**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 **
**December      31, 2007**

**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 **
**x**
**      NON-ACCELERATED FILER**

**o**
**      YES     **
**x**
**      NO**

----

**HAUPPAUGE      DIGITAL, INC. AND      SUBSIDIARIES**

**INDEX**

**PART      I. FINANCIAL INFORMATION**

|                                                                                                                                                                                                  | **Page no.**         |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------|
| **Item                1. Financial Statements**                                                                                                                                                  |                      |
|                                                                                                                                                                                                  |                      |
| **Condensed                Consolidated Balance Sheets - December 31, 2007 (unaudited) and September                30, 2007**                                                                        | **5**                     |
|                                                                                                                                                                                                  |                      |
| **Condensed                Consolidated Statements of Income - Three Months ended December 31,                2007                (unaudited) and 2006 (unaudited)**                                  | **6**                     |
|                                                                                                                                                                                                  |                      |
| **Condensed                Consolidated Statements of Other Comprehensive Income-Three months                ended                December 31, 2007 (unaudited) and 2006                (unaudited)** | **7**                     |
|                                                                                                                                                                                                  |                      |
| **Condensed                Consolidated Statements of Cash Flows-Three months ended December                31, 2007                (unaudited) and 2006 (unaudited)**                                | **8**                     |
|                                                                                                                                                                                                  |                      |
| **Notes                to Condensed Consolidated Financial Statements**                                                                                                                               | **9-13**                  |
|                                                                                                                                                                                                  |                      |
| **Item                2. Management's Discussion and Analysis of Financial Condition and                Results                of Operations**                                                        | **14                -18** |
|                                                                                                                                                                                                  |                      |
| **Item                3. Quantitative and Qualitative Disclosures about Market                Risks**                                                                                                 | **18**                    |
|                                                                                                                                                                                                  |                      |
| **Item                4. Controls and Procedures**                                                                                                                                                    | **18-19**                 |

----

| **PART                II. OTHER INFORMATION**                                                            |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |
| **Item                1. Legal Proceedings**                                                             | **20** |
|                                                                                                     |   |
| **Item                1A. Risk Factors**                                                                 | **20** |
|                                                                                                     |   |
| **Item                2.****Unregistered                Sales of Equity Securities and Use of Proceeds** | **20** |
|                                                                                                     |   |
| **Item                4. Submission of matters to a vote of security                holders**            | **21** |
|                                                                                                     |   |
| **Item                6. Exhibits**                                                                      | **21** |
|                                                                                                     |   |
| **Signatures**                                                                                           | **22** |
|                                                                                                     |   |
| **Certification                of Chief Executive Officer 31.1**                                         | **23** |
|                                                                                                     |   |
| **Certification                of Chief Financial Officer 31.1**                                         | **24** |
|                                                                                                     |   |
| **Certification                of Chief Executive Officer and Chief Financial Officer 32**               | **25** |

