<SEC-DOCUMENT>0000944075-11-000032.txt : 20110516
<SEC-HEADER>0000944075-11-000032.hdr.sgml : 20110516
<ACCEPTANCE-DATETIME>20110513204403
ACCESSION NUMBER:		0000944075-11-000032
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20110331
FILED AS OF DATE:		20110516
DATE AS OF CHANGE:		20110513

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:		11843113

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

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

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SOCKET COMMUNICATIONS INC
		DATE OF NAME CHANGE:	19950418
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>q1-2011.htm
<DESCRIPTION>10-Q
<TEXT>
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<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 March 31, 2011</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 May
  6, 2011 was 4,237,306 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 - March 31, 2011 and December 31, 2010 </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 Ended March 31,
      2011 and 2010</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 - Three Months Ended March
      31, 2011 and 2010</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">12</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">22</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">22</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">23</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">35</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">36</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">37</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">March
        31,<br>
        2011<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>
        2010*</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">758,813</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">460,833</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;Restricted
          cash </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">---</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">710,797</font></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;Accounts
          receivable, net</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">1,687,169</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" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">813,569</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;Inventories</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">1,375,268</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">1,698,650</font></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;Prepaid
          expenses and other current assets</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">202,437</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">128,131</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td 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 current assets</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">4,023,687</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">3,811,980</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 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" height="8"><font face="Times New Roman, Times, serif" size="3">Property
        and equipment:</font></td>
      <td height="8">&nbsp;</td>
      <td align="left" valign="bottom" height="8">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="8">&nbsp;</td>
      <td height="8">&nbsp;</td>
      <td width="10" height="8">&nbsp;</td>
      <td align="left" valign="bottom" height="8">&nbsp;</td>
      <td align="right" nowrap height="8">&nbsp;</td>
      <td height="8">&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;Machinery
          and office equipment</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,145,597</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">2,140,897</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;Computer
          equipment</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">1,281,790</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">1,285,197</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 colspan="2" 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 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">3,427,387</font></td>
      <td bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"></font></td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,426,094</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;Accumulated
          depreciation</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">(3,035,202</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">(2,954,757</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>&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;Property and equipment, net</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">392,185</font></td>
      <td bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">471,337</font></td>
      <td bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td>&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" height="8"><font face="Times New Roman, Times, serif" size="3">Intangible
        assets, net</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"><font face="Times New Roman, Times, serif" size="3">195,000</font></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"><font face="Times New Roman, Times, serif" size="3">210,000</font></td>
      <td bgcolor="#cceeff" height="8">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">Goodwill</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">4,427,000</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">4,427,000</font></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">Other
        assets</font></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">122,931</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">146,298</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td>&nbsp;</td>
      <td align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000">
        <font face="Times New Roman, Times, serif" size="3">9,160,803</font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000">&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">9,066,615</font></td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="10" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="center" valign="top"> <font face="Times New Roman, Times, serif" size="3"><b>LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</b></font></td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="14" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Current
        liabilities:</font></td>
      <td height="14" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="14" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14" bgcolor="#cceeff">&nbsp;</td>
      <td height="14" bgcolor="#cceeff">&nbsp;</td>
      <td height="14" width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="14" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14" bgcolor="#cceeff">&nbsp;</td>
      <td height="14" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Accounts
          payable</font></div>
      </td>
      <td>&nbsp;</td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap><font face="Times New Roman, Times, serif" size="3">3,931,982</font></td>
      <td>&nbsp;</td>
      <td width="10">&nbsp;</td>
      <td align="left" valign="bottom"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap><font face="Times New Roman, Times, serif" size="3">3,770,325</font></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;Accrued
          payroll and related expenses</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">617,273</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" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">634,146</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">595,786</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">673,484</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">301,985</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">324,267</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">29,356</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">27,080</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">5,476,382</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">5,429,302</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">173,095</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">197,044</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">194,658</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">202,072</font></td>
      <td valign="bottom">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="4" bgcolor="#cceeff"><font size="3">Senior
        convertible note payable, net of debt discount of $628,135 at March 31,
        2011 and $670,447 at December 31, 2010</font></td>
      <td height="4" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="4" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="4" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">171,865</font></td>
      <td valign="bottom" height="4" bgcolor="#cceeff">&nbsp;</td>
      <td width="10" height="4" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="4" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="4" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">329,553</font></td>
      <td valign="bottom" height="4" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" height="8"><font face="Times New Roman, Times, serif" size="3">Deferred
        income taxes</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">23,500</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">15,515</font></td>
      <td valign="bottom">&nbsp;</td>
    </tr>
    <tr>
      <td height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="top" height="18" 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 liabilities</font></div>
      </td>
      <td height="18" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" height="18" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><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" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">6,039,500</font></td>
      <td height="18" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><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" height="18" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><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" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">6,173,486</font></td>
      <td height="18" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <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" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Commitments
        and contingencies</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top" 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" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">Stockholders'
        equity:</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap bgcolor="#cceeff">&nbsp;</td>
      <td bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="2" align="left" valign="top">
        <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" bgcolor="#cceeff">
        <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;4,220,495 at March 31, 2011 and 3,801,991
          at December 31, 2010</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">4,220</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" valign="bottom" nowrap bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">3,802</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;&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">58,827,081</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">57,671,065</font></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;&nbsp;&nbsp;Accumulated
          deficit</font></div>
      </td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(55,709,998</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">(54,781,738</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td>&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">3,121,303</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">2,893,129</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" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
        liabilities and stockholders&#146; equity</font></td>
      <td bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">9,160,803</font></td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff">&nbsp;</td>
      <td width="10" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">9,066,615</font></td>
      <td align="left" style="border-bottom: 3px double #000000" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="10" align="left" valign="top" height="8">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
          * Derived from audited financial statements.</font></div>
      </td>
    </tr>
  </table>
</center>
<P align=left>&nbsp;
<P align=center>
<P align=center>
<P></P>
<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>
  <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">&nbsp;</td>
      <td width="2%">&nbsp;</td>
      <td align="center" nowrap colspan="7"><font face="Times New Roman, Times, serif" size="3">Three
        Months Ended March&nbsp;31,</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" nowrap>&nbsp;</td>
      <td width="2%">&nbsp;</td>
      <td colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2011</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 colspan="2" align="center" nowrap style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">2010</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Revenues</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&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 bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3">4,039,442</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 bgcolor="#cceeff" width="11%"><font face="Times New Roman, Times, serif" size="3">3,807,149</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Cost of revenues</font></div>
      </td>
      <td width="2%">&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="11%"><font face="Times New Roman, Times, serif" size="3">2,525,732</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" width="2%"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">2,201,689</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Gross profit</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,513,710</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">1,605,460</font></td>
      <td width="1%" bgcolor="#cceeff" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating expenses:</font></div>
      </td>
      <td width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#CCEEFF">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#CCEEFF">&nbsp;</td>
      <td width="1%" bgcolor="#CCEEFF">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="18">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research
          and development</font></div>
      </td>
      <td height="18" width="2%">&nbsp;</td>
      <td align="left" valign="bottom" height="18" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">654,775</font></td>
      <td height="18" width="1%">&nbsp;</td>
      <td height="18" width="1%">&nbsp;</td>
      <td align="left" valign="bottom" height="18" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="18" width="11%"><font face="Times New Roman, Times, serif" size="3">681,520</font></td>
      <td height="18" width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
          and marketing</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">827,966</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">&nbsp;</td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,239,367</font></td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General
          and administrative</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">595,557</font></td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">660,625</font></td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
          of intangible assets</font></div>
      </td>
      <td width="2%" bgcolor="#cceeff">&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" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</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>
      <td width="1%" 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="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">15,000</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>
      <td width="5%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td colspan="2" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Total operating expenses</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">2,093,298</font></td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%"><font face="Times New Roman, Times, serif" size="3">2,596,512</font></td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
      <td width="2%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
      <td width="1%" bgcolor="#cceeff" valign="bottom">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Operating loss</font></div>
      </td>
      <td width="2%">&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="11%"><font face="Times New Roman, Times, serif" size="3">(579,588</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom"  width="2%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td align="right" valign="bottom" nowrap  width="11%"><font face="Times New Roman, Times, serif" size="3">(991,052</font></td>
      <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="top" bgcolor="#cceeff">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
        </div>
      </td>
      <td width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" bgcolor="#cceeff">&nbsp;</td>
      <td align="right" nowrap width="11%" bgcolor="#cceeff">&nbsp;</td>
      <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    </tr>
    <tr valign="bottom">
      <td colspan="3" align="left" valign="bottom" height="13">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Interest expense, net (including amortization of debt discount of $316,216
          for the three months ended March 31, 2011)</font></div>
      </td>
      <td width="2%" height="13">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%" height="13"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 1px solid #000000" width="11%" height="13"><font face="Times New Roman, Times, serif" size="3">(340,687</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" height="13">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="1%" height="13">&nbsp;</td>
      <td align=left style="border-bottom: 1px solid #000000" width="2%" height="13"><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="11%" height="13"><font face="Times New Roman, Times, serif" size="3">(47,749</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" height="13">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="3" align="left" valign="top" height="14">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp</font>
          <font face="Times New Roman, Times, serif" size="3">&nbsp</font> <font size="3" face="Times New Roman, Times, serif">&nbsp</font></div>
      </td>
      <td width="2%" height="14">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</td>
      <td align="left" valign="bottom" width="2%" height="14">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%" height="14">&nbsp;</td>
      <td width="1%" height="14">&nbsp;</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 loss before income taxes</font></div>
      </td>
      <td height="14" width="2%">&nbsp;</td>
      <td align="left" valign="bottom" height="14" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap height="14" width="11%"><font face="Times New Roman, Times, serif" size="3">(920,275</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
      <td height="14" width="1%">&nbsp;</td>
      <td align="left" valign="bottom" height="14" width="2%">&nbsp;</td>
      <td align="right" nowrap height="14" width="11%"><font face="Times New Roman, Times, serif" size="3">(1,038,801</font></td>
      <td height="14" width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Deferred income tax expense</font></div>
      </td>
      <td width="2%">&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="11%"><font face="Times New Roman, Times, serif" size="3">(7,985</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
      </td>
      <td width="1%">&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="11%"><font face="Times New Roman, Times, serif" size="3">---</font></td>
      <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
        <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
      </td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top" height="16">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss</font></div>
      </td>
      <td width="2%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(928,260</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">)</font></td>
      <td width="1%" height="16">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(1,038,801</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    </tr>
    <tr bgcolor="#cceeff">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td valign=bottom align=left width="2%" ><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
      <td align="right" valign="bottom" nowrap  width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr>
