| x | ANNUAL REPORT      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934  |
|---|------------------------------------------------------------------------------------------------|

| ¨ | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934  |
|--------|----------------------------------------------------------------------------------------------------------|

| Delaware                                                                | 58-1729436                                    |
|-------------------------------------------------------------------------|-----------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) | (I.R.S.      EmployerIdentification      No.) |
|                                                                    |                                          |
| 2401      Merced Street, San Leandro, CA                                | 94577                                         |
| (Address      of principal executive offices)                           | (Zip      Code)                               |

| Title      of each class |
|--------------------------|

----

----

| FORWARD      LOOKING STATEMENTS        | 1                                     |
|----------------------------------------|---------------------------------------|
| PART I                            |                                  | 1 |
|                                   |     ITEM 1.  | DESCRIPTION      OF BUSINESS | 1 |
|                                   |     ITEM 2.  | DESCRIPTION      OF PROPERTY | 7 |
|                                   |     ITEM 3.  | LEGAL      PROCEEDINGS | 7 |
|                                   |     ITEM 4.  | SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS | 7 |
|                                   |                                  |   |
| PART II                           |                                  | 8 |
|                                   |     ITEM 5.  | MARKET      FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER      PURCHASES OF EQUITY SECURITIES | 8 |
|                                   |     ITEM 6.  | MANAGEMENT’S      DISCUSSION AND ANALYSIS | 8 |
|                                   |     ITEM 7.  | FINANCIAL      STATEMENTS | 14 |
|                                   |     ITEM 8.  | CHANGES      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE | 14 |
|                                   |     ITEM 8A. | CONTROLS      AND PROCEDURES | 15 |
|                                   |     ITEM 8B. | OTHER      INFORMATION | 17 |
|                                   |                                  |   |
| PART III                          |                                  | 17 |
|                                   |     ITEM 9.  | DIRECTORS,      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE      GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE    ACT | 17 |
|                                   |     ITEM 10. | EXECUTIVE      COMPENSATION | 17 |
|                                   |     ITEM 11. | SECURITY      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED      STOCKHOLDER MATTERS | 17 |
|                                   |     ITEM 12. | CERTAIN      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR      INDEPENDENCE | 17 |
|                                   |     ITEM 13. | EXHIBITS | 18 |
|                                   |     ITEM 14. | PRINCIPAL      ACCOUNTANT FEES AND SERVICES | 19 |
| CONSOLIDATED      FINANCIAL STATEMENTS | F-1                                   |
| SIGNATURES                             | S-1                                   |
| EXHIBITS                               |                                  |

----

----

----

----

|  | ▪ | changes in economic      conditions; |
|--|---------|--------------------------------------|

|  | ▪ | changes in government programs      that provide funding to companies and research      institutions; |
|--|---------|-------------------------------------------------------------------------------------------------------|

|  | ▪ | changes in the regulatory      environment affecting life sciences companies and life sciences      research; |
|--|---------|---------------------------------------------------------------------------------------------------------------|

|  | ▪ | market-driven pressures on      companies to consolidate and reduce costs;  and |
|--|---------|---------------------------------------------------------------------------------|

|  | ▪ | other factors affecting research      and development spending. |
|--|---------|-----------------------------------------------------------------|

|  | ▪ | our partners may develop      technologies or components competitive with our      products; |
|--|---------|----------------------------------------------------------------------------------------------|

|  | ▪ | some of our agreements may      terminate prematurely due to disagreements between us and our      partners; |
|--|---------|--------------------------------------------------------------------------------------------------------------|

|  | ▪ | our partners may not devote      sufficient resources to the development and sale of our      products; |
|--|---------|---------------------------------------------------------------------------------------------------------|

|  | ▪ | our partners may be unable to      provide the resources required for us to progress in the collaboration on      a timely basis; |
|--|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|  | ▪ | our collaborations may be      unsuccessful; or |
|--|---------|-------------------------------------------------|

|  | ▪ | we may not be able to negotiate      future collaborative arrangements on acceptable    terms. |
|--|---------|------------------------------------------------------------------------------------------------|

----

----

----

----

| Fiscal Year 2007 |   | High      Bid |   |   | Low Bid |   |
|----------------------------|--------|---------------|--------|--------|--------------|--------|
| First Quarter         |   | $             | 1.30   |   |         | $      | 0.75 |   |
| Second Quarter        |   |          | 2.50   |   |         |   | 0.86 |   |
| Third Quarter         |   |          | 1.31   |   |         |   | 1.02 |   |
| Fourth Quarter        |   |          | 1.25   |   |         |   | 0.70 |   |
|                       |   |          |   |   |         |   |
| Fiscal Year 2006 |   | High      Bid |   |   | Low      Bid |   |
| First Quarter         |   | $             | 1.69   |   |         | $      | 1.05 |   |
| Second Quarter        |   |          | 1.70   |   |         |   | 1.05 |   |
| Third Quarter         |   |          | 1.15   |   |         |   | 0.70 |   |
| Fourth Quarter        |   |          | 1.30   |   |         |   | 0.70 |   |

----

----

|                                | Twelve Months Ended      December 31, |
|-------------------------------------|------------------------------------------------------|
|                                | 2007                                                 |   | 2006 |   |
| Cost      of goods sold             | $                                                    | 2,441 |   | $ | 7,191 |   |
| Sales      and marketing            |                                                 | 122,363 |   |   | 16,861 |   |
| Research      and development       |                                                 | 44,513 |   |   | 14,096 |   |
| General      and administrative     |                                                 | 217,328 |   |   | 259,114 |   |
| Total      share-based compensation | $                                                    | 386,645 |   | $ | 297,262 |   |

|                                                                           |   | Number      of Shares |     |   | Weighted      Average Grant Date Fair Value |   |
|--------------------------------------------------------------------------------|--------|-----------------------|----------|--------|---------------------------------------------|--------|
| Non-vested      stock outstanding at January 1, 2007                      |   |                  | 389,566  |   |                                        | $      | 1.42 |   |
| Granted                                                                        |   |                  | 700,800  |   |                                        | $      | 0.99 |   |
| Vested                                                                         |   |                  | (52,153  | )      |                                        | $      | 1.09 |   |
| Forfeited                                                                      |   |                  | (98,586  | )      |                                        | $      | 1.03 |   |
| Expired                                                                        |   |                  | (149,321 | )      |                                        | $      | 2.60 |   |
|     Non-vested      stock outstanding at December 31, 2007 |   |                  | 790,306  |   |                                        | $      | 1.10 |   |

----

|                     |   | 2007          |    |   | 2006          |   |
|--------------------------|--------|---------------|---------|--------|---------------|--------|
| Risk-free      interest  |   |          | 4.72    | %      |          |   | 4.74 | % |
| Expected      life       |   | 10      Years |    |   | 10      Years |   |
| Expected      volatility |   |          | 117     | %      |          |   | 73 | % |
| Expected      dividend   |   |          | — |   |          |   | — |   |

|                                                  | Shares    |   | Weighted      -Average Exercise Price per Share |   | Weighted-Average      Remaining Contractual Terms in Years |   | Aggregate      Intrinsic Value |   |
|-------------------------------------------------------|-----------|--------|-------------------------------------------------|--------|------------------------------------------------------------|--------|--------------------------------|--------|
| Outstanding      at January 1, 2007              | 880,821   |   | $                                               | 2.30   |                                                       |   |                           |   |   |   |
| Grants                                                | 700,800   |   | $                                               | 0.99   |                                                       |   |                           |   |   |   |
| Forfeitures                                           | (98,586   | )      | $                                               | 1.03   |                                                       |   |                           |   |   |   |
| Expirations                                           | (149,321  | )      | $                                               | 2.60   |                                                       |   |                           |   |   |   |
| Outstanding      at December 31, 2007                 | 1,333,714 |   | $                                               | 1.68   |                                                       | 7.92   |                           | $      | — |   |
| Exercisable      at December 31, 2007                 | 543,408   |   | $                                               | 2.51   |                                                       | 6.22   |                           | $      | — |   |
| Vested      and expected to vest at December 31, 2007 | 543,408   |   | $                                               | 2.51   |                                                       | 6.22   |                           | $      | — |   |

|                                                |   | 2007    |   | 2006  |
|-----------------------------------------------------|--------|---------|--------|------------|
| Shares      issuable upon exercise of stock options |   | — |   | 54,818     |
| Shares      issuable upon exercise of warrants      |   | 336,934 |   | 398,214    |
| Denominator      for basic and diluted calculations |   | 336,934 |   | 453,032    |

