Exhibit 32.1</font>
<p align="center">CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
  OFFICER<br>
  PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 </p>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  I, Kevin J. Mills, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
  to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report
  of Socket Mobile, Inc. on Form 10-Q for the quarter ended September 30, 2010
  fully complies with the requirements of Section 13(a) or 15(d) of the Securities
  Exchange Act of 1934 and that information contained in such Quarterly Report
  on Form 10-Q fairly presents in all material respects the financial condition
  and results of operations of Socket Mobile, Inc. </font></p>
<p>&nbsp;</p>
<div align="right"></div>
<table cols=2 width="43%" align="right">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ Kevin J. Mills</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        Kevin J. Mills<br>
        Title: &nbsp&nbspPresident and Chief Executive Officer <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Executive
        Officer)<br>
        Date: &nbspNovember 15, 2010</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>I, David W. Dunlap, certify, pursuant to 18 U.S.C. Section 1350, as adopted
  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
  Report of Socket Mobile, Inc. on Form 10-Q for the quarter ended September 30,
  2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities
  Exchange Act of 1934 and that information contained in such Quarterly Report
  on Form 10-Q fairly presents in all material respects the financial condition
  and results of operations of Socket Mobile, Inc.</p>
<p>&nbsp;</p>
<p align="right"></p>
<table cols=2 width="43%" align="right">
  <tr>
    <td width="41%">
      <div align=left><font face="Times New Roman, Times, serif"
      size=3><u>By: &nbsp;&nbsp;/s/ David W. Dunlap&nbsp;&nbsp;</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%">
      <div align=left><font face="Times New Roman, Times, serif" size=3>Name:
        David W. Dunlap<br>
        Title: &nbsp&nbspVice President of Finance and Administration <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspand Chief Financial
        Officer <br>
        &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Financial
        Officer)<br>
        Date:&nbsp&nbsp&nbsp&nbspNovember15, 2010</font></div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center>&nbsp;
<p align=center>&nbsp;
</body>
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</DOCUMENT>
</SEC-DOCUMENT>
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