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Net loss per share:</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <td colspan="3" align="left" valign="top" height="10">
        <div style="margin-left: 10px; text-indent: -10px"> <font size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic
          and diluted</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(0.24</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">)</font></td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" style="border-bottom: 3px double #000000" width="2%"><font face="Times New Roman, Times, serif" size="3">$</font></td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">(0.27</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    </tr>
    <tr>
      <td colspan="3"><font style="font-size: 10pt" face="Times New Roman, Times, serif" size="3">&nbsp;</font><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
    </tr>
    <tr valign="bottom" bgcolor="#cceeff">
      <td colspan="3" align="left" valign="top">
        <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">
          Weighted average shares outstanding:</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" valign="bottom" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap width="11%">&nbsp;</td>
      <td width="1%">&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;Basic
          and diluted</font></div>
      </td>
      <td width="2%">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">3,935,271</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
      <td width="1%">&nbsp;</td>
      <td align="left" style="border-bottom: 3px double #000000" width="2%">&nbsp;</td>
      <td align="right" valign="bottom" nowrap style="border-bottom: 3px double #000000" width="11%"><font face="Times New Roman, Times, serif" size="3">3,788,990</font></td>
      <td align="left" style="border-bottom: 3px double #000000" width="1%">&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">Three
        Months Ended March&nbsp;31,</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">2011</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">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>
  </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">(928,260</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">(1,038,801</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 used in 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">178,503</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">165,240</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">105,640</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">138,812</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization
        of debt discount to interest expense</font></div>
    </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">316,216</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td 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;Non
        cash interest expense on convertible note</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">4,029</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">---</font></td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        income tax expense</font></div>
    </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">7,985</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td width="1%">&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 valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Changes in operating assets and liabilities:</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&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 noWrap align=right width="11%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        receivable</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">(873,600</font></td>
    <td valign=bottom noWrap align=left width="1%"><font 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">(1,260,225</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&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">323,382</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">427,100</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid
        expenses and other current 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">(74,306</font></td>
    <td valign=bottom noWrap align=left width="1%"><font 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">(125,539</font></td>
    <td valign=bottom noWrap align=left width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other
        assets </font></div>
    </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">23,367</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">14,167</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
        payable</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">661,655</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">1,104,580</font></td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
        payroll and related expenses</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&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">(16,873</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">143,213</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        income on shipments to distributors</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">(77,698</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">(8,258</font></td>
    <td valign=bottom noWrap align=left width="1%"><font size="3">)</font></td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
        service revenue</font></div>
    </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">(46,231</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">64,585</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Change
        in deferred rent</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">(1,943</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">(5,985</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr>
    <td colspan="4" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash used in operating activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(398,134</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">(381,111</font></td>
    <td valign=bottom noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="1%">&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 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 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 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">(11,488</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)</font></div>
    </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">(46,492</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">)&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        &nbsp;&nbsp; Net cash used in investing activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(11,488</font></td>
    <td 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 noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(46,492</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b></font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div
    style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><b>Financing
        activities</b></font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left 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 valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Payments on capital leases</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">(3,195</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="11%"><font size="3" face="Times New Roman, Times, serif">(3,009</font></td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Reduction in restricted cash requirement</font></div>
    </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">710,797</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">---</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;
        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">---</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">1,803,623</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 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">---</font></td>
    <td width="1%" valign="bottom" 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">(1,338,902</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">)</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="4">
      <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="4" width="1%">&nbsp;</td>
    <td align=left style="border-bottom: 1px solid #000000" width="1%" height="4"><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" height="4"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" height="4">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td height="4" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="4" 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" height="4"><font size="3" face="Times New Roman, Times, serif">8,120</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" height="4">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
        Net cash provided by financing activities</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align=left style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">707,602</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td 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">469,832</font></td>
    <td noWrap align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="4">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif"><b><b>&nbsp</b></b>
        &nbsp; </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 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%">&nbsp;</td>
    <td valign=bottom noWrap align=left 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">Net
        increase in cash and cash equivalents</font></div>
    </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">297,980</font></td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="11%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">42,229</font></td>
    <td noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
      &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 valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td valign=bottom align=left >&nbsp;</td>
    <td valign=bottom noWrap align=right width="11%" >&nbsp;</td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at beginning of period</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" width="1%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">460,833</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3"><b>&nbsp</b></font></td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,940,295</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="12">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">Cash
        and cash equivalents at end of period</font></div>
    </td>
    <td height="12" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="12" style="border-bottom: 3px double #000000" 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"><font size="3" face="Times New Roman, Times, serif">758,813</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td height="12" width="1%">&nbsp;</td>
    <td valign=bottom align=left height="12" width="1%" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">1,982,524</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td valign=top align=left colspan=4 height="16" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3"><font size="3"></font>
        </font></div>
    </td>
    <td height="16" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left height="16" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=left height="16" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td height="16" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom align=left height="16" width="1%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=right height="16" width="11%" bgcolor="#cceeff"><font size="3"></font></td>
    <td valign=bottom noWrap align=left height="16" 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
        cash flow information </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 bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Cash paid for interest</font></div>
    </td>
    <td>&nbsp;</td>
    <td align=left height="12"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12"><font size="3" face="Times New Roman, Times, serif">12,143</font></td>
    <td align="left">&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left height="12"><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12"><font size="3" face="Times New Roman, Times, serif">47,583</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Non-cash investing and financing activities:</font></div>
    </td>
    <td>&nbsp;</td>
    <td align=left height="12" >&nbsp;</td>
    <td noWrap align=right height="12" >&nbsp;</td>
    <td align="left" >&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left height="12" >&nbsp;</td>
    <td noWrap align=right height="12" >&nbsp;</td>
    <td align="left" >&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4>
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Issuance of Common Stock for reduction
        in accounts payable balance</font></div>
    </td>
    <td>&nbsp;</td>
    <td align=left height="12" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" ><font size="3" face="Times New Roman, Times, serif">499,998</font></td>
    <td align="left" >&nbsp;</td>
    <td>&nbsp;</td>
    <td align=left height="12" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="12" ><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" >&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=top align=left colspan=4 height="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beneficial conversion feature associated
        with senior convertible note payable</font></div>
    </td>
    <td height="2">&nbsp;</td>
    <td align=left height="2" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="2" ><font size="3" face="Times New Roman, Times, serif">273,904</font></td>
    <td align="left" height="2" >&nbsp;</td>
    <td height="2">&nbsp;</td>
    <td align=left height="2" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="2" ><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" height="2" >&nbsp;</td>
  </tr>
  <tr valign=bottom bgcolor="#cceeff">
    <td valign=top align=left colspan=4 height="6">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Conversion of senior convertible
        note payable and accrued interest to Common Stock</font></div>
    </td>
    <td height="6">&nbsp;</td>
    <td align=left height="6" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="6" ><font size="3" face="Times New Roman, Times, serif">204,029</font></td>
    <td align="left" height="6" >&nbsp;</td>
    <td height="6">&nbsp;</td>
    <td align=left height="6" ><font face="Times New Roman, Times, serif" size="3">$</font></td>
    <td noWrap align=right height="6" ><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" height="6" >&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, 2010. The financial statements
  in the Company's annual report on Form 10-K were prepared on a going concern
  basis.</p>
<p><i>Liquidity and Going Concern</i><br>
  The Company's financial statements have been prepared on a going concern basis.
  During the quarter ended March 31, 2011 and the year ended December 31, 2010,
  the Company incurred net losses of $928,260 and $3,975,837, respectively. As
  of March 31, 2011, the Company has an accumulated deficit of $55,709,998. The
  Company's cash balances at March 31, 2011 were $758,813. The Company's balance
  sheet at March 31, 2011 has a current ratio of 0.73 to 1.0 (current assets divided
  by current liabilities), and a working capital deficit of $1,452,695 (current
  assets less current liabilities). These circumstances raise substantial 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. The Company has been taking steps intended
  to reduce operating losses and achieve profitability including the introduction
  of new products, continued close support of its distributors and its application
  partners as they establish their mobile applications in key vertical markets,
  and management of its costs. The Company has the ability to reduce expenses
  further if necessary. The Company believes that it will be able to improve its
  liquidity and secure additional sources of financing by managing its working
  capital balances, improving its 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 the Company 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. The Company's inability to secure and maintain the necessary liquidity
  would have a material adverse effect on its financial condition and results
  of operations. If the Company is unable to secure the necessary capital for
  its business, it may need to suspend some or all of its 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 the Company can return to revenue growth and attain
  profitability, it anticipates requirements for cash will include funding of
  higher receivable and inventory balances, and increased expenses, including
  more employees to support its growth and increases in salaries, benefits, and
  related support costs for employees.</p>
<p>&nbsp;</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><br>
  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 the Company's inability
  to continue as a going concern.</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>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 March 31, 2011 and December 31, 2010, 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>Restricted Cash</i><br>
  Under the terms of the Company's senior convertible note issued in November
  2010, the Company is required at all times to maintain collateralization of
  the convertible note with an amount equivalent to the unconverted principal
  plus accrued interest. Collateral consists of qualified accounts receivables
  of the Company, plus cash to the extent qualified accounts receivables are less
  than the unconverted principal plus accrued interest (see &quot;NOTE 4 - Senior
  Convertible Note&quot; for more information). At March 31, 2011, the Company's
  accounts receivable fully collateralized the note and therefore no cash was
  classified as restricted. At December 31, 2010 all of the Company's restricted
  cash consisted of amounts held in demand deposits in banks under the terms of
  our senior convertible note.</p>
<p><i>Derivative Financial Instruments</i><br>
  The Company regularly enters into forward foreign currency contracts to reduce
  exposures related to foreign exchange rate changes in certain foreign currencies
  against the U.S. dollar. The Company's forward foreign currency contracts are
  recorded at fair value and are included within current assets or liabilities
  as appropriate. The Company had no foreign currency forward contracts outstanding
  at March 31, 2011. At December 31, 2010, the fair value of contracts with a
  notional amount of $132,900 to hedge Euros was immaterial based on quotations
  from financial institutions, and had maturity dates in January 2011.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">5<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p align=left>
<p><font face="Times New Roman, Times, serif"><b>NOTE 3 - Inventories</b></font></p>
<p><font face="Times New Roman, Times, serif">Inventories consist principally
  of raw materials and sub-assemblies, which are stated at the lower of cost (first-in,
  first-out) or market.<br>
  <br>
  </font></p>
<table width="70%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="center" valign="bottom" colspan="2" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">March
      31,<br>
      2011</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>
      2010</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">1,333,008</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">$</font></td>
    <td align="right" nowrap width="11%" bgcolor="#cceeff"><font face="Times New Roman, Times, serif" size="3">1,608,469</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="60%">
      <div style="margin-left: 10px; text-indent: -10px"><font face="Times New Roman, Times, serif" size="3">Finished
        goods</font></div>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">42,260</font></td>
    <td align="left" valign="bottom" nowrap width="1%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td align="right" valign="bottom" nowrap width="11%" style="border-bottom: 1px solid #000000"><font face="Times New Roman, Times, serif" size="3">90,181</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="60%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"> </div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font face="Times New Roman, Times, serif" size="3">$</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">1,375,268</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">1,698,650</font></td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  </font></p>
<p align=left><font face="Times New Roman, Times, serif" size="3"><b>NOTE 4 -
  Senior Convertible Note</b></font>
<p>On November 19, 2010, the Company issued a senior secured convertible note
  having a principal amount of $1,000,000 in a private placement financing. The
  note was initially convertible all or in part at the option of the noteholder
  into 500,000 shares of Common Stock, at an initial conversion price of $2.00
  per share. The conversion price is subject to resets under certain market conditions.
