Our operating results may vary significantly, which may cause our stock price to fluctuate.

Our operating results are influenced by a number of factors, which may cause our sales and operating results to fluctuate greatly. These factors include:

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product availability and pricing;

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the addition or loss of supplier or customer relationships;

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the timing of introduction of new products by our suppliers and competitors;

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purchasing patterns of customers in different markets;

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general economic conditions;

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promotions and subsidies; and



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gross margins

        For example, the closing price of our common stock has fluctuated between $16.76 and $0.90 from January 1, 2006 through March 20, 2008.

·We have outstanding indebtedness, which is secured by substantially all our assets and which could prevent us from borrowing additional funds, if needed.              gross margins

        We had outstanding debt in the amount of approximately $26.8 million at December 31, 2007 in the form of a bank line of credit of up to $30 million based on a borrowing base, which is based on a percentage of eligible accounts receivable and inventory. Any significant decrease in our level of eligible accounts receivable or inventory will reduce our ability to borrow additional funds to adequately finance our operations and expansion strategies. If we violate our loan covenants, default on our obligations or become subject to a change of control, our indebtedness would become immediately due and payable. The terms of our credit facility restrict us from incurring additional indebtedness, which could limit our ability to expand our operations. We are also subject to negative covenants that, among other things, limit our ability to sell certain assets and make certain payments, including but not limited to, dividends, repurchases of common stock and other payments outside the normal course of business, as well as prohibiting us from merging or consolidating with another corporation or selling all or substantially all of our assets. At December 31, 2007, the Company did not meet all of these financial covenants. The Company received a waiver from Wells Fargo relating to default rights Wells Fargo may have due to the Company failing to meet certain of these financial covenants at December 31, 2007. The Company cannot provide assurance that it will be able to comply with the financial covenants, or whether it will be required or be able to obtain an applicable waiver of default-related rights in the future, including for any default-related rights relating to the first quarter 2008 financial results or condition. A default of the terms of the bank line of credit would have a material adverse impact to our financial condition, cash flows, operations and business generally.

We buy a significant amount of our products from a limited number of suppliers, who may not provide us with competitive products at reasonable prices when we need them in the future.

We purchase wireless handsets and accessories principally from wireless communications equipment manufacturersOEMs and distributors. We depend on these suppliers to provide us with adequate inventories of currently popular brand name products on a timely basis and on favorable pricing and other terms. In 2006, two2007, three vendors accounted for 59%55%, 17% and 20%11%, respectively, of our total cost of sales. We currently have twoone exclusive and several non-exclusive agreements with our principal suppliers, which can be terminated on short notice and provide for certain territorial restrictions. Our suppliers may not offer us competitive products on favorable terms or with timely delivery. In addition, new products from other manufacturers could impact the demand for products from manufacturers we represent. From

time to time, we have been unable to obtain sufficient product supplies. Any failure or delay by our suppliers, particularly our three primary vendors, in supplying us with products on favorable terms may severely diminish our ability to obtain and deliver products to our customers on a timely and competitive basis. If we lose any of our principal suppliers, or if these suppliers are unable to fulfill our product needs, or if any principal supplier imposes substantial price increases or unfavorable terms and alternative sources of supply are not readily available, it would have a material adverse effect on our financial condition and results of operations.

The loss or reduction in orders from principal customers or a reduction in prices we are able to charge these customers will have a negative impact upon our revenues and could cause our stock price to decline.

Our three largest customers in fiscal 2006 represented 20%18%, 19%17% and 17% of our net sales.sales in fiscal 2007. All three of these customers are carriers in Latin America. The markets we serve are subject to severesignificant price competition. Additionally, our customers are not contractually obligated to purchase product from us. For these and other reasons, such as competitive pricing and competitive pressures, customers may seek to obtain products or services from us at lower prices than we have been able to obtain from these customers in the past. This could occur, for example, in the case of a customer purchasing large quantities of a product from us, who then terminates this relationship because the customer can obtain a lower price by buying directly from the manufacturer. The loss of any of our principal customers, a reduction in the amount of product or services our principal customers order from us or the inability to maintain current terms, including price, with these or other customers could have an adverse effect on our financial condition, results of operations and liquidity. We have experienced losses of certain customers through industry consolidation and ordinary course of business and there can be no assurance that any of our customers will continue to purchase products or services from us or that their purchases will be at the same or greater levels than in prior periods. For example, the consolidation in the United States of regional carriers such as Dobson Cellular Systems Inc. and Suncom Wireless resulted in our loss of existing and potential customers.