----

**PART      I. FINANCIAL INFORMATION**

**Item      1.Financial **
**Statements**

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED BALANCE SHEETS**

|                                                                                                                                         |   | **December                31, 2007****(unaudited)** |           | **September                30, 2007** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|----------------|---------------------------------------|--------|
| **Assets:**                                                                                                                                  |   |                                                |                |                                  |   |   |   |
| **Current                Assets:**                                                                                                           |   |                                                |                |                                  |   |  |   |
| **Cash                and cash equivalents**                                                                                                 |   | **$**                                               | **10,113,306** |                                  | **$**  | **11,581,657** |   |
| **Trade                receivables, net of various allowances**                                                                              |   |                                                | **18,621,545** |                                  |   | **15,038,751** |   |
| **Other                non trade receivables**                                                                                               |   |                                                | **11,193,094** |                                  |   | **8,629,075** |   |
| **Inventories**                                                                                                                              |   |                                                | **14,220,618** |                                  |   | **13,521,864** |   |
| **Deferred                tax asset-current**                                                                                                |   |                                                | **603,078**    |                                  |   | **603,078** |   |
| **Prepaid                expenses and other current assets**                                                                                 |   |                                                | **1,465,070**  |                                  |   | **802,575** |   |
| **Total                current assets**                                                                                                      |   |                                                | **56,216,711** |                                  |   | **50,177,000** |   |
|                                                                                                                                         |   |                                                |           |                                  |   |   |   |
| **Property,                plant and equipment, net**                                                                                        |   |                                                | **818,474**    |                                  |   | **745,121** |   |
| **Security                deposits and other non current assets**                                                                            |   |                                                | **101,993**    |                                  |   | **110,165** |   |
| **Deferred                tax asset-non current**                                                                                            |   |                                                | **887,611**    |                                  |   | **887,611** |   |
| **Total                assets**                                                                                                              |   | **$**                                               | **58,024,789** |                                  | **$**  | **51,919,897** |   |
|                                                                                                                                         |   |                                                |                |                                  |   |  |   |
| **Liabilities                and Stockholders’ Equity:**                                                                               |   |                                                |                |                                  |   |  |   |
|                                                                                                                                         |   |                                                |                |                                  |   |  |   |
| **Current                Liabilities:**                                                                                                      |   |                                                |                |                                  |   |  |   |
| **Accounts                payable**                                                                                                          |   | **$**                                               | **24,036,116** |                                  | **$**  | **20,635,137** |   |
| **Accrued                expenses – fees**                                                                                        |   |                                                | **5,471,670**  |                                  |   | **5,827,356** |   |
| **Accrued                expenses – other**                                                                                       |   |                                                | **3,271,522**  |                                  |   | **2,374,410** |   |
| **Income                taxes payable**                                                                                                      |   |                                                | **148,291**    |                                  |   | **141,913** |   |
| **Total                current liabilities**                                                                                                 |   |                                                | **32,927,599** |                                  |   | **28,978,816** |   |
|                                                                                                                                         |   |                                                |                |                                  |   |  |   |
| **Stockholders'                Equity:**                                                                                                     |   |                                                |                |                                  |   |  |   |
| **Common                stock, $.01 par value; 25,000,000 shares authorized, 10,603,867 and                10,597,002 issued, respectively** |   |                                                | **106,039**    |                                  |   | **105,970** |   |
| **Additional                paid-in capital**                                                                                                |   |                                                | **15,655,801** |                                  |   | **15,497,703** |   |
| **Retained                earnings**                                                                                                         |   |                                                | **13,489,872** |                                  |   | **11,026,884** |   |
| **Accumulated                other comprehensive loss**                                                                                      |   |                                                | **(1,750,185** | **)**                                 |   | **(1,325,971** | **)** |
| **Treasury                Stock, at cost, 759,579 and 749,579 shares**                                                                       |   |                                                | **(2,404,337** | **)**                                 |   | **(2,363,505** | **)** |
| **Total                stockholders' equity**                                                                                                |   |                                                | **25,097,190** |                                  |   | **22,941,081** |   |
| **Total                liabilities and stockholders' equity**                                                                                |   | **$**                                               | **58,024,789** |                                  | **$**  | **51,919,897** |   |