  The convertible note matures eighteen months from the date of issuance, and
  will bear interest at the rate of 10% per annum, which is payable quarterly
  in arrears. The proceeds from the note financing were used for working capital
  purposes.</p>
<p>In conjunction with the convertible note, the Company issued to the investor
  a 5.5 year warrant to purchase 500,000 shares of Common Stock at $2.44 per share.
  In connection with the note financing, the Company issued to the private placement
  agent a 5.5 year warrant to purchase 50,000 shares of Common Stock with a fair
  value of $50,500. The private placement agent warrants have terms that are substantially
  the same as the warrant issued to the investor, except that the private placement
  agent's warrant will allow for net exercise. The fair values of these warrants
  were derived using a binomial lattice valuation formula with the following assumptions:
  0.0% dividend yield rate, 1.54% risk free interest rate, $2.11 fair value of
  common stock, $2.44 exercise price, a life of five and a half years, and a volatility
  of 65.32%.</p>
<p>The convertible note was initially recorded on the Company's balance sheet
  net of the associated debt discount of $726,096, which was comprised of the
  following:</p>
<ul>
  <li>allocated fair value of the warrant issued to the investor of $335,548;</li>
  <li>beneficial conversion feature of $335,548 based on the allocation of the
    proceeds between the note and the fair value of the investor warrants; and
  </li>
  <li>in-the-money beneficial conversion feature of $55,000.</li>
</ul>
<p>The debt discount will be amortized ratably over the life of the note, except
  in the case of conversion which may accelerate the amortization.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">6<br>
  </font>
<p align=center>
<hr width="100%">
<p 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>
  The convertible note is secured by all the assets of the Company. In order to
  secure the note, the Company terminated its credit line facilities with its
  bank, who then released its security interest. The Company is required at all
  times to maintain collateralization of the convertible note with an amount equivalent
  to the unconverted principal plus accrued interest. Collateral consists of qualified
  accounts receivables of the Company, plus cash to the extent qualified accounts
  receivables are less than the unconverted principal plus interest due over the
  remaining life of the note. At March 31, 2011, the outstanding note was fully
  collateralized by the Company's accounts receivable and therefore no cash was
  classified as restricted on the Company's balance sheet. At December 31, 2010,
  $710,797 of the note proceeds was reserved as collateral under the terms of
  the note and classified as restricted cash.</p>
<p>On January 12, 2011, the Company completed the registration of 1,310,398 shares
  which is an amount equal to the maximum shares issuable for the conversion of
  the note and warrants. On January 20, 2011, the date of the first conversion
  price reset, 85% of the lowest reported closing bid price in the five days preceding
  the reset date resulted in a conversion price reset of $1.50 per share which
  added an additional 166,666 shares to be issued upon conversion of the note
  for a total of 666,666 shares issuable upon conversion. As a result of the reset,
  a beneficial conversion feature with a fair value of $273,904 was added to debt
  discount in the quarter ended March 31, 2011 and is being amortized ratably
  over the remaining life of the note. The conversion price is subject to one
  additional price reset one year from date of closing subject to a conversion
  floor price of $1.31 per share and could result in an increase in the number
  of shares the Company is obligated to issue upon conversion of the note up to
  an additional 97,732 shares in aggregate. As the total debt discount is limited
  to the face value of the note, no additional debt discount will be recognized
  in the future. </p>
<p>During the three months ended March 31, 2011, the holder converted a $200,000
  principal amount which resulted in the issuance of 133,333 shares of Common
  Stock. Amortization of the debt discount during the quarter totaled $316,216,
  which is classified as interest expense in the quarter ended March 31, 2011.
  Interest expense on the note principal for the quarter ended March 31, 2011
  was $24,029.</p>
<p><b>NOTE 5 - Common Stock Financing</b></p>
<p>On February 23, 2011, the Company completed the sale of 282,485 shares of its
  Common Stock in a private placement with AboCom Systems, Inc., a corporation
  organized under the laws of Taiwan and a contract manufacturer of the Company's
  products. The shares were priced at the closing bid price of $1.77 per share
  as reported on February 23, 2011 for a total of $499,998 raised in the private
  placement. The issuance of Common Stock was used to settle trade payables due
  to AboCom Systems.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">7<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited)</font>
<p>&nbsp;</p>
<p> <b>NOTE 6 - Intangible Assets</b></p>
<p>Amortization of all intangible assets for each of the quarters ended March
  31, 2011 and 2010 was $15,000. Intangible assets as of March 31, 2011 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">405,000</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">195,000</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">975,750</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">195,000</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=left> Intangible assets as of December 31, 2010 consisted of the following:<br>
  <br>
<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">390,000</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">210,000</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">960,750</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">210,000</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>The future amortization expense is expected to be $15,000 per quarter through
  mid 2014.<br>
  <br>
</p>
<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 and distributors. Revenues for the geographic areas
  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="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="65%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="1%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="1%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body -->
    <td align=left width="1%">&nbsp;</td>
    <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter --> <!-- colindex=04 type=lead -->
    <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13">&nbsp; </td>
    <td height="13">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=7 height="13" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td noWrap align=left width="71%" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">
      Revenues:</font></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">2011</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">2010</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">United
        States</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">2,924,445</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">2,802,929</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">Europe</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left>&nbsp; </td>
    <td valign=bottom noWrap align=right><font size="3" face="Times New Roman, Times, serif">874,169</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
    <td noWrap align=right><font size="3" face="Times New Roman, Times, serif">825,170</font></td>
    <td valign=bottom noWrap align=left>&nbsp;</td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Asia
        and rest of world</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">240,828</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>&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">179,050</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left>
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif"><font style="FONT-SIZE: 10pt" size="2">&nbsp;&nbsp;
        &nbsp;&nbsp; </font>Total Revenues</font></div>
    </td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">4,039,442</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&nbsp;</td>
    <td>&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$
      </font></td>
    <td noWrap align=right style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,807,149</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="1%">&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>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">8<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=center><font face="Times New Roman, Times, serif" size="3"><b>SOCKET
  MOBILE, INC.<br>
  NOTES TO CONDENSED FINANCIAL STATEMENTS<br>
  </b>(Unaudited) </font>
<p><br>
  <i>Major Customers</i><br>
  Customers who accounted for at least 10% of the Company's total revenues in
  the quarters ended March 31, 2011 and 2010 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="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 1pt" valign=bottom>
    <td width="51%">&nbsp;</td>
    <!-- colindex=01 type=maindata -->
    <td width="9%">&nbsp;</td>
    <!-- colindex=02 type=gutter -->
    <td align=right width="11%">&nbsp;</td>
    <!-- colindex=02 type=lead -->
    <td align=right width="6%">&nbsp;</td>
    <!-- colindex=02 type=body -->
    <td align=left width="4%">&nbsp;</td>
    <!-- colindex=02 type=hang1 -->
    <td width="2%">&nbsp;</td>
    <!-- colindex=03 type=gutter -->
    <td align=right width="9%">&nbsp;</td>
    <!-- colindex=03 type=lead -->
    <td align=right width="8%">&nbsp;</td>
    <!-- colindex=03 type=body --> <!-- colindex=03 type=hang1 --> <!-- colindex=04 type=gutter -->
    <!-- colindex=04 type=lead --> <!-- colindex=04 type=body --> <!-- colindex=04 type=hang1 --></tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="16" colspan="2">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=6 height="16" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left colspan="2">
      <div
     ></div>
    </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">2011</font></div>
    </td>
    <td width="1%">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan="3">
      <div align="center"></div>
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left colspan="2">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Ingram
        Micro Inc.</font></div>
    </td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">17</font></td>
    <td noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font>
    </td>
    <td width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">17</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="2">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Tech
        Data Corporation</font></div>
    </td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">*</font></td>
    <td noWrap align=left width="8%">&nbsp;</td>
    <td width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">12</font></td>
    <td valign=bottom noWrap align=left width="8%"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">BlueStar</font></div>
    </td>
    <td noWrap align=right width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">*</font></td>
    <td noWrap align=left width="8%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">18</font></td>
    <td valign=bottom noWrap align=left width="8%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="2">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Epcoal,
        Inc. </font></div>
    </td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">20</font></td>
    <td noWrap align=left width="8%"><font size="3">%</font></td>
    <td width="1%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="1%">&nbsp;</td>
    <td noWrap align=right width="9%"><font size="3" face="Times New Roman, Times, serif">*</font></td>
    <td valign=bottom noWrap align=left width="8%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left colspan="8" height="26">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="2" face="Times New Roman, Times, serif">_____________________________________________<br>
        * Customer accounted for less than 10% of total revenues for the period</font></div>
    </td>
  </tr>
</table>
<p><i><br>
  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 March 31, 2011, 56% of the Company's accounts receivable balances were with
  two customers. At December 31, 2010, 62% of the Company's accounts receivable
  balances were with five customers.</p>
<p><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, such as the Company experienced
  in the fourth quarter 2010 and to a lesser extent in the first quarter 2011
  with the delays in availability of LCD touch screens used in the manufacture
  of the Company's mobile handheld computer. 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 March 31, 2011 and
  December 31, 2010, 28% and 32%, respectively, of the Company's accounts payable
  balances were concentrated in a single supplier. For the quarter ended March
  31, 2011, this same supplier accounted for 55% of the inventory purchases.</p>
<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>&nbsp;</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>&nbsp;</p>
<p>Total stock-based compensation expense recognized in the Company's statements
  of operations is shown below:</p>
<table width="60%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr>
    <td align="left" nowrap width="72%" height="21">&nbsp;</td>
    <td width="1%" height="21">&nbsp;</td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center" class="border"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td height="8"style="border-bottom: 1px solid #000000">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="left"><font size="3">Statements of Operations Classification</font></div>
      </div>
    </td>
    <td height="13">&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">2011</font></div>
    </td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td class="border" height="13">&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">2010</font></div>
    </td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td height="13">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><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">Cost of revenues</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">14,548</font></td>