Our future profitability depends on our ability to maintain or increase existing margins and our ability to increase our sales, which we may not be able to do.

The gross margins that we realize on sales of wireless handsets could be reduced due to increased competition or a growing industry emphasis on cost containment. Therefore, our future profitability will continue to depend on our ability to maintain or increase our

margins or to increase our sales to help offset potential future declines in margins. We may not be able to maintain or increase existing margins for products or services we offer or increase our sales. Our ability to generate sales is based upon demand for wireless handset products that we have or can deliver and our having an adequate supply of these products. Even if our sales rates increase, the gross margins that we receive from our sales may not be sufficient to make our future operations profitable or as profitable. For example, in 2007, we had experienced a net loss due to, among other things, lower gross margins, product mix, decreased average sales price per unit, and sales of certain US products below our cost due to the consolidation of some regional carriers.

Our business depends on the continued tendency of wireless handset manufacturers and carriers to outsource aspects of their business to us.

Our business depends in large part on wireless handset manufacturers and carriers outsourcing some of their business functions to us. We provide functions such as product approval and testing, inventory management, product fulfillment, preparation of product kits, and customized packaging, light assembly and end-user support services. Certain wireless handset manufacturers and carriers have elected, and others may elect, to undertake these services internally. Additionally, our customer service levels, industry consolidation, competition, deregulation, technological changes or other factors could reduce the degree to which members of the wireless handset industry rely on outsourced services such

as the services we provide. Any significant change in the market for these services could have a material adverse effect on our current and planned business. We may not be able to effectively compete in our industry if consolidation of carriers continues.continues or a change in product delivery routing occurs.

The past several years have witnessed a consolidation within the wireless carrier community. For example, the consolidation in the United States of regional carriers such as Dobson Cellular Systems Inc. and Suncom Wireless resulted in our loss of existing and potential customers. If this trend continues, it could result in a reduction or elimination of promotional activities by the remaining wireless carriers as they seek to reduce their expenditures which could, in turn, result in decreased demand for our products or services. Moreover, consolidation of wireless carriers reduces the number of potential contracts available to us. We could also lose business if wireless carriers, which currently are our customers, are acquired by other wireless carriers which are not our customers.customers, which has been a new occurrence with some of our U.S. customers (e.g. Dobson Cellular Systems Inc. and Suncom Wireless). Wireless carriers may also change their policypolicies regarding sales to their agents by independent distributors, such as requiring those agents to purchase products from the carrier or manufacturer, rather than from distributors such as us. This type of requirement could have a material adverse effect on our business and results of operations.

StockholdersWe have been and may be dilutedcould lose customers or orders as a result of past or future offerings or other financings or equity grants.

We mayconsolidation in the future raise additional capital through one or more public offerings, private placements or other financings involvingwireless telecommunications carrier industry.

        There has been significant consolidation in the wireless industry, particularly in the U.S. Rural Service Area market, which has caused extreme price competition and reduced our securities or make stock option or other equity incentive grants. As a resultnumber of these financings or grants, ownership interestscustomers and potential customers. Future consolidations could further erode our current and potential markets. This could also lead to fluctuations in us may be diluted, potentially substantially.

In January 2006, we sold an aggregate 2,200,000 sharesour quarterly results and carrying value of our common stock at $6.55 per share, for total gross proceeds of $14,410,000. The purchasers wereinventory. These consolidated entities may also issued warrantsorder fewer products from us or elect to purchase an aggregate of 660,000 shares of our common stock at an exercise price of $9.19 per share during the period beginning six months after the date of the purchase agreement and ending four years from the date of the purchase agreement. As part of the sale, we also issued three-year term warrantsno longer do business with us or demand pricing changes in order to purchase a total of 57,200 shares to placement agents with varying exercise prices (44,000 shares at $6.88 per share and 13,200 at $9.65 per share).

Additionally, in April and June 2006, we granted stock options to purchase an aggregate of 32,000 and 50,000 of our common stock to certain employees. These options have exercise prices of $5.33 and $15.17 per share and expire five years from the date of grant.compete. In August of 2006, we granted stock options to purchase an aggregate of 15,000 and 10,000 to certain employees and a chairman of a board committee. These options have exercise prices of $5.12 and $5.91, respectively per share and expire five years from the date of grant. Also in June 2006, our stockholders approved previously granted options to purchase an aggregate of 180,000 of our common stock to certain non-employee directors. These options have exercise prices of $1.65 and $8.12 per share and expire five and three years, respectively, from the date of grant. As a result of these issuances and grants, ownership interests in us have been, and may be2007, consolidation in the future, further diluted.regional United States carriers had an adverse impact on our existing and potential customer base.

Class action and derivative lawsuits have been filed against us, our board of directors and certain of our officers, and other lawsuits may be instituted against us from time to time.

We are currently, and from time to time in the future may become, subject to claims and litigation, which could be expensive, lengthy, and disruptive to our normal business operations. In addition, the outcomeoutcomes of any claims or litigation, may beincluding possibly substantial awards and penalties, are difficult to predict and could have a material adverse effecteffects on our business, operating results or financial condition. For further information regarding certain claims and litigation in which we are currently involved and which could adversely affect us, see “Item"Item 3. Legal Proceedings”.Proceedings."

Our sales and inventory risk may be materially affected by fluctuations in regional demand patterns and economic factors for which we cannot plan.

The demand for our products and services has fluctuated and may continue to vary substantially within the regions served by us. We believe the roll-out of third generation, or 3G, cellular telephone systems and other new technologies which have been delayed and could further be delayed, have had and will continue to have an effect on overall subscriber growth and wireless handset replacement demand. Economic slow-downs in regions served by us, or changes in promotional programs offered by wireless carriers

or customer preferences, may lower consumer demand for our products and create higher levels of inventories which could decrease our gross and operating margins. We could face a substantial inventory risk due to depreciation and equipment price erosion if our products are not sold in a timely manner. During 2007, the consolidation in regional carrier channels resulted in an adverse impact, including decreased margin potential, and products were sold at a considerable loss.

Approximately 88% of our revenues during the fiscal year ended December 31, 2007 were generated outside of the United States in countries that may have volatile currencies or other risks.

        We engage in significant sales activities in territories and countries outside of the United States, particularly Latin American countries, including Argentina. The fact that we distribute a substantial amount of our products into a number of territories and countries other than the United States exposes us to, among other things, increased credit risks, customs duties, import quotas and other trade restrictions, potentially greater and more unpredictable inflationary and currency pressures, and shipping delays. Changes may occur in social, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories and countries where we currently distribute products. United States laws and regulations relating to investment and trade in foreign countries could also change to our detriment. Any of these factors could have material adverse effects on our business and operations. Although we purchase and sell products and services in U.S. dollars and do not engage in exchange swaps, futures or options contracts or other hedging techniques, fluctuations in currency exchange rates could reduce demand for products sold in United States dollars. We cannot predict the effect that future exchange rate fluctuations will have on our operating results or financial position. We may in the future engage in currency hedging transactions, which could result in our incurring significant additional expenses and losses.

We may not be able to adequately respond to rapid technological changes in the wireless handset industry, which could cause us to lose customers.

The technology relating to wireless handsets changes rapidly resulting in product obsolescence or short product life cycles. We are required to anticipate future technological changes in our industry and to continually identify, obtain and market new products in order to satisfy evolving industry and customer requirements. While our top vendors have historically kept their products and we aim to keep our proprietary products competitive in terms of technological changes, there is no guarantee they or we will continue to do so, which could materially effectaffect our business. Competitors or manufacturers of wireless handsets may market products which have perceived or actual advantages over products that we handle or which otherwise render those products obsolete or less marketable. We have made and continue to make significant capital investments in accordance with evolving industry and customer requirements including maintaining levels of inventories of currently popular products that we believe are necessary based on current market conditions. This utilization of capital for product development and inventory buildup of this nature increases our risk of loss due to possible product obsolescence. Furthermore, if we do not adequately anticipate future technological changes, we may not have established adequate relationships with suppliers.suppliers or done appropriate product development.

Substantial defaults by our customers on accounts receivables could have a significant negative impact on our cash flow and financial condition.