----

----

----

|   | ▪ | Issuance of Convertible Note - On      July 21, 2006, the Company completed a private placement offering of      subordinated Senior Convertible Note with the principal amount of $375,000      due in 2011 (the "Note"). The Note bears interest at a rate of 3% per year      and is due on July 20, 2011. During the occurrence of an "Event of      Default" under the Note, the Note will bear interest at a rate of 10% per      year. The Note is convertible into shares of common stock of the Company      at an initial conversion price of $1.60 per share. As of December 31,      2007, no portion of the principal amount of the note had been repaid or      converted. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ▪ | Loan From Alexandria - On      April 8, 2005, Alpha CA secured a loan in the amount of $1,500,000.      The loan bears interest at the rate of 12.5% per annum and the      outstanding principal amount of the loan is due and payable in 30 equal      monthly installments of $50,000 per month ($600,000 per year) beginning on      November 1, 2005. As of December 31, 2007, $1,300,000 of the      principal had been repaid, leaving $200,000 still owing. The obligations      under the loan are secured by a second priority lien and security interest      in substantially all ourassets. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ▪ | BFI Business Finance Line of      Credit - On March 9, 2004, Alpha CA established a line of credit with      BFI Business Finance (“BFI”). The interest rate is variable. As of      December 31, 2007, the interest rate was 10.22% and the outstanding      balance was subject to a 0.50% per month administrative fee. The      obligations under the line of credit are secured by a first priority lien      and security interest in substantially all our assets. Effective October      26, 2007, BFI and Alpha CA entered into a First Modification to Loan and      Security Agreement raising the maximum amount of the line of credit to      $1.5 million. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1.   | The      Board of Directors has not established adequate financial reporting      monitoring activities to mitigate the risk of management override,      specifically; |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a.   | Board      of Directors delegation of authority has not been formally      documented |
|----------------|---------------------------------------------------------------------------------------|

| b.   | Insufficient      oversight of accounting principleimplementation |
|----------------|-------------------------------------------------------------------|

| c.   | The whistleblower      program has not been adequately communicated to  employees |
|----------------|----------------------------------------------------------------------------------------|

| d.   | Insufficient      oversight of external audit specifically related to executive      sessions |
|----------------|-----------------------------------------------------------------------------------------------|

| 2.   | There      is a strong reliance on the external auditors to review and adjust the      annual and quarterly financial statements, to monitor new accounting      principles, and to ensure compliance with GAAP and SEC disclosure      requirements. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | We      have not maintained sufficient competent evidence to support the effective      operation of our internal controls over financial reporting, specifically      related to management’s review of journal entries; account analyses,      reconciliations, and other records underlying recorded amounts; customer      contracts; and critical spreadsheetcontrols. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | We      have not adequately divided, or compensated for, incompatible functions      among personnel to reduce the risk that a potential material misstatement      of the financial statements would occur without being prevented or      detected. Specifically, journal entries or account analyses prepared by      the Controller are not subject to review, and access to our acounting      modules has not been adequately  restricted.  |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

    Because of thematerial weaknesses noted above, management has concluded that we did notmaintain effective internal control over financial reporting as of December 31,2007, based on InternalControl over Financial Reporting – Guidance for Smaller Public Companiesissued by (“COSO”).

----

| 1.   | Regarding financial      reporting monitoring: |
|----------------|------------------------------------------------|

| a.   | Our CEO/CFO will      prepare a formal documentation of delegation policy that will be reviewed      and approved by the Board. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------|

| b.   | Future      Audit Committee meetings will specifically include reviews over our      implementation of accountingprinciples. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| c.   | The Company’s      existing whistleblower program will be posted on our website as well      as at our offices.  The whistleblower program will include      a confidential telephone number to report any      violations. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Although the      Audit Committee has held annual sessions with our external auditor      without our management present, these sessions will be documented in      the future. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | As a small      company, we do not have the resources to have dedicated staff with      deep expertise in all facets of SEC disclosure and GAAP      compliance.  As is the case with many small firms, we will      continue to work with our external auditors and attorneys as it      relates to new accounting principles and changes to SEC disclosure      requirements.  We have found this approach has worked well in      the past and believe it to be the most cost effective solution available      over the foreseeable future. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | We will conduct a      review of existing signoff and review procedures as well as document      control protocols for critical accounting spreadsheets.  We will      also increase management’s review of key financial documents and      records. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | As a small company, we do not      have the resources to fund sufficient staff to ensure complete segregation      of responsibilities within the accounting function.  However,      our management does review, and will increase the review of, financial      statements on a monthly basis, and our external auditor conducts      reviews on a quarterly basis.  We will make our information      technology group the primary system administrator for our accounting      system and will restrict access to specific modules of the accounting      system on a need-to-use and/or read-only basis. These actions, in addition      to improvements made under item 3 above, will minimize any risk of a      potential material misstatement  occurring. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| NAME                  | AGE  | POSITION                                              |
|-----------------------|-----------|-------------------------------------------------------|
| Jeff      Whitmore    | 38        | Vice      President Global Sales                      |
| Siavash      Ghazvini | 38        | Vice      President Marketing and BusinessDevelopment |

----

| Number      | Description                                                                          |
|-------------|--------------------------------------------------------------------------------------|
| 2.11        | Agreement      and Plan of Merger dated as of December 14, 2004                      |
|        |                                                                                 |
| 2.22        | Amendment      No. 1 to Agreement and Plan of Merger dated April 6,  2005            |
|        |                                                                                 |
| 2.33        | Amendment      No. 2 to Agreement and Plan of Merger dated July 6,2005               |
|        |                                                                                 |
| 2.44        | Amendment      No. 3 to Agreement and Plan of Merger dated August 25,  2005          |
|        |                                                                                 |
| 3.15        | Certificate      of Incorporation                                                    |
|        |                                                                                 |
| 3.1.15      | Certificate      of Amendment to Certificate of Incorporation                        |
|        |                                                                                 |
| 3.26        | Bylaws                                                                               |
|        |                                                                                 |
| 4.17        | 1993      Stock Incentive Plan*                                                      |
|        |                                                                                 |
| 4.28        | 2000      Stock Incentive Plan*                                                      |
|        |                                                                                 |
| 4.35        | Amended      and Restated 1999 Stock Option Plan of Alpha Innotech      Corporation* |
|        |                                                                                 |
| 4.45        | 2001      Milestone Stock Option Plan of Alpha Innotech  Corporation*                |
|        |                                                                                 |
| 4.59        | 2006      Equity Incentive Plan*                                                     |
|        |                                                                                 |
| 4.65        | Secured      Promissory Note Issued to Alexandria Dated April 8,2005                 |
|        |                                                                                 |
| 4.75        | Loan      and Security Agreement with BFI dated March 9, 2004                        |
|        |                                                                                 |
| 4.810       | Form      of Convertible Note Issued to ETP/FBR Venture Capital II,    LLC           |
|        |                                                                                 |
| 4.910       | Form      of Warrant Issued to ETP/FBR Venture Capital II, LLC                       |
|        |                                                                                 |
|  4.109 | Form      of 2006 Equity Incentive Plan Stock Option Agreement                       |
|        |                                                                                 |
|  4.11  | Form      of 2006 Equity Incentive Plan Stock Award Agreement                   |
|        |                                                                                 |
| 10.110      | Form      of Securities Purchase Agreement with ETP/FBR Venture Capital II,      LLC |

| 1 | Incorporated by reference to our      Form 8-K filed December 17,2004 |
|---|----------------------------------------------------------------------------|

| 2 | Incorporated by reference to our      Form 8-K filed April 12,2005. |
|---|--------------------------------------------------------------------------|

| 3 | Incorporated by reference to our      Form 8-K filed July 11,2005. |
|---|-------------------------------------------------------------------------|

| 4 | Incorporated by reference to our      Form 8-K filed August 26,2005. |
|---|---------------------------------------------------------------------------|

| 5 | Incorporated by reference to our      Form 8-K filed October 7,2005. |
|---|---------------------------------------------------------------------------|

| 6 | Incorporated by reference to the      Registrant's Registration Statement on Form S-1 (File      No. 33-20584). |
|---|----------------------------------------------------------------------------------------------------------------------|

| 7 | Incorporated by reference to the      Registrant's Annual Report on Form 10-KSB for the fiscal year ended      December 31, 1994. |
|---|----------------------------------------------------------------------------------------------------------------------------------------|

| 8 | Incorporated by reference to      Registrant's Definitive Proxy Statement filed on June 23,      2000. |
|---|-------------------------------------------------------------------------------------------------------------|

| 9 | Incorporated by reference to our      Form S-8 filed October 19,2006. |
|---|-----------------------------------------------------------------------|

| 10 | Incorporated by reference to our      Quarterly Report on Form 10-QSB for the quarter ending June 30, 2006 filed      August 14, 2006. |
|----|----------------------------------------------------------------------------------------------------------------------------------------|

----

| 10.25   | Employment      Agreement between Alpha Innotech Corporation and Haseeb Chaudhry dated May      11, 2001*          |
|---------|--------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                               |
| 10.35   | Amendment      No. 1 to Employment Agreement with Haseeb Chaudhry dated April 6,      2005*.                  |
|    |                                                                                                               |
| 10.4    | Agreement      and General Release with Haseeb Chaudhry dated October 27,      2006*.                              |
|    |                                                                                                               |
| 10.55   | Employment      Agreement between Alpha Innotech Corporation and Darryl Ray dated May 11,      2001*               |
|    |                                                                                                               |
| 10.65   | Amendment      No. 1 to Employment Agreement with Darryl Ray dated April 6,      2005.*                            |
|    |                                                                                                               |
| 10.7    | Agreement      and General Release with Darryl Ray dated March 31,  2006*                                          |
|    |                                                                                                               |
| 10.811  | Employee      offer letter to Ronald H. Bissinger*                                                                 |
|    |                                                                                                               |
| 10.912  | First Modification to Loan and Security Agreement      with BFI Business Finance dated as of October 26,    2007   |
|    |                                                                                                               |
| 10.10   | Secured Promissory Note to BFI Business Finance      dated January 15, 2008                                        |
|    |                                                                                                               |
| 10.11   | Second Modification to Loan and Security Agreement      with BFI Business Finance dated as of February 29,    2008 |
|    |                                                                                                               |
| 10.12   | Secured Promissory Note to BFI Business Finance      dated February 29, 2008                                       |
|    |                                                                                                               |
| 10.1313 | Employment      contract with Ronald H. Bissinger dated July 17, 2007                                              |
|    |                                                                                                               |
| 10.14   | Common      Stock Purchase Agreement with William Snider dated as of March 13,      2008                           |
|    |                                                                                                               |
| 11.114  | Statement      regarding computation of per share earnings                                                         |
|    |                                                                                                               |
| 14.115  | Code      of Ethical Conduct                                                                                       |
|    |                                                                                                               |
| 21.1    | Subsidiaries      of the small business issuer                                                                     |
|    |                                                                                                               |
| 23.1    | Letter      of Consent From Independent Registered Public Accounting Firm, Rowbotham      & Company            |
|    |                                                                                                               |
| 24.116  | Power      of attorney                                                                                             |
|    |                                                                                                               |
| 31.1    | Rule      13a-14(a) Certification (CEO and CFO)                                                                    |
|    |                                                                                                               |
| 32.1    | Section      1350 Certification (CEO and CFO)                                                                      |
|    |                                                                                                               |
|    |                                                                                                               |

| * | Management contract or      compensatory plan |
|---|-----------------------------------------------|

| 11 | Incorporated      by reference to our Form 8-K filed March 9,  2006. |
|----|---------------------------------------------------------------------------|

| 12 | Incorporated      by reference to our Form 10-QSB filed November 14,2007. |
|----|---------------------------------------------------------------------------|
| 13 |  Incorporated      by reference to our Form 8-K filed July 20,2007   |

| 14 | Incorporated by reference to the      discussion of “Loss per Share” located in Note 1 of the consolidated      financial statements for the years ended December 31, 2007 and 2006 of      this report. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15 | Copy will be made available on      our website atwww.alphainnotech.com |
|----|-------------------------------------------------------------------------|

| 16 | Incorporated by reference to      Power of Attorney located on page S-1 of this    report. |
|----|--------------------------------------------------------------------------------------------|

----

|                                                                   |    Page  |
|------------------------------------------------------------------------|------------------------------|
| Alpha      Innotech Corp.                                              |                         |
| Report      of Independent Registered Public Accounting Firm           | F-2                          |
| Consolidated      Balance Sheet                                        | F-3                          |
| Consolidated      Statements of Operations                             | F-4                          |
| Consolidated      Statements of Changes in Shareholders’ Deficit | F-5                          |
| Consolidated      Statements of Cash Flows                             | F-6                          |
| Notes      to Consolidated Financial Statements                        | F-7                          |

----

----

|                                                                                                                                              |   | 2007   |        |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| Assets                                                                                                                                            |   |   |        |
| Current      assets:                                                                                                                              |   |   |        |
|     Cash      and cash equivalents                                                                                            |   | $      | 167,738     |   |
|     Restricted      cash                                                                                                      |   |   | 50,113      |   |
|     Accounts      receivable, net                                                                                             |   |   | 2,229,698   |   |
|     Inventory,      net                                                                                                       |   |   | 1,006,085   |   |
|     Prepaid      expenses and other current assets                                                                            |   |   | 218,780     |   |
|         Total      current assets                                                                         |   |   | 3,672,414   |   |
|                                                                                                                                              |   |   |        |   |
| Property      and equipment, net                                                                                                                  |   |   | 914,383     |   |
|                                                                                                                                              |   |   |        |   |
| Other      assets                                                                                                                                 |   |   | 90,232      |   |
|     Total      assets                                                                                                         |   | $      | 4,677,029   |   |
| Liabilities      and Shareholders’ Deficit                                                                                                  |   |   |        |   |
| Current      liabilities:                                                                                                                         |   |   |        |   |
|     Accounts      payable                                                                                                     |   | $      | 1,785,909   |   |
|     Accrued      liabilities                                                                                                  |   |   | 1,329,860   |   |
|     Current      portion of debt                                                                                              |   |   | 1,406,968   |   |
|     Deferred      revenue                                                                                                     |   |   | 1,027,006   |   |
|     Other      liabilities                                                                                                    |   |   | 265,526     |   |
|         Total      current liabilities                                                                    |   |   | 5,815,269   |   |
|                                                                                                                                              |   |   |        |   |
| Debt,      net of current portion                                                                                                                 |   |   | 307,938     |   |
|                                                                                                                                              |   |   |        |   |
| Commitments      and contingencies                                                                                                                |   |   | —     |   |
|                                                                                                                                              |   |   |        |   |
| Shareholders’      deficit:                                                                                                                 |   |   |        |   |
|     Common      stock, $0.01 par value per share: 50,000,000 shares authorized, 10,462,576      shares issued and outstanding |   |   | 104,626     |   |
|     Additional      paid-in capital                                                                                           |   |   | 17,492,662  |   |
|     Accumulated      deficit                                                                                                  |   |   | (19,035,398 | ) |
|     Treasury      stock                                                                                                       |   |   | (8,068      | ) |
|         Total      shareholders’ deficit                                                            |   |   | (1,446,178  | ) |
|             Total      liabilities and shareholders’ deficit                    |   | $      | 4,677,029   |   |