    <td width="2%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">14,407</font></td>
    <td align="left" valign="bottom" nowrap width="2%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Research and
        development</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="left" width="3%" valign="bottom" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3" face="Times New Roman, Times, serif">40,154</font></td>
    <td align="left" valign="bottom" nowrap width="2%" >&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" >&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="7%" ><font size="3" face="Times New Roman, Times, serif">39,826</font></td>
    <td align="left" valign="bottom" nowrap width="2%" >&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><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">Sales and marketing</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">41,743</font></td>
    <td width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" >&nbsp;</td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" ><font size="3" face="Times New Roman, Times, serif">51,005</font></td>
    <td align="left" valign="bottom" nowrap width="2%" bgcolor="#cceeff" >&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="72%">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">General and
        administrative</font></div>
    </td>
    <td width="1%">&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 align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">82,058</font></td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td width="1%">&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 align="right" valign="bottom" nowrap width="7%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">60,002</font></td>
    <td align="right" valign="bottom" nowrap width="2%" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="72%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif"></font><font size="3" face="Times New Roman, Times, serif">Total</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="3%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">178,503</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" valign="bottom" width="2%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align="right" nowrap width="7%" bgcolor="#cceeff" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">165,240</font></td>
    <td align="left" style="border-bottom: 3px double #000000" width="2%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  <br>
  The weighted average per share fair value of stock options granted during the
  three months ended March 31, 2011 and 2010 was estimated at $1.04 and $2.16,
  respectively. At March 31, 2011, options issued to employees for 3,794,938 shares
  were outstanding, of which options for 1,514,905 shares were exercisable. As
  of March 31, 2011, the total remaining unrecognized compensation costs related
  to unvested stock options was approximately $1.18 million, which will be amortized
  over the weighted average remaining requisite period of 2.1 years.</font></p>
<p>Weighted average assumptions for stock options granted during the three months
  ended March 31, 2011 and 2010 are shown below:</p>
<p><font face="Times New Roman, Times, serif"> <br>
  </font></p>
<table width="60%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10.0pt; margin-top: 6pt; ">
  <tr class="border">
    <td align="left" valign="top" width="70%" height="19">&nbsp;</td>
    <td width="1%" class="border" height="19">&nbsp;</td>
    <td colspan="7" align="center" nowrap height="21" >
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31,</font></div>
    </td>
  </tr>
  <tr class="border">
    <td align="left" valign="top" width="70%" height="16">
      <div style="margin-left: 10px; text-indent: -10px">
        <div align="center" ></div>
      </div>
    </td>
    <td width="1%" class="border" height="16">&nbsp;</td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000" ><font size="3" face="Times New Roman, Times, serif">2011</font></div>
    </td>
    <td width="1%"class="border" height="16"><font face="Times New Roman, Times, serif" size="3">&nbsp
      </font></td>
    <td align="right" valign="bottom" nowrap colspan="2" height="16">
      <div align="center" style="border-bottom: 1px solid #000000"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Risk-free interest rate (%) </font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">3.46</font></td>
    <td width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">3.61</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Dividend
        yield</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="left" valign="top" width="70%" bgcolor="#cceeff">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Volatility factor</font></div>
    </td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">0.60</font></td>
    <td width="5%" bgcolor="#cceeff">&nbsp;</td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1.11</font></td>
    <td align="left" valign="bottom" nowrap width="5%" bgcolor="#cceeff">&nbsp;</td>
  </tr>
  <tr>
    <td align="left" valign="top" width="70%">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">Expected
        option life (years)</font></div>
    </td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">5.7</font></td>
    <td align="left" valign="bottom" nowrap width="5%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td align="right" valign="bottom" nowrap width="9%"><font size="3" face="Times New Roman, Times, serif">4.2</font></td>
    <td align="right" valign="bottom" nowrap width="5%">&nbsp;</td>
  </tr>
</table>
<p><font face="Times New Roman, Times, serif"><br>
  <b>NOTE 9 - Net Loss Per Share Applicable to Common Stockholders</b></font></p>
<p>The following table sets forth the computation of basic and diluted net loss
  per share:<br>
  <br>
  <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="60%" align=center border=0>
  <!-- Table Width Row -->
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left height="13" width="59%">&nbsp; </td>
    <td height="13" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=middle colspan=8 height="13">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        Months Ended March 31, </font></div>
    </td>
  </tr>
  <tr style="FONT-SIZE: 8pt" valign=bottom align=middle>
    <td valign=bottom noWrap align=left width="59%" height="16">
      <div
      ></div>
    </td>
    <td width="0%" height="16">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2011</font></div>
    </td>
    <td width="1%" height="16">&nbsp;</td>
    <td width="2%" height="16">&nbsp; </td>
    <td style="BORDER-BOTTOM: #000000 1px solid" valign=bottom noWrap
    align=middle colspan=3 height="16">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Numerator:</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="12%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
  </tr>
  <tr  valign=bottom>
    <td valign=bottom noWrap align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Net loss</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(928,260</font></td>
    <td valign=bottom noWrap align=left width="2style="border-bottom: 3px double #000000"%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$&nbsp</font>
    </td>
    <td noWrap align=right style="border-bottom: 3px double #000000" width="11%"><font size="3" face="Times New Roman, Times, serif">(1,038,801</font></td>
    <td noWrap align=left width="2style="border-bottom: 3px double #000000"%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp;</td>
    <td noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font size="3" face="Times New Roman, Times, serif">Denominator:</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td noWrap align=left width="2%">&nbsp;</td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        </font><font size="3" face="Times New Roman, Times, serif">Weighted average
        common shares outstanding used in computing net loss per share:</font></div>
    </td>
    <td bgcolor="#cceeff" width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td bgcolor="#cceeff" width="1%">&nbsp;</td>
    <td bgcolor="#cceeff" width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left bgcolor="#cceeff" width="2%">&nbsp;</td>
    <td noWrap align=right bgcolor="#cceeff" width="11%">&nbsp;</td>
    <td noWrap align=left bgcolor="#cceeff" width="2%">&nbsp; </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Basic
        and diluted</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,935,271</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
    <td noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">3,788,995</font></td>
    <td noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">&nbsp
      </font></td>
  </tr>
  <tr style="BACKGROUND: #cceeff" valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font face="Times New Roman, Times, serif"><font size="3"><font size="3">Net
        loss per share:</font></font></font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td valign=bottom noWrap align=right width="11%">&nbsp;</td>
    <td valign=bottom noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
    <td width="1%"><font face="Times New Roman, Times, serif" size="3">&nbsp</font></td>
    <td width="2%">&nbsp; </td>
    <td valign=bottom noWrap align=left width="2%">&nbsp;</td>
    <td noWrap align=right width="11%">&nbsp;</td>
    <td noWrap align=left width="2%"><font size="3" face="Times New Roman, Times, serif">&nbsp</font>
    </td>
  </tr>
  <tr valign=bottom>
    <td valign=bottom align=left width="59%">
      <div style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt"><font style="FONT-SIZE: 10pt" size="3" face="Times New Roman, Times, serif">&nbsp;&nbsp;
        &nbsp;&nbsp; </font><font size="3" face="Times New Roman, Times, serif">Basic
        and diluted</font></div>
    </td>
    <td width="0%">&nbsp; </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td valign=bottom noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">(0.24</font></td>
    <td valign=bottom noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)&nbsp
      </font></td>
    <td width="1%">&nbsp;</td>
    <td width="2%">&nbsp; </td>
    <td noWrap align=left style="border-bottom: 3px double #000000" width="2%"><font size="3" face="Times New Roman, Times, serif">$</font>
    </td>
    <td noWrap align=right width="11%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">(0.27</font></td>
    <td noWrap align=left width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">)&nbsp
      </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">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>&nbsp;</p>
<p>For the quarters ended March 31, 2011 and 2010, 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 2,031,258 shares and
  1,271,969 shares of common stock at March 31, 2011, and 2010, respectively,
  have been omitted from the net loss per share calculation.</p>
<p><b>NOTE 10 - Bank Financing Arrangements</b></p>
<p>In the comparable first quarter of 2010 and up through November 2, 2010, the
  Company had a credit facility with Silicon Valley Bank (the &quot;Bank&quot;)
  which allowed the Company to borrow up to $2,500,000 based on the level of qualified
  domestic and international receivables, up to a maximum of $1,500,000 and $1,000,000,
  respectively. The outstanding amounts borrowed under the domestic and international
  lines at March 31, 2010 were $1,096,913 and $369,896, respectively, and the
  full amounts of accounts receivable provided as collateral were $1,953,666,
  and $688,840, respectively.</p>
<p>On November 2, 2010, in anticipation of issuing a senior convertible note which
  subsequently closed on November 19, 2010, the Company repaid in full its outstanding
  indebtedness to the Bank and terminated the lines of credit (see &quot;NOTE
  4 - Senior Convertible Note&quot; for more information). 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, were terminated.</p>
<p><b>NOTE 11 - Taxes</b></p>
<p>Deferred tax expense in first quarter of 2011 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. As a result, the Company recognized deferred
  tax expense of $7,985 for the quarter ended March 31, 2011.</p>
<p>At December 31, 2010, the Company has an unrecognized tax benefit of approximately
  $597,000, which did not change significantly during the three months ended March
  31, 2011. Future changes in the unrecognized tax benefit will have no impact
  on the effective tax rate due to the existence of the valuation allowance.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">11<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left>
<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 product components and 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.</i><br>
</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><i>Our financial statements have been prepared assuming the Company will continue
  as a going concern as described in Note 1 to our condensed financial statements
  as of March 31, 2011 and for the three months then ended.<br>
  <br>
  </i><b> </b></p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman, Times, serif" size="3">12<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><b>Revenues</b><br>
  We are a producer of mobile handheld computers and data collection products
  serving the business mobility markets. We offer a family of handheld computer
  products designed for business enterprise use and a wide range of data collection
  products including two dimensional (2D) and linear (1D) bar code scanners, Radio
  Frequency Identification (RFID) readers, and magnetic stripe readers. We also
  offer wearable ring scanners, customized versions of our handheld computers,
  embedded wireless LAN cards and Bluetooth modules as OEM products to third party
  companies. Our data collection products work with our handheld computers and
  our cordless hand scanners work with many third-party mobile handheld devices
  including smartphones, tablet computers, ultra-mobile personal computers (UMPCs),
  notebooks and desktop systems, adding data collection 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 using management software we developed for ease of use.</p>
<p>We work closely with software application developers offering or developing
  vertical software applications for use with our handheld computers and for use
  with Smartphones, including phones running Apple iOS4, Google Android, RIM BlackBerry
  and Microsoft Windows operating systems for use with our cordless hand scanners.