We currently offer and intend to offer open account terms to certain of our customers, both large and small, which may subject us to credit risks, particularly to the extent that our receivables represent sales to a limited number of customers or are concentrated in particular geographic markets. Although we have two accounts receivable insurance policies, these policies carry a substantial co-insurance factor and may not cover our liability in all instances. We also have an accounts receivable-based credit facility in order to reduce our working capital requirements. The extent of our ability to use our accounts receivable-based credit facility is dependent on the amount of and collection cycle of our accounts receivable. Adverse changes in our ability to use accounts receivable financing could have a material adverse effect on our financial position, cash flows and results of operations.

We rely on our suppliers to provide favorable terms, including payment terms, in order for us to make appropriate product purchases, and without such terms, our ability to procure products could be impacted.

Our        Much of our business is dependent on our ability to obtain adequate supplies of currently popular products on favorable pricing and other terms. Our ability to fund our product purchases is dependent on our principal suppliers providing favorable payment terms that allow us to maximize the efficiency of our capital usage. The payment terms we receive from our suppliers are dependent on several factors, including, but not limited to, our payment history with the supplier, the suppliers’suppliers' credit granting policies, contractual provisions, our overall credit rating as determined by various credit rating agencies, industry conditions, our recent operating results, financial position and cash flows, and each supplier’ssupplier's ability to obtain credit insurance on amounts that we owe them. Adverse changes in any of these factors, certain of which may not be wholly in our control, could have a material adverse effect on our operations.

Approximately 95% of our revenues during the fiscal year ended December 31, 2006 were generated outside of the United States in countries that may have volatile currencies or other risks.

We engage in significant sales activities in areas outside of the United States, particularly South and Central America. We also maintain a facility in Mexico. The fact that we have a facility in and distribute products into a number of countries other than the United States exposes us to increased credit risks, customs duties, import quotas and other trade restrictions, potentially greater and more unpredictable inflationary pressures, and shipping delays. Changes may occur in social, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories and countries where we currently distribute products. United States laws and regulations relating to investment and trade in foreign countries could also change to our detriment. Any of these factors could have a material adverse effect on our business and operations. Although we purchase and sell products and services in United States dollars and do not engage in exchange swaps, futures or options contracts or other hedging techniques, fluctuations in currency exchange rates could reduce demand for products sold in United States dollars. We cannot predict the effect that future exchange rate fluctuations will have on our operating results. We may in the future engage in currency hedging transactions, which could result in our incurring significant additional losses.

We rely on our information technology systemsystems to function efficiently, without interruptions, and if it does not, customer relationships could be harmed.

We have focused on the application of our information technology systemsystems to provide customized services to wireless handset manufacturers and carriers. Our ability to meet our customers’customers' technical and performance requirements is highly dependent on the effective functioning of our information technology systems, which may experience interruptions, including aspects provided by third-party providers.providers which may be beyond our control. These business interruptions could cause us to fall below acceptable performance levels pursuant to our customers’customers' requirements and could result in a negative impact on, including the loss of, the related business relationship. Some of our information technology systems are managed and operated by third party providers. All information technology systems, both internal and external, are potentially

vulnerable to damage or interruption from a variety of sources, including, without limitation, computer viruses, security breaches, energy blackouts, natural disasters, terrorism, war and telecommunication failures, andas well as third-party provider failures. We have implemented various measures to manage our risks related to system and network disruptions, but a systems failure or security breach or other problem with our information technology systems could negatively impact our operations and financial results.

We have outstanding indebtedness, which is secured by substantially all our assets and which could prevent us from borrowing additional funds, if needed.

We had outstanding debt in the amount of approximately $25.6 million at December 31, 2006 in the form of a bank line of credit, the borrowing base of which is based on a percentage of eligible accounts receivable. If we violate our loan covenants, default on our obligations or become subject to a change of control, our indebtedness would become immediately due and payable. Any significant decrease in our level of eligible accounts receivable will reduce our ability to borrow additional funds to adequately finance our operations and expansion strategies. The terms of our credit facility could substantially prohibit us from incurring additional indebtedness, which could limit our ability to expand our operations. We are also subject to negative covenants that, among other things, limit our ability to sell certain assets and make certain payments, including but not limited to, cash dividends, repurchases of common stock and other payments outside the normal course of business, as well as prohibiting us from merging or consolidating with another corporation or selling all or substantially all of our assets.