----

|                                                                                              |   | 2007    |       |    | 2006   |    |
|---------------------------------------------------------------------------------------------------|--------|---------|------------|---------|--------|---------|
| Revenue                                                                                           |   | $       | 15,321,729 |    |   | $       | 13,253,844 |   |
| Cost      of goods sold                                                                           |   |    | 6,885,032  |    |   |    | 6,314,064 |   |
|     Gross      profit                                                         |   |    | 8,436,697  |    |   |    | 6,939,780 |   |
| Operating      costs and expenses:                                                                |   |    |       |    |   |    |   |   |
|     Sales      and marketing                                                  |   |    | 4,873,866  |    |   |    | 4,064,723 |   |
|     Research and      development                                             |   |    | 1,322,758  |    |   |    | 1,227,324 |   |
|     General      and administrative                                           |   |    | 2,594,936  |    |   |    | 2,380,836 |   |
|         Total      operating costs and expenses           |   |    | 8,791,560  |    |   |    | 7,672,883 |   |
|             Loss      from operations |   |    | (354,863   | )  |   |    | (733,103 | ) |
| Other      expense:                                                                               |   |    |       |    |   |    |   |   |
|     Interest      expense                                                     |   |    | (299,549   | )  |   |    | (318,630 | ) |
|     Other      expense, net                                                   |   |    | (7,325     | )  |   |    | 53,479 |   |
|         Total      other expense                          |   |    | (306,874   | )  |   |    | (265,151 | ) |
|             Net      loss             |   |  $ | (661,737   | )  |   |  $ | (998,254 | ) |
|                                                                                              |   |    |       |    |   |    |   |   |
| Net      loss per share - basic and diluted                                                       |   | $       | (0.06      | )       |   | $       | (0.10 | ) |
| Weighted      average shares outstanding - basic and diluted                                      |   |    | 10,373,426 |    |   |    | 9,880,221 |   |

----

|                                                                   |   |            |       |   |   |    |    |                     |   |    |           |   |   |   |          |   |                     |    |          |   |   |
|------------------------------------------------------------------------|--------|-----------------|------------|--------|--------|---------|---------|--------------------------|--------|---------|----------------|--------|--------|--------|---------------|--------|--------------------------|---------|---------------|--------|--------|
|                                                                   |   | Common    Stock |       |   |   |    |    | Treasury      Stock      |   |    |           |   |   |   |          |
|                                                                   |   | NumberofShares  |       |   | Amount |    |    | AdditionalPaid-inCapital |   |    | NumberofShares |   |   | Amount |          |   | Accumulated      Deficit |    |          | Total  |   |
| Balance      at January 1,    2006                 |   |            | 9,725,809  |   |   |  $ | 97,258  |                     |   |  $ | 16,703,678     |   |   |   | —       |   |                     |  $ | —       |   |   |  $ | (17,375,407 | ) |   |  $ | (574,471 | ) |
| Cashless      exercise of warrants                                     |   |            | 92,211     |   |   |    | 922     |                     |   |    | 7,146          |   |   |   | 4,746    |   |                     |    | (8,068        | )      |   |   | — |   |   |   | —  |   |
| Exercise      of warrants for cash                                     |   |            | 73,373     |   |   |    | 734     |                     |   |    | 5,686          |   |   |   | —  |   |                     |    | —  |   |   |   | —  |   |   |   | 6,420 |   |
| To      record debt discount associated with APB 14 financing      ETP |   |            | —    |   |   |    | — |                     |   |    | 94,353         |   |   |   | —  |   |                     |    | —  |   |   |   | — |   |   |   | 94,353 |   |
| FAS      123 (R) Stock based compensation                              |   |            | —    |   |   |    | — |                     |   |    | 297,262        |   |   |   | —       |   |                     |    | —       |   |   |   | — |   |   |   | 297,262 |   |
| Net      loss                                                          |   |            | —    |   |   |    | — |                     |   |    | —        |   |   |   | —       |   |                     |    | —       |   |   |   | (998,254 | ) |   |   | (998,254 | ) |
| Balance      at December 31, 2006                                      |   |            | 9,891,393  |   |   | $       | 98,914  |                     |   | $       | 17,108,125     |   |   |   | 4,746    |   |                     | $       | (8,068        | )      |   | $ | (18,373,661 | ) |   | $ | (1,174,690 | ) |
| Issuance      of restricted shares                                     |   |            | 530,000    |   |   |    | 5,300   |                     |   |    | (5,300         | )      |   |   | —  |   |                     |    | —  |   |   |   | —  |   |   |   | —  |   |
| Exercise      of warrants                                              |   |            | 41,183     |   |   |    | 412     |                     |   |    | 3,192          |   |   |   | —  |   |                     |    | —  |   |   |   | —  |   |   |   | 3,604 |   |
| FAS      123 (R) Stock based compensation                              |   |            |       |   |   |    |    |                     |   |    | 386,645        |   |   |   | —  |   |                     |    | —  |   |   |   | —  |   |   |   | 386,645 |   |
| Net      loss                                                          |   |            |       |   |   |    |    |                     |   |    |           |   |   |   |          |   |                     |    |          |   |   |   | (661,737 | ) |   |   | (661,737 | ) |
| Balance      at December 31, 2007                                      |   |            | 10,462,576 |   |   |  $ | 104,626 |                     |   |  $ | 17,492,662     |   |   |   | 4,746    |   |                     |  $ | (8,068        | )      |   |  $ | (19,035,398 | ) |   |  $ | (1,446,178 | ) |

----

|                                                                                                                                           |   | 2007   |     |    | 2006   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|---------|--------|--------|
| Cash      flows from operating activities:                                                                                                     |   |   |     |    |   |   |
|     Net      loss                                                                                                          |   | $      | (661,737 | )       |   | $      | (998,254 | ) |
|     Adjustments to      reconcile net income to net cash provided by operating      activities:                            |   |   |     |    |   |   |   |   |
|         Depreciation      and amortization                                                             |   |   | 601,181  |    |   |   | 565,668 |   |
|         Allowance for      sales returns and doubtful accounts                                         |   |   | (12,320  | )  |   |   | 28,711 |   |
|         Allowance for      excess and obsolete inventory                                               |   |   | 4,698    |    |   |   | (14,025 | ) |
|         Provision for      demo equipment                                                              |   |   | (8,175   | )       |   |   | (46,825 | ) |
|         Gain on      disposal of property and equipment                                                |   |   | —  |    |   |   | 1,165 |   |
|         Accretion of      debt discount to interest expense                                            |   |   | —  |    |   |   | 8,421 |   |
|         Share-based      compensation                                                                  |   |   | 386,645  |    |   |   | 297,262 |   |
|         Change      in operating assets and liabilities:                                               |   |   |     |    |   |   |   |   |
|             Accounts      receivables                                              |   |   | (27,968  | )       |   |   | 192,448 |   |
|             Inventory                                                              |   |   | (377,231 | )       |   |   | 332,484 |   |
|             Prepaid      expenses and other current assets                         |   |   | (29,256  | )       |   |   | 22,463 |   |
|             Other      assets                                                      |   |   | 1,075    |    |   |   | (14,982 | ) |
|             Accounts      payable                                                  |   |   | 177,623  |    |   |   | 111,457 |   |
|             Accrued      liabilities                                               |   |   | 354,194  |    |   |   | (108,672 | ) |
|             Deferred      revenue                                                  |   |   | 131,131  |    |   |   | 120,904 |   |
|             Other      liabilities                                                 |   |   | 55,052   |    |   |   | (19,725 | ) |
|                 Net      cash provided by operating activities |   |   | 594,912  |    |   |   | 478,500 |   |
| Cash      flows from investing activities:                                                                                                     |   |   |     |    |   |   |   |   |
|     Restricted      cash                                                                                                   |   |   | (50,113  | )  |   |   | —  |   |
|     Purchase of      property and equipment                                                                                |   |   | (458,483 | )       |   |   | (397,638 | ) |
|         Net      cash used in investing activities                                                     |   |   | (508,596 | )       |   |   | (397,638 | ) |
| Cash      flows from financing activities:                                                                                                     |   |   |     |    |   |   |   |   |
|     Proceeds from      borrowing of debt obligation                                                                        |   |   | 232,162  |    |   |   | 37,709 |   |
|     Repayment of      debt obligation                                                                                      |   |   | (600,000 | )       |   |   | (600,000 | ) |
|     Proceeds from      issuance of convertible notes                                                                       |   |   | —  |    |   |   | 375,000 |   |
|     Proceeds from      exercise of warrants                                                                                |   |   | 3,604    |    |   |   | 14,488 |   |
|     Repurchase of      common stock                                                                                        |   |   | —  |    |   |   | (8,068 | ) |
|         Net      cash used in financing activities                                                     |   |   | (364,234 | )       |   |   | (180,871 | ) |
|             Net      decrease in cash and cash equivalents                         |   |   | (277,918 |  ) |   |   | (100,009 | ) |
| Cash      and cash equivalents at the beginning of the year                                                                                    |   |   | 445,656  |    |   |   | 545,665 |   |
|     Cash      and cash equivalents at the end of the year                                                                  |   | $      | 167,738  |    |   | $      | 445,656 |   |

|                                                                              |   | 2007   |    |   | 2006   |   |
|-----------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Supplemental      disclosures of cash flow information:                           |   |   |    |   |   |   |
|     Interest paid      during the year                        |   | $      | 299,549 |   |   | $      | 318,630 |   |
|     Income      taxes paid during the year                    |   | $      | — |   |   | $      | — |   |
| Supplemental      disclosure of non-cash investing and financing      activities: |   |   |    |   |   |   |   |   |
|     Issuance of      restricted shares at par value           |   | $      | 5,300   |   |   | $      | — |   |
|     Issuance of      common stock warrant                     |   | $      | — |   |   | $      | 94,353 |   |