  Healthcare and hospitality are two of the primary areas of focus for software
  application developers who have developed applications for use on our handheld
  computers, and a significant portion of our handheld computer sales now come
  from organizations within these two market segments. Other vertical markets
  benefiting from 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, Smartphones and networking technologies along
  with the pervasive use of the Internet are driving broader adoption of mobile
  computing solutions. 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 applications to become
  complete mobile data collection and connectivity solutions.</p>
<p>We also make available directly to original equipment manufacturers (&quot;OEMs&quot;)
  and other select customers our wearable ring scanners, customized versions of
  our handheld computers, component Bluetooth and wireless LAN technologies. We
  customize these products and components for our use in our own products and
  leverage that investment through the sale of modified versions or 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.<br>
  <br>
</p>
<p>&nbsp; </p>
<p align=center><font face="Times New Roman, Times, serif" size="3">13<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>We subcontract the manufacturing of all of our products to independent third-party
  contract manufacturers located in the U.S., China and Taiwan who have the equipment,
  know-how and capacity to manufacture products to our specifications. Our handheld
  computers and data collection 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. </p>
<p>Total revenues for the first quarter of 2011 were $4.0 million, an increase
  of 6% from revenues of $3.8 million in the first quarter of 2010.</p>
<p>Our revenues in the comparable three month periods are classified into three
  broad product families:</p>
<ul>
  <li>Mobile handheld computer products;</li>
  <li>Data collection products; and</li>
  <li><font face="Times New Roman, Times, serif">OEM embedded products. </font></li>
</ul>
<p>Our <i><b>mobile handheld computer products</b></i> are designed to be durable,
  lightweight and dependable devices which meet the requirements of the healthcare,
  hospitality and other markets we serve. Our initial model, <i>the SoMo&reg;
  650</i> (SoMo is derived from <u>So</u>cket <u>Mo</u>bile), was introduced in
  June 2007 with initial volume shipments in September 2007, and features the
  Microsoft Windows Mobile operating system, Version 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 are designed with 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 upgrade SoMo technology
  components from time to time without impacting form, fit or function. We expect
  our SoMo650 product to continue to be offered into 2014, approximately seven
  years from its introduction. </p>
<p>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 tableside ordering in the
  hospitality market, most of which use Bluetooth or wireless LAN connections
  for data communications. </p>
<p>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 a back pack 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, printers and smartcard readers.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">14<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left>Mobile handheld computer products, accessories and related service
  revenues represented approximately 42% of our revenue in the first quarters
  of 2011 and 2010, respectively.
<p align=left>Our <i><b>data collection products</b></i> are designed to enable
  the electronic collection of data from barcodes, radio frequency identification
  (RFID) tags or magnetic stripes. The products have been designed as durable
  devices for commercial use enabling a wide variety of accurate and rapid scans
  over a full work shift. All of the products come with SocketScan software that
  allows data to be edited when scanned and provides an easy-to-use interface
  for developers to build barcode scanning into their applications. Products are
  available in both standard and antimicrobial cases. <br>
  <br>
  Our data collection products consist of:<br>
<ul>
  <li>Cordless Hand Scanners: two dimensional (2D) and linear (1D) scanning used
    primarily with Smartphones and Tablet computers;<br>
  </li>
  <li>Plug-in barcode scanners: 2D and 1D in a CompactFlash form factor used primarily
    with our SoMo handheld computers;<br>
  </li>
  <li>Plug-in RFID products that read radio frequency identification tags used
    primarily with our SoMo handheld computers;<br>
  </li>
  <li>Combination plug-in barcode scanner and RFID reader/writer used primarily
    with our SoMo handheld computers;</li>
  <li>Plug-in magnetic stripe reader used primarily with our SoMo handheld computers;
    and </li>
  <li>Wearable cordless ring scanner for industrial applications needing two hands.
  </li>
</ul>
<p>Our plug-in barcode scanning products plug into handheld computers and our
  cordless hand scanners connect wirelessly over Bluetooth to tablet computers,
  ultra-mobile personal computers, notebook computers and smartphones 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 connect using Bluetooth technology. </p>
<p>Our <i>Cordless Hand Scanners</i> use Bluetooth technology as the connection
  interface. The scanners are available with two dimensional (2D) imagers and
  laser (1D) linear scanning engines. The scanners are available in standard cases
  or antimicrobial cases. The Cordless Hand Scanners are lightweight, ergonomically
  designed for ease of use and rapid repetitive scanning and are durable, lightweight
  and compact. During 2010, we redesigned our SocketScan software to enable the
  use of our Cordless Hand Scanners with a wide variety of smartphones, and we
  intend to add additional smartphone models as they are released by the smartphone
  manufacturers to provide wide ranging support for this fast emerging category
  of mobile devices. Currently SocketScan10 supports smartphones that use Windows
  Mobile, Windows CE, RIM Blackberry, and Google Android operating systems. The
  Human Interface Device (HID) Bluetooth protocol also allows the use of our Cordless
  Hand Scanners with HID-enabled devices including the iPad, iPhone, and iPod
  touch using the Apple iOS4 operating system. The HID protocol enters scanned
  data as if it was entered through the keyboard. During 2011, we intend to extend
  the benefits of SocketScan 10 software to Apple devices running the iOS operating
  system.<br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">15<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left>Our <i>plug-in barcode scanners</i> use the industry standard CompactFlash
  form factor and are available with two dimensional 2D and laser linear 1D scanning
  engines. When plugged into a mobile computing device with a CompactFlash slot
  and SocketScan loaded onto the device, the combination of device and plug-in
  barcode scanner can be used as a one handed barcode scanner operated from programmable
  buttons on the mobile computing device.
<p align=left>Our <i>ring scanner</i> is an industrial strength barcode scanner
  that is worn on the index finger and connects via Bluetooth to mobile or fixed
  data collection computing devices. The device enables a worker to scan while
  having two hands available and is designed for applications such as warehousing
  and pick-and-pack operations.
<p>Our <i>Radio Frequency Identification (RFID) products</i> enable RFID tags
  to be read. We also offer an RFID/laser barcode scanner combination product
  that enables RFID tags to be read or written to and linear (1D) barcodes to
  be scanned with the same device.</p>
<p>Our <i>Magnetic Stripe Reader</i> is a plug-in device in a CompactFlash form
  factor for use with devices having a CompactFlash slot. The Reader enables magnetic
  card stripes such as on credit cards to be swiped and read electronically from
  a mobile location and is ideal for applications such as tableside ordering.</p>
<p>Data collection product revenues represented approximately 49% and 40% of our
  revenues in the first quarters of 2011 and 2010, respectively.</p>
<p>Our <i><b>OEM embedded products</b></i> consist of Bluetooth and wireless LAN
  plug-in cards used primarily by Original Equipment Manufacturers (OEMs) of electronic
  products to build wireless connection functions into their products using the
  Bluetooth and wireless LAN standards for wireless connectivity. Our Bluetooth
  products use the Bluetooth 2.1 + EDR standard. Our plug-in cards for connecting
  wirelessly to local area networks were upgraded in 2009 to use the wireless
  LAN 802.11 a/b/g Wi-Fi standard, upgrading our products from the wireless LAN
  802.11b/g standard used in 2008. Our wireless LAN products include extensive
  communications software with Cisco Compatible Extensions (CCX) designed to make
  these products easy to use. In 2008 our Bluetooth module sales peaked due to
  last time buys of older Bluetooth chip technology that was being phased out
  by the chip manufacturer. Our OEM product sales are primarily based on the acceptance
  of our designs by OEM customers (referred to as design-wins), and the product
  transitions described have resulted in last-time buys and reductions in ongoing
  revenue as new design-wins are pursued. OEM embedded products represented approximately
  4% and 14% of our revenues for the three months ended March 31, 2011 and 2010,
  respectively.</p>
<p>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 represented
  approximately 7% and 5% of our revenues in the first quarter 2011 and 2010,
  respectively. Service revenues are included within the related handheld computer
  and data collection revenues in the table that follows.</p>
<p><br>
  <br>
</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>In addition, we continue to carry legacy plug-in <i><b>connectivity products</b></i>
  consisting of Ethernet cards and adapters which represented approximately 5%
  and 4% of our revenues in the first quarter 2011 and 2010, respectively. </p>
<p>Our revenues by product family for the three months ended March 31, 2011 and
  2010, 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="70%" align=center border=0>
  <tr class="border">
    <td colspan=2 height="20" valign="bottom"  ><font size="3" face="Times New Roman, Times, serif"><i>(revenues
      in thousands)</i></font></td>
    <td height="20" valign="bottom" width="3%"  >&nbsp;</td>
    <td noWrap align=middle colspan=11 height="20">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">Three
        months ended March 31,</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%" valign="bottom">
      <div align="left"></div>
    </td>
    <td noWrap align=middle colspan=2 height="20" >
      <div align="center"><font face="Times New Roman, Times, serif" size="3">Increase</font></div>
    </td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="8"style="border-bottom: 1px solid #000000">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font size="3" face="Times New Roman, Times, serif">Product
        family: </font></div>
    </td>
    <td height="8" width="3%">&nbsp;</td>
    <td align="center" colspan="5" style="border-bottom: 1px solid #000000" height="8"><font face="Times New Roman, Times, serif" size="3">2011</font></td>
    <td align=left width="1%">&nbsp;</td>
    <td align=right style="border-bottom: 1px solid #000000" colspan="5">
      <div align="center"><font size="3" face="Times New Roman, Times, serif">2010</font></div>
    </td>
    <td align=right style="border-bottom: 1px solid #000000" width="1%%">
      <div align="left"></div>
    </td>
    <td align="center" style="border-bottom: 1px solid #000000" height="8" colspan="2"><font face="Times New Roman, Times, serif" size="3">(Decrease)</font></td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Mobile handheld computer products</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,689</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">42</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,613</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">42</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</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" face="Times New Roman, Times, serif">5</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr>
    <td colspan="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Data collection products</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">1,988</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