Our continuing liabilities on leases from our former mall-based retail kiosk locations could have a negative impact on earnings and cash flow.

Although we have assigned our five remaining retail leases to a third party and we have received indemnification from the third party, we remain liable to the lessor for the respective remaining lease terms of one or two years, if the third party does not fulfill its obligations under the leases. As of December 31, 2006, the total potential liability under these leases was $573,435 exclusive of a $95,044 escrow deposit held for our benefit to the extent that the third party should default on any of the assigned leases. This escrow is not reflected on our financial statements however this potential lease liability is included in the footnotes to our Consolidated Financial Statements.

We depend on third parties to manufacture the products that we distribute, including our proprietary verykool® products, and, accordingly, we rely on their quality control procedures.

Product manufacturers typically provide limited or no warranties on the products directly to us or directly to the end consumer or to us, which weconsumer. We generally pass through any warranties received from our manufacturers to our customers.customers and in absence of such warranty we are solely responsible for the products. If a product we distribute forfrom a manufacturer has quality or performance problems, our ability to provide adequatesatisfactory products to our customers could be disrupted and our reputation could be negatively affected, thereby adversely impactingimpaired. In addition, as theverykool® products are manufactured exclusively for us, we carry the financial risk of the inventory, and there can be no assurance that we will be able to sell these products before payment is due and at prices above our business.cost. Either of these risks could have a negative impact on our business and operations.

The wireless handset industry is intensely competitive and we may not be able to continue to compete against well established competitors with greater financial and other resources.

We compete for sales of wireless handsets and accessories, and expect that we will continue to compete, with numerous well-established carriers, distributors and manufacturers, including our own suppliers. Many of our competitors possess greater financial and other resources than we do and may market similar products or services directly to our customers. Distribution of wireless handsets and accessories has generally had low barriers to entry. As a result, additional competitors may choose to

enter our industry in the future. The markets for wireless handsets and accessories are characterized by intense price competition and significant price erosion over the life of a product. Many of our competitors have the financial resources to withstand substantial price competition and to implement extensive advertising and promotional programs, both generally and in response to efforts by additional competitors to enter into new markets or introduce new products. Our ability to continue to compete successfully will depend largely on our ability to maintain our current industry relationships, both manufacturers and carrier customers. We may not be successful in anticipating and responding to competitive factors affecting our industry, including new or changing outsourcing requirements, the entry of additional well-capitalized competitors, new products which may be introduced, changes in consumer preferences, demographic trends, international, national, regional and local economic conditions and competitors’competitors' discount pricing and promotion strategies. As wireless telecommunications markets mature and as we seek to enter into new markets in the Latin American region and offer new products in the future, the competition that we face may change and grow more intense.

Our continued growth depends on retaining our current key employees and attracting additional qualified personnel, and we may not be able to continue to do so.

Our success depends in large part on the abilities and continued service of our executive officers and other key employees, particularly Joseph Ram, our Chief Executive Officer. Although we have previously entered into employment agreements with several of our officers and employees, including Mr. Ram, we may not be able to retain their services under applicable law. The loss of executive officers or other key personnel could have a material adverse effect on us. In addition, in order to support our continued growth, we will be required to effectively recruit, develop and retain additional qualified management. If we are unable to attract and retain additional necessary personnel, it could delay or hinder our plans for growth.

11

We rely on trade secret laws and agreements with our key employees and other third parties to protect our proprietary rights, and there is no assurance that these laws or agreements adequately protect our rights.

We rely on trade secret laws to protect our proprietary knowledge, particularly our database of customers and suppliers and business terms such as pricing.pricing, and the information related to ourverykool® brand. In general, we also have non-disclosure agreements with our key employees and limit access to and distribution of our trade secrets and other proprietary information. These measures may prove difficult to enforce and may not prove adequate to prevent misappropriation of our proprietary information.

We may become subject to suits alleging medical risks associated with our wireless handsets, and the cost of these suits could be substantial, and divert funds from our business.