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

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF INCOME**

**(UNAUDITED)**

|                                                            |   | **Three                months ended December 31,** |           |
|-----------------------------------------------------------------|--------|----------------------------------------------------|----------------|
|                                                            |   | **2007**                                           |           | **2006** |   |
|                                                            |   |                                               |           |   |   |
| **Net                sales**                                    |   | **$**                                              | **37,047,461** |   | **$** | **29,919,133** |   |
| **Cost                of sales**                                |   |                                               | **28,906,400** |   |   | **23,101,596** |   |
| **Gross                profit**                                 |   |                                               | **8,141,061**  |   |   | **6,817,537** |   |
|                                                            |   |                                               |                |   |   |  |   |
| **Selling,                general and administrative expenses** |   |                                               | **4,552,569**  |   |   | **3,802,223** |   |
| **Research                and development expenses**            |   |                                               | **913,757**    |   |   | **753,445** |   |
| **Income                from operations**                       |   |                                               | **2,674,735**  |   |   | **2,261,869** |   |
|                                                            |   |                                               |                |   |   |  |   |
| **Other                income (expense):**                      |   |                                               |           |   |   |  |   |
| **Interest                income**                              |   |                                               | **6,194**      |   |   | **12,391** |   |
| **Foreign                currency**                             |   |                                               | **(27,609**    | **)** |   | **12,027** |   |
| **Other                income (expense)**                       |   |                                               | **(21,415**    | **)** |   | **24,418** |   |
| **Income                before taxes on income**                |   |                                               | **2,653,320**  |   |   | **2,286,287** |   |
| **Tax                provision**                                |   |                                               | **190,332**    |   |   | **83,552** |   |
| **Net                income**                                   |   | **$**                                              | **2,462,988**  |   | **$** | **2,202,735** |   |
|                                                            |   |                                               |                |   |   |  |   |
|                                                            |   |                                               |                |   |   |  |   |
| **Net                income per share:**                        |   |                                               |                |   |   |  |   |
| **Basic**                                                       |   | **$**                                              | **0.25**       |   | **$** | **0.23** |   |
| **Diluted**                                                     |   | **$**                                              | **0.24**       |   | **$** | **0.22** |   |

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

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME**

**(UNAUDITED)**

|                                                           |   | **Three                months ended December 31,** |          |
|----------------------------------------------------------------|--------|----------------------------------------------------|---------------|
|                                                           |   | **2007**                                           |          | **2006** |   |
| **Net                income**                                  |   | **$**                                              | **2,462,988** |   | **$** | **2,202,735** |   |
| **Foreign                currency translation (loss) gain**    |   |                                               | **(463,007**  | **)** |   | **56,265** |   |
| **Forward                exchange contracts marked to market** |   |                                               | **38,793**    |   |   | **(84,697** | **)** |
| **Other                comprehensive income**                  |   | **$**                                              | **2,038,774** |   | **$** | **2,174,303** |   |

