UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. DC 20549

FORM 10-Q

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

xFor ~~QUARTERLY~~the quarterly ~~REPORT~~period ~~PURSUANT~~ended TOMarch ~~SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~31, 2009

~~For~~Commission File ~~the quarterly period ended September 30, 2003~~Number: 001-15069

ORInPlay Technologies, Inc.

¨ 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: 001-15069

Duraswitch Industries, Inc.

(Exact name of registrant as specified in its charter)

Nevada	88-0308867	~~88-0308867~~
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
P.O. Box 28936 Scottsdale, Arizona	85255
(Address of principal executive offices)	(Zip Code)

~~234 S. Extension Road~~ (NONE)

Mesa, Arizona 85210

(Address of principal executive offices)

(480) 586-3300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ¨ Yes x ~~No ¨~~ No

Indicate by check mark whether the registrant ishas ansubmitted ~~accelerated~~electronically ~~filer~~and ~~(as~~posted ~~defined~~on its incorporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule ~~12b~~405 of Regulation S-2T (§232.405 of this chapter) during the ~~Exchange~~preceding 12 months (or for such ~~Act~~shorter period that the registrant was required to submit and post such files). ~~Yes ¨ No x~~

~~As of October 29, 2003, there were 9,571,477 shares of common stock~~ ¨ ~~outstanding.~~Yes ¨ No

~~PART~~Indicate by Icheck ~~FINANCIAL~~mark ~~INFORMATION~~whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

As of July 25, 2009, the issuer had outstanding 11,622,568 shares of common stock.

INPLAY TECHNOLOGIES, INC.

Quarterly Report on Form 10-Q

March 31, 2009

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements:	3

	Consolidated Unaudited Balance Sheets as of March 31, 2009 and December 31, 2008	3

	Consolidated Unaudited Statements of Operations for the Three Months Ended March 31, 2009 and 2008	4

	Consolidated Unaudited Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008	5

	Notes to Unaudited Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 4T.	Controls and Procedures	19

PART II – OTHER INFORMATION

Item 6.	Exhibits	20

SIGNATURES		21

EXHIBITS

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

~~DURASWITCH INDUSTRIES~~INPLAY TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2003			December 31, 2002
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,681,060		$	7,036,959
Accounts receivable (net of allowance for doubtful accounts of $12,000 in 2003 and 2002)		62,559			11,191
Inventory—Net (Note 3)		183,765			192,915
Prepaid expenses and other current assets		201,357			168,121
Total current assets		5,128,741			7,409,186
PROPERTY AND EQUIPMENT—Net		447,788			786,506
GOODWILL—Net		443,874			443,874
PATENTS—Net (Note 4)		782,425			743,447
OTHER ASSETS		101,245			119,116
TOTAL ASSETS	$	6,904,073		$	9,502,129
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	58,894		$	23,933
Accrued salaries and benefits		195,387			500,413
Other accrued expenses and other current liabilities		169,706			231,973
Deferred licensing revenue (Note 2)		493,065			460,803
Current portion of capital leases payable		11,447			18,110
Total current liabilities		928,499			1,235,232
LONG-TERM LIABILITIES:
Capital leases payable		1,568			8,213
Other non-current liabilities		31,453			36,750
Deferred licensing revenue—long-term (Note 2)		1,064,233			1,364,601
Total long-term liabilities		1,097,254			1,409,564
Total liabilities		2,025,753			2,644,796
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, no par value, 10,000,000 shares authorized, no shares issued and outstanding in 2003 and 2002		—			—
Common stock, $.001 par value, 40,000,000 shares authorized in 2003 and 2002, 9,571,477 and 9,534,195 shares issued and outstanding in 2003 and 2002, respectively		9,571			9,534
Additional paid-in capital		27,359,927			27,317,314
Accumulated deficit		(22,491,178	)		(20,469,515	)
Total stockholders’ equity		4,878,320			6,857,333
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,904,073		$	9,502,129

See notes to consolidated financial statements.

DURASWITCH INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	March 31, 2009			December 31, 2008
	2003			2002			2003			2002
ASSETS
NET REVENUE:
CURRENT ASSETS:
Licensing	$	192,863		$	150,164		$	513,135		$	572,508
Cash and cash equivalents	$	34,142		$	372,621
Product		—			—			—			24,675
Restricted short term investment		-			20,000
Total net revenue		192,863			150,164			513,135			597,183
Accounts receivable		12,000			73,783
COST OF GOODS SOLD:
Inventory		-			13,838
Licensing		30,874			9,248			61,450			66,494
Prepaid expenses and other current assets		62,344			89,611
Product		—			—			—			—
Total current assets		108,486			569,853
Total cost of goods sold		30,874			9,248			61,450			66,494
PROPERTY AND EQUIPMENT - Net		-			275,027
Gross profit		161,989			140,916			451,685			530,689
PATENTS – Net		389,810			411,207
OPERATING EXPENSES:
OTHER ASSETS		2,480			17,731
Selling, general and administrative		488,955			627,933			1,710,054			2,192,491
TOTAL ASSETS	$	500,776		$	1,273,818
Research and development		159,083			606,159			763,972			2,013,588
LIABILITIES AND STOCKHOLDERS' DEFICIT
Total operating expenses		648,038			1,234,092			2,474,026			4,206,079
CURRENT LIABILITIES:
LOSS FROM OPERATIONS		(486,049	)		(1,093,176	)		(2,022,341	)		(3,675,390	)
Accounts payable	$	1,592,466		$	911,368
OTHER INCOME—Net		10,255			32,251			678			125,306
Accrued salaries and benefits		226,715			311,879
NET LOSS	$	(475,794	)	$	(1,060,925	)	$	(2,021,663	)	$	(3,550,084	)
Liabilities of discontinued operations		65,911			68,049
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(0.05	)	$	(0.11	)	$	(0.21	)	$	(0.37	)
Other accrued expenses and other current liabilities		197,351			599,797
WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED		9,569,385			9,534,195			9,595,870			9,531,880
Total current liabilities		2,082,443			1,891,093
Total liabilities		2,082,443			1,891,093
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, no par value, 10,000,000 shares authorized;
no shares issued and outstanding		-			-
Common stock, $.001 par value, 40,000,000 shares authorized;
11,622,568 shares issued and outstanding at March 31, 2009
and December 31, 2008		11,623			11,623
Additional paid-in capital		31,971,836			31,942,010
Accumulated deficit		(33,565,126	)		(32,570,908	)
Total stockholders' deficit		(1,581,667	)		(617,275	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	500,776		$	1,273,818

See notes to consolidated financial statements.

~~DURASWITCH INDUSTRIES~~INPLAY TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

INPLAY TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2009			2008

NET REVENUE:	$	217,527		$	8,951
COST OF GOODS SOLD:		128,397			9,618
Gross profit		89,130			(667	)

OPERATING EXPENSES:
Selling, general and administrative		302,455			784,674
Impairment charge on property and equipment		241,696			-
Research, development and commercial
application engineering		296,292			948,754
Total operating expenses		840,443			1,733,428

LOSS FROM OPERATIONS		(751,313	)		(1,734,095	)

OTHER INCOME (EXPENSE)
Interest and other income - Net		(242,904	)		33,881

LOSS FROM CONTINUING OPERATIONS		(994,217	)		(1,700,214	)

Income from discontinued Duraswitch segment		-			103,733

NET LOSS	$	(994,217	)	$	(1,596,481	)

LOSS PER SHARE - BASIC	$	(0.09	)	$	(0.14	)

LOSS PER SHARE - DILUTED	$	(0.09	)	$	(0.14	)

WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC		11,622,568			11,596,950
DILUTED		11,622,568			11,596,950


See Notes to Consolidated Financial Statements.