----

| 1. | Summary of Significant Accounting      Policies |
|----|-------------------------------------------------|

----

----

|                                                                                                |   | 2007   |    | 2006   |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|
|     Shares      issuable upon exercise of stock options                         |   |   | — |   |   | 54,818 |   |
|     Shares      issuable upon exercise of warrants                              |   |   | 336,934 |   |   | 398,214 |   |
|         Denominator for      basic and diluted calculations |   |   | 336,934 |   |   | 453,032 |   |

----

----

|                                                                          |   | 2007   |      |
|-------------------------------------------------------------------------------|--------|--------|-----------|
|     Accounts      receivable                              |   | $      | 2,367,989 |   |
|     Less      allowance for sales returns                 |   |   | (133,291  | ) |
|     Less      allowance for doubtful accounts             |   |   | (5,000    | ) |
|         Accounts      receivable, net |   | $      | 2,229,698 |   |

|                                                                          |   | 2007   |      |
|-------------------------------------------------------------------------------|--------|--------|-----------|
|     Raw      materials                                    |   | $      | 896,935   |   |
|     Inventory in      transit                             |   |   | 155,681   |   |
|     Less      allowance for excess and obsolete inventory |   |   | (46,531   | ) |
|         Inventory,      net           |   | $      | 1,006,085 |   |

|                                                                              |   | 2007   |       |
|-----------------------------------------------------------------------------------|--------|--------|------------|
|     Machinery and      equipment                              |   | $      | 435,617    |   |
|     Furniture and      fixtures                               |   |   | 208,201    |   |
|     Leasehold      improvements                               |   |   | 1,507,500  |   |
|     Loaner      and demonstration units                       |   |   | 1,160,053  |   |
|     Computers                                                 |   |   | 358,443    |   |
|     Software                                                  |   |   | 103,796    |   |
|         Total      property and equipment |   |   | 3,773,610  |   |
|     Less      accumulated depreciation and amortization       |   |   | (2,859,227 | ) |
| Property      and equipment, net                                                  |   | $      | 914,383    |   |

----

|                                                                           |   | 2007   |      |
|--------------------------------------------------------------------------------|--------|--------|-----------|
|     Payroll      and related costs                         |   | $      | 455,641   |   |
|     Warranty                                               |   |   | 153,251   |   |
|     Audit      and tax service fees                        |   |   | 62,250    |   |
|     Finder’s      fee                                |   |   | 175,000   |   |
|     Consultant and      Board member fees                  |   |   | 1,792     |   |
|     Founder's      Bonus                                   |   |   | 398,162   |   |
|     Other                                                  |   |   | 83,764    |   |
|         Total      accrued liabilities |   | $      | 1,329,860 |   |

| 3. | Debt |
|----|------|

|                                                                                              |   | 2007   |       |
|---------------------------------------------------------------------------------------------------|--------|--------|------------|
|     Alexandria      Finance, LLC Term Loan                                    |   | $      | 200,000    |   |
|     BFI      Business Finance Line of Credit                                  |   |   | 1,206,968  |   |
|     ETP      Venture Capital II LLC Convertible Note, net of debt    discount |   |   | 307,938    |   |
|         Total      debt                                   |   |   | 1,714,906  |   |
|     Less      current portion                                                 |   |   | (1,406,968 | ) |
|         Debt,      net of current portion                 |   | $      | 307,938    |   |

|     Year      ending December 31:                                                          |   |   |    |
|----------------------------------------------------------------------------------------------------------------|--------|--------|---------|
|         2008                                                           |   | $      | 200,000 |   |
|             Alexandria      Finance, LLC Term Loan |   | $      | 200,000 |   |

----

|     Year      ending December 31:                                                 |   |   |    |
|-------------------------------------------------------------------------------------------------------|--------|--------|---------|
|        2011                                                        |   | $      | 307,938 |   |
|         ETP/FBR      Venture Capital II, LLC Convertible Note |   | $      | 307,938 |   |

| 4. | Commitments and      Contingencies |
|----|------------------------------------|

|     Year      ending December 31:                                                  |   |   |      |
|-------------------------------------------------------------------------------------------------------------|--------|--------|-----------|
|         2008                                                        |   | $      | 587,040   |   |
|         2009                                                        |   |   | 589,558   |   |
|         2010                                                        |   |   | 592,127   |   |
|         2011                                                        |   |   | 545,185   |   |
|             Total      minimum lease obligation |   | $      | 2,313,910 |   |

| 5. | Income    Taxes |
|----|-----------------|

|                                                                |   | 2007   |       |   | 2006   |   |
|---------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|     Net      operating loss carryforwards       |   | $      | 3,677,511  |   |   | $      | 3,626,096 |   |
|     Research and      development credits       |   |   | 759,099    |   |   |   | 665,141 |   |
|     Reserves and      accruals                  |   |   | 1,281,102  |   |   |   | 1,191,544 |   |
|         Total               |   |   | 5,717,712  |   |   |   | 5,482,781 |   |
|     Less      valuation allowance               |   |   | (5,717,712 | )      |   |   | (5,482,781 | ) |
|         Deferred      taxes |   | $      | —    |   |   | $      | — |   |

----

| 6. | Common    Stock |
|----|-----------------|

|                            |   | Common      Stock WarrantsOutstanding      at December 31,      2007 |    | Common      Stock WarrantsExercisable      at December 31, 2007 |   |
|---------------------------------|--------|---------------------------------------------------------------------------|---------|----------------------------------------------------------------------|--------|
|  ExercisePrice             |   | NumberOutstanding                                                         |    | WeightedAverageRemainingContractualLifeIn      Years                 |   | WeightedAverageExercisePrice |   | NumberExercisable  |   | WeightedAverageExercisePrice |   |
| $    0.0875 |   |                                                                      | 364,169 |                                                                 |   | 4.25 |   | $ | 0.0875 |   |   | 364,169 |   | $ | 0.0875 |   |
| $    1.2000 |   |                                                                      | 125,000 |                                                                 |   | 8.56 |   | $ | 1.2000 |   |   | 125,000 |   | $ | 1.2000 |   |
| $    1.7500 |   |                                                                      | 102,861 |                                                                 |   | 4.27 |   | $ | 1.7500 |   |   | 102,861 |   | $ | 1.7500 |   |
| $    8.5900 |   |                                                                      | 22,500  |                                                                 |   | 2.34 |   | $ | 8.5900 |   |   | 22,500 |   | $ | 8.5900 |   |
| $  14.6900            |   |                                                                      | 5,000   |                                                                 |   | 2.17 |   | $ | 14.6900 |   |   | 5,000 |   | $ | 14.6900 |   |
|                            |   |                                                                      | 619,530 |                                                                 |   |   |   |   |   |   |   | 619,530 |   |   |   |   |