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

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|  ** **** **                                                                                             |   | **Three                months ended December 31,** |           |
|------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|----------------|
|                                                                                                                   |   | **2007**                                           |           | **2006** |   |
| **Net                income**                                                                                          |   | **$**                                              | **2,462,988**  |   | **$** | **2,202,735** |   |
| **Adjustments                to reconcile net income to net cash provided****by                operating activities:** |   |                                               |           |   |   |   |   |
| **Depreciation                and amortization**                                                                       |   |                                               | **65,093**     |   |   | **52,456** |   |
| **Bad                debt and inventory reserves**                                                                     |   |                                               | **100,000**    |   |   | **20,000** |   |
| **Inventory                reserve**                                                                                   |   |                                               | **650,000**    |   |   | **-** |   |
| **Stock                compensation expense**                                                                          |   |                                               | **139,179**    |   |   | **108,868** |   |
| **Other                non cash items**                                                                                |   |                                               | **8,172**      |   |   | **(1,252** | **)** |
| **Changes                in current assets and liabilities:**                                                          |   |                                               |                |   |   |   |   |
| **Accounts                receivable**                                                                                 |   |                                               | **(6,246,813** | **)** |   | **(11,973,040** | **)** |
| **Inventories**                                                                                                        |   |                                               | **(1,348,754** | **)** |   | **(2,743,725** | **)** |
| **Prepaid                expenses and other current assets**                                                           |   |                                               | **(662,495**   | **)** |   | **55,375** |   |
| **Accounts                payable**                                                                                    |   |                                               | **3,400,979**  |   |   | **11,506,855** |   |
| **Accrued                expenses and other current liabilities**                                                      |   |                                               | **547,804**    |   |   | **1,479,706** |   |
| **Total                adjustments**                                                                                   |   |                                               | **(3,346,835** | **)** |   | **(1,494,757** | **)** |
| **Net                cash provided by (used in) operating activities**                                                 |   |                                               | **(883,847**   | **)** |   | **707,978** |   |
|                                                                                                                   |   |                                               |                |   |   |  |   |
| **Cash                Flows From Investing Activities:**                                                               |   |                                               |           |   |   |  |   |
| **Purchases                of property, plant and equipment**                                                          |   |                                               | **(138,446**   | **)** |   | **(56,905** | **)** |
| **Net                cash used in investing activities**                                                               |   |                                               | **(138,446**   | **)** |   | **(56,905** | **)** |
|                                                                                                                   |   |                                               |                |   |   |  |   |
| **Cash                Flows From Financing Activities:**                                                               |   |                                               |                |   |   |   |   |
| **Purchase                of treasury stock**                                                                          |   |                                               | **(40,832**    | **)** |   | **-** |   |
| **Proceeds                from the exercise of stock options and employee****stock                purchases**          |   |                                               | **18,988**     |   |   | **213,645** |   |
| **Net                cash (used in) provided by financing activities**                                                 |   |                                               | **(21,844**    | **)** |   | **213,645** |   |
| **Effect                of exchange rates on cash**                                                                    |   |                                               | **(424,214**   | **)** |   | **(28,432** | **)** |
| **Net                (decrease) increase in cash and cash equivalents**                                                |   |                                               | **(1,468,351** | **)** |   | **836,286** |   |
| **Cash                and cash equivalents, beginning of period**                                                      |   |                                               | **11,581,657** |   |   | **9,020,941** |   |
| **Cash                and cash equivalents, end of period**                                                            |   | **$**                                              | **10,113,306** |   | **$** | **9,857,227** |   |
| **Supplemental                disclosures:**                                                                           |   |                                               |           |   |   |   |   |
| **Income                taxes paid**                                                                                   |   | **$**                                              | **159,036**    |   | **$** | **84,451** |   |

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

----

** HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**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 us at cost by our contract                manufacturers which are excluded from sales |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|                                                  |   | December                31, |       | September                30, |   |
|-------------------------------------------------------|--------|-----------------------------|------------|------------------------------|--------|
|                                                  |   | 2007                        |       |                  2007   |   |
| Trade                receivables                      |   | $                           | 23,007,359 |                         | $      | 19,324,565 |   |
| Allowances                and reserves                |   |                        | (4,385,814 | )                            |   | (4,285,814 | ) |
| Total                trade receivables                |   | $                           | 18,621,545 |                         | $      | 15,038,751 |   |
| Receivable                from contract manufacturers |   |                        | 9,387,112  |                         |   | 6,673,021 |   |
| GST                and VAT taxes receivables          |   |                        | 1,763,023  |                         |   | 1,912,492 |   |
| Other                                                 |   |                        | 42,959     |                         |   | 43,562 |   |
| Total                non trade receivables            |   | $                           | 11,193,094 |                         | $      | 8,629,075 |   |

----

** HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**Note      3. Foreign currency translations and transactions **

**Note      4. Inventories**

|                           |   | December                31, |       | September                30, |   |
|--------------------------------|--------|-----------------------------|------------|------------------------------|--------|
|                           |   | 2007                        |       | 2007                         |   |
| Component                parts |   | $                           | 4,249,601  |                         | $      | 6,298,489 |   |
| Finished                goods  |   |                        | 9,971,017  |                         |   | 7,223,375 |   |
|                           |   | $                           | 14,220,618 |                         | $      | 13,521,864 |   |

**Note      5. Net income per share **

|                                                                            |   | Three                months endedDecember                31, |       |
|---------------------------------------------------------------------------------|--------|--------------------------------------------------------------|------------|
|                                                                            |   | 2007                                                         |       | 2006 |   |
| Weighted                average shares outstanding-basic                        |   |                                                         | 9,843,799  |   |   | 9,678,869 |   |
| Number                of shares issued on the assumed exercise of stock options |   |                                                         | 294,171    |   |   | 555,762 |   |
| Weighted                average shares outstanding-diluted                      |   |                                                         | 10,137,970 |   |   | 10,234,631 |   |