See Notes to Consolidated Financial Statements.

INPLAY TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	Three Months Ended March 31,
	2003			2002
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2994,~~021,663~~217	)	$	(31,~~550~~596,~~084~~481	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in)
Depreciation and amortization		287,069			312,983
operating activities:
Bad debt expense		—			11,000
Depreciation and amortization		54,728			68,528
Issuance of stock for services		40,000			—
Gain on sale of equipment		(1,500	)		-
Impairment loss on assets held for sale		10,618			—
Impairment charge for Property and Equipment		241,696			-
(Gain) loss on disposal of equipment		(2,980	)		5,224
Stock compensation		29,825			77,601
Reserve for inventory obsolescence		20,353			35,000
Changes in operating assets and liabilities:
Accounts receivable		~~(51~~61,~~368~~783	)		17(19,~~802~~228	)
Inventory		~~(11~~13,~~203~~838	)		(7543,~~129~~694	)
Prepaid expenses and other current assets		(242,~~255~~518	)		~~(28~~43,~~492~~780	)
Other assets		300			7,914
Accounts payable		852,811			(170,738	)
Accounts payable		34,961			(61,310	)
Accrued salaries and benefits		(85,164	)		(213,668	)
Accrued salaries and benefits		(305,026	)		33,901
Other accrued expenses and other current liabilities		(576,297	)		(333,157	)
Other accrued expenses and other current liabilities		(62,267	)		53,700
Other non-current liabilities		-			(70,975	)
Other non-current liabilities		(5,297	)		(181,240	)
Deferred revenue		-			(695	)
Deferred licensing revenue		(268,106	)		(270,982	)
Net cash used in operating activities		(359,979	)		(2,258,727	)
Net cash used in operating activities		(2,336,864	)		(3,689,713	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in patents		(71,836	)		(152,912	)
Sale (purchase) of restricted investment		20,000			(20,000	)
Proceeds from sale of equipment		~~104~~1,~~707~~500			—-
Purchases of property and equipment		(41,248	)		(120,127	)
Increase in patents		-			(15,570	)
Net cash used in investing activities		(8,377	)		(273,039	)
Purchases of property and equipment		-			(116,000	)
Net cash provided by (used in) investing activities		21,500			(151,570	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of stock		2,650			31,849
Stock issuance fee to NASDAQ		-			(2,500	)
Principal payments on capital leases		(13,308	)		(13,365	)
Net cash used in financing activities		-			(2,500	)
Net cash (used in) provided by financing activities		(10,658	)		18,484
DECREASE IN CASH AND CASH EQUIVALENTS		(338,479	)		(2,412,797	)
DECREASE IN CASH AND CASH EQUIVALENTS		(2,355,899	)		(3,944,268	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		372,621			5,592,412
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		7,036,959			12,016,430
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	34,142		$	3,179,615
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	4,681,060		$	8,072,162
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
Cash paid for interest	$	593		$	4,300
Issuance of $96,000 of stock in exchange for consulting services agreement, net of cancellation of $56,000 of stock upon cancellation of consulting agreement	$	40,000		$	—
Sale of assets held for sale in exchange for note receivable	$	17,250		$	—

See notes to consolidated financial statements.

4 5

~~DURASWITCH INDUSTRIES~~INPLAY TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	BASIS OF PRESENTATION

The accompanying interim financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim reporting. Accounting policies utilized in the preparation of financial information herein presented are the same as set forth in our annual financial statements. Certain disclosures and information normally included in financial statements have been condensed or omitted. In the opinion of Duraswitch Industries, Inc. (the “Company”), these financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the interim financial statements. Interim results of operations are not necessarily indicative of the results of operations for the full year. Operations

2InPlay Technologies, Inc., ~~DEFERRED~~a ~~LICENSING~~Nevada ~~REVENUE~~corporation (the “Company”), has developed and patented innovative human interface devices (HIDs) for electronic products. The Company has marketed its FinePoint digital pen and dual-mode pen and touch technologies to manufacturers of tablet and convertible PCs.

~~In April 2000~~Previously, the Company ~~entered~~had ~~into a license agreement with Delphi Corporation (“Delphi”)~~developed, ~~that gives Delphi the exclusive right to utilize and manufacture the Company’s~~ patented ~~switch technologies for the automotive industry. In connection with the license agreement~~, ~~the~~and ~~Company~~licensed ~~also~~innovative ~~issued a~~technologies ~~warrant~~utilizing ~~to Delphi to purchase 225,000 shares of common stock at $7.00 per share and~~ a ~~short~~magnetic-~~term~~based ~~option~~design ~~to purchase 1,651,846 shares of common stock at $7.00 per share. In exchange, Delphi paid the Company a non-refundable payment of $4 million and agreed to pay a royalty fee~~ for ~~each~~electronic ~~switch~~switches ~~sold~~under ~~by Delphi. The initial term of~~ the ~~exclusive license agreement is seven years. The agreement also requires Delphi to make minimum royalty payments, beginning July 1, 2004, totaling $12 million during~~Duraswitch ~~the~~brand ~~initial term ending June 30, 2007~~name. This ~~Delphi~~technology ~~can~~segment ~~maintain~~was ~~exclusivity~~sold ~~for~~in ~~the automotive industry through June 30, 2012 by making additional minimum annual royalty payments during that period. After June 30, 2012, either party may convert the~~October ~~agreement to a non-exclusive agreement through 2020~~2008.

~~The~~Interim ~~estimated~~Financial fair value of the warrant and the option was $1,134,338, as determined using the Black-Scholes valuation model. The remaining value of the non-refundable payment, totaling $2,865,662, was recorded as deferred revenue and is being amortized over the initial seven-year term of the exclusive license agreement. Information

The consolidated ~~current~~balance ~~portion~~sheet as of ~~deferred~~March ~~licensing~~31, ~~revenue~~2009, ~~includes~~the consolidated statements of operations for the ~~revenue~~three tomonths beended March ~~recognized~~31, in2009 and March 31, 2008, and the ~~next~~consolidated ~~twelve~~statements ~~months~~of ~~related~~cash toflows for the ~~Delphi~~three ~~non-refundable~~months ~~payment~~ended March 31, 2009 and ~~royalty~~March ~~prepayments~~31, 2008 have been prepared by ~~other~~the ~~licensees~~Company ~~that~~and ~~have~~are unaudited. The ~~been~~consolidated ~~deferred~~balance ~~until~~sheet ~~such~~as of December 31, 2008 was ~~royalties~~derived ~~are~~from ~~earned~~the ~~under~~audited consolidated financial statements included in the Company’s ~~licensing~~Annual ~~agreements.~~Report on Form 10-K for the year ended December 31, 2008.

3Certain information and footnote disclosures normally included in consolidated financial statements have been condensed or omitted. It ~~INVENTORY~~is the opinion of management that all adjustments (which include normal recurring adjustments) necessary for a fair statement of financial results are reflected in the interim periods presented. Accordingly, these consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. The results of operations for the three months ended March 31, 2009 are not indicative of the operating results for the full year.

The preparation ~~Company’s~~of ~~inventory~~financial isstatements ~~primarily~~in ~~comprised~~accordance ofwith accounting principles ~~licensed~~generally ~~components.~~accepted ~~The~~in ~~licensed~~the ~~components~~United ~~are~~States ~~sold~~of America requires management to ~~licensees~~make estimates and ~~are~~assumptions ~~recognized~~that asaffect ~~licensing~~the ~~revenue~~reported amounts of assets and liabilities ~~the~~and ~~cost~~disclosure of contingent assets and liabilities at the ~~components~~date isof the ~~recorded~~financial statements, as ~~licensing~~well ~~cost~~as ofnet ~~goods~~sales ~~sold~~and ~~when~~expenses reported for the period ~~components~~presented. The ~~are~~Company ~~shipped~~regularly toassesses these estimates and, while actual results may differ, management believes that the ~~licensee.~~estimates are reasonable.

~~4. PATENTS~~ Going Concern

~~Amortization~~The Company ~~expense~~has ~~for~~experienced ~~patents~~significant ~~was~~operating ~~$11,359~~losses since its inception and its accumulated net deficit is in excess of $1033.5 million. During 2007,~~796~~ the Company completed production for ~~the~~our ~~three~~primary ~~months~~customer, ~~ended~~Gateway. ~~September~~During 302008, the ~~2003~~Company’s revenue was primarily related to non-recurring engineering fees and ~~2002~~low volume production for Panasonic. Due to a lack of funding, the Company ~~respectively~~subsequently completed production and does not anticipate revenue from either customer. ~~Amortization~~During ~~expense~~the ~~for~~first ~~patents~~quarter ~~was~~of ~~$32~~2009,~~858~~ ~~and~~the ~~$29~~Company ceased ongoing operations,~~139~~ ~~for~~and began the ~~nine~~process ~~months~~of ~~ended~~liquidation. These ~~September~~factors, among 30others, ~~2003~~indicate ~~and~~that ~~2002,~~the ~~respectively.~~Company ~~The~~will ~~estimated~~not ~~amortization~~continue ~~expense~~as a going concern for a ~~existing~~reasonable ~~patents~~amount isof ~~$45,400~~time. The ~~for~~financial ~~each~~statements do not include any adjustments relating to the recoverability and classification of recorded assets amounts or the ~~next~~amounts ~~five~~and ~~years~~classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The financial statements are presented at historical amounts however management believes these amounts represent the liquidation value of the assets and liabilities.

In May of 2009, the Company’s management and Board of directors elected to wind down operations and liquidate that net assets of the Company. The ~~gross~~Company has ~~carrying~~focused ~~amount~~its attention on the sale of its assets, negotiation of outstanding obligations with creditors, satisfaction of legal and ~~accumulated~~regulatory ~~amortization~~requirements associated with any sale and wind down of the Company, and ultimately dissolving ~~patents~~the ~~are~~corporation aswith ~~follows:~~the approval of stockholders. As described in Note 14, the Company has executed an asset purchase agreement pursuant to which it has agreed to sell the intellectual property pertaining to the digital computer pen and digitizer segment of its business, which represents substantially all of the Company’s remaining assets, for a price of $2.0 million. Upon completion of the transaction, the Company intends to negotiate settlements for amounts owed to creditors, cease business operations, and dissolve the Company and its subsidiaries. At the date of the financial statements, management’s best estimate of the liquidation value of its remaining assets and liabilities is the recorded value of these assets and liabilities consequently, the Company has not adjusted the historical values of the assets and liabilities.

	September 30, 2003			December 31, 2002
Patents	$	956,633		$	884,797
Accumulated amortization		(174,208	)		(141,350	)
Patents—net	$	782,425		$	743,447

5. STOCK-BASED COMPENSATION

At September 30, 2003, we had three stock-based employee compensation plans. SFAS No. 123, Accounting for Stock-Based Compensation encourages, but does not require, companies to record as compensation expense, over the vesting period, the fair value of all stock-based awards on the date of grant. We have chosen to account for these plans using the intrinsic value method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The fair value of all stock option grants is estimated on the date of grant in accordance with SFAS No. 123 using the Black-Scholes option pricing model with the following assumptions: an expected risk-free interest rate of 1.9 percent and 2.9 percent in 2003 and 2002, respectively, an expected life of three years, an expected volatility rate of 82 percent and 69 percent for options granted in 2003 and 2002, respectively, and an expected dividend rate of zero percent. The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2003			2002			2003			2002
Net loss, as reported	$	(475,794	)	$	(1,060,925	)	$	(2,021,663	)	$	(3,550,084	)
Less: Total stock-based employee expense determined under fair value based method for all awards, net of related tax effects		—			(10,097	)		(71,384	)		(190,903	)
Pro forma net loss	$	(475,794	)	$	(1,071,022	)	$	(2,093,047	)	$	(3,740,987	)
Loss per share:
Basic and diluted, as reported	$	(0.05	)	$	(0.11	)	$	(0.21	)	$	(0.37	)
Basic and diluted, pro forma	$	(0.05	)	$	(0.11	)	$	(0.22	)	$	(0.39	)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. There can be no assurance that the forward-looking statements contained in this report will, in fact, transpire or prove to be accurate. For a more detailed description of these and other cautionary factors that may affect our future results, please refer to our Annual Report on Form 10-K for our fiscal year ended December 31, 2002 filed with the Securities and Exchange Commission.

Critical Accounting Policies

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported or expected financial results.

Because ~~making judgments about~~ the ~~carrying~~determination ~~values~~to ofliquidate ~~assets~~was ~~and liabilities that are~~ not ~~readily~~made ~~apparent~~until ~~from~~May ~~other~~2009, ~~sources.~~the ~~Actual~~fact ~~results could differ~~that ~~significantly~~Company ~~from~~maintained ~~those~~its ~~estimates~~operations ~~under~~in ~~different assumptions and conditions. We believe that~~ the ~~following~~first ~~discussion~~fiscal ~~addresses~~quarter ~~our~~of ~~most~~2009, ~~critical accounting policies~~and, during ~~which are those~~ that ~~are~~time ~~most~~period ~~important to~~ the ~~portrayal~~Company ofcontinued ~~our~~to ~~financial condition~~seek ~~and~~capital ~~results of operations~~ and ~~require~~negotiate ~~our~~with potential ~~most~~new ~~difficult~~customers, ~~subjective,~~the ~~and~~accompanying ~~complex~~financial ~~judgments,~~statements ~~often~~do asnot ainclude adjustments ~~result~~that ofwould ~~the~~reflect ~~need~~such toon ~~make~~a ~~estimates~~liquidation ~~about~~basis ~~the effect~~ of ~~matters that are inherently uncertain~~ accounting.

~~Revenue~~Management has ~~Recognition.~~settled Wesubstantially ~~enter~~all ~~into~~accounts ~~licensing~~receivable ~~agreements~~at ~~with~~March ~~our~~31, 2009 at the ~~customers~~carrying value of such. Management ~~Our~~believes ~~licensing~~salvage ~~agreements~~value ~~require~~for ~~the~~its property ~~licensee~~and toequipment ~~purchase~~will ~~licensed~~be ~~components~~nominal ~~from~~and ~~us.~~has ~~The~~applied ~~purchase~~an ~~price~~impairment ofcharge for the ~~licensed~~full ~~components~~carrying ~~includes~~amount in the ~~royalty~~three ~~fee~~months ended March 31, 2009. As discussed ~~When~~on Note 14, the ~~components~~Company ~~are~~has ~~shipped~~an agreement to sell the patented technology for $2,000,000. Management wehas ~~recognize~~not ~~licensing~~yet ~~revenue~~begun to negotiate the settlement of the Company’s obligations and ~~licensing~~therefore cannot estimate the ~~cost~~amount of ~~goods~~such ~~sold~~settlements. The Insettlement ~~some~~of ~~cases,~~obligations ~~where~~will include nothe ~~licensed~~severance ~~components~~bonus ~~are~~payments ~~supplied,~~to wemanagement ~~are~~discussed ~~paid~~in aNote ~~royalty~~11 ~~per~~and ~~switch~~will be ~~manufactured~~prior byto ~~the~~any ~~licensee.~~potential distribution to shareholders.

~~Some of our licensees have prepaid royalties to us pursuant to their license agreements~~2. ~~These~~EARNINGS ~~prepayments~~PER are recorded as deferred revenue. This deferred revenue is recognized as licensing revenue when earned under the licensing agreement. If a licensee purchases a licensed component from us, the royalty is earned when the licensed component is shipped. If the licensee directly manufactures our switches without purchasing licensed components from us, we consider the royalty earned when the switch is manufactured. In the case of our exclusive license agreement with Delphi, the up-front payment is nonrefundable and the portion of the $4.0 million payment allocated to deferred revenue is being amortized over the initial seven-year term of the agreement. (See Note 2 of our Notes to Unaudited Consolidated Financial Statements.) SHARE

~~Inventory Valuation. Our inventory is primarily comprised~~ Statement of ~~licensed components~~Financial ~~that~~Accounting ~~are~~Standards ~~sold~~(“SFAS”) ~~to licensees~~No. We128 ~~state~~requires ~~inventories at~~ the ~~lower~~presentation of basic ~~cost~~and ordiluted ~~market~~earnings ~~value,~~per ~~determined~~share ~~using the first-in, first-out method~~(“EPS”). Basic ~~Our~~EPS ~~policy~~ is tocomputed by ~~write~~dividing ~~down~~income ~~our~~available ~~inventory~~to ~~for~~common ~~estimated~~shareholders ~~obsolescence~~by orthe ~~unmarketable~~weighted ~~inventory~~average number toof ~~the extent~~common ~~the~~shares ~~cost~~outstanding ~~exceeds~~for the ~~estimated market value~~period. Diluted WeEPS ~~base~~is computed ~~the~~giving ~~estimate~~effect onto ~~our~~all ~~assumptions~~potential ~~about~~dilutive ~~future~~common ~~demand~~shares ~~and~~that ~~market~~were outstanding ~~conditions.~~during Ifthe ~~actual~~period ~~market~~unless ~~conditions~~they are ~~less favorable than those assumed in our estimates, additional inventory~~antidilutive. Potential ~~write-downs~~dilutive ~~might~~common beshares ~~required.~~consist ~~We reflect any write-down~~ of ~~inventory in~~ the ~~period~~incremental incommon ~~which~~shares ~~the~~that ~~facts~~would ~~giving~~be issued ~~rise~~upon toexercise ~~the~~of ~~inventory~~stock ~~write-down~~options ~~become~~and ~~known to us~~warrants.

~~Impairment~~For ~~or Disposal of Long-Lived Assets. We review our long-lived assets and identifiable intangibles for~~the ~~impairment~~three ~~whenever~~months ~~events~~ended orMarch ~~changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Additionally~~31, ~~goodwill~~2009 ~~is reviewed on an annual basis. Our intangible assets are primarily our patents~~ and ~~the goodwill associated with the acquisition of Aztec Industries. If such assets were considered to be impaired~~2008, the ~~impairment~~effect ~~to be recognized would be measured by the amount by which the carrying amount~~ of ~~the~~potential ~~assets~~dilutive common ~~exceeds~~shares ~~the~~was ~~fair~~antidilutive ~~market~~and ~~value~~no ofdiluted ~~the~~calculation was ~~assets~~required.

~~We evaluate the recoverability of property and~~Options ~~equipment~~ and ~~intangibles~~warrants ~~(excluding~~excluded ~~goodwill) not held for sale by comparing the carrying amount of the asset or group of assets against the estimated undiscounted future net cash flows expected to result~~ from the ~~use~~calculation of ~~the~~diluted ~~asset~~earnings orper ~~group~~share ofwere ~~assets.~~2,126,424 Ifand ~~the undiscounted estimated cash flows are less than the carrying value of the asset or group of assets being reviewed~~1,708,520 anfor ~~impairment loss would be recorded. The loss would be measured based on~~ the ~~estimated~~three ~~fair~~months ~~value~~ended ofMarch ~~the asset or group of assets compared to its carrying value. The estimated fair value would be based on the best information available under the circumstances~~31, ~~including~~2009 ~~prices for similar assets~~ and ~~the~~March ~~results of valuation techniques~~31, ~~including the present~~ ~~value~~2008, ofrespectively, ~~expected~~because ~~future~~they ~~cash~~were ~~flows using a discount rate commensurate with the risks involved~~antidilutive.

~~We evaluate goodwill for impairment by comparing the estimated fair value of our company, which is the only reporting unit, with the carrying value, including goodwill~~3. ~~The~~STOCK ~~estimated~~BASED fair value is based on the best information available under the circumstances, including quoted market prices in stock markets, valuation techniques based on earnings, or independent valuations. If the fair value of our company exceeds the carrying amount, goodwill is not considered to be impaired. If the carrying amount of our company exceeds our fair value, the fair value of the goodwill is calculated, and the excess of the carrying value of the goodwill over its fair value is recorded as an impairment loss. To determine the fair value of goodwill, our fair value is allocated to all of our assets and liabilities, and any excess of fair value of our company over the fair value of our assets and liabilities is the estimated fair value of goodwill. COMPENSATION

~~Results~~As of March ~~Operations~~31, 2009, the Company had four stock-based employee compensation plans. The plans provide for the granting of awards in the form of incentive and nonqualified stock options, stock appreciation rights, shares of restricted common stock, bonus stock in lieu of obligations, or other stock-based awards to employees, directors and independent contractors who provide valuable service to the Company. Options are granted at the market price of our common stock on the date the grant, are approved by the Compensation Committee, and have ten-year terms. The stock options for directors typically vest within 30 days of grant. The stock options for officers and employees typically vest over a 30 month period from the date of grant.

~~Net~~At ~~Revenue:~~the Company’s annual stockholder meeting held on December 19, 2008, stockholders approved the Second Amendment to the Company’s 2005 Stock Award Plan, authorizing an increase in the number of shares of our common stock reserved for issuance under the plan from 1,000,000 shares to 2,000,000 shares plus (i) the number of shares with respect to which awards previously granted under our 1997, 1999, and 2000 stock option plans that terminate without the issuance of the shares or where the shares are forfeited or repurchased; (ii) any shares available for grant in the share reserve for the 1997, 1999, and 2000 stock option plans as of the date this proposal is approved by the stockholders; (iii) with respect to awards granted under the plans, the number of shares which are not issued as a result of the award being settled for cash or otherwise not issued in connection with the exercise or payment of the award; and (iv) the number of shares that are surrendered or withheld in payment of exercise price of any award or any tax withholding requirements in connection with any award granted under the existing plans. As of March 31, 2009, 1,294,354 shares of the Company’s common stock were available for grant under the plans.

WeThe Company ~~recorded~~accounts ~~net~~for ~~revenue~~its ofoptions ~~$192,863~~in ~~for~~accordance ~~the~~with ~~three~~SFAS ~~months~~No. ~~ended~~123(R), ~~September~~“Share-Based 30Payment,” which ~~2003,~~requires ~~compared~~the tomeasurement ~~$150,164~~and ~~for~~recognition of compensation expense in the financial ~~three~~statements ~~months~~for ~~ended~~all ~~September~~share ~~30,~~based ~~2002,~~payment anawards ~~increase~~made ofto ~~$42,699~~employees orand directors ~~28%.~~based ~~Net~~on ~~revenue~~estimated ~~was~~fair ~~$513,135~~values. Under ~~and~~this ~~$597~~method,~~183~~ ~~for~~in addition ~~the~~to ~~nine~~reflecting ~~months~~compensation ~~ended~~expense ~~September~~for 30new share-based awards, ~~2003~~expense is ~~and~~also ~~2002,~~recognized ~~respectively,~~to areflect ~~decrease~~the remaining service period of ~~$84,048~~awards orthat ~~14%.~~had been granted in prior periods.

~~Licensing~~Stock-based compensation ~~revenue~~cost ~~was~~recognized ~~$192,863~~in ~~and $150,164 for~~ the three months ended ~~September~~March 3031, ~~2003~~2009 ~~and 2002,~~was ~~respectively~~$29,825, anwhich ~~increase~~consisted of $429,~~699~~437 orof ~~28%.~~expense ~~Licensing~~relating ~~revenue~~to ~~was~~stock ~~$513,135~~options ~~and~~issued in ~~$572,508~~2007 ~~for~~which ~~the~~will ~~nine~~be ~~months~~recognized ~~ended~~quarterly ~~September~~through 30March 2010, ~~2003~~ and ~~2002, respectively, a decrease of~~ $598,~~373~~730 ~~or 10%. To date, the majority~~ of ~~non-exclusive licensing revenue has~~ ~~been~~expense related to ~~our~~options ~~PushGate~~issued ~~pushbutton technology. The majority of the increase~~ in ~~licensing~~2008 ~~revenue~~which ~~for~~will ~~the~~be ~~quarter~~recognized ~~ended~~quarterly through ~~September~~March 302011, ~~2003~~and ~~was~~$11,658 ~~a result~~ of ~~increases~~expense inrelating ~~the~~to ~~quantities~~stock ofoptions ~~royalty~~issued ~~bearing PushGate and rotor licensed components~~in ~~sold.~~2009 ~~Revenue~~which ~~for~~will ~~the~~be ~~quarter~~recognized ~~also~~quarterly ~~increased~~through ~~related~~July to2011. Stock based ~~fees~~compensation expense for the ~~review~~three ofmonths ~~customer~~ended ~~designs~~March ~~and~~31, ~~from~~2008 ~~the~~totaled $68,227. This ~~sale~~compensation ofexpense ~~other~~is ~~materials~~included ~~to our licensees. The decrease~~ in ~~licensing revenue for~~ the ~~nine-month period was primarily a result of a decrease~~selling, ingeneral ~~the~~and ~~number~~administrative ofexpenses ~~royalty~~on ~~bearing PushGate licensed components sold. The majority of~~ the ~~decrease~~consolidated ~~was~~statements ~~due to a large sale to one licensee in 2002 that was not replicated in 2003~~of operations.

~~For~~Option activity ~~each~~under of the ~~three~~Company’s ~~months~~stock ~~ended~~option ~~September~~plans ~~30,~~during ~~2003 and 2002, recognition of revenue from~~ the ~~Delphi~~three ~~license agreement generated $102,345 of licensing revenue, representing 53% and 68% of licensing and total net revenue in 2003 and 2002, respectively. For each of the nine~~ months ended ~~September 30, 2003 and 2002, the Delphi license agreement generated $307,035 of~~ ~~licensing~~March ~~revenue representing 60% and 54% of licensing revenue in 2003 and 2002~~31, ~~respectively,~~2009 ~~and~~was ~~60%~~as ~~and 51% of total net revenue in 2003 and 2002, respectively.~~ follows:

We anticipate that licensing revenue will fluctuate from period to period. It will be difficult for us to predict the timing and magnitude of licensing revenue as it depends on production orders being issued to our licensees for products utilizing our technologies. The timing of the purchase orders depends on economic conditions as well as market acceptance of products that incorporate our technologies. We believe that the amount of licensing revenue for any period is not necessarily indicative of results for any future period.

				Weighted						Weighted
				Average						Average
	Option			Exercise			Option			Exercise
	Shares			Price			Shares			Price
Outstanding, December 31, 2008		1,551,030		$	2.02	Outstanding, December 31, 2007		1,775,873		$	5.73
Granted		865,000		$	0.19	Granted		40,000		$	1.19
Exercised		-		$	-	Exercised		-		$	-
Expired or terminated		(798,697	)	$	0.81	Expired or terminated		(265,442	)	$	19.80
Outstanding, March 31, 2009		1,617,333		$	1.64	Outstanding, March 31, 2008		1,550,431		$	3.21
Exercisable, March 31, 2009		1,002,333		$	2.45	Exercisable, March 31, 2008		1,199,429		$	3.70

~~Product~~The weighted ~~revenue~~average ~~was~~remaining $0contractual ~~for~~term ~~the three~~ and ~~nine~~aggregate ~~months~~intrinsic ~~ended~~value ~~September 30, 2003 compared to $0~~ for ~~the three months ended~~ ~~September~~options ~~30,~~outstanding ~~2002~~at ~~and~~March ~~$24~~31,~~675~~ ~~for~~2009 ~~the~~was ~~nine~~6.86 ~~months~~years ~~ended~~and ~~September 30~~$3,321 ~~2002.~~and Asfor weoptions exercisable ~~have~~at ~~completed~~March ~~our transition from switch manufacturing to licensing our technologies~~31, we2009 dowas ~~not~~5.67 ~~expect~~years toand ~~have any significant product revenue in the future~~$0. The weighted ~~2002~~average ~~product~~remaining ~~revenue~~contractual ~~was~~term ~~related~~and toaggregate ~~the~~intrinsic ~~collection~~value offor ~~disputed~~options outstanding ~~fees~~at ~~for~~March 31, ~~engineering~~2008 ~~services~~was we6.34 years ~~had~~and ~~provided~~$1,000 toand afor options ~~product~~exercisable ~~customer~~at inMarch 31, ~~prior~~2008 ~~periods~~was 8.20 years and $1,000.

~~Cost~~As of March ~~Goods~~31, ~~Sold:~~2009, $78,700 of compensation cost related to unvested stock options is expected to be recognized through fiscal 2011.

~~Total~~The ~~cost~~fair value of ~~goods~~each ~~sold~~option ~~was~~granted ~~$30,874~~during ~~for~~ the ~~three~~period ~~months ended September 30, 2003, compared to $9,248 for the three months ended September 30, 2002, an increase of $21,626 or 234%. Total cost of goods sold~~ was ~~$61,450~~estimated ~~for~~on the ~~nine~~date ~~months ended September 30, 2003, compared to $66,494 for the nine months ended September 30, 2002, a decrease~~ of ~~$5,044 or 8%. The increase in cost of goods sold for the~~ ~~three~~grant ~~months~~using ended September 30, 2003 was primarily due to increased sales of royalty bearing PushGate licensed components and other materials which have a higher cost of goods sold than licensing revenue resulting from the ~~amortization~~Black-Scholes ofoption ~~deferred revenue~~pricing ~~from~~model ~~our license agreement~~ with ~~Delphi. The decrease in cost of goods sold for~~ the ~~nine~~following ~~months ended September 30, 2003 was primarily due to the decrease in unit sales of royalty bearing PushGate licensed components that was offset by the~~weighted ~~increase~~average ~~in sales of other materials to our licensees. There was no product cost of goods sold.~~ assumptions:

Selling, General and Administrative Expenses:

	Three Months Ended
	March 31, 2009		March 31, 2008
Weighted average expected stock price volatility	78% and 85%		89% and 91%
Weighted average expected option life (years)		3.0		3.0
Risk-free interest rate	1.13%, 1.31% and 1.37%		2.19% and 2.51%
Expected dividends		0%		0%

Selling, general and administrative expenses were $488,955 for the three months ended September 30, 2003, compared to $627,933 for the three months ended September 30, 2002, a decrease of $138,978 or 22%4. ~~Selling,~~REVENUE general and administrative expenses were $1,710,054 for the nine months ended September 30, 2003, compared to $2,192,491 for the nine months ended September 30, 2002, a decrease of $482,437 or 22%. The decrease in selling, general and administrative expenses for the three-month period was primarily related to reductions in personnel and to the gain on the sale of equipment where impairment had been previously recognized. The equipment had been used for research and development and for manufacturing marketing pieces. The decrease in selling, general and administrative expenses for the nine-month period was primarily related to reductions in personnel. CONCENTRATIONS

~~Research~~For the three months ended March 31, 2009, the Company recognized $112,372 of revenue for sales to Panasonic and ~~Development:~~$93,000 of revenue for sales to Dakota International Trading, a supplier of replacement pens for Gateway products.

~~Research and development expenses were $159,083 for the three months ended~~The ~~September~~Company ~~30,~~does ~~2003,~~not ~~compared~~anticipate tofuture ~~$606,159~~material ~~for~~revenue ~~the~~from ~~three~~Panasonic ~~months ended September 30, 2002, a decrease of $447,076~~ or ~~74%. Research and development expenses were $763,972 for the nine months ended September 30, 2003, compared to $2,013,588 for the nine~~Dakota ~~months~~International ~~ended September 30, 2002, a decrease of $1,249,616 or 62%~~Trading. These decreases were primarily related to cost-cutting initiatives that included significant reductions in research and development personnel which were announced in October 2002 and which were completed by December 31, 2002 and to further reductions in research and development

~~personnel that were completed in the second quarter of 2003~~5. The efforts of our remaining research and development personnel will be directed to supporting our licensees in their efforts to commercialize our developed technologies as opposed to also focusing on the creation of new technologies. INVENTORY

~~Effective~~The Company’s ~~July~~inventory 1,is ~~2003,~~primarily wecomprised ~~entered~~of ~~into~~certain araw ~~new~~materials ~~employment~~that ~~agreement with our co-founder and Chief Technology Officer, Anthony J. Van Zeeland. Consistent~~are ~~with~~used ~~our focus on supporting our licensees~~ in ~~commercializing developed technologies as opposed to focusing on~~ the ~~creation~~manufacture of ~~new~~digital ~~technologies,~~pens ~~the new agreement reduces his salary~~ and ~~time commitment to Duraswitch by 50%~~digitizers.

~~Loss~~Inventory consists ~~from~~of ~~Operations:~~the following:

As a result of the factors described above, loss from operations was $486,049 for the three months ended September 30, 2003 compared to $1,093,176 for the three months ended September 30, 2002, an improvement of $607,127 or 56%. As a result of the factors described above, loss from operations was $2,022,341 for the nine months ended September 30, 2003 compared to $3,675,390 for the nine months ended September 30, 2002, an improvement of $1,653,049 or 45%.

	March 31, 2009		December 31, 2008
Raw materials	$	-	$	13,838
Finished goods		-		-
Inventories - net	$	-	$	13,838

~~Other~~6. ~~Income—Net:~~PROPERTY AND EQUIPMENT

~~Other~~Depreciation expense ~~income—net was $10,255~~ for ~~the~~property ~~three~~and ~~months~~equipment ~~ended~~was ~~September 30~~$33,331 ~~2003,~~and ~~compared to~~ $3233,~~251~~473 for the three months ended ~~September~~March 3031, ~~2002,~~2009 ~~a decrease~~and ~~of $21~~2008,~~996~~ respectively. As ~~Other~~the ~~income—net~~company ~~was~~ceased operations ~~$678~~during ~~for~~ the ~~nine~~quarter, ~~months~~and ~~ended~~expects ~~September~~the ~~30,~~net ~~2003,~~recoverable ~~compared~~scrap tovalue ~~$125,306 for~~ of the ~~nine~~assets ~~months~~to ~~ended~~be ~~September 30~~minimal, ~~2002,~~an aimpairment ~~decrease~~charge of $~~124~~241,~~628.~~696 ~~The~~was ~~decrease~~recorded into adjust ~~other~~the ~~income—~~net ~~for~~book ~~the~~value ~~three months and nine months ended September 30, 2003 is primarily due to decreased investment income as a result~~ of ~~lower~~the ~~interest~~property ~~rates~~ and ~~lower~~equipment ~~average cash balances. Other income—net also decreased for the nine-month period due~~ to ~~the loss recorded for the disposal of fixed assets during the second quarter~~zero.

~~Net~~Property ~~Loss:~~and equipment consists of the following at:

The $585,131 or 55% improvement in the net loss to $475,794 for the three months ended September 30, 2003 from $1,060,925 for the three months ended September 30, 2002 and the $1,528,421 or 43% improvement in the net loss to $2,021,663 for the nine months ended September 30, 2003 from $3,550,084 for the nine months ended September 30, 2002 were primarily a result of reductions in personnel.

	March 31, 2009			December 31, 2008
Computer equipment and software	$	533,561		$	533,561
Tooling		65,783			65,783
Other machinery and equipment		43,089			64,466
Leasehold improvements		19,400			19,400
Office furniture and fixtures		149,171			149,170
Total		811,004			832,380
Accumulated depreciation		(811,004	)		(557,353	)
Property and equipment - net	$	-		$	275,027

~~Liquidity~~7. ~~and Capital Resources~~ PATENTS

~~Cash~~Amortization expense ~~and~~for ~~cash~~patents ~~equivalents~~was on$21,397 ~~September~~and 30$21,575 ~~2003~~for ~~were~~the $4three months ended March 31,~~681~~ 2009 and 2008,~~060~~ ~~compared~~respectively. The toestimated amortization expense for existing patents is approximately $787,~~036,959~~000 onfor ~~December~~each ~~31,~~of ~~2002.~~the ~~The~~next ~~decrease~~four years and $63,000 in ~~cash~~year ~~and~~five. See ~~cash~~Note ~~equivalents~~14 ~~was~~for ~~primarily~~discussion ~~attributable~~relative to ~~cash~~the disposition ~~used~~of inthe ~~operations~~underlying technology related to these patents. These patents support the technology being sold.

~~Net cash used in operating activities was $2,336,864 for the nine months ended September 30, 2003~~8. ~~The~~ACCRUED ~~net~~SALARIES ~~use~~AND ~~of cash was primarily attributable to the net loss.~~ BENEFITS

~~Net~~Accrued salaries ~~cash used in investing activities was $8,377 for the nine months ended September 30, 2003. The net cash used in investing activities related to investment in patents~~ and ~~purchases~~benefits consisted of ~~equipment, offset by proceeds from~~ the ~~sale~~following ~~of equipment.~~ amounts:

Net cash used in financing activities was $10,658 the nine months ended September 30, 2003 related primarily to payments on capital leases.

	March 31, 2009		December 31, 2008
Termination and severance expenses	$	181,661	$	184,252
Accrued salaries, benefits and payroll taxes		45,054		77,726
Vacation salary accruals		-		49,901
Total accrued salaries and benefits	$	226,715	$	311,879

At December 31, 2002, we had approximately $17.6 million in net operating loss carry forwards available for federal and state income tax purposes. We have not recognized any benefit from these operating loss carry forwards which expire in 2011 through 2021.

Our license agreement with Delphi requires Delphi to pay us minimum royalty payments, beginning July 1, 2004, totaling $12 million during the initial term ending June 30, 2007. Delphi can maintain exclusivity for the automotive industry through June 30, 2012 by making additional minimum annual royalty payments during that period. After June 30, 2012, either party may convert the agreement to a non-exclusive agreement through 2020.

We have experienced significant operating losses since our inception. In October 2002, we announced cost-cutting initiatives that included significant reductions in personnel. The announced personnel reductions were completed

~~by the end of the fourth quarter of 2002~~9. ~~During~~OTHER ~~2003~~ACCRUED ~~we continued our cost cutting initiatives through additional personnel reductions.~~ EXPENSES

~~During 2002 and 2003 we reduced our personnel to 15 employees from 72 at~~Other ~~December~~accrued ~~31,~~expenses ~~2001.~~consisted ~~Our~~of ~~existing~~the ~~lease~~following commitment for 33,650 square feet expires on December 31, 2003 and we anticipate that we will be able to reduce our occupancy costs at that time through a significant reduction in our space requirements. We anticipate that our cash and working capital requirements will decrease in 2003 from 2002 historical levels. However, our capital expenditures and working capital requirements could increase depending on our operating results and other adjustments to our operating plan as may be needed to respond to competition or unexpected events. amounts:

We believe that our cash on hand will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least 12 months. We continually evaluate our working capital needs and we may seek to obtain additional working capital through debt or equity offerings. There can be no assurance that additional funds will be available on acceptable terms. In the event that additional funds are not available on acceptable terms, we could be required to reduce the scope of or cease operations.

	March 31, 2009		December 31, 2008
Accrued rent	$	-	$	49,207
Accrued accounting and legal expenses		73,416		82,150
Warranty reserve		63,584		63,584
Accrued commissions		1,930		6,018
Non-cancelable purchase order commitments		11,895		348,659
Other operating expense accruals		46,526		50,179
Total other accrued expenses	$	197,351	$	599,797

~~The following~~10. ~~table~~INCOME ~~sets forth our contractual obligations and commitments as of September 30, 2003:~~ TAXES

	Payments Due by Period
	Less than 1 year		1-3 years		Thereafter		Total
Contractual obligations
Capital lease obligations	$	12,379	$	1,594	$	—	$	13,973
Operating leases		56,256		549		—		56,805
Purchase order obligations		37,983		11,426		—		49,409
Total contractual cash obligations	$	106,618	$	13,569	$	—	$	120,187

As of March 31, 2009, the Company had net operating loss carryforwards for federal income tax purposes of approximately $24.5 million, which expire in 2019 through 2028, and net operating loss carryforwards for state income tax purposes of approximately $7.4 million, which expire in 2009 through 2013. The Company has reviewed its deferred tax asset based on these carryforwards and has provided a full valuation allowance against the asset. The Company has recorded a valuation allowance for its deferred tax assets due to the historical lack of profitable operating history. In the event that the Company determines that it will be more likely than not that the Company will derive profitability and corresponding taxable income, then it will realize a portion of its fully reserved deferred tax asset. Upon such determination and corresponding realization, an adjustment to the deferred tax asset would increase net income through recording a tax benefit in the period when such a determination is made. The Company does not believe that recognition is likely before the end of fiscal year 2009.

~~Item~~During the 3three months ended March 31, 2009, the Company incurred operating losses. Any ~~Quantitative~~potential ~~and~~income tax benefit from those losses has been ~~Qualitative~~fully ~~Disclosures~~offset ~~About~~by ~~Market~~a ~~Risk.~~valuation allowance.

~~Market risk is~~The ~~the~~Company ~~potential~~adopted ~~loss~~FIN ~~arising~~48, ~~from~~“Accounting ~~adverse~~for ~~changes~~Uncertainty in ~~market~~Income ~~rates~~Taxes ~~and~~– ~~prices,~~an interpretation ~~such~~of asFASB ~~foreign~~Statement ~~currency~~No. ~~exchange~~109” ~~and~~(FIN ~~interest~~48) ~~rates~~as of January 1, 2007. The Weadoption doof FIN 48 has not ~~use~~had ~~derivative~~an impact on the Company's financial ~~instruments~~position toor ~~manage~~results ~~these~~of ~~risks~~operations for the three months ended March 31, 2009 and do2008. The ~~not~~Company ~~hold~~has orno ~~issue~~recorded ~~financial~~unrecognized ~~instruments~~tax ~~for~~benefit, ~~trading~~as ~~purposes.~~described in FIN 48, as of March 31, 2009.

WeIt ~~are~~is ~~currently exposed to credit risk on~~the ~~credit~~Company's ~~extended~~policy to ~~our~~recognize ~~licensees.~~interest ~~Based~~and onpenalties ~~the~~related ~~credit~~to ~~worthiness~~unrecognized oftax benefits ~~our~~as ~~licensee~~a ~~base~~component ~~and the relative size~~ of ~~these~~income ~~financial~~tax ~~instruments,~~expense. There weis ~~believe~~no ~~the risk associated with these instruments will not have a material adverse affect on our~~interest ~~business,~~or ~~financial~~penalties ~~position,~~accrued ~~results~~as of ~~operations~~March or31, ~~cash~~2009 ~~flows.~~and 2008.

~~Additionally,~~The wetax years ~~are~~1996 ~~exposed~~through 2008 remain open to ~~some~~examination ~~market~~for ~~risk~~federal ~~through~~income ~~interest~~tax purposes ~~rates~~and ~~related~~from 2002 to ~~our~~2008 ~~investments~~for ofstate ~~cash~~taxing ~~and~~jurisdictions ~~cash~~to ~~equivalents~~which ofthe Company ~~approximately~~is $4subject.7 As ~~million.~~of ~~The~~March ~~risk~~31, 2009, the Company is not undergoing ~~considered~~any ~~material~~U.S. ~~and~~Federal weor ~~manage~~state ~~such~~tax ~~risk~~audits. The byCompany ~~evaluating~~does ~~the~~not ~~best~~anticipate ~~investment~~that ~~rates~~total ~~available~~unrecognized ~~for~~tax ~~short-term~~benefits ~~high-quality~~will ~~investments.~~significantly change prior to December 31, 2009.

~~Presently,~~There ~~all~~was no ofcurrent ~~our~~income ~~receivables~~tax ~~and~~expense ~~substantially~~for ~~all~~the ofthree ~~our~~months ~~payments~~ended ~~are~~March ~~denominated~~31, in2009 ~~U.S. dollars~~ and, ~~consequently,~~2008 because wethe ~~believe~~Company werecognized ~~have~~a ~~minimal~~loss ~~foreign~~for ~~currency exchange rate risk. However, in~~ the ~~future, we may enter into agreements in foreign currencies that may subject us to foreign exchange rate risk~~periods. ~~There can be no assurance that our future efforts to reduce foreign exchange risk will be successful.~~

~~Item 4~~11. ~~Controls~~COMMITMENTS ~~and~~AND ~~Procedures.~~ CONTINGENCIES

~~We have evaluated, with the participation of our Chief Executive Officer and~~Employment ~~Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of September 30, 2003~~Agreements. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures are effective to ensure that we record, process, summarize, and report information required to be disclosed by us in our quarterly reports filed under the Securities Exchange Act within the time periods specified by the Securities and Exchange Commission’s rules and forms. During the quarterly period covered by this report, there have not been any changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Robert J. Brilon

On July 31, 2007, the Company entered into a severance and release agreement with Robert J. Brilon, its former Chief Executive Officer and Chief Financial Officer. Pursuant to the settlement and release agreement, Mr. Brilon’s employment with the Company terminated effective July 27, 2007, and he resigned from the Board of Directors effective July 27, 2007.

Pursuant to the settlement and release agreement, Mr. Brilon released the Company from, among other things, any and all claims or liabilities through July 31, 2007 arising out of his employment agreement and any option agreements with the Company, his employment, or the termination of his employment. In addition, Mr. Brilon released the Company from claims or charges relating to violations of certain employment laws.

~~PART~~In consideration IIfor ~~OTHER~~the ~~INFORMATION~~release and in accordance with the provisions of his employment agreement, the Company paid, or will pay, Mr. Brilon (a) approximately $541,200, which is equal to two times his current gross annual salary as a severance benefit, to be paid to Mr. Brilon over a two-year period in equal installments; (b) approximately $125,500 representing Mr. Brilon’s unpaid accrued vacation benefits; (c) $250,000 representing an agreed upon amount relating to a bonus payment obligation; (d) approximately $6,700 representing one-half of the remaining amount due under the automobile leased by the Company and Mr. Brilon; and (e) Mr. Brilon’s and his family’s medical and dental insurance premiums to maintain coverage under the Company’s group medical and dental insurance plans, only to the extent such premiums are not covered by any subsequent employer during the two-year period following the separation date. In addition, all of Mr. Brilon’s stock options or other rights provided to him under any of the Company’s long-term incentive plans immediately vested on the day prior to the effective date of the settlement and release agreement.

~~Item 2~~Van H. ~~Changes~~Potter ~~in Securities~~ and ~~Use~~Mark ~~of Proceeds~~R. Sokolowski

~~During~~In September ~~January 2003~~2008, wethe ~~issued~~Company toentered ~~UTEK~~into ~~Corporation,~~an aemployment ~~consultant~~agreement towith ~~our~~Van ~~company~~H. Potter, ~~83,478~~granting ~~shares~~him ofan ~~common~~annual ~~stock~~base atsalary aof ~~deemed value~~$200,000 ~~per~~and ~~share~~an option grant of 200,000 $1shares.15 inUntil ~~exchange~~the ~~for~~company ~~services~~has tosecured beadditional ~~rendered~~funding ~~over~~and established a ~~12-month~~sufficient ~~period~~cash ~~pursuant~~position to acontinue ~~consulting~~ongoing ~~agreement~~operations, $75,000 of Mr. Potter’s Webase ~~issued~~salary ~~these~~will ~~shares~~be ~~without~~deferred ~~registration~~on ~~under~~a ~~the~~semi-monthly ~~Securities~~basis. ~~Act~~Upon inhis appointment ~~reliance~~as onChief ~~the~~Executive ~~exemption~~Officer, ~~provided~~his byagreement ~~Section~~was ~~4(2)~~amended ofto reflect an ~~the~~annual ~~Securities~~salary ~~Act~~of as$250,000. aBeginning ~~transaction~~in by2009, anMr. ~~issuer~~Potter ~~not~~will ~~involving~~be aeligible ~~public~~for ~~offering.~~a performance ~~During~~bonus ~~June~~of ~~2003,~~up weto ~~terminated~~100% ~~the~~of ~~consulting~~his ~~agreement~~base ~~with~~salary, ~~UTEK~~as ~~and~~decided ~~cancelled~~by the 48Board of Directors. Additionally,~~696~~ ~~unvested~~Mr. ~~shares~~Potter ~~which~~will ~~had~~be ~~been~~eligible ~~issued~~for ~~pursuant~~all tomedical, dental and vacation benefits per the ~~agreement~~standard Company Policy.

~~Item~~On 6July 16, 2009, the Company entered into amendments to our Change of Control Severance Agreements with Mr. ~~Exhibits~~Potter and ~~Reports~~Mark onSokolowski, ~~Form~~our 8Chief Financial Officer. The Company entered into these agreements to incent Messrs. Potter and Sokolowski to remain employed with the company to assure the successful wind down of our operations and the payment and settlement of outstanding payables and liabilities. Under the agreements, as amended, each of Messrs. Potter and Sokolowski will be paid closing bonuses of $215,000 subsequent to the closing of the asset purchase transaction with Wacom. The closing payments will be paid in three installments, with (a) $161,250 due within three business days following the closing date of the asset purchase transaction, (b) $43,000 due within three business days after the board of directors approves a plan providing for the settlement of all of the Company’s outstanding creditors’ claims and our creditors’ approval of such plan, and (c) $10,750 due within three business days after the board of directors approves a plan to terminate the Company’s business affairs and dissolve the Company. The Company will also provide each of Messrs. Potter and Sokolowski lump sum payment amounts equal to the amount of premium necessary as of the date the last closing bonus installment is paid to continue all medical, dental, vision, life, accidental death and dismemberment, and short-Kterm and long-term disability insurance as is presently provided by the company, for the period commencing on the date the last closing bonus installment is paid through and until December 31, 2009. In the event the Company files for bankruptcy protection, all remaining closing bonus payments that have not been paid to Messrs. Potter and Sokolowski as of the date of that filing, as well as the payment for continued group insurance benefits, shall accelerate and become immediately due.

(Lease Agreement. In May 2007 the Company entered into a) ~~See~~five ~~attached~~year lease ~~exhibit~~for ~~list~~new corporate headquarters located in Scottsdale, Arizona and transferred operations there in June 2007. Rent expense for the three months ended March 31, 2009 was $169,394. Future minimum rental payments will be approximately $255,000 in 2009 through 2011, and $190,000 in 2012. In April 2009, the company vacated the property, and subsequently agreed to pay the landlord $209,749 to terminate the lease if payment is received by landlord by October 5, 2009.

~~(b)~~Litigation. The Company ~~Reports~~is involved in various claims and legal actions arising from the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the ~~Form~~Company’s ~~8-K~~financial position, results of operations, or liquidity.

On August 5, 2003, we filed Current Report on Form 8-K announcing our second quarter 2003 financial results.

12.	DISCONTINUED OPERATIONS

In October 2008, the Company sold its Duraswitch electronic switch operations. The Company sold these assets to provide cash to enable it to focus on its pen technology products. On October 28, 2008, Company entered into an agreement with a licensee of the Duraswitch technology to sell substantially all of the operating assets for $1.6 million in cash. The agreement calls for the potential for the Company to earn an additional $800,000 if certain operating milestones are met by the acquirer within the Duraswitch business.

Therefore, pursuant to the criteria established by SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, the Company has determined that all of its electronic switch operations for the years ended March 31, 2008 should be reclassified as income from discontinued operations.

A summary of the results from discontinued operations for the three months ended March 31, 2008 are as follows:

Income from Discontinued Duraswitch Segment:

Net Revenue	$	379,126
Cost of Goods Sold:		120,930
Gross Profit		258,196
Operating Expenses		154,463
Income From Discontinued Operations	$	103,733

There was no tax effect from the discontinued operations.

13.	RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“FAS 141(R)”), to replace FAS 141, Business Combinations. FAS 141(R) requires use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and broadens the scope to all transactions and other events in which one entity obtains control over one or more other businesses. This statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 with earlier adoption prohibited. While the Company does not expect that the adoption of FAS 141(R) to have a material impact to its consolidated financial statements for transactions completed prior to December 31, 2008, the impact of the accounting change could be material for business combinations which may be consummated subsequent thereