**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION **

**WASHINGTON,      D.C. 20549**

**FORM      10-Q**

**(Mark      One)**

**x      QUARTERLY REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934**

**For      the quarterly period ended **
**June      30, 2008**

**OR**

**o      TRANSITION REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934**

**For      the transition period from _______ to ________**

**Commission      file number **
**1-13550**

**HAUPPAUGE      DIGITAL INC**
**.**

**(Exact      name of registrant as specified in its charter)**

| **Delaware**                                       | **11-3227864**                         |
|----------------------------------------------------|----------------------------------------|
| **(State                or other jurisdiction of** | (**I.R.S.                Employer**    |
| **incorporation                or organization)**  | **Identification                No.)** |

**91      Cabot Court, Hauppauge, New York 11788**

**(Address      of principal executive offices)**

**(631)      434-1600**

**(Registrant’s      telephone number, including area code)**

**x      YES        o      NO**

| **o                LARGE ACCELERATED                FILER** | **o                ACCELERATED                FILER**         |
|-------------------------------------------------------------|---------------------------------------------------------------|
| **o                NON-ACCELERATED                FILER**   | **x                SMALLER REPORTING                COMPANY** |

**o      YES     x NO **

** **

----

**HAUPPAUGE      DIGITAL INC. AND SUBSIDIARIES**

**INDEX**

|                                                                                                                                                                                                         | **Page                no.** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------|
|                                                                                                                                                                                                         |                        |
| **PART                I. FINANCIAL INFORMATION**                                                                                                                                                             |                        |
|                                                                                                                                                                                                         |                        |
| **Item                1. Financial Statements**                                                                                                                                                              |                        |
|                                                                                                                                                                                                         |                        |
| **Condensed                Consolidated Balance Sheets –****June                30, 2008 (unaudited) and September 30, 2007**                                                                          | **3**                       |
|                                                                                                                                                                                                         |                        |
| **Condensed                Consolidated Statements of Operations -****Three                Months ended June 30, 2008 (unaudited) and 2007                (unaudited)**                                      | **4**                       |
|                                                                                                                                                                                                         |                        |
| **Condensed                Consolidated Statements of Operations-****Nine                Months ended June 30, 2008 (unaudited) and 2007                (unaudited)**                                        | **5**                       |
|                                                                                                                                                                                                         |                        |
| **Condensed                Consolidated Statements of Other Comprehensive Income (Loss)****Three                Months and Nine Months ended June 30, 2008 (unaudited) and 2007                (unaudited)** | **6**                       |
|                                                                                                                                                                                                         |                        |
| **Condensed                Consolidated Statements of Cash Flows-Nine months ended June 30,                2008                (unaudited) and 2007 (unaudited)**                                            | **7**                       |
|                                                                                                                                                                                                         |                        |
| **Notes                to Condensed Consolidated Financial Statements**                                                                                                                                      | **8-13**                    |
|                                                                                                                                                                                                         |                        |
| **Item                2. Management's Discussion and Analysis of Financial Condition and                Results                of Operations**                                                               | **14                -20**   |
|                                                                                                                                                                                                         |                        |
| **Item                3. Quantitative and Qualitative Disclosures about Market                Risks**                                                                                                        | **21**                      |
|                                                                                                                                                                                                         |                        |
| **Item                4T. Controls and Procedures**                                                                                                                                                          | **21**                      |
|                                                                                                                                                                                                         |                        |
| **PART                II. OTHER INFORMATION**                                                                                                                                                                |                        |
|                                                                                                                                                                                                         |                        |
| **Item                1. Legal Proceedings**                                                                                                                                                                 | **22**                      |
|                                                                                                                                                                                                         |                        |
| **Item                1A. Risk Factors**                                                                                                                                                                     | **22**                      |
|                                                                                                                                                                                                         |                        |
| **Item                2. Unregistered Sales of Equity Securities and Use of                Proceeds**                                                                                                        | **22**                      |
|                                                                                                                                                                                                         |                        |
| **Item                6. Exhibits**                                                                                                                                                                          | **22**                      |
|                                                                                                                                                                                                         |                        |
| **Signatures**                                                                                                                                                                                               | **23**                      |

----

**PART      I. FINANCIAL INFORMATION**

**Item      1. Financial Statements**

| **HAUPPAUGE                DIGITAL, INC. AND SUBSIDIARIES**             |
|-------------------------------------------------------------------------|
| **CONDENSED                CONSOLIDATED BALANCE                SHEETS** |

|                                                                                                                                         |   | **June 30, 2008                (unaudited)** |           | **September                30, 2007** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------|----------------|---------------------------------------|--------|
| **Assets:**                                                                                                                                  |   |                                                   |                |                                  |   |   |   |
|                                                                                                                                         |   |                                                   |           |                                  |   |   |   |
| **Current                Assets:**                                                                                                           |   |                                                   |                |                                  |   |  |   |
| **Cash                and cash equivalents**                                                                                                 |   | **$**                                                  | **12,227,016** |                                  | **$**  | **11,581,657** |   |
| **Trade                receivables, net of various allowances**                                                                              |   |                                                   | **9,350,027**  |                                  |   | **15,038,751** |   |
| **Other                non trade receivables**                                                                                               |   |                                                   | **3,231,373**  |                                  |   | **8,629,075** |   |
| **Inventories**                                                                                                                              |   |                                                   | **11,667,319** |                                  |   | **13,521,864** |   |
| **Deferred                tax asset-current**                                                                                                |   |                                                   | **603,078**    |                                  |   | **603,078** |   |
| **Prepaid                expenses and other current assets**                                                                                 |   |                                                   | **1,232,966**  |                                  |   | **802,575** |   |
| **Total                current assets**                                                                                                      |   |                                                   | **38,311,779** |                                  |   | **50,177,000** |   |
|                                                                                                                                         |   |                                                   |           |                                  |   |   |   |
| **Property,                plant and equipment, net**                                                                                        |   |                                                   | **786,518**    |                                  |   | **745,121** |   |
| **Security                deposits and other non current assets**                                                                            |   |                                                   | **102,428**    |                                  |   | **110,165** |   |
| **Deferred                tax asset-non current**                                                                                            |   |                                                   | **887,611**    |                                  |   | **887,611** |   |
| **Total                assets**                                                                                                              |   | **$**                                                  | **40,088,336** |                                  | **$**  | **51,919,897** |   |
|                                                                                                                                         |   |                                                   |                |                                  |   |  |   |
| **Liabilities                and Stockholders’ Equity:**                                                                               |   |                                                   |                |                                  |   |  |   |
|                                                                                                                                         |   |                                                   |                |                                  |   |  |   |
| **Current                Liabilities:**                                                                                                      |   |                                                   |                |                                  |   |  |   |
| **Accounts                payable**                                                                                                          |   | **$**                                                  | **7,883,342**  |                                  | **$**  | **20,635,137** |   |
| **Accrued                expenses – fees**                                                                                             |   |                                                   | **6,993,093**  |                                  |   | **5,827,356** |   |
| **Accrued                expenses – other**                                                                                            |   |                                                   | **1,991,379**  |                                  |   | **2,374,410** |   |
| **Income                taxes payable**                                                                                                      |   |                                                   | **54,305**     |                                  |   | **141,913** |   |
| **Total                current liabilities**                                                                                                 |   |                                                   | **16,922,119** |                                  |   | **28,978,816** |   |
|                                                                                                                                         |   |                                                   |                |                                  |   |  |   |
| **Stockholders'                Equity:**                                                                                                     |   |                                                   |                |                                  |   |  |   |
| **Common                stock, $.01 par value; 25,000,000 shares authorized, 10,778,021 and                10,597,002 issued, respectively** |   |                                                   | **107,780**    |                                  |   | **105,970** |   |
| **Additional                paid-in capital**                                                                                                |   |                                                   | **16,322,355** |                                  |   | **15,497,703** |   |
| **Retained                earnings**                                                                                                         |   |                                                   | **10,847,231** |                                  |   | **11,026,884** |   |
| **Accumulated                other comprehensive loss**                                                                                      |   |                                                   | **(1,706,812** | **)**                                 |   | **(1,325,971** | **)** |
| **Treasury                Stock, at cost, 759,579 and 749,579 shares**                                                                       |   |                                                   | **(2,404,337** | **)**                                 |   | **(2,363,505** | **)** |
| **Total                stockholders' equity**                                                                                                |   |                                                   | **23,166,217** |                                  |   | **22,941,081** |   |
| **Total                liabilities and stockholders' equity**                                                                                |   | **$**                                                  | **40,088,336** |                                  | **$**  | **51,919,897** |   |

* *
***See      accompanying notes to condensed consolidated financial      statements***

----

| **HAUPPAUGE                DIGITAL, INC. AND SUBSIDIARIES**                       |
|-----------------------------------------------------------------------------------|
| **CONDENSED                CONSOLIDATED STATEMENTS OF                OPERATIONS** |

**(UNAUDITED)**

|                                                            |   | **Three                months ended June 30,** |           |
|-----------------------------------------------------------------|--------|------------------------------------------------|----------------|
|                                                            |   | **2008**                                       |           | **2007** |   |
|                                                            |   |                                           |           |   |   |
| **Net                sales**                                    |   | **$**                                          | **19,415,731** |   | **$** | **23,540,149** |   |
| **Cost                of sales**                                |   |                                           | **15,568,094** |   |   | **18,932,180** |   |
| **Gross                profit**                                 |   |                                           | **3,847,637**  |   |   | **4,607,969** |   |
|                                                            |   |                                           |                |   |   |  |   |
| **Selling,                general and administrative expenses** |   |                                           | **3,997,595**  |   |   | **3,516,244** |   |
| **Research                and development expenses**            |   |                                           | **966,690**    |   |   | **876,697** |   |
| **Income                (loss) from operations**                |   |                                           | **(1,116,648** | **)** |   | **215,028** |   |
|                                                            |   |                                           |                |   |   |  |   |
| **Other                income (expense):**                      |   |                                           |           |   |   |   |   |
| **Interest                income**                              |   |                                           | **11,816**     |   |   | **10,250** |   |
| **Foreign                currency gain (loss)**                 |   |                                           | **15,823**     |   |   | **(38** | **)** |
| **Other                income**                                 |   |                                           | **27,639**     |   |   | **10,212** |   |
| **Income                (loss) before taxes**                   |   |                                           | **(1,089,009** | **)** |   | **225,240** |   |
| **Tax                provision**                                |   |                                           | **28,554**     |   |   | **43,788** |   |
| **Net                income (loss)**                            |   | **$**                                          | **(1,117,563** | **)** | **$** | **181,452** |   |
|                                                            |   |                                           |                |   |   |  |   |
| **Net                income (loss) per share:**                 |   |                                           |                |   |   |  |   |
| **Basic**                                                       |   | **$**                                          | **(0.11**      | **)** | **$** | **0.02** |   |
| **Diluted**                                                     |   | **$**                                     | **(0.11**      | **)** | **$** | **0.02** |   |

***See      accompanying notes to condensed consolidated financial      statements***

----

| **HAUPPAUGE                DIGITAL, INC. AND SUBSIDIARIES**                       |
|-----------------------------------------------------------------------------------|
| **CONDENSED                CONSOLIDATED STATEMENTS OF                OPERATIONS** |

**(UNAUDITED)**

|                                                            |   | **Nine                months ended June 30,** |           |
|-----------------------------------------------------------------|--------|-----------------------------------------------|----------------|
|                                                            |   | **2008**                                      |           | **2007** |   |
|                                                            |   |                                          |           |   |   |
| **Net                sales**                                    |   | **$**                                         | **73,975,884** |   | **$** | **83,351,123** |   |
| **Cost                of sales**                                |   |                                          | **58,647,765** |   |   | **66,282,026** |   |
| **Gross                profit**                                 |   |                                          | **15,328,119** |   |   | **17,069,097** |   |
|                                                            |   |                                          |                |   |   |   |   |
| **Selling,                general and administrative expenses** |   |                                          | **12,500,452** |   |   | **10,868,706** |   |
| **Research                and development expenses**            |   |                                          | **2,859,386**  |   |   | **2,379,969** |   |
| **Income                (loss) from operations**                |   |                                          | **(31,719**    | **)** |   | **3,820,422** |   |
|                                                            |   |                                          |                |   |   |  |   |
| **Other                income (expense):**                      |   |                                          |           |   |   |   |   |
| **Interest                income**                              |   |                                          | **28,633**     |   |   | **31,988** |   |
| **Foreign                currency loss**                        |   |                                          | **(16,130**    | **)** |   | **(6,256** | **)** |
| **Other                income**                                 |   |                                          | **12,503**     |   |   | **25,732** |   |
| **Income                (loss) before taxes**                   |   |                                          | **(19,216**    | **)** |   | **3,846,154** |   |
| **Tax                provision**                                |   |                                          | **160,437**    |   |   | **185,033** |   |
| **Net                income (loss)**                            |   | **$**                                         | **(179,653**   | **)** | **$** | **3,661,121** |   |
|                                                            |   |                                          |                |   |   |  |   |
| **Net                income (loss) per share:**                 |   |                                          |                |   |   |  |   |
| **Basic**                                                       |   | **$**                                         | **(0.02**      | **)** | **$** | **0.37** |   |
| **Diluted**                                                     |   | **$**                                         | **(0.02**      | **)** | **$** | **0.35** |   |

***See      accompanying notes to condensed consolidated financial      statements***

----

| **HAUPPAUGE                DIGITAL, INC. AND SUBSIDIARIES**                                              |
|----------------------------------------------------------------------------------------------------------|
| **CONDENSED                CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME                (LOSS)** |

**(UNAUDITED)**

|                                                                |   | **Three                months ended June 30****,** |           |
|---------------------------------------------------------------------|--------|----------------------------------------------------|----------------|
|                                                                |   | **2008**                                           |           | **2007** |   |
| **Net                income (loss)**                                |   | **$**                                              | **(1,117,563** | **)** | **$** | **181,452** |   |
| **Foreign                currency translation loss**                |   |                                               | **(336,577**   | **)** |   | **(103,215** | **)** |
| **Forward                exchange contracts marked to market gain** |   |                                               | **128,327**    |   |   | **22,147** |   |
| **Other                comprehensive income ( loss)**               |   | **$**                                              | **(1,325,813** | **)** | **$** | **100,384** |   |

|                                                                         |   | **Nine                  months ended June 30,** |         |
|------------------------------------------------------------------------------|--------|-------------------------------------------------|--------------|
|                                                                         |   | **2008**                                        |         | **2007** |   |
| **Net                  income (loss)**                                       |   | **$**                                      | **(179,653** | **)** | **$** | **3,661,121** |   |
| **Foreign                  currency translation loss**                       |   |                                            | **(462,344** | **)** |   | **(691,165** | **)** |
| **Forward                  exchange contracts marked to market gain (loss)** |   |                                            | **81,503**   |   |   | **(31,147** | **)** |
| **Other                  comprehensive income (loss)**                       |   | **$**                                           | **(560,494** | **)** | **$** | **2,938,809** |   |

***See      accompanying notes to condensed consolidated financial      statements***

----

| **HAUPPAUGE                DIGITAL, INC. AND SUBSIDIARIES**                       |
|-----------------------------------------------------------------------------------|
| **CONDENSED                CONSOLIDATED STATEMENTS OF CASH                FLOWS** |

**(UNAUDITED)**

|  ** **** **                                                                                                                          |   | **Nine                months ended June 30,** |            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------------|
|                                                                                                                                                |   | **2008**                                      |            | **2007** |   |
| **Net                income (loss)**                                                                                                                |   | **$**                                         | **(179,653**    | **)** | **$** | **3,661,121** |   |
| **Adjustments                to reconcile net income (loss) to net cash provided by (used in)                operating                activities:** |   |                                          |            |   |   |   |   |
| **Depreciation                and amortization**                                                                                                    |   |                                          | **196,499**     |   |   | **157,990** |   |
| **Inventory                reserve**                                                                                                                |   |                                          | **650,000**     |   |   | **-** |   |
| **Bad                debt**                                                                                                                         |   |                                          | **120,000**     |   |   | **20,000** |   |
| **Stock                based compensation expense-employees**                                                                                       |   |                                          | **417,537**     |   |   | **361,216** |   |
| **Stock                based compensation expense-directors**                                                                                       |   |                                          | **126,000**     |   |   |   |   |
| **Other                non cash items**                                                                                                             |   |                                          | **7,737**       |   |   | **(586** | **)** |
| **Changes                in current assets and liabilities:**                                                                                       |   |                                          |                 |   |   |   |   |
| **Accounts                receivable**                                                                                                              |   |                                          | **10,966,426**  |   |   | **(5,930,179** | **)** |
| **Inventories**                                                                                                                                     |   |                                          | **1,204,545**   |   |   | **(191,651** | **)** |
| **Prepaid                expenses and other current assets**                                                                                        |   |                                          | **(430,391**    | **)** |   | **(1,299** | **)** |
| **Accounts                payable**                                                                                                                 |   |                                          | **(12,751,795** | **)** |   | **4,896,861** |   |
| **Accrued                expenses and other current liabilities**                                                                                   |   |                                          | **695,098**     |   |   | **650,998** |   |
| **Total                adjustments**                                                                                                                |   |                                          | **1,201,656**   |   |   | **(36,650** | **)** |
| **Net                cash provided by operating activities**                                                                                        |   |                                          | **1,022,003**   |   |   | **3,624,471** |   |
|                                                                                                                                                |   |                                          |                 |   |   |  |   |
| **Cash                Flows From Investing Activities:**                                                                                            |   |                                          |            |   |   |  |   |
| **Purchases                of property, plant and equipment**                                                                                       |   |                                          | **(237,896**    | **)** |   | **(277,386** | **)** |
| **Net                cash used in investing activities**                                                                                            |   |                                          | **(237,896**    | **)** |   | **(277,386** | **)** |
|                                                                                                                                                |   |                                          |                 |   |   |  |   |
| **Cash                Flows From Financing Activities:**                                                                                            |   |                                          |                 |   |   |   |   |
| **Purchase                of treasury stock**                                                                                                       |   |                                          | **(40,832**     | **)** |   | **(53,398** | **)** |
| **Proceeds                from the exercise of stock options and employee stock                purchases**                                          |   |                                          | **282,925**     |   |   | **758,756** |   |
| **Net                cash provided by financing activities**                                                                                        |   |                                          | **242,093**     |   |   | **705,358** |   |
| **Effect                of exchange rates on cash**                                                                                                 |   |                                          | **(380,841**    | **)** |   | **(722,312** | **)** |
| **Net                increase in cash and cash equivalents**                                                                                        |   |                                          | **645,359**     |   |   | **3,330,131** |   |
| **Cash                and cash equivalents, beginning of period**                                                                                   |   |                                          | **11,581,657**  |   |   | **9,020,941** |   |
| **Cash                and cash equivalents, end of period**                                                                                         |   | **$**                                         | **12,227,016**  |   | **$** | **12,351,072** |   |
| **Supplemental                disclosures:**                                                                                                        |   |                                          |            |   |   |   |   |
| **Income                taxes paid**                                                                                                                |   | **$**                                         | **241,338**     |   | **$** | **168,915** |   |

***See      accompanying notes to condensed consolidated financial      statements***
*** ***

----

** **

**Note      1. Basis of Presentation**

**Note      2. Trade Accounts and Other Non-Trade Receivables**

|   | · | Trade                receivables from sales to customers |
|--------|--------|----------------------------------------------------------|

|   | · | Allowances,                consisting of sales and bad debt |
|--------|--------|-------------------------------------------------------------|

|   | · | Receivables                pertaining to component parts purchased from the Company at cost                by the                Company’s contract manufacturers which are excluded from sales |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | General                services tax (GST) and value added tax (VAT) reclaimable on goods                purchased by the Company’s Asian and European                locations |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other                minor non-trade receivables |
|--------|--------|--------------------------------------------------|

|                                                  |   | June 30, |       | September 30,         |   |
|-------------------------------------------------------|--------|---------------|------------|----------------------------|--------|
|                                                  |   | 2008          |       |                  2007 |   |
| Trade                receivables                      |   | $             | 13,755,841 |                       | $      | 19,324,565 |   |
| Allowances                and reserves                |   |          | (4,405,814 | )                          |   | (4,285,814 | ) |
| Total                trade receivables                |   | $             | 9,350,027  |                       | $      | 15,038,751 |   |
| Receivable                from contract manufacturers |   |          | 2,755,816  |                       |   | 6,673,021 |   |
| GST                and VAT taxes receivables          |   |          | 428,210    |                       |   | 1,912,492 |   |
| Other                                                 |   |          | 47,347     |                       |   | 43,562 |   |
| Total                non trade receivables            |   | $             | 3,231,373  |                       | $      | 8,629,075 |   |

----

**Note      3. Foreign Currency Translations and Transactions **

**Note      4. Inventories**

|                             |   | June                  30, |       | September                  30, |   |
|----------------------------------|--------|---------------------------|------------|--------------------------------|--------|
|                             |   | 2008                      |       |                    2007   |   |
| Component                  parts |   | $                         | 4,508,498  |                           | $      | 6,298,489 |   |
| Finished                  goods  |   |                      | 7,158,821  |                           |   | 7,223,375 |   |
|                             |   | $                         | 11,667,319 |                           | $      | 13,521,864 |   |

**Note      5. Net Income (Loss) Per Share **

|                                                                |   | Three                  months |       | Nine                  months |   |
|---------------------------------------------------------------------|--------|-------------------------------|------------|------------------------------|--------|
|                                                                |   | ended                         |       | ended                        |   |
|                                                                |   | June                  30,     |       | June                  30,    |   |
|                                                                |   | 2008                          |       | 2007                         |   | 2008 |   |                    2007 |   |
|                                                                |   |                          |       |                         |   |   |   |   |   |
| Weighted                  average shares outstanding-basic          |   |                          | 10,018,152 |                         |   | 9,968,686 |   |   | 9,951,552 |   |   | 9,843,568 |   |
| Number                  of shares issued on the assumed exercise of |   |                          |       |                         |   |   |   |   |   |   |   |   |   |
| stock                  options                                      |   |                          | -          |                         |   | 479,094 |   |   | - |   |   | 557,893 |   |
| Weighted                  average shares outstanding-diluted        |   |                          | 10,018,152 |                         |   | 10,447,780 |   |   | 9,951,552 |   |   | 10,401,461 |   |

----

**Note      6. Accumulated Other Comprehensive Loss **

| Accumulated other comprehensive loss            |   | Balance as of |       | Oct 07 to June 08 |   | Balance as of       |   |
|----------------------------------------------------------------|--------|-------------------------|------------|---------------------------------------|--------|-------------------------------|--------|
| Fiscal 2008 activity                                 |   | Sept 30, 2007 |       | gains (losses)                   |   | June  30, 2008 |   |
| Translation                  losses                            |   | $                       | (1,257,918 | )                                     | $      | (462,344                      | )      | $ | (1,720,262 | ) |
| FAS                  133 mark to market adjustment gain (loss) |   |                    | (68,053    | )                                     |   | 81,503                        |   |   | 13,450 |   |
|                                                           |   | $                       | (1,325,971 | )                                     | $      | (380,841                      | )      | $ | (1,706,812 | ) |

**Note      7. Revenue recognition**

----

** **

**Note      8. Product segment and geographic information **

|   | · | Analog                TV tuners |
|--------|--------|---------------------------------|

|   | · | Digital                TV tuners, and combination analog and digital TV tuners |
|--------|--------|--------------------------------------------------------------------------------|

|   | · | Other                non-TV tuner products |
|--------|--------|--------------------------------------------|

|                                                                                       |   | Three                  months ended June 30, |       | Nine                  months ended June 30, |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------------------------|------------|---------------------------------------------|--------|
| Product                  line sales                                                        |   | 2008                                         |       | 2007                                        |   | 2008 |   | 2007 |   |
| Analog                  TV tuner sales                                                     |   | $                                            | 1,000,041  |                                        | $      | 7,974,677 |   | $ | 7,146,937 |   | $ | 33,318,167 |   |
| Digital                  and combination analog and digital TVtuner                  sales |   |                                         | 17,180,626 |                                        |   | 15,174,370 |   |   | 64,071,903 |   |   | 49,215,324 |   |
| Other                  non-TV tuner products                                               |   |                                         | 1,235,064  |                                        |   | 391,102 |   |   | 2,757,044 |   |   | 817,632 |   |
| Total                  sales                                                               |   | $                                            | 19,415,731 |                                        | $      | 23,540,149 |   | $ | 73,975,884 |   | $ | 83,351,123 |   |

----

|                               |   | Three months ended June  30, |   | Nine  months ended June 30, |   |
|------------------------------------|--------|-------------------------------------------------------|--------|------------------------------------------------------|--------|
| Geographic                  region |   | 2008                                                  |   | 2007                                                 |   |                    2008 |   |                    2007 |   |
| The                  Americas      |   |                                                  | 42     | %                                                    |   | 67 | % |   | 48 | % |   | 55 | % |
| Europe                             |   |                                                  | 54     | %                                                    |   | 30 | % |   | 49 | % |   | 43 | % |
| Asia                               |   |                                                  | 4      | %                                                    |   | 3 | % |   | 3 | % |   | 2 | % |
| Total                              |   |                                                  | 100    | %                                                    |   | 100 | % |   | 100 | % |   | 100 | % |

**Note      9. Tax provision **

|                                                     |   | Three months ended June, |   | Nine months ended June 30, |   |
|----------------------------------------------------------|--------|-----------------------------------------|--------|------------------------------------------------|--------|
|                                                     |   | 2008                                    |   |                    2007                   |   | 2008 |   |                    2007 |   |
|                                                     |   |                                    |   |                                           |   |   |   |   |   |
| Federal                  income tax expense              |   | $                                       | -      |                                           | $      | 20,000 |   | $ | - |   | $ | 72,000 |   |
| Tax                  expense on international operations |   |                                    | 28,554 |                                           |   | 18,788 |   |   | 143,437 |   |   | 98,033 |   |
| State                  taxes                             |   |                                    | -      |                                           |   | 5,000 |   |   | 17,000 |   |   | 15,000 |   |
| Tax                  provision                           |   | $                                       | 28,554 |                                           | $      | 43,788 |   | $ | 160,437 |   | $ | 185,033 |   |

**Note      10. Recent Accounting Pronouncements **

----

SFAS      No.      161,      “Disclosures about Derivative Instruments and Hedging Activities— An Amendment      of FASB Statement No. 133” (SFAS No. 161). SFAS 161 requires enhanced      qualitative disclosures about objectives and strategies for using derivatives,      quantitative disclosures about fair value amounts of and gains and losses on      derivative instruments, and disclosures about credit-risk-related contingent      features in derivative agreements. SFAS 161 is effective for financial      statements issued for fiscal years and interim periods beginning after November      15, 2008. The Company is currently evaluating the impact of SFAS 161 on its      consolidated financial statements.

----

**ITEM      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF      OPERATIONS**

**THREE      MONTH PERIOD ENDED JUNE 30, 2008 COMPARED TO THREE MONTH PERIOD ENDED JUNE      30 ,      2007**

|                                                                |   | Three   |       | Three   |   |       |   |                                 |       |   |   |     |   |
|---------------------------------------------------------------------|--------|---------|------------|---------|--------|------------|--------|--------------------------------------|------------|--------|--------|----------|--------|
|                                                                |   | Months  |       | Months  |   |       |   |                                 |       |   |   |     |   |
|                                                                |   | Ended   |       | Ended   |   | Variance   |   | Percentage                  of sales |       |
|                                                                |   | 6/30/08 |       | 6/30/07 |   | $          |   | 2008                                 |       | 2007   |   | Variance |   |
| Net                  sales                                          |   | $       | 19,415,731 |    | $      | 23,540,149 |   | $                                    | (4,124,418 | )      |   | 100.00   | %      |   | 100.00 | % |   | - |   |
| Cost                  of sales                                      |   |    | 15,568,094 |    |   | 18,932,180 |   |                                 | (3,364,086 | )      |   | 80.18    | %      |   | 80.43 | % |   | -0.25 | % |
| Gross                  profit                                       |   |    | 3,847,637  |    |   | 4,607,969  |   |                                 | (760,332   | )      |   | 19.82    | %      |   | 19.57 | % |   | 0.25 | % |
| Gross                  profit %                                     |   |    | 19.82      | %       |   | 19.57      | %      |                                 | 0.25       | %      |   |     |   |   |   |   |   |   |   |
| Selling,                  general and administrative expenses:      |   |    |       |    |   |       |   |                                 |       |   |   |          |   |   |  |   |   |  |   |
| Sales                  and marketing                                |   |    | 2,776,622  |    |   | 2,419,401  |   |                                 | 357,221    |   |   | 14.30    | %      |   | 10.28 | % |   | 4.02 | % |
| Technical                  support                                  |   |    | 131,393    |    |   | 156,137    |   |                                 | (24,744    | )      |   | 0.68     | %      |   | 0.66 | % |   | 0.02 | % |
| General                  and administrative                         |   |    | 994,339    |    |   | 861,782    |   |                                 | 132,557    |   |   | 5.12     | %      |   | 3.66 | % |   | 1.46 | % |
| Stock                  compensation                                 |   |    | 95,241     |    |   | 78,924     |   |                                 | 16,317     |   |   | 0.49     | %      |   | 0.34 | % |   | 0.15 | % |
| Total                  selling, general and administrative expenses |   |    | 3,997,595  |    |   | 3,516,244  |   |                                 | 481,351    |   |   | 20.59    | %      |   | 14.94 | % |   | 5.65 | % |
| Research                  and development expenses                  |   |    | 922,752    |    |   | 830,989    |   |                                 | 91,763     |   |   | 4.75     | %      |   | 3.53 | % |   | 1.22 | % |
| Research                  & development stock compensation      |   |    | 43,938     |    |   | 45,708     |   |                                 | (1,770     | )      |   | 0.23     | %      |   | 0.19 | % |   | 0.04 | % |
| Total                  expenses                                     |   |    | 4,964,285  |    |   | 4,392,941  |   |                                 | 571,344    |   |   | 25.57    | %      |   | 18.66 | % |   | 6.91 | % |
| Net                  operating income (loss)                        |   |    | (1,116,648 | )       |   | 215,028    |   |                                 | (1,331,676 | )      |   | -5.75    | %      |   | 0.91 | % |   | -6.66 | % |
|                                                                |   |    |       |    |   |       |   |                                 |       |   |   |     |   |   |   |   |   |   |   |
| Other                  income (expense) :                           |   |    |       |    |   |       |   |                                 |       |   |   |     |   |   |   |   |   |   |   |
| Interest                  income                                    |   |    | 11,816     |    |   | 10,250     |   |                                 | 1,566      |   |   | 0.06     | %      |   | 0.04 | % |   | 0.02 | % |
| Foreign                  currency                                   |   |    | 15,823     |    |   | (38        | )      |                                 | 15,861     |   |   | 0.08     | %      |   | 0.00 | % |   | 0.08 | % |
| Total                  other income                                 |   |    | 27,639     |    |   | 10,212     |   |                                 | 17,427     |   |   | 0.14     | %      |   | 0.04 | % |   | 0.10 | % |
| Income                  (loss) before taxes                         |   |    | (1,089,009 | )       |   | 225,240    |   |                                 | (1,314,249 | )      |   | -5.61    | %      |   | 0.95 | % |   | -6.56 | % |
| Taxes                  on income (loss)                             |   |    | 28,554     |    |   | 43,788     |   |                                 | (15,234    | )      |   | 0.15     | %      |   | 0.19 | % |   | -0.04 | % |
| Net                  income (loss)                                  |   | $       | (1,117,563 | )       | $      | 181,452    |   | $                                    | (1,299,015 | )      |   | -5.76    | %      |   | 0.76 | % |   | -6.52 | % |

|                          |   |                            |       |                            |   | Increase   |   | Increase        |       |                                  |   |   |   |
|-------------------------------|--------|---------------------------------|------------|---------------------------------|--------|------------|--------|-----------------|------------|---------------------------------------|--------|--------|--------|
|                          |   | Three                    Months |       | Three                    Months |   | (decrease) |   | (decrease)      |       | Percentage of sales by |   |
|                          |   | ended                           |       | ended                           |   | dollar     |   | dollar          |       | Geographic region                |   |
|                          |   | 06/30/08                        |       | 06/30/07                        |   | variance   |   | variance % |       |  2008                            |   | 2007   |   |
| The                  Americas |   |                            | 8,112,299  |                            |   | 15,626,282 |   |            | (7,513,983 | )                                     |   | -48    | %      |   | 42 | % |   | 67 | % |
| Europe                        |   |                            | 10,561,243 |                            |   | 7,253,426  |   |            | 3,307,817  |                                  |   | 46     | %      |   | 54 | % |   | 30 | % |
| Asia                          |   |                            | 742,189    |                            |   | 660,441    |   |            | 81,748     |                                  |   | 12     | %      |   | 4 | % |   | 3 | % |
| Total                         |   | $                               | 19,415,731 |                            | $      | 23,540,149 |   | $               | (4,124,418 | )                                     |   | -18    | %      |   | 100 | % |   | 100 | % |

----

**Gross      profit**

|                                                      |   | Increase                (decrease) |       |
|-----------------------------------------------------------|--------|------------------------------------|------------|
| Lower                sales                                |   | $                                  | (1,109,015 | ) |
| Higher                gross profit on sales mix           |   |                               | 432,136    |   |
| Production                and production related expenses |   |                               | (83,453    | ) |
| Total                decrease in gross profit             |   | $                                  | (760,332   | ) |

|                                                      |   | Increase                (decrease) |   |
|-----------------------------------------------------------|--------|------------------------------------|--------|
| Higher                gross profit on sales mix           |   |                               | 2.24   | % |
| Production                and production related expenses |   |                               | (1.99  | )% |
| Net                increase in gross profit percentage    |   |                               | 0.25   | % |

|  | · | Larger                sales percentage of higher gross profit margin products contributing                to a                2.24% increase in the gross profit                percentage |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lower                sales which resulted in production labor, shipping labor and production                overhead becoming a larger percentage of sales, contributing to a                1.99%                reduction in the gross profit percentage. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Selling,      general and administrative expenses**

|                                        |   | Three                  months ended June 30, |           |                                 |
|---------------------------------------------|--------|----------------------------------------------|-----------|--------------------------------------|
|                                        |   | Dollar                  Costs                |      | Percentage                  of Sales |   |
|                                        |   |                                         |      |                                 |   | Increase |   |   |   |   |   |   |   |
|                                        |   | 2008                                         |      |                    2007         |   | (decrease) |   | 2008 |   | 2007 |   | Increase |   |
| Sales                  and marketing        |   | $                                            | 2,776,622 |                                 | $ | 2,419,401 |   | $ | 357,221 |   |   | 14.30 | % |   | 10.28 | % |   | 4.02 | % |
| Technical                  support          |   |                                         | 131,393   |                                 |   | 156,137 |   |   | (24,744 | ) |   | 0.68 | % |   | 0.66 | % |   | 0.02 | % |
| General                  and administrative |   |                                         | 994,339   |                                 |   | 861,782 |   |   | 132,557 |   |   | 5.12 | % |   | 3.66 | % |   | 1.46 | % |
| Stock                  compensation         |   |                                         | 95,241    |                                 |   | 78,924 |   |   | 16,317 |   |   | 0.49 | % |   | 0.34 | % |   | 0.15 | % |
| Total                                       |   | $                                            | 3,997,595 |                                 | $ | 3,516,244 |   | $ | 481,351 |   |   | 20.59 | % |   | 14.94 | % |   | 5.65 | % |

----

**Research      and development expenses**

**Tax      provision**

|                                                   |   | Three                months ended June                30,  |   |
|--------------------------------------------------------|--------|-----------------------------------------------------------------|--------|
|                                                   |   | 2008                                                            |   |                  2007 |   |
|                                                   |   |                                                            |   |   |   |
|                                                   |   |                                                            |   |   |   |
| Federal                income tax expense              |   | $                                                               | -      |   | $ | 20,000 |   |
| Tax                expense on international operations |   |                                                            | 28,554 |   |   | 18,788 |   |
| State                taxes                             |   |                                                            | -      |   |   | 5,000 |   |
| Tax                provision                           |   | $                                                               | 28,554 |   | $ | 43,788 |   |

----

**NINE      MONTH PERIOD ENDED JUNE 30, 2008 COMPARED TO NINE MONTH PERIOD ENDED JUNE 30      ,      2007**

|                                                                |   | Nine    |       | Nine    |   |       |   |                                 |       |   |   |     |   |
|---------------------------------------------------------------------|--------|---------|------------|---------|--------|------------|--------|--------------------------------------|------------|--------|--------|----------|--------|
|                                                                |   | Months  |       | Months  |   |       |   |                                 |       |   |   |     |   |
|                                                                |   | Ended   |       | Ended   |   | Variance   |   | Percentage                  of sales |       |
|                                                                |   | 6/30/08 |       | 6/30/07 |   | $          |   | 2008                                 |       | 2007   |   | Variance |   |
| Net                  sales                                          |   | $       | 73,975,884 |    | $      | 83,351,123 |   | $                                    | (9,375,239 | )      |   | 100.00   | %      |   | 100.00 | % |   | - |   |
| Cost                  of sales                                      |   |    | 58,647,765 |    |   | 66,282,026 |   |                                 | (7,634,261 | )      |   | 79.28    | %      |   | 79.52 | % |   | -0.24 | % |
| Gross                  profit                                       |   |    | 15,328,119 |    |   | 17,069,097 |   |                                 | (1,740,978 | )      |   | 20.72    | %      |   | 20.48 | % |   | 0.24 | % |
| Gross                  profit %                                     |   |    | 20.72      | %       |   | 20.48      | %      |                                 | 0.24       | %      |   |     |   |   |   |   |   |   |   |
| Selling                  , general and administrative expenses:     |   |    |       |    |   |       |   |                                 |       |   |   |          |   |   |  |   |   |  |   |
| Sales                  and marketing                                |   |    | 8,699,273  |    |   | 7,555,426  |   |                                 | 1,143,847  |   |   | 11.76    | %      |   | 9.06 | % |   | 2.70 | % |
| Technical                  support                                  |   |    | 434,160    |    |   | 439,112    |   |                                 | (4,952     | )      |   | 0.59     | %      |   | 0.53 | % |   | 0.06 | % |
| General                  and administrative                         |   |    | 3,081,296  |    |   | 2,646,944  |   |                                 | 434,352    |   |   | 4.17     | %      |   | 3.18 | % |   | 0.99 | % |
| Stock                  compensation                                 |   |    | 285,723    |    |   | 227,224    |   |                                 | 58,499     |   |   | 0.39     | %      |   | 0.27 | % |   | 0.12 | % |
| Total                  selling, general and administrative expenses |   |    | 12,500,452 |    |   | 10,868,706 |   |                                 | 1,631,746  |   |   | 16.91    | %      |   | 13.04 | % |   | 3.87 | % |
| Research                  and development expenses                  |   |    | 2,727,572  |    |   | 2,245,977  |   |                                 | 481,595    |   |   | 3.69     | %      |   | 2.69 | % |   | 1.00 | % |
| Research                  & development stock compensation      |   |    | 131,814    |    |   | 133,992    |   |                                 | (2,178     | )      |   | 0.17     | %      |   | 0.16 | % |   | 0.01 | % |
| Total                  expenses                                     |   |    | 15,359,838 |    |   | 13,248,675 |   |                                 | 2,111,163  |   |   | 20.77    | %      |   | 15.89 | % |   | 4.88 | % |
| Net                  operating income (loss)                        |   |    | (31,719    | )       |   | 3,820,422  |   |                                 | (3,852,141 | )      |   | -0.05    | %      |   | 4.59 | % |   | -4.64 | % |
|                                                                |   |    |       |    |   |       |   |                                 |       |   |   |     |   |   |   |   |   |   |   |
| Other                  income (expense) :                           |   |    |       |    |   |       |   |                                 |       |   |   |     |   |   |   |   |   |   |   |
| Interest                  income                                    |   |    | 28,633     |    |   | 31,988     |   |                                 | (3,355     | )      |   | 0.04     | %      |   | 0.04 | % |   | 0.00 | % |
| Foreign                  currency                                   |   |    | (16,130    | )       |   | (6,256     | )      |                                 | (9,874     | )      |   | -0.02    | %      |   | -0.01 | % |   | -0.01 | % |
| Total                  other income (expense)                       |   |    | 12,503     |    |   | 25,732     |   |                                 | (13,229    | )      |   | 0.02     | %      |   | 0.03 | % |   | -0.01 | % |
| Income                  before taxes on income                      |   |    | (19,216    | )       |   | 3,846,154  |   |                                 | (3,865,370 | )      |   | -0.03    | %      |   | 4.62 | % |   | -4.65 | % |
| Taxes                  provision                                    |   |    | 160,437    |    |   | 185,033    |   |                                 | (24,596    | )      |   | 0.22     | %      |   | 0.22 | % |   | 0.00 | % |
| Net                  income (loss)                                  |   | $       | (179,653   | )       | $      | 3,661,121  |   | $                                    | (3,840,774 | )      |   | -0.25    | %      |   | 4.40 | % |   | -4.65 | % |

|                          |   | Nine months         |       | Nine months         |   | Increase(decrease)                  dollar |   | Increase                  (decrease)                  dollar |        | Percentage of salesgeographic region                    |   |
|-------------------------------|--------|--------------------------|------------|--------------------------|--------|--------------------------------------------|--------|--------------------------------------------------------------|-------------|-----------------------------------------------------------------------------|--------|
|                          |   |  ended 6/30/08 |       |  ended 6/30/07 |   |  variance                             |   |  variance %                                        |        | 2008                                                                        |   | 2007 |   |
| The                  Americas |   |                     | 35,497,270 |                     |   | 46,026,127                                 |   |                                                         | (10,528,857 | )                                                                           |   | -23 | % |   | 48 | % |   | 55 | % |
| Europe                        |   |                     | 36,560,030 |                     |   | 35,752,969                                 |   |                                                         | 807,061     |                                                                        |   | 2 | % |   | 49 | % |   | 43 | % |
| Asia                          |   |                     | 1,918,584  |                     |   | 1,572,027                                  |   |                                                         | 346,557     |                                                                        |   | 22 | % |   | 3 | % |   | 2 | % |
| Total                         |   | $                        | 73,975,884 |                     | $      | 83,351,123                                 |   | $                                                            | (9,375,239  | )                                                                           |   | -11 | % |   | 100 | % |   | 100 | % |

----

**Gross      profit**

|                                                                             |   | Increase                (decrease) |       |
|----------------------------------------------------------------------------------|--------|------------------------------------|------------|
| Lower                sales          |   | $                                  | (2,594,979 | ) |
| Higher                gross profit on sales mix                                  |   |                               | 1,306,652  |   |
| Production                and production related expenses                        |   |                               | (452,651   | ) |
| Total                decrease in gross profit                                    |   | $                                  | (1,740,978 | ) |

|                                                        |   | Increase                  (decrease) |   |
|-------------------------------------------------------------|--------|--------------------------------------|--------|
| Higher                  gross profit on sales mix           |   |                                 | 1.76   | % |
| Production                  and production related expenses |   |                                 | (1.52  | )% |
| Net                  increase in gross profit percentage    |   |                                 | 0.24   | % |

|  | · | Larger                sales percentage of higher gross profit margin products contributing                to a                1.76% increase in the gross profit                percentage |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Lower                sales which resulted in production labor, shipping labor and production                overhead becoming a larger percentage of sales, contributing to a                1.52%                reduction in the gross profit percentage. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Selling,      general and administrative expenses**

|                                          |   | Nine                    months ended June 30, |            |                                   |
|-----------------------------------------------|--------|-----------------------------------------------|------------|----------------------------------------|
|                                          |   | Dollar                    Costs               |       | Percentage                    of Sales |   |
|                                          |   |                                          |       |                                   |   | Increase |   |   |   |   |   |   |   |
|                                          |   | 2008                                          |       |                      2007         |   | (decrease) |   | 2008 |   | 2007 |   | Increase |   |
| Sales                    and marketing        |   | $                                             | 8,699,273  |                                   | $ | 7,555,426 |   | $ | 1,143,847 |   |   | 11.76 | % |   | 9.06 | % |   | 2.70 | % |
| Technical                    support          |   |                                          | 434,160    |                                   |   | 439,112 |   |   | (4,952 | ) |   | 0.59 | % |   | 0.53 | % |   | 0.06 | % |
| General                    and administrative |   |                                          | 3,081,296  |                                   |   | 2,646,944 |   |   | 434,352 |   |   | 4.17 | % |   | 3.18 | % |   | 0.99 | % |
| Stock                    compensation         |   |                                          | 285,723    |                                   |   | 227,224 |   |   | 58,499 |   |   | 0.39 | % |   | 0.27 | % |   | 0.12 | % |
| Total                                         |   | $                                             | 12,500,452 |                                   | $ | 10,868,706 |   | $ | 1,631,746 |   |   | 16.91 | % |   | 13.04 | % |   | 3.87 | % |

----

**Research      and development expenses**

**Tax      provision**

|                                                   |   | Nine                months ended June 30, |    |
|--------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                   |   | 2008                                      |    |                  2007 |   |
|                                                   |   |                                      |    |   |   |
| Federal                income tax expense              |   | $                                         | -       |   | $ | 72,000 |   |
| Tax                expense on international operations |   |                                      | 143,437 |   |   | 98,033 |   |
| State                taxes                             |   |                                      | 17,000  |   |   | 15,000 |   |
| Tax                provision                           |   | $                                         | 160,437 |   | $ | 185,033 |   |

**S**
**easonality**

**Liquidity      and capital resources**

----

|                                      |   | June 30, 2008 |       | September 30, 2007 |   |
|-------------------------------------------|--------|-------------------------|------------|------------------------------|--------|
|                                      |   |                    |       |                         |   |
| Cash                                      |   | $                       | 12,227,016 |                         | $      | 11,581,657 |   |
| Working                Capital            |   |                    | 21,389,660 |                         |   | 21,198,184 |   |
| Stockholders’                Equity |   |                    | 23,166,217 |                         |   | 22,941,081 |   |

| Sources                of cash:                                      |   |   |        |   |
|----------------------------------------------------------------------|--------|--------|-------------|--------|
| Net                loss adjusted for non cash items                  |   | $      | 1,338,120   |   |
| Decrease                in accounts receivables                      |   |   | 10,966,426  |   |
| Decrease                in inventories                               |   |   | 1,204,545   |   |
| Proceeds                from employee stock purchases                |   |   | 282,925     |   |
| Less                cash used for:                                   |   |   |        |   |
| Decrease                in accounts payable and accrued expenses     |   |   | (12,056,697 | )      |
| Increase                in prepaid expenses and other current assets |   |   | (430,391    | )      |
| Capital                equipment purchases                           |   |   | (237,896    | )      |
| Effect                of exchange rates on cash                      |   |   | (380,841    | )      |
| Purchase                of treasury stock                            |   |   | (40,832     | )      |
| Net                cash increase                                     |   | $      | 645,359     |   |

**Future      contractual obligations**

|                                       |   | Payments                due by period |      |
|--------------------------------------------|--------|---------------------------------------|-----------|
|                                       |   | Total                                 |      | Less than 1 year |   | 1-3 years |   |   3 to 5 years |   |
| Operating                lease obligations |   | $                                     | 1,763,089 |   | $ | 609,094, |   | $ | 1,083,344 |   | $ | 70,651 |   |

----

**Inflation**

**Item      3. Quantitative and qualitative disclosures about market      risks**

**Item      4T. Controls and procedures**

**Special      note regarding forward looking statements**

----

**PART      II. OTHER INFORMATION**

**Item      1. Legal proceedings**

**Item      1A. Risk factors**

**Item      2. Unregistered sales of equity securities and use of      proceeds**
** **

|                                              |   |           |    |          |   |                        |   | Maximum                  |    |
|---------------------------------------------------|--------|----------------|---------|---------------|--------|-----------------------------|--------|--------------------------|---------|
|                                              |   |           |    |          |   | Total Number           |   | Number                   |    |
|                                              |   | Total          |    | Average       |   | of Shares              |   | of Shares           |    |
|                                              |   | Number         |    | Price         |   | Purchased                as |   | that May Yet   |    |
|                                              |   | of Shares |    | Paid per |   | Part of Publicly  |   | Be Purchased        |    |
| Period                                            |   | Purchased      |    | Share         |   | Announced Plan         |   | Under the Plan |    |
| Purchases                as of September 30, 2007 |   |           | 749,579 |          |   | 3.15                        |   |                     | 749,579 |   |   | 450,421 |   |
| October                1 to June 30, 2008         |   |           | 10,000  |          |   | 4.08                        |   |                     | 10,000  |   |   | 440,421 |   |
| Purchases                as of June 30, 2008      |   |           | 759,579 |          |   | 3.17                        |   |                     | 759,579 |   |   |   |   |

**Item      6. Exhibits**

| 10.1      | Agreement,                  dated April 10, 2008, between Hauppauge Digital Inc. and Kenneth                  Plotkin.                  (1)                                                                                                       |
|-----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                                              |
| 31.1      | Certification                  of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a)                  as                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of                  2002                    |
|      |                                                                                                                                                                                                                                              |
| 31.2      | Certification                  of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule                  15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley                  Act of                  2002                |
|      |                                                                                                                                                                                                                                              |
| 32.  | Certification                  of Chief Executive Officer and Chief Financial Officer pursuant                  to 18                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the                  Sarbanes-Oxley Act of 2002 |

**(**
**.**

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**SIGNATURES**

|                                 |   | HAUPPAUGE              DIGITAL INC. |
|--------------------------------------|--------|-------------------------------------|
|                                 |   | Registrant                          |
|                                 |   |                                |   |
| Date:                August 14, 2008 |   | By                                  | /s/Kenneth                Plotkin |
|                                 |   |                                | KENNETH                PLOTKIN |
|                                 |   |                                | Chief                Executive Officer, Chairman of the Board, |
|                                 |   |                                | President                (Principal Executive Officer) |
|                                 |   |                                |   |
| Date:                August 14, 2008 |   | By                                  | /s/Gerald                Tucciarone |
|                                 |   |                                | GERALD                TUCCIARONE |
|                                 |   |                                | Treasurer,                Chief Financial Officer, (Principal Accounting officer) and                Secretary |

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