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**Note      6. Accumulated other comprehensive loss **

| Accumulated                  other comprehensive income (loss) |   | Balance                  as of |       | Oct                  07 to Dec 07 |   | Balance                  as of     |   |
|----------------------------------------------------------------|--------|--------------------------------|------------|-----------------------------------|--------|------------------------------------|--------|
| Fiscal                  2008 activity                          |   | Sept                  30, 2007 |       | gains                  ( losses)  |   | December                  31, 2007 |   |
| Translation                  gains and losses                  |   | $                              | (1,257,917 | )                                 | $      | (463,007                           | )      | $ | (1,720,924 | ) |
| FAS                  133 mark to market adjustment             |   |                           | (68,054    | )                                 |   | 38,793                             |   |   | (29,261 | ) |
|                                                           |   | $                              | (1,325,971 | )                                 | $      | (424,214                           | )      | $ | (1,750,185 | ) |

**Note      7. Revenue recognition**

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

** **

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

|   | · | Analog                TV receivers |
|--------|--------|------------------------------------|

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

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

|                                                            |   | Three months ended December 31, |       |
|-----------------------------------------------------------------|--------|-----------------------------------------------------|------------|
| Product                line sales                               |   | 2007                                                |       | 2006 |   |
| Analog                sales                                     |   | $                                                   | 11,687,545 |   | $ | 11,215,097 |   |
| Digital                and combination analog and digital sales |   |                                                | 24,025,631 |   |   | 18,195,597 |   |
| Other                non-TV tuners products                     |   |                                                | 1,334,285  |   |   | 508,439 |   |
| Total                sales                                      |   | $                                                   | 37,047,461 |   | $ | 29,919,133 |   |

----

**HAUPPAUGE      DIGITAL, INC. AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

|                             |   | Three months ended December 31, |   |
|----------------------------------|--------|-----------------------------------------------------|--------|
| Geographic                region |   | 2007                                                |   | 2006 |   |
| The                Americas      |   |                                                | 50     | % |   | 42 | % |
| Europe                           |   |                                                | 48     | % |   | 56 | % |
| Asia                             |   |                                                | 2      | % |   | 2 | % |
| Total                            |   |                                                | 100    | % |   | 100 | % |

**Note      9. Tax provision **

|                                           |   | Three months ended December 31, |    |
|------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                           |   | 2007                                                |    | 2006 |   |
|                                           |   |                                                |    |   |   |
| Federal                income tax expense      |   | $                                                   | 100,000 |   | $ | 31,000 |   |
| Tax                expense European operations |   |                                                | 78,332  |   |   | 47,552 |   |
| State                taxes                     |   |                                                | 12,000  |   |   | 5,000 |   |
| Tax                provision                   |   | $                                                   | 190,332 |   | $ | 83,552 |   |

**Note      10. Recent Accounting Pronouncements **

----

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

**CONDITION      AND RESULTS OF OPERATIONS**

**THREE      MONTH PERIOD ENDED DECEMBER 31, 2007 COMPARED TO THREE **

**MONTH      PERIOD ENDED DECEMBER 31 , 2006**

|                                                                   |   | Three    |       | Three    |   |       |   |                                 |      |   |   |     |   |
|------------------------------------------------------------------------|--------|----------|------------|----------|--------|------------|--------|--------------------------------------|-----------|--------|--------|----------|--------|
|                                                                   |   | Months   |       | Months   |   |       |   |                                 |      |   |   |     |   |
|                                                                   |   | Ended    |       | Ended    |   | Variance   |   | Percentage                  of sales |      |
|                                                                   |   | 12/31/07 |       | 12/31/06 |   | $          |   | 2007                                 |      | 2006   |   | Variance |   |
| Net                  sales                                             |   | $        | 37,047,461 |     | $      | 29,919,133 |   | $                                    | 7,128,328 |   |   | 100.00   | %      |   | 100.00 | % |   | - |   |
| Cost                  of sales                                         |   |     | 28,906,400 |     |   | 23,101,596 |   |                                 | 5,804,804 |   |   | 78.03    | %      |   | 77.21 | % |   | 0.82 | % |
| Gross                  profit                                          |   |     | 8,141,061  |     |   | 6,817,537  |   |                                 | 1,323,524 |   |   | 21.97    | %      |   | 22.79 | % |   | -0.82 | % |
| Gross                  profit %                                        |   |     | 21.97      | %        |   | 22.79      | %      |                                 | -0.82     | %      |   |     |   |   |   |   |   |   |   |
| Selling                  , general and administrative expenses:        |   |     |       |     |   |       |   |                                 |      |   |   |          |   |   |  |   |   |  |   |
| Sales                  and marketing                                   |   |     | 3,249,853  |     |   | 2,707,222  |   |                                 | 542,631   |   |   | 8.77     | %      |   | 9.05 | % |   | -0.28 | % |
| Technical                  support                                     |   |     | 150,007    |     |   | 136,405    |   |                                 | 13,602    |   |   | 0.40     | %      |   | 0.46 | % |   | -0.06 | % |
| General                  and administrative                            |   |     | 1,057,468  |     |   | 890,983    |   |                                 | 166,485   |   |   | 2.85     | %      |   | 2.98 | % |   | -0.13 | % |
| Stock                  compensation expense                            |   |     | 95,241     |     |   | 67,613     |   |                                 | 27,628    |   |   | 0.26     | %      |   | 0.23 | % |   | 0.03 | % |
| Total                  selling, general and administrative expense     |   |     | 4,552,569  |     |   | 3,802,223  |   |                                 | 750,346   |   |   | 12.28    | %      |   | 12.72 | % |   | -0.44 | % |
| Research                  and development expenses                     |   |     | 869,819    |     |   | 712,190    |   |                                 | 157,629   |   |   | 2.35     | %      |   | 2.38 | % |   | -0.03 | % |
| Research                  & development stock compensation expense |   |     | 43,938     |     |   | 41,255     |   |                                 | 2,683     |   |   | 0.12     | %      |   | 0.14 | % |   | -0.02 | % |
| Total                  expenses                                        |   |     | 5,466,326  |     |   | 4,555,668  |   |                                 | 910,658   |   |   | 14.75    | %      |   | 15.24 | % |   | -0.49 | % |
| Net                  operating income                                  |   |     | 2,674,735  |     |   | 2,261,869  |   |                                 | 412,866   |   |   | 7.22     | %      |   | 7.55 | % |   | -0.33 | % |
|                                                                   |   |     |       |     |   |       |   |                                 |      |   |   |     |   |   |   |   |   |   |   |
| Other                  income (expense) :                              |   |     |       |     |   |       |   |                                 |      |   |   |     |   |   |   |   |   |   |   |
| Interest                  income                                       |   |     | 6,194      |     |   | 12,391     |   |                                 | (6,197    | )      |   | 0.02     | %      |   | 0.04 | % |   | -0.02 | % |
| Foreign                  currency                                      |   |     | (27,609    | )        |   | 12,027     |   |                                 | (39,636   | )      |   | -0.07    | %      |   | 0.04 | % |   | -0.10 | % |
| Total                  other income (expense)                          |   |     | (21,415    | )        |   | 24,418     |   |                                 | (45,833   | )      |   | -0.05    | %      |   | 0.08 | % |   | -0.13 | % |
| Income                  before taxes on income                         |   |     | 2,653,320  |     |   | 2,286,287  |   |                                 | 367,033   |   |   | 7.17     | %      |   | 7.63 | % |   | -0.46 | % |
| Taxes                  on income                                       |   |     | 190,332    |     |   | 83,552     |   |                                 | 106,780   |   |   | 0.51     | %      |   | 0.28 | % |   | 0.23 | % |
| Net                  income                                            |   | $        | 2,462,988  |     | $      | 2,202,735  |   | $                                    | 260,253   |   |   | 6.66     | %      |   | 7.35 | % |   | -0.69 | % |

|                          |   |                                                   |       |                                                   |   |                       |   |                                |      | Percentage of sales by |   |
|-------------------------------|--------|--------------------------------------------------------|------------|--------------------------------------------------------|--------|----------------------------|--------|-------------------------------------|-----------|---------------------------------------|--------|
|                          |   |                                                   |       |                                                   |   | Increase                   |   |                                |      | geographic region                |   |
| Location                      |   | Three Months                  ended 12/31/07 |       | Three Months                  ended 12/31/06 |   | dollar  variance |   | Increase  variance % |      | 2007                                  |   | 2006 |   |
| The                  Americas |   |                                                   | 18,701,785 |                                                   |   | 12,472,831                 |   |                                | 6,228,954 |                                  |   | 50 | % |   | 50 | % |   | 42 | % |
| Europe                        |   |                                                   | 17,783,120 |                                                   |   | 16,920,057                 |   |                                | 863,063   |                                  |   | 5 | % |   | 48 | % |   | 56 | % |
| Asia                          |   |                                                   | 562,556    |                                                   |   | 526,245                    |   |                                | 36,311    |                                  |   | 7 | % |   | 2 | % |   | 2 | % |
| Total                         |   | $                                                      | 37,047,461 |                                                   | $      | 29,919,133                 |   | $                                   | 7,128,328 |                                  |   | 24 | % |   | 100 | % |   | 100 | % |

----

**Gross      profit**

|                                                      |   | Increase  (decrease)  |      |
|-----------------------------------------------------------|--------|--------------------------------------|-----------|
| Increased                sales                            |   | $                                    | 2,145,096 |   |
| Lower                gross profit on sales mix            |   |                                 | (346,188  | ) |
| Production                and production related expenses |   |                                 | (475,384  | ) |
| Total                increase in gross profit             |   | $                                    | 1,323,524 |   |

|                                       |   | Increase   |   |
|-----------------------------------------------------------|--------|------------|--------|
|                                                      |   | (decrease) |   |
| Lower                gross profit on sales mix            |   |       | (0.93  | )% |
| Production                and production related expenses |   |       | 0.11   | % |
| Net                decrease in gross profit percent       |   |       | (0.82  | )% |

|  | · | A                higher sales percentage of lower gross profit margin products contributed                to a 0.93% decrease in gross profit |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Production                and shipping expenses declined as a percentage of sales which contributed                to a 0.11% increase in the gross profit percent. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Selling,      general and administrative expenses**

|                                        |   | Three                  months ended December 31, |      |                                 |   |
|---------------------------------------------|--------|--------------------------------------------------|-----------|--------------------------------------|--------|
|                                        |   | Dollar                  Costs                    |      | Percentage                  of Sales |   |
|                                        |   |                                             |      |                                 |   |   |   | Increase |   |
|                                        |   | 2007                                             |      |                    2006         |   | Increase |   | 2007 |   | 2006 |   | (decrease) |   |
| Sales                  and marketing        |   | $                                                | 3,249,853 |                                 | $      | 2,707,222 |   | $ | 542,631 |   |   | 8.77 | % |   | 9.05 | % |   | -0.28 | % |
| Technical                  support          |   |                                             | 150,007   |                                 |   | 136,405 |   |   | 13,602 |   |   | 0.40 | % |   | 0.46 | % |   | -0.06 | % |
| General                  and administrative |   |                                             | 1,057,468 |                                 |   | 890,983 |   |   | 166,485 |   |   | 2.85 | % |   | 2.98 | % |   | -0.13 | % |
| Stock                  compensation expense |   |                                             | 95,241    |                                 |   | 67,613 |   |   | 27,628 |   |   | 0.26 | % |   | 0.23 | % |   | 0.03 | % |
| Total                                       |   | $                                                | 4,552,569 |                                 | $      | 3,802,223 |   | $ | 750,346 |   |   | 12.28 | % |   | 12.72 | % |   | -0.44 | % |