    <td width="3%" valign="bottom">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">49</font></div>
    </td>
    <td width="2%" valign="bottom">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom align=left width="1%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">1,513</font></td>
    <td width="1%" valign="bottom">&nbsp;</td>
    <td width="3%" valign="bottom">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">40</font></div>
    </td>
    <td width="2%" valign="bottom">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">31</font></td>
    <td width="1%" valign="bottom"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        OEM embedded 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" face="Times New Roman, Times, serif">151</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" valign="bottom" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">4</font></div>
    </td>
    <td width="2%" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">529</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="3%" bgcolor="#cceeff">
      <div align="right"><font size="3" face="Times New Roman, Times, serif">14</font></div>
    </td>
    <td width="2%" bgcolor="#cceeff">
      <div align="left"><font size="3" face="Times New Roman, Times, serif">%</font></div>
    </td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">(71</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%)</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2" height="10">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        Other:</font></div>
    </td>
    <td height="10" width="3%">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" height="10">&nbsp;</td>
    <td width="1%" valign="bottom" height="10">&nbsp;</td>
    <td width="3%" valign="bottom" height="10">
      <div align="right"></div>
    </td>
    <td width="2%" valign="bottom" height="10">
      <div align="left"></div>
    </td>
    <td valign=bottom align=left width="1%" height="10">&nbsp;</td>
    <td valign=bottom align=left width="1%" height="10">&nbsp;</td>
    <td noWrap align=right width="5%" height="10">&nbsp;</td>
    <td width="1%" height="10">&nbsp;</td>
    <td width="3%" height="10">
      <div align="right"></div>
    </td>
    <td width="2%" height="10">
      <div align="left"></div>
    </td>
    <td valign=bottom align=left width="1%%" height="10">&nbsp;</td>
    <td noWrap align=right width="5%" height="10">&nbsp;</td>
    <td width="1%" valign="bottom" height="10">&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2" bgcolor="#cceeff">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Connectivity</font></div>
    </td>
    <td width="3%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">211</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">5</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=left width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom align=left width="1%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">&nbsp</font></td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">152</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff">&nbsp;</td>
    <td valign=bottom noWrap align=right width="5%" style="border-bottom: 1px solid #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">4</font></td>
    <td align="right" nowrap style="border-bottom: 1px solid #000000" valign="bottom" bgcolor="#cceeff">
      <div align="left"><font face="Times New Roman, Times, serif" size="3">%&nbsp</font></div>
    </td>
    <td valign=bottom align=left width="1%%" bgcolor="#cceeff">&nbsp;</td>
    <td noWrap align=right width="5%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">39</font></td>
    <td width="1%" valign="bottom" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
  <tr valign=bottom>
    <td colspan="2">
      <div style="MARGIN-LEFT: 10px; TEXT-INDENT: -10px"><font face="Times New Roman, Times, serif" size="3">&nbsp;&nbsp;
        &nbsp;&nbsp; Total</font></div>
    </td>
    <td width="3%">&nbsp;</td>
    <td valign=bottom align=left style="border-bottom: 3px double #000000" width="1%" ><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td valign=bottom align=right style="border-bottom: 3px double #000000" width="5%" ><font size="3" face="Times New Roman, Times, serif">4,039</font></td>
    <td width="1%" height="10">&nbsp;</td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" ><font size="3" face="Times New Roman, Times, serif">100</font></td>
    <td width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td align=left width="1%" height="14">&nbsp;</td>
    <td align=left style="border-bottom: 3px double #000000" width="1%" ><font size="3" face="Times New Roman, Times, serif">$</font></td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" ><font size="3" face="Times New Roman, Times, serif">3,807</font></td>
    <td width="1%" height="10">&nbsp;</td>
    <td align=right style="border-bottom: 3px double #000000" width="5%" ><font size="3" face="Times New Roman, Times, serif">100</font></td>
    <td width="2%" style="border-bottom: 3px double #000000"><font size="3" face="Times New Roman, Times, serif">%</font></td>
    <td align=left width="1%%" height="14">&nbsp;</td>
    <td noWrap align=right width="5%"><font size="3" face="Times New Roman, Times, serif">6</font></td>
    <td width="1%"><font size="3" face="Times New Roman, Times, serif">%</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p>Our mobile handheld computer product and related service revenues in the first
  quarter of 2011 were $1.7 million, an increase of 5% compared to revenues of
  $1.6 million in the first quarter of 2010. Sales of our mobile handheld computer
  have been adversely affected as a result of shortages in the availability of
  LCD touch screens used in the manufacture of our mobile handheld computer. Beginning
  in the fourth quarter 2010, a major tablet and smartphone manufacturer secured
  a majority of the LCD touch screen manufacturing capacity producing LCD screens
  for our mobile handheld computer products causing short term supply disruptions
  as the LCD touch screen manufacturer reprioritized its capacity commitments.
  As a result of the supply disruptions our fourth quarter 2010 mobile handheld
  product revenues were adversely affected. The supply of this key component improved
  in the first quarter 2011 and consequently our mobile handheld revenues improved
  significantly from fourth quarter 2010 revenues. However, the increases in the
  comparable first quarter mobile handheld computer revenues are due to an increase
  in mobile handheld service revenues as a result of an increased percentage of
  customers opting to include our SocketCare extended warranty and accidental
  breakage coverage in conjunction with their deployments. Partially offsetting
  this increase was an overall decline in sales volumes of our mobile handheld
  computer of 2% in the comparable first quarters as a consequence of the continuing
  supply delay and our inability to ship approximately $1.5 million of our customer
  mobile handheld computer orders scheduled for shipment in the first quarter
  2011. </p>
<p>Our data collection product revenues in the first quarter of 2011 were $2.0
  million, an increase of 31%, or $0.5 million, compared to revenues of $1.5 million
  in the first quarter of 2010. Revenue increases of $0.4 million were from increased
  sales volumes of our Cordless Hand Scanner. Additional revenue increases of
  $0.3 million were from increased sales volumes of our Cordless Ring Scanner.
  Partially offsetting these increases were declines in sales of our SDIO In-Hand
  Scan card. Sales of our CompactFlash In-Hand Scan card were flat in the comparable
  first quarters. A significant sales volume of our plug-in scan cards are sold
  in conjunction with our mobile handheld computer. In the fourth quarter 2010
  in particular, and to a lesser extent in the first quarter 2011, supply delays
  in our mobile handheld computer mentioned previously, adversely impacted our
  mobile handheld computer sales and consequently the companion plug-in scan card
  revenues as we were forced to defer shipments beyond the end of the first quarter.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">17<br>
  </font>
<p align=center>
<hr width="100%">
<p><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
</p>
<p><font face="Times New Roman, Times, serif"> Service revenues from our SocketCare
  extended warranty program were $0.3 million or 7% of our revenue in the first
  quarter 2011 and approximately $0.2 million or 5% of our revenue in the comparable
  first quarter 2010. Increases in SocketCare service revenues are due to an increased
  percentage of customers opting to purchase our SocketCare extended warranty
  and accidental breakage coverage in conjunction with their mobile handheld computer
  and data collection deployments. Revenues related to our SocketCare services
  have been allocated to the respective mobile handheld computer and data collection
  revenues in the comparable first quarters presented in the table above.</font></p>
<p>Our OEM embedded product revenues in the first quarter of 2011 were $151,000,
  a decrease of 71% compared to $529,000 in the first quarter of 2010. Approximately
  half of the revenue decrease 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. Sales of Bluetooth plug-in products
  declined as a result of last-buys of these products as we completed the phase
  out of these products in 2010. Remaining declines in first quarter 2011 were
  from reductions in sales of our wireless LAN plug-in cards.</p>
<p>Our connectivity product revenues in the first quarter of 2011 were $211,000,
  an increase of 39% compared to revenues of $152,000 in the first quarter of
  2010. The increases resulted from increased sales volumes of our adapter plug-in
  cards.</p>
<p><b>Gross Margins</b><br>
  Our gross margins for the first quarter of 2011 were 37% compared to 42% in
  the comparable period one year ago. We generally price our products as a markup
  from our cost, and we offer discount pricing for higher volume purchases. Reductions
  in overall margins in the first quarter of 2011 are due primarily to a greater
  portion of our revenues comprised of data collection products, which comprised
  48% of our revenues in the first quarter of 2011 compared to 38% in the first
  quarter last year, at margins below the overall average data collection product
  margins due to a product mix emphasizing new data collection products. New products
  typically begin with reduced margins that improve over time as unit volumes
  increase. Additional decreases in margins are due to declines in margins on
  our mobile handheld computer product line due to a product mix within that line
  which emphasized lower margin OEM models.</p>
<p><b>Research and Development Expense</b><br>
  Research and development expense in the first quarter of 2011 was $655,000,
  a decrease of 4% compared to $682,000 in the first quarter of 2010. Reductions
  in research and development expense in the first quarter of 2011 were from reduced
  development costs due to a reduction in product development activities, and
  reduced equipment costs and outside services related to those reductions in
  product development activities, compared to the first quarter one year ago.
  Partially offsetting these reductions in the first quarter 2011 were increased
  personnel costs due to the elimination of a payroll salary cost savings program
  which had been in effect throughout fiscal 2010. Research and development expense
  in the second quarter of 2011 is expected to increase slightly due to higher
  levels of anticipated development activities.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">18<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><b>Sales and Marketing Expense</b><br>
  Sales and marketing expense for the first quarter of 2011 was $0.8 million,
  a decrease of 33%, or $0.4 million, compared to $1.2 million in the first quarter
  of 2010. The majority of the reduction in sales and marketing expense in the
  first quarter 2011 was from reduced personnel costs as a result of a realignment
  of the sales force we initiated in the fourth 2010 quarter to emphasize inside
  sales personnel located at the Company's Newark, CA headquarters to better serve
  our customer base, and from reductions in the related travel expense as a result
  of fewer outside sales personnel. Sales and marketing expense in the second
  quarter of 2011 is expected to continue at levels similar to the first quarter.