Lawsuits or claims have been filed or made against manufacturers of wireless handsets alleging possible medical risks, including brain cancer, associated with the electromagnetic fields emitted by wireless handsets. There has been only limited relevant research in this area, and this research has not been conclusive as to what effects, if any, exposure to electromagnetic fields emitted by wireless handsets has on human cells. Substantially all of our revenues are derived, either directly or indirectly, from sales of wireless handsets. We may become subject to lawsuits filed by plaintiffs alleging various health risks from our products. If any future studies find possible health risks associated with the use of wireless handsets or if any damages claim against us or a business partner is successful, it could have a material adverse effect on our business. Even an unsubstantiated perception that health risks exist could adversely affect our ability or the ability of our customers to market wireless handsets.

Our continuing liabilities on leases from our former mall-based retail kiosk locations could have a negative impact on earnings and cash flow.

        Although we have assigned our four remaining retail leases to a third party and we have received indemnification from the third party, we remain liable to the lessor for the respective remaining lease terms of one or two years, if the third party does not fulfill its obligations under the leases. As of December 31, 2007, the total potential liability under these leases was $35,805 exclusive of a $95,044 escrow deposit held for our benefit to the extent that the third party should default on any of the assigned leases. This escrow is not reflected on our financial statements; however, this potential lease liability is included in the footnotes to our Consolidated Financial Statements.

Risks Related To Our Common Stock

Our common stock and our stock price could be volatile and could decline, resulting in a substantial loss on your investment.

Prior to our initial public offering in June 2004, there was not a public market for our common stock. An active trading market for our common stock may not be sustained, which could affect the ability of our stockholders to sell their shares and could depress the market price of their shares. The stock market in general and the market for telecommunications-related stocks in particular, has been highly volatile. For example, the closing price of our common stock has fluctuated between $16.76 and $0.90 from January 1, 2006 through March 20, 2008.

As a result, the market price of our common stock has been and is likely to beremain volatile, and investors in our common stock may experience a decrease in the value of their stock, including decreases unrelated to our operating performance or prospects.

If the trading price of our common stock remains below $1.00 for an extended period of time, our common stock may, among other things, be delisted from The Nasdaq Global Market or Nasdaq markets altogether adversely affecting the value of our common stock.

        Between January 1, 2006 and March 20, 2008, our common stock share price fluctuated between $0.90 and $16.52 per share. Under Nasdaq Market Rules, among other things, if our share price is under $1.00 per share for an extended period of time, our stock could be delisted from The Nasdaq Global Market, be transferred to a listing on The Nasdaq Capital Market, or be delisted from the Nasdaq markets altogether. If our common stock were to be delisted from The Nasdaq Global Market or the Nasdaq markets altogether, we may seek quotation on a regional stock exchange or other exchange or market, if available. Such listing could reduce the market liquidity for our common stock. If our common stock is not eligible for quotation on another exchange or market, trading of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities, such as the Pink Sheets or the OTC Bulletin Board. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, which would likely cause a decrease in the value of our common stock.

        Further, if our common stock were to be delisted from the Nasdaq markets, and our trading price remained below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a "penny stock." In addition, many brokerage firms are reluctant to recommend low-priced stocks to their clients. Further, various regulations and policies may restrict the ability of shareholders to borrow against or "margin" low-priced stocks, and declines in our stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers' commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the price of our common stock could result in an individual shareholder paying transaction costs that

represent a higher percentage of total share value than would be subjectthe case if our share price were higher. This factor may also limit the willingness of institutions to wide fluctuations.purchase our common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from facilitating trades in our common stock. All of these risks could severely limit the market liquidity of our common stock and the ability of investors to trade our common stock, thereby negatively impacting share price.

The ability of our stockholders to control our policies or effect a change in control of our company is limited, which may not be in our stockholders’stockholders' best interests.

Some provisions of our charter and bylaws and the General Corporation Law of Maryland, under which we are incorporated, may delay or prevent a change in control of our company or other transactions that could provide our common stockholders with a premium over the then-prevailing market price of our common stock or that might otherwise be in the best interests of our stockholders. These include the ability of our Board of Directors to authorize the issuance of preferred stock without stockholder approval, which preferred stock may have voting provisions that could delay or prevent a change in control or other transaction that might involve a premium price or otherwise be in the best interests of our stockholders. Maryland law imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions can occur. These provisions of Maryland law may have the effect of discouraging offers to acquire us even if the acquisition would be advantageous to our stockholders.

Stockholders have been and may be diluted as a result of past or future offerings or other financings or equity grants.