----

|                                                                                    |   |                    |      | Outstanding      Options    |   |
|-----------------------------------------------------------------------------------------|--------|-------------------------|-----------|-----------------------------|--------|
|                                                                                    |   | SharesAvailableForGrant |      | Number of      Shares  |   | WeightedAverageExercisePrice |   | AggregatePrice |   |
|     Balance      at January 1, 2006                                 |   |                    | 460,368   |                        |   | 475,117 |   | $ | 3.21 |   | $ | 1,524,282 |   |
|     Authorized      under the 2006 Plan                             |   |                    | 1,000,000 |                        |   | — |   | $  | — |   |   | — |   |
|     Granted                                                         |   |                    | (476,001  | )                           |   | 476,001 |   | $ | 1.40 |   |   | 665,643 |   |
|     Cancelled                                                       |   |                    | 53,693    |                        |   | (53,693 | ) | $ | 1.59 |   |   | (85,198 | ) |
|     Expired                                                         |   |                    | 14,279    |                        |   | (16,604 | ) | $ | 4.58 |   |   | (76,088 | ) |
|         Balance      at December 31, 2006  |   |                    | 1,052,339 |                        |   | 880,821 |   | $ | 2.30 |   |   | 2,028,639 |   |
|     Authorized      under the evergreen provisions of the 2006 Plan |   |                    | 494,570   |                        |   | — |   | $ | — |   |   | — |   |
|     Restricted      shares issued                                   |   |                    | (530,000  | )                           |   | — |   | $ | — |   |   | — |   |
|     Granted                                                         |   |                    | (700,800  | )                           |   | 700,800 |   | $ | 0.99 |   |   | 696,086 |   |
|     Cancelled                                                       |   |                    | 98,586    |                        |   | (98,586 | ) | $ | 1.03 |   |   | (101,994 | ) |
|     Expired                                                         |   |                    | 86,693    |                        |   | (149,321 | ) | $ | 2.60 |   |   | (387,894 | ) |
|         Balance      at December 31, 2007  |   |                    | 501,388   |                        |   | 1,333,714 |   | $ | 1.68 |   | $ | 2,234,837 |   |

----

|                                      |   | OptionsOutstanding      atDecember 31,      2007 |      | OptionsExercisable      atDecember 31,      2007 |   |
|-------------------------------------------|--------|-------------------------------------------------------|-----------|-------------------------------------------------------|--------|
| ExercisePrice                             |   | NumberOutstanding                                     |      | WeightedAverageRemainingContractualLifeIn      Years  |   | Weighted      Average ExercisePrice |   | NumberExercisable |   | Weighted      Average ExercisePrice |   |
| $      0.90 |   |                                                  | 363,000   |                                                  |   | 9.12 |   | $ | 0.90 |   |   | — |   | $ | 0.90 |   |
| $      0.95 |   |                                                  | 40,000    |                                                  |   | 8.83 |   | $ | 0.95 |   |   | 40,000 |   | $ | 0.95 |   |
| $      1.12 |   |                                                  | 214,300   |                                                  |   | 9.70 |   | $ | 1.12 |   |   | — |   | $ | 1.12 |   |
| $      1.20 |   |                                                  | 60,000    |                                                  |   | 9.47 |   | $ | 1.20 |   |   | 30,000 |   | $ | 1.20 |   |
| $      1.35 |   |                                                  | 119,500   |                                                  |   | 8.40 |   | $ | 1.35 |   |   | 47,816 |   | $ | 1.35 |   |
| $      1.40 |   |                                                  | 16,425    |                                                  |   | 2.65 |   | $ | 1.40 |   |   | 16,425 |   | $ | 1.40 |   |
| $      1.50 |   |                                                  | 30,000    |                                                  |   | 7.93 |   | $ | 1.50 |   |   | 30,000 |   | $ | 1.50 |   |
| $      1.53 |   |                                                  | 200,000   |                                                  |   | 8.27 |   | $ | 1.53 |   |   | 112,500 |   | $ | 1.53 |   |
| $      1.66 |   |                                                  | 56,116    |                                                  |   | 7.34 |   | $ | 1.66 |   |   | 32,654 |   | $ | 1.66 |   |
| $      1.92 |   |                                                  | 3,372     |                                                  |   | 7.05 |   | $ | 1.92 |   |   | 3,012 |   | $ | 1.92 |   |
| $      2.30 |   |                                                  | 11,000    |                                                  |   | 4.60 |   | $ | 2.30 |   |   | 11,000 |   | $ | 2.30 |   |
| $      2.62 |   |                                                  | 72,635    |                                                  |   | 4.53 |   | $ | 2.62 |   |   | 72,635 |   | $ | 2.62 |   |
| $      2.89 |   |                                                  | 60,003    |                                                  |   | 3.41 |   | $ | 2.89 |   |   | 60,003 |   | $ | 2.89 |   |
| $      3.70 |   |                                                  | 49,500    |                                                  |   | 4.31 |   | $ | 3.70 |   |   | 49,500 |   | $ | 3.70 |   |
| $      6.60 |   |                                                  | 2,000     |                                                  |   | 0.83 |   | $ | 6.60 |   |   | 2,000 |   | $ | 6.60 |   |
| $      7.00 |   |                                                  | 6,000     |                                                  |   | 3.47 |   | $ | 7.00 |   |   | 6,000 |   | $ | 7.00 |   |
| $      7.81 |   |                                                  | 1,500     |                                                  |   | 3.25 |   | $ | 7.81 |   |   | 1,500 |   | $ | 7.81 |   |
| $      9.38 |   |                                                  | 200       |                                                  |   | 2.05 |   | $ | 9.38 |   |   | 200 |   | $ | 9.38 |   |
| $      9.40 |   |                                                  | 15,663    |                                                  |   | 1.42 |   | $ | 9.40 |   |   | 15,663 |   | $ | 9.40 |   |
| $    10.00            |   |                                                  | 6,000     |                                                  |   | 2.61 |   | $ | 10.00 |   |   | 6,000 |   | $ | 10.00 |   |
| $    10.30            |   |                                                  | 1,500     |                                                  |   | 2.61 |   | $ | 10.30 |   |   | 1,500 |   | $ | 10.30 |   |
| $    11.56            |   |                                                  | 4,500     |                                                  |   | 0.42 |   | $ | 11.56 |   |   | 4,500 |   | $ | 11.56 |   |
| $    16.87            |   |                                                  | 500       |                                                  |   | 2.18 |   | $ | 16.87 |   |   | 500 |   | $ | 16.87 |   |
|                                      |   |                                                  | 1,333,714 |                                                  |   |   |   |   |   |   |   | 543,408 |   |   |   |   |

|                                                        |   | Twelve Months Ended      December 31, |    |
|-------------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                        |   | 2007                                                 |    |   | 2006 |   |
|     Cost of      goods sold             |   | $                                                    | 2,441   |   |   | $ | 7,191 |   |
|     Sales      and marketing            |   |                                                 | 122,363 |   |   |   | 16,861 |   |
|     Research and      development       |   |                                                 | 44,513  |   |   |   | 14,096 |   |
|     General      and administrative     |   |                                                 | 217,328 |   |   |   | 259,114 |   |
|     Total      share-based compensation |   | $                                                    | 386,645 |   |   | $ | 297,262 |   |

----

|                                                                                                   |   | Number      of Shares |     |   | Weighted      Average Grant Date Fair Value |    |
|--------------------------------------------------------------------------------------------------------|--------|-----------------------|----------|--------|---------------------------------------------|---------|
|     Non-vested      stock outstanding at January 1, 2007                      |   |                  | 389,566  |   |                                        | $       | 1.42 |   |
|     Granted                                                                        |   |                  | 700,800  |   |                                        | $  | 0.99 |   |
|     Vested                                                                         |   |                  | (52,153  | )      |                                        | $       | 1.09 |   |
|     Forfeited                                                                      |   |                  | (98,586  | )      |                                        | $       | 1.03 |   |
|     Expired                                                                        |   |                  | (149,321 | )      |                                        | $       | 2.60 |   |
|         Non-vested      stock outstanding at December 31, 2007 |   |                  | 790,306  |   |                                        | $       | 1.10 |   |

|                                             |   | 2007          |    |   | 2006          |   |
|--------------------------------------------------|--------|---------------|---------|--------|---------------|--------|
|     Risk-free      interest  |   |          | 4.72    | %      |          |   | 4.74 | % |
|     Expected      life       |   | 10      Years |    |   | 10      Years |   |
|     Expected      volatility |   |          | 117     | %      |          |   | 73 | % |
|     Expected      dividend   |   |          | — |   |          |   | — |   |

----

|                                                                          | Shares |      | Weighted      -Average Exercise Price per Share |   | Weighted-Average      Remaining Contractual Terms in Years |   | Aggregate      Intrinsic Value |   |
|-------------------------------------------------------------------------------|--------|-----------|-------------------------------------------------|--------|------------------------------------------------------------|--------|--------------------------------|--------|
|     Outstanding      at January 1, 2007              |   | 880,821   |                                            | $      | 2.30                                                       |   |                           |   |   |   |   |   |
|     Grants                                                |   | 700,800   |                                            | $      | 0.99                                                       |   |                           |   |   |   |   |   |
|     Forfeitures                                           |   | (98,586   | )                                               | $      | 1.03                                                       |   |                           |   |   |   |   |   |
|     Expirations                                           |   | (149,321  | )                                               | $      | 2.60                                                       |   |                           |   |   |   |   |   |
|     Outstanding at      December 31, 2007                 |   | 1,333,714 |                                            | $      | 1.68                                                       |   |                           | 7.92   |   | $ | — |   |
|     Exercisable at      December 31, 2007                 |   | 543,408   |                                            | $      | 2.51                                                       |   |                           | 6.22   |   | $ | — |   |
|     Vested      and expected to vest at December 31, 2007 |   | 543,408   |                                            | $      | 2.51                                                       |   |                           | 6.22   |   | $ | — |   |

| 7. | Employee      Benefits Plan  |
|----|-----------------------------------|

| 8. | Business      Segment Information  |
|----|-----------------------------------------|

----

|                                                               |   | 2007   |       |   | 2006   |   |
|--------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|     North      America                         |   | $      | 8,128,413  |   |   | $      | 8,155,266 |   |
|     Asia      and Pacific Rim                  |   |   | 2,696,736  |   |   |   | 2,203,397 |   |
|     Europe                                     |   |   | 4,450,748  |   |   |   | 2,669,519 |   |
|     Other                                      |   |   | 45,832     |   |   |   | 225,662 |   |
|         Total      revenue |   | $      | 15,321,729 |   |   | $      | 13,253,844 |   |

|                                                                         |   | 2007   |      |
|------------------------------------------------------------------------------|--------|--------|-----------|
|     United      States                                   |   | $      | 1,004,615 |   |
|     International                                        |   |   | —   |   |
|         Total      long-lived assets |   | $      | 1,004,615 |   |

| 9. | Quarterly      Financial Data (Unaudited)  |
|----|-------------------------------------------------|

|                                                                                                                               |   | For the Year Ended      December 31, 2007 |      |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                                                                                               |   | FirstQuarter                                   |      |   | SecondQuarter |   |   | ThirdQuarter |   |   | FourthQuarter |   |
|     Revenue                                                                                                    |   | $                                              | 3,546,936 |   |   | $ | 3,611,820 |   |   | $ | 3,680,160 |   |   | $ | 4,482,813 |   |
|     Cost of      goods sold                                                                                    |   |                                           | 1,575,317 |   |   |   | 1,619,770 |   |   |   | 1,690,139 |   |   |   | 1,999,806 |   |
|         Gross      profit                                                                  |   |                                           | 1,971,619 |   |   |   | 1,992,050 |   |   |   | 1,990,021 |   |   |   | 2,483,007 |   |
|     Operating      expenses:                                                                                   |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Sales      and marketing                                                           |   |                                           | 1,054,569 |   |   |   | 1,162,826 |   |   |   | 1,299,011 |   |   |   | 1,357,460 |   |
|         Research and      development expenses                                             |   |                                           | 303,494   |   |   |   | 343,996 |   |   |   | 298,820 |   |   |   | 376,448 |   |
|         General      and administrative expenses                                           |   |                                           | 531,998   |   |   |   | 753,297 |   |   |   | 604,475 |   |   |   | 705,166 |   |
|             Total      operating expenses                              |   |                                           | 1,890,061 |   |   |   | 2,260,119 |   |   |   | 2,202,306 |   |   |   | 2,439,074 |   |
|                 Income      (loss) from operations |   |                                           | 81,558    |   |   |   | (268,069 | ) |   |   | (212,285 | ) |   |   | 43,933 |   |
|     Other      income (expense):                                                                               |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Interest      expense                                                              |   |                                           | (82,452   | ) |   |   | (66,693 | ) |   |   | (71,811 | ) |   |   | (78,593 | ) |
|         Other      income (expense), net                                                   |   |                                           | 229       |   |   |   | (2,635 | ) |   |   | (5,459 | ) |   |   | 540 |   |
|             Total      other income (expense)                          |   |                                           | (82,223   | ) |   |   | (69,328 | ) |   |   | (77,270 | ) |   |   | (78,053 | ) |
|                 Net      loss                      |   | $                                              | (665      | ) |   | $ | (337,397 | ) |   | $ | (289,555 | ) |   | $ | (34,120 | ) |
|     Net      loss per share - basis and diluted                                                                |   | $                                              | 0.00      |   |   | $ | (0.03 | ) |   | $ | (0.03 | ) |   | $ | 0.00 |   |
|     Weighted      average shares outstanding - basic and diluted                                               |   |                                           | 9,891,393 |   |   |   | 10,421,393 |   |   |   | 10,449,147 |   |   |   | 10,462,576 |   |

----

|                                                                                                                               |   | For the Year Ended      December 31, 2006 |      |
|------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|
|                                                                                                                               |   | FirstQuarter                                   |      |   | SecondQuarter |   |   | ThirdQuarter |   |   | FourthQuarter |   |
|     Revenue                                                                                                    |   | $                                              | 2,958,794 |   |   | $ | 3,192,617 |   |   | $ | 3,354,790 |   |   | $ | 3,747,643 |   |
|     Cost of      goods sold                                                                                    |   |                                           | 1,507,910 |   |   |   | 1,508,802 |   |   |   | 1,503,344 |   |   |   | 1,794,008 |   |
|         Gross      profit                                                                  |   |                                           | 1,450,884 |   |   |   | 1,683,815 |   |   |   | 1,851,446 |   |   |   | 1,953,635 |   |
|     Operating      expenses:                                                                                   |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Sales      and marketing                                                           |   |                                           | 982,531   |   |   |   | 1,158,046 |   |   |   | 933,044 |   |   |   | 991,102 |   |
|         Research and      development expenses                                             |   |                                           | 327,228   |   |   |   | 410,245 |   |   |   | 246,256 |   |   |   | 243,595 |   |
|         General      and administrative expenses                                           |   |                                           | 504,092   |   |   |   | 606,946 |   |   |   | 639,940 |   |   |   | 629,858 |   |
|             Total      operating expenses                              |   |                                           | 1,813,851 |   |   |   | 2,175,237 |   |   |   | 1,819,240 |   |   |   | 1,864,555 |   |
|                 Income      (loss) from operations |   |                                           | (362,967  | ) |   |   | (491,422 | ) |   |   | 32,206 |   |   |   | 89,080 |   |
|     Other      income (expense):                                                                               |   |                                           |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Interest      expense                                                              |   |                                           | (84,475   | ) |   |   | (73,620 | ) |   |   | (77,918 | ) |   |   | (82,617 | ) |
|         Other      income (expense), net                                                   |   |                                           | 31,746    |   |   |   | (10,748 | ) |   |   | (2,354 | ) |   |   | 34,835 |   |
|             Total      other income (expense)                          |   |                                           | (52,729   | ) |   |   | (84,368 | ) |   |   | (80,272 | ) |   |   | (47,782 | ) |
|                 Net      income (loss)             |   | $                                              | (415,696  | ) |   | $ | (575,790 | ) |   | $ | (48,066 | ) |   | $ | 41,298 |   |
|     Net      income (loss) per share - basis and diluted                                                       |   | $                                              | (0.04     | ) |   | $ | (0.06 | ) |   | $ | (0.00 | ) |   | $ | 0.00 |   |
|     Weighted      average shares outstanding - basic and diluted                                               |   |                                           | 9,725,809 |   |   |   | 9,804,847 |   |   |   | 9,858,694 |   |   |   | 9,783,878 |   |