<p align=left><b>General and Administrative Expense</b><br>
  General and administrative expense for the first quarter of 2011 was $596,000,
  a decrease of 10% compared to $661,000 in the first quarter of 2010. Reductions
  in general and administrative expense in the first quarter 2011 were due to
  reductions in legal fees and outside services as a result of reduced activities
  requiring such services. Partially offsetting these reductions in the first
  quarter 2011 were increased personnel costs due to the elimination of a payroll
  salary cost savings program which had been in effect throughout fiscal 2010.
  General and administrative expense is expected to decline in the second quarter
  of 2011 from first quarter levels due to the absence of professional fees and
  other expenses related to the costs of our annual audit and stockholder communications
  which are expensed in the fourth and first quarters.
<p><b>Amortization of Intangibles</b><br>
  Amortization expense for the three months ended March 31, 2011 and 2010 was
  $15,000. Future amortization expense will be $15,000 per quarter going forward
  until fully amortized in mid 2014.</p>
<p><b>Interest Income and Expense</b><br>
  Interest income reflects interest earned on cash balances. Interest income in
  the first quarter of 2011and 2010 was nominal in each of the periods, reflecting
  low average rates of return on cash balances.</p>
<p>Interest expense in the first quarter of 2011 was $341,000 compared to interest
  expense of $48,000 in the same period one year ago. Interest expense in the
  first quarter 2011 is primarily related to our convertible note including the
  amortization of the related debt discount and interest on the principal outstanding
  during the quarter. Amortization of debt discount is a non-cash expense and
  totaled $316,000 in the first quarter 2011. Additionally, interest expense includes
  interest on equipment lease financing obligations, and in 2010 interest on amounts
  drawn on our bank lines of credit.</p>
<p><b>Taxes</b><br>
  Deferred tax expense in the first quarter of 2011 and the corresponding deferred
  tax liability shown on our balance sheet, 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 at
  December 31, 2009 on that portion of our goodwill being amortized for tax purposes
  resulted in the reversal of accumulated deferred tax expense in 2009 and the
  related deferred tax liability, temporarily eliminating the difference between
  financial and tax reporting at December 31, 2009, and through the first half
  of 2010. As a result no deferred tax expense was incurred in the first quarter
  of 2010. 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>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">19<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left><b>Liquidity and Capital Resources</b><br>
  During the quarter ended March 31, 2011, and the year ended December 31, 2010,
  we incurred net losses of $0.9 million and $4.0 million, respectively. As of
  March 31, 2011, we have an accumulated deficit of $55.7 million. 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>As reflected in our Statements of Cash Flows, net cash used in operating activities
  was $0.4 million in the comparable first quarters of 2011 and 2010. We calculate
  net cash used in or provided by operating activities by reducing our net loss
  ($0.9 million and $1.0 million in the first quarter of 2011 and 2010, 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, amortization of intangible assets, deferred
  tax expense, and in 2011 in particular, the amortization of debt discount. These
  amounts totaled $0.6 million in the first quarter of 2011 and $0.3 million in
  the first quarter of 2010. 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 quarter of 2011 changes in operating assets and liabilities
  resulted in a net use of cash of $0.1 million and were primarily from increases
  in accounts receivable due to increases in overall shipments in the first quarter
  2011 and the timing of those shipments later in the quarter compared to the
  previous quarter, increases in prepaid expenses, and reductions in deferred
  income on shipments to distributors due to delays in stocking our distribution
  channel resulting from supply delays on our mobile handheld computer, partially
  offset by increases in accounts payable due to deferred payments, and decreases
  in inventory. In the first quarter of 2010 changes in operating assets and liabilities
  resulted in a net source of cash of $0.4 million and were primarily from increases
  in accounts payable due to timing of payments, increases in accrued payroll
  and related expense, increases in deferred service revenue due to increased
  service billings, and reductions in inventory levels as a result of planned
  reductions from year end levels, partially offset by increases in accounts receivable
  due to increases in overall shipments in the first quarter 2010 and the timing
  of those shipments later in the quarter compared to the previous quarter, and
  increases in prepaid expenses.</p>
<p>Cash used in investing activities was $12,000 in the first quarter of 2011
  compared to $46,000 in the first quarter of 2010. Reductions in investing activities
  in the first quarter of 2011 reflects reductions in equipment and tooling purchases
  due to fewer development projects requiring these expenditures.</p>
<p>Cash provided by financing activities was $0.7 million in the first quarter
  of 2011 compared to $0.5 million in the first quarter of 2010. Financing activities
  in the first quarter 2011 consisted primarily of a reduction in the amount of
  cash required to collateralize our senior convertible note payable. Increases
  in qualified accounts receivable during the first quarter were sufficient to
  fully collateralize the note thereby eliminating the requirement to restrict
  cash at March 31, 2011 (see &quot;NOTE 4 - Senior Convertible Note&quot; for
  more information). The reduction in restricted cash was partially offset by
  payments on capital leases. Financing activities in the first quarter of 2010
  consisted of a net increase in the amounts drawn on our bank lines of credit
  and proceeds from the exercise of stock options, partially offset by payments
  on capital leases.</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">20<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p align=left> Our cash balances at March 31, 2011 were $759,000. Our balance
  sheet at March 31, 2011 has a current ratio (current assets divided by current
  liabilities) of 0.73 to 1.0, and a working capital deficit of $1,453,000 (current
  assets less current liabilities). We have experienced continuing operating losses
  and declines in our working capital balances. These conditions raise substantial
  doubt about our 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 have the ability to reduce expenses further if necessary. 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>Our contractual cash obligations at March 31, 2011 are outlined in the table
  below:<br>
  <font face="Times New Roman, Times, serif"><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">28,000</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">15,000</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">2,841,000</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">381,000</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">730,000</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">779,000</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">951,000</font></td>
    <td colspan="4" width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="2" align="left" bgcolor="#cceeff" height="18">
      <div style="margin-left: 10px; text-indent: -10px"><font size="3" face="Times New Roman, Times, serif">
        Senior convertible notes (including interest)</font></div>
    </td>
    <td bgcolor="#cceeff" width="4%" height="18">&nbsp;</td>
    <td align="left" bgcolor="#cceeff" width="1%" height="18">&nbsp;</td>
    <td align="right" width="8%" nowrap bgcolor="#cceeff" height="18"><font size="3" face="Times New Roman, Times, serif">891,000</font></td>
    <td bgcolor="#cceeff" width="1%" height="18">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%" height="18">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" height="18"><font size="3" face="Times New Roman, Times, serif"></font></td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%" height="18"><font size="3" face="Times New Roman, Times, serif">80,000</font></td>
    <td bgcolor="#cceeff" width="1%" height="18">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%" height="18">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" height="18">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%" height="18"><font size="3" face="Times New Roman, Times, serif">811,000</font></td>
    <td bgcolor="#cceeff" width="1%" height="18">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%" height="18">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" height="18">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%" height="18"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td bgcolor="#cceeff" width="1%" height="18">&nbsp;</td>
    <td bgcolor="#cceeff" width="4%" height="18">&nbsp;</td>
    <td align="left" width="1%" bgcolor="#cceeff" valign="bottom" height="18">&nbsp;</td>
    <td align="right" nowrap bgcolor="#cceeff" width="8%" height="18"><font size="3" face="Times New Roman, Times, serif">---</font></td>
    <td colspan="4" width="1%" height="18">&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">2,957,000</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">2,957,000</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 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">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">6,717,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</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">3,431,000</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">$</font></font></td>
    <td align="right" width="8%" nowrap style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif">1,556,000</font></td>
    <td width="1%" bgcolor="#cceeff">&nbsp;</td>
    <td width="4%" bgcolor="#cceeff">&nbsp;</td>
    <td align="left" width="1%" style="border-bottom: 3px double #000000" bgcolor="#cceeff"><font size="3" face="Times New Roman, Times, serif"><font color="#000000">$</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">779,000</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">951,000</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>As of March 31, 2011, 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">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>
  <font face="Times New Roman, Times, serif" size="3"><a
name=qqd></a></font>
<p align=left><b> Item 3. Quantitative and Qualitative Disclosures About Market
  Risk</b>
<p><b>Interest Rate Risk</b></p>
<p>Our exposure to market risk for changes in interest rates relates primarily
  to invested cash. Our cash is invested in short-term money market investments
  backed by U.S. Treasury notes and other investments that mature within one year
  and whose principal is not subject to market rate fluctuations. Accordingly,
  interest rate declines would adversely affect our interest income but would
  not affect the carrying value of our cash investments. Based on a sensitivity
  analysis of our cash investments during the quarter ended March 31, 2011, a
  decline of 1% in interest rates would not have had a material effect on our
  quarterly interest income.</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 March 31, 2011, an adverse change of 10% in exchange rates would
  have resulted in an increase in our net loss for the first quarter 2011 of approximately
  $7,600 if left unprotected. For the first quarter of 2011 the total net adjustment
  for the effects of changes in foreign currency on cash balances, collections,
  payables, and derivatives was a net gain of $6,500. We will continue to monitor,
  assess, and mitigate through hedging activities, the risk associated with these
  exposures.</p>
<p align=left><br>
  <b>Item 4. Controls and Procedures<font face="Times New Roman, Times, serif" size="3"><a
name=item4></a></font></b>
<p><i>Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures</i>
  <br>
  <br>
  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>
  <br>
  <i>Changes in Internal Control Over Financial Reporting</i><br>
  <br>
  There was no change in our internal control over financial reporting that occurred
  during the period covered by this Quarterly Report on Form 10-Q that has materially
  affected, or is reasonably likely to materially affect, our internal control
  over financial reporting. </p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">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>
  <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 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 raise additional
  capital as needed. 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 our inability to continue as
  a going concern.</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.</p>
<p> <b><br>
  </b></p>
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<p><b>We have a history of operating losses and may not achieve ongoing profitability.</b></p>
<p>We have been unprofitable in every quarter except one during the past three
  fiscal years. 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, deployments by businesses
  of applications that use our handheld computers and our data collection products,
  and supply delays in key components such as we experienced in the fourth quarter
  of 2010 and to a lesser extent in the first quarter of 2011. 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>We may require additional capital in the future to repay our outstanding
  convertible note, 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 note that we issued in November 2010 is priced to
  facilitate its conversion into equity over the eighteen-month term of the convertible
  note, such conversion is at the option of the noteholder and the note, including
  interest, if outstanding at the end of the eighteen-month period, would require
  repayment by the Company. Our failure to repay the convertible note including
  interest if outstanding at the end of its term, would be an event of default.