----

**Research      and development expenses**

**Other      income (expense)**

**Tax      provision**

|                                           |   | Three months ended December 31, |    |
|------------------------------------------------|--------|-----------------------------------------------------|---------|
|                                           |   | 2007                                                |    |                  2006 |   |
|                                           |   |                                                |    |   |   |   |   |
| Federal                income tax expense      |   | $                                                   | 100,000 |   | $ | 31,000 |   |
| Tax                expense European operations |   |                                                | 78,332  |   |   | 47,552 |   |
| State                taxes                     |   |                                                | 12,000  |   |   | 5,000 |   |
| Tax                provision                   |   | $                                                   | 190,332 |   | $ | 83,552 |   |

----

**Seasonality**

**Liquidity      and capital resources**

|                                      |   | December 31, 2007 |       | September 30, 2007 |   |
|-------------------------------------------|--------|-----------------------------|------------|------------------------------|--------|
|                                      |   |                        |       |                         |   |   |   |
| Cash                                      |   | $                           | 10,113,306 |                         | $      | 11,581,657 |   |
| Working                Capital            |   |                        | 23,289,112 |                         |   | 21,198,184 |   |
| Stockholders’                Equity |   |                        | 25,097,190 |                         |   | 22,941,081 |   |

| Sources                of cash:                                      |   |   |       |   |
|----------------------------------------------------------------------|--------|--------|------------|--------|
| Net                income adjusted for non cash items                |   | $      | 3,425,432  |   |
| Increase                in accounts payable and accrued expenses     |   |   | 3,948,783  |   |
| Proceeds                from employee stock purchases                |   |   | 18,988     |   |
| Less                cash used for:                                   |   |   |       |   |
| Increase                in account receivables                       |   |   | (6,246,813 | )      |
| Increase                in inventories                               |   |   | (1,348,754 | )      |
| Increase                in prepaid expenses and other current assets |   |   | (662,495   | )      |
| Effect                of exchange rates on cash                      |   |   | (424,214   | )      |
| Capital                equipment purchases                           |   |   | (138,446   | )      |
| Purchase                of treasury stock                            |   |   | (40,832    | )      |
| Net                cash decrease                                     |   | $      | (1,468,351 | )      |

----

**Future      contractual obligations**

|                                       |   | Payments                due by period |      |
|--------------------------------------------|--------|---------------------------------------|-----------|
|                                       |   | Total                                 |      | Less than 1 year |   | 1-3 years |   | 3 to 5 years |   |
| Operating                lease obligations |   | $                                     | 1,875,172 |   | $ | 528,913 |   | $ | 1,303,746 |   | $ | 42,513 |   |

**Inflation**

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

**Item      4. 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 December 31, 2007     |   |           | 10,000  |          |   | 4.08                       |   |                     | 10,000  |   |   | 440,421 |   |
| Purchases                as of December 31, 2007  |   |           | 759,579 |          |   | 3.17                       |   |                     | 759,579 |   |   |   |   |

**Item      4. Submission of matters to a vote of security holders**
** **

**Proposal      No. 1: Election of directors**

|                                |   | **For** |      |  **Withheld** |   |
|-------------------------------------|--------|---------|-----------|--------------------|--------|
| Kenneth                Plotkin      |   |    | 8,965,716 |               |   | 174,466 |   |
| Bernard                Herman       |   |    | 8,832,973 |               |   | 307,208 |   |
| Robert                S. Nadel      |   |    | 8,961,401 |               |   | 178,784 |   |
| Christopher                G. Payan |   |    | 8,964,341 |               |   | 175,841 |   |
| Neal                Page            |   |    | 8,973,316 |               |   | 166,866 |   |
| Seymour                G. Siegel    |   |    | 8,959,401 |               |   | 180,781 |   |

----

**Item      6. Exhibits **

----

**SIGNATURES**

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

----