        We may in the future raise additional capital through one or more public offerings, private placements or other financings involving our securities or make stock option or other equity incentive grants. As a result of these financings or grants, ownership interests in us may be diluted, potentially substantially.

        In January 2006, we sold an aggregate 2,200,000 shares of our common stock at $6.55 per share, for total gross proceeds of $14,410,000. The purchasers were also issued warrants to purchase an aggregate of 660,000 shares of our common stock at an exercise price of $9.19 per share during the period beginning six months after the date of the purchase agreement and ending four years from the date of the purchase agreement. As part of the sale, we also issued three-year term warrants to purchase a total of 57,200 shares to placement agents with varying exercise prices (44,000 shares at $6.88 per share and 13,200 at $9.65 per share).

        Additionally, in April and June of 2006, we granted stock options to purchase an aggregate of 32,000 and 50,000 shares of our common stock to certain employees. These options have exercise prices of $5.33 and $15.17 per share and expire five years from the date of grant. In August of 2006, we granted stock options to purchase an aggregate of 15,000 and 10,000 shares of our common stock to certain employees and a chairman of a board committee. These options have exercise prices of $5.12 and $5.91, respectively per share and expire five years from the date of grant. Also in June 2006, our stockholders approved previously granted options to purchase an aggregate of 180,000 of our common stock to certain non-employee directors. These options have exercise prices of $1.65 and $8.12 per share, and expire five and three years, respectively, from the date of grant. In March 2007, we granted stock options to purchase an aggregate of 40,000 shares of our common stock to certain foreign contractors. These options have an exercise price of $3.79 per share and expire six years from the date of grant. As a result of these issuances and grants, and possible future equity grants, ownership interests in us have been and may be in the future, further diluted.

Our largest stockholder may have strategic interests that differ from those of our other stockholders, and can significantly influence important corporate matters.

As of March 31, 2007,20, 2008, Joseph Ram, our Chief Executive Officer beneficially owned approximately 32%31% of our outstanding common stock. As a result, Mr. Ram may be able to significantly influence corporate actions relating to:

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controlling the composition of our board of directors;

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controlling our management and policies;

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determining the outcome of significant corporate transactions, including changes in control that may not be beneficial to other stockholders; and

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acting in his own interest, which may conflict with, or be different from, the interests of other stockholders.

Item 1B.    Unresolved Staff Comments—N/ANone.

Item 2.    Properties.
                       Properties.

Our corporate headquarters, United States sales and operations are located in San Diego, California. We provide our distribution and other value added services from our sales and operations center in Miami, Florida.  Our facility in Mexico isFlorida, which also usedserves as our headquarters for sales, marketing, engineering, distribution and assembly.Latin America. These facilities are occupied pursuant to operating leases. The table below summarizes information about our sales and operations centers as of December 31, 2006:centers:

*                Does

This lease was extended in March 2008, monthly rental amount listed does not include reduction of square footagelocal sales taxes or monthly rent for subleased space. We subleased approximately 20,000 square feet of spacecommon area maintenance charges.

**

This lease was terminated in the San Diego, CA facility to two subtenants for which we received approximately $42,000 per month in rent.  In February 2007, one of the subtenant leases terminated and we are currently negotiating a new sublease for a portion of that space.

January 2008

We believe that these facilities are adequate for our current requirements and that suitable alternative or additional space will be available as needed for alternative space or to accommodate future expansion of our operations.

Item 3.    Legal Proceedings.

In the normal course of our business, we may be a party to legal proceedings. Except as disclosed below, we are not currently a party to any material legal proceedings other than ordinary routine litigation incidental to our business.

Securities Class Actions

Six        In the securities actions, originally filed between June and July 2006, were recently consolidated as class action, captionedIn Re: InfoSonics Corporation Securities Litigation, Lead Case No. 06 CV 1231, now pending before Judge MoskowitzSammartino in the United States District Court for the Southern District of California.  Plaintiffs’California, Plaintiffs filed a second amended consolidated complaint was filed on February 14, 2007. Plaintiffs assert claims for violationSeptember 10, 2007 against the Company and certain of sectionits officers and directors. The second amended consolidated complaint alleges violations of Section 10(b) of the Exchange Act and associated Rule 10b-5, Section 20(a) and Section 20A in connection with the Company’sannouncement of the Company's restatement announced June 12,of first quarter 2006 earnings and in connection with allegedly false and/or misleading