  In addition, the convertible note contains 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
  note. There can be no assurance that capital to refinance the convertible note
  at the end of its 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 November 2010
  convertible note financing contain certain anti-dilution provisions. Should
  we need to raise additional capital in the future at prices below the conversion
  price of the convertible note, if outstanding at such future time, substantial
  dilution could result from such a financing.</p>
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<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 or in the manufacture of products relating to orders received,
  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;</li>
  <li>the size and timing of customer orders;</li>
  <li>unanticipated delays or problems in our introduction of new products and
    product enhancements;</li>
  <li>the introduction of new products and product enhancements by our competitors;</li>
  <li>the timing of the introduction and deployments of new applications that
    work with our products;</li>
  <li>changes in the revenues attributable to royalties and engineering development
    services;</li>
  <li>product mix;</li>
  <li>timing of software enhancements;</li>
  <li>changes in the level of operating expenses;</li>
  <li>competitive conditions in the industry including competitive pressures resulting
    in lower average selling prices;</li>
  <li>timing of distributors' shipments to their customers;</li>
  <li>delays in supplies of key components used in the manufacturing of our products,
    and </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>Goodwill comprises a significant portion of our assets and may be subject
  to impairment write-downs in future periods which would substantially increase
  our losses, make it more difficult to achieve profitability, and cause our stock
  price to decline.</b></p>
<p>We review our goodwill for impairment at least annually and more often if factors
  suggest potential impairment. Many factors are considered in evaluating goodwill
  including our market capitalization, comparable companies within our industry,
  our estimates of our future performance, and discounted cash flow analysis.
  Many of these factors are highly subjective and may be negatively impacted by
  our financial results and market conditions in the future. We recorded goodwill
  impairment charges in 2009 of $5.4 million. We may incur goodwill impairment
  charges in the future and any future write-downs of our goodwill would increase
  our net losses, make it more difficult to achieve profitability, and as a result
  the market price of our Common Stock could be adversely affected.</p>
<p>&nbsp;</p>
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<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 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. In particular, shipments of our mobile handheld computers
  in the fourth quarter 2010, and to a lesser extent in the first quarter 2011,
  were adversely affected by a worldwide supply chain LCD screen shortage, due
  to increased demand for LCD screens by tablet and smart phone manufacturers.
  If we are unable to procure certain component parts such as we experienced in
  the fourth quarter of 2010 and first quarter 2011, 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>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 Nokia,
  Blackberry, Google, Hewlett-Packard 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 Windows Mobile devices, or experience difficulties with new product
  transitions that cause delays in the market, 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><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><br>
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<p>The development of new products and services can be very difficult and requires
  high levels of innovation. The development process is also lengthy and costly.
  Short product life cycles expose our products to the risk of obsolescence and
  require frequent new product introductions. We will be unable to introduce new
  products and services into the market on a timely basis and compete successfully,
  if we fail to:</p>
<ul>
  <li> invest significant resources in research and development, sales and marketing,
    and customer support;</li>
  <li>identify emerging trends, demands and standards in the field of mobile computing
    products;</li>
  <li>enhance our products by adding additional features; </li>
  <li>maintain superior or competitive performance in our products; and</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
  26% and 27% of our worldwide revenues in the first quarter of 2011 and fiscal
  year 2010, 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, 11% of our revenues in fiscal 2010 came from our distributor BlueStar,
  Inc., and 20% and 10% of our revenue in the first quarter 2011 and fiscal 2010,
  respectively, came from Epocal, Inc., an OEM customer. We do not have long-term
  commitments from Tech Data Corporation or Ingram Micro Inc. to carry our products,
  or any of our other distributors who may from quarter to quarter comprise a
  significant concentration of our revenues. Any 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., or any of our other significant distributors, we would
  experience disruption and delays in marketing our products.</p>
<p><b>If the market for mobile computers experiences delays, or fails to grow,
  we may not achieve our sales projections.</b></p>
<p>Substantially all of our peripheral products are designed for use with mobile
  computers, including handhelds, notebooks, tablets, and handhelds with integrated
  phones. If the mobile computer industry does not grow, if its growth slows,
  or if product or operating system changeovers by mobile computer manufacturers
  and partners cause delays in the market, or if the markets for our mobile handheld
  computers do not grow, or if the impact of the global economic financial crisis
  continues, we may not achieve our sales projections.</p>
<p><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>
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<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; </li>
  <li>we periodically face intense price competition, particularly when our competitors
    have excess inventories and discount their prices to clear their inventories;
    and</li>
  <li>certain manufacturers 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>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>
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<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>We have devoted significant research and development resources to design products
  to work with a number of operating systems used in mobile devices including
  Windows Mobile, Windows CE, Windows 7/Vista/XP, RIM Blackberry, Apple, Google's
  Android, and 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, Apple, or Google 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>&nbsp;</p>
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<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><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.</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.<br>
  <br>
  <br>
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<p><b>New industry standards may require us to redesign our products, which could
  substantially increase our operating expenses.</b></p>
<p>Standards for the form and functionality of our products are established by
  standards committees. These independent committees establish standards, which
  evolve and change over time, for different categories of our products. We must
  continue to identify and ensure compliance with evolving industry standards
  so that our products are interoperable and we remain competitive. Unanticipated
  changes in industry standards could render our products incompatible with products
  developed by major hardware manufacturers and software developers. Should any
  major changes, even if anticipated, occur, we would be required to invest significant
  time and resources to redesign our products to ensure compliance with relevant
  standards. If our products are not in compliance with prevailing industry standards
  for a significant period of time, we would miss opportunities to sell our products
  for use with new hardware components from mobile computer manufacturers and
  OEMs, thus affecting our business.</p>
<p><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 sixteen
  to nineteen 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 a stockholder approved 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 quarter 2011 and in each of the quarters
  in fiscal 2010, 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>
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<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><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>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
  28% and 24% of our revenue in the first quarter of 2011 and fiscal 2010, respectively.
  Accordingly, our operating results are subject to the risks inherent in export
  sales, including:</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">32<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<ul>
  <li>longer payment cycles;</li>
  <li>unexpected changes in regulatory requirements, import and export restrictions
    and tariffs;</li>
  <li>difficulties in managing foreign operations;</li>
  <li>the burdens of complying with a variety of foreign laws;</li>
  <li>greater difficulty or delay in accounts receivable collection;</li>
  <li>potentially adverse tax consequences; and</li>
  <li>political and economic instability. </li>
</ul>
<p>Our export sales are primarily denominated in United States dollars and in
  Euros for our sales to European distributors. Accordingly, an increase in the
  value of the United States dollar relative to foreign currencies could make
  our products more expensive and therefore potentially less competitive in foreign
  markets. Declines in the value of the Euro relative to the United States dollar
  may result in foreign currency losses relating to collection of Euro denominated
  receivables if left unhedged.</p>
<p><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 May 6, 2011, we had 4,237,306 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>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">33<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p>As of May 6, 2011, we had 1,418,335 shares of Common Stock subject to outstanding
  options under our stock option plans, and 96,777 shares of Common Stock were
  available for future issuance under the plans. We have registered the shares
  of Common Stock subject to outstanding options and reserved for issuance under
  our stock option plans. Accordingly, the shares of Common Stock underlying vested
  options will be eligible for resale in the public market as soon as the options
  are exercised.</p>
<p>As of May 6, 2011, we had 86,585 shares of Common Stock subject to outstanding
  warrants issued in our 2009 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>As of May 6, 2011, we had 516,666 shares of Common Stock subject to the conversion
  of a note issued in our November 2010 senior convertible note financing. The
  conversion price of this note is subject to one additional conversion price
  reset one year from date of issuance of the note, and, depending upon the market
  price of our Common Stock at the time of such reset, can result in an increase
  in the number of shares we are obligated to issue upon conversion of the note
  up to an additional 97,732 shares in aggregate. As of May 6, 2011, we had 550,000
  shares of Common Stock subject to outstanding warrants issued in connection
  with the convertible note financing in November 2010. The warrants are not exercisable
  until May 20, 2011. We have registered the resale of all shares of Common Stock
  subject to the note conversion and warrants. Accordingly, the shares of Common
  Stock underlying the note and warrants will be eligible for resale in the public
  market as soon as the note is converted and the warrants are eligible and exercised,
  subject to S-3 prospectus delivery requirements.</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, 2010 through May 6, 2011, our Common Stock
  price fluctuated between a high of $5.44 and a low of $1.51. 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. <br>
  <br>
</p>
<p>&nbsp;</p>
<p align=center><font face="Times New Roman, Times, serif" size="3">34<br>
  </font>
<p align=center>
<hr width="100%">
<p align=left>
<p align=left><font face="Times New Roman, Times, serif" size="3"><a href="#TAB">(Index)</a></font>
<p> <font face="Times New Roman, Times, serif" 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">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><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:
      May 13, 2011 </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:
      May 13, 2011 </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">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>
  <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">37<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>1. I have reviewed this quarterly report on Form 10-Q of Socket Mobile, Inc.;</p>
<p>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;</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>
<blockquote>
  <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>
</blockquote>
<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>
<blockquote>
  <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>
</blockquote>
<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:
      May 13, 2011 </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>
</html>
</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>1. I have reviewed this quarterly report on Form 10-Q of Socket Mobile, Inc.;</p>
<p>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;</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>
<blockquote>
  <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>
</blockquote>
<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>
<blockquote>
  <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>
</blockquote>
<p><font face="Times New Roman, Times, serif" size="3"><br>
  <br>
  </font></p>
<table cols=2 width="96%">
  <tr>
    <td width="38%"><font face="Times New Roman, Times, serif" size="3">Date:
      May 13, 2011 </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 March 31, 2011 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: &nbspMay 13, 2011</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 March 31, 2011
  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</u></font></div>
    </td>
  </tr>
  <tr>
    <td valign=top align=middle width="41%" height="95">
      <div align=left>
        <p><font face="Times New Roman, Times, serif" size=3>Name: David W. Dunlap<br>
          Title: &nbsp&nbspVice President of Finance and Administration</font><font face="Times New Roman, Times, serif" size=3><br>
          &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbspand Chief Financial
          Officer &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp<br>
          &nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp&nbsp(Principal Financial
          Officer)<br>
          Date: &nbspMay 13, 2011</font></p>
      </div>
    </td>
  </tr>
</table>
<p>&nbsp;</p>
<p align=center>&nbsp;
<p align=center>&nbsp;
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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