----

| Date:      March 28, 2008 |   | Alpha      Innotech Corp.                                                                                                                                |
|---------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |   |                                                                                                                                                     |
|                      |   | /s/      Ronald H. Bissinger                                                                                                                             |
|                      |   | Ronald      H. Bissinger                                                                                                                                 |
|                      |   | Chief      Executive Officer and Chief Financial Officer(Principal      Executive Officer and Principal Financial and Accounting      Officer) |

| Signature                             |   | Title                                                                                       |   | Date                |
|---------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|---------------------|
| /s/      Ronald H.      Bissinger     |   | Chief      Executive Officer and Chief Financial Officer                                    |   | March      28, 2008 |
| Ronald      H. Bissinger              |   | (Principal      Executive Officer and Principal Financial and Accounting      Officer) |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      William      Snider          |   | Chairman                                                                                    |   | March      28, 2008 |
| William      Snider                   |   |                                                                                        |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      Haseeb      Chaudhry         |   | Vice      Chairman                                                                          |   | March      28, 2008 |
| Haseeb      Chaudhry                  |   |                                                                                        |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      Michael D. Bick, Ph.      D. |   | Director                                                                                    |   | March      27, 2008 |
| Michael      D. Bick, Ph. D.          |   |                                                                                        |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      James H.      Chamberlain    |   | Director                                                                                    |   | March      28, 2008 |
| James      H. Chamberlain             |   |                                                                                        |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      Gus      Davis               |   | Director                                                                                    |   | March      27, 2008 |
| Gus      Davis                        |   |                                                                                        |   |                |
|                                  |   |                                                                                        |   |                |
| /s/      Joseph Keegan, Ph.      D.   |   | Director                                                                                    |   | March      28, 2008 |
| Joseph      Keegan, Ph. D.            |   |                                                                                        |   |                |

----

| Number      | Description                                                                          |
|-------------|--------------------------------------------------------------------------------------|
| 2.11        | Agreement      and Plan of Merger dated as of December 14, 2004                      |
|        |                                                                                 |
| 2.22        | Amendment      No. 1 to Agreement and Plan of Merger dated April 6,  2005            |
|        |                                                                                 |
| 2.33        | Amendment      No. 2 to Agreement and Plan of Merger dated July 6,2005               |
|        |                                                                                 |
| 2.44        | Amendment      No. 3 to Agreement and Plan of Merger dated August 25,  2005          |
|        |                                                                                 |
| 3.15        | Certificate      of Incorporation                                                    |
|        |                                                                                 |
| 3.1.15      | Certificate      of Amendment to Certificate of Incorporation                        |
|        |                                                                                 |
| 3.26        | Bylaws                                                                               |
|        |                                                                                 |
| 4.17        | 1993      Stock Incentive Plan*                                                      |
|        |                                                                                 |
| 4.28        | 2000      Stock Incentive Plan*                                                      |
|        |                                                                                 |
| 4.35        | Amended      and Restated 1999 Stock Option Plan of Alpha Innotech      Corporation* |
|        |                                                                                 |
| 4.45        | 2001      Milestone Stock Option Plan of Alpha Innotech  Corporation*                |
|        |                                                                                 |
| 4.59        | 2006      Equity Incentive Plan*                                                     |
|        |                                                                                 |
| 4.65        | Secured      Promissory Note Issued to Alexandria Dated April 8,2005                 |
|        |                                                                                 |
| 4.75        | Loan      and Security Agreement with BFI dated March 9, 2004                        |
|        |                                                                                 |
| 4.810       | Form      of Convertible Note Issued to ETP/FBR Venture Capital II,    LLC           |
|        |                                                                                 |
| 4.910       | Form      of Warrant Issued to ETP/FBR Venture Capital II, LLC                       |
|        |                                                                                 |
|  4.109 | Form      of 2006 Equity Incentive Plan Stock Option Agreement                  |
|        |                                                                                 |
|  4.11  | Form      of 2006 Equity Incentive Plan Stock Award Agreement                        |
|        |                                                                                 |
| 10.110      | Form      of Securities Purchase Agreement with ETP/FBR Venture Capital II,      LLC |

| 1 | Incorporated by reference to our      Form 8-K filed December 17,2004 |
|---|----------------------------------------------------------------------------|

| 2 | Incorporated by reference to our      Form 8-K filed April 12,2005. |
|---|--------------------------------------------------------------------------|

| 3 | Incorporated by reference to our      Form 8-K filed July 11,2005. |
|---|-------------------------------------------------------------------------|

| 4 | Incorporated by reference to our      Form 8-K filed August 26,2005. |
|---|---------------------------------------------------------------------------|

| 5 | Incorporated by reference to our      Form 8-K filed October 7,2005. |
|---|---------------------------------------------------------------------------|

| 6 | Incorporated by reference to the      Registrant's Registration Statement on Form S-1 (File      No. 33-20584). |
|---|----------------------------------------------------------------------------------------------------------------------|

| 7 | Incorporated by reference to the      Registrant's Annual Report on Form 10-KSB for the fiscal year ended      December 31, 1994. |
|---|----------------------------------------------------------------------------------------------------------------------------------------|

| 8 | Incorporated by reference to      Registrant's Definitive Proxy Statement filed on June 23,      2000. |
|---|-------------------------------------------------------------------------------------------------------------|

| 9 | Incorporated by reference to our      Form S-8 filed October 19,2006. |
|---|-----------------------------------------------------------------------|

| 10 | Incorporated by reference to our      Quarterly Report on Form 10-QSB for the quarter ending June 30, 2006 filed      August 14, 2006. |
|----|----------------------------------------------------------------------------------------------------------------------------------------|

----

|        10.25 |        Employment      Agreement between Alpha Innotech Corporation and Haseeb Chaudhry dated May      11, 2001* |
|-------------------|-----------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                  |
| 10.35             | Amendment      No. 1 to Employment Agreement with Haseeb Chaudhry dated April 6,      2005*.                     |
|              |                                                                                                                  |
| 10.4              | Agreement      and General Release with Haseeb Chaudhry dated October 27,      2006*.                                 |
|              |                                                                                                                  |
| 10.55             | Employment      Agreement between Alpha Innotech Corporation and Darryl Ray dated May 11,      2001*                  |
|              |                                                                                                                  |
| 10.65             | Amendment      No. 1 to Employment Agreement with Darryl Ray dated April 6,      2005.*                               |
|              |                                                                                                                  |
| 10.7              | Agreement      and General Release with Darryl Ray dated March 31,  2006*                                             |
|              |                                                                                                                  |
| 10.811            | Employee      offer letter to Ronald H. Bissinger*                                                                    |
|              |                                                                                                                  |
| 10.912            | First Modification to Loan and Security Agreement      with BFI Business Finance dated as of October 26,    2007      |
|              |                                                                                                                  |
| 10.10             | Secured Promissory Note to BFI Business Finance      dated January 15, 2008                                           |
|              |                                                                                                                  |
| 10.11             | Second Modification to Loan and Security Agreement      with BFI Business Finance dated as of February 29,    2008    |
|              |                                                                                                                  |
| 10.12             | Secured Promissory Note to BFI Business Finance      dated February 29, 2008                                          |
|              |                                                                                                                  |
| 10.1313           | Employment      contract with Ronald H. Bissinger dated July 17, 2007                                                 |
|              |                                                                                                                  |
| 10.14             | Common      Stock Purchase Agreement with William Snider dated as of March 13,      2008                              |
|              |                                                                                                                  |
| 11.114            | Statement      regarding computation of per share earnings                                                            |
|              |                                                                                                                  |
| 14.115            | Code      of Ethical Conduct                                                                                          |
|              |                                                                                                                  |
| 21.1              | Subsidiaries      of the small business issuer                                                                        |
|              |                                                                                                                  |
| 23.1              | Letter      of Consent From Independent Registered Public Accounting Firm, Rowbotham      & Company               |
|              |                                                                                                                  |
| 24.116            | Power      of attorney                                                                                                |
|              |                                                                                                                  |
| 31.1              | Rule      13a-14(a) Certification (CEO and CFO)                                                                       |
|              |                                                                                                                  |
| 32.1              | Section      1350 Certification (CEO and CFO)                                                                         |
|              |                                                                                                                  |
|              |                                                                                                                  |

| * | Management contract or      compensatory plan |
|---|-----------------------------------------------|

| 11 | Incorporated      by reference to our Form 8-K filed March 9,  2006. |
|----|---------------------------------------------------------------------------|

| 12 | Incorporated      by reference to our Form 10-QSB filed November 14,2007. |
|----|---------------------------------------------------------------------------|
| 13 |  Incorporated      by reference to our Form 8-K filed July 20,207    |

| 14 | Incorporated by reference to the      discussion of “Loss per Share” located in Note 1 of the consolidated      financial statements for the years ended December 31, 2007 and 2006 of      this report. |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15 | Copy to be made available on our      website atwww.alphainnotech.com |
|----|-----------------------------------------------------------------------|

| 16 | Incorporated by reference to      Power of Attorney located on page S-1 of this    report. |
|----|--------------------------------------------------------------------------------------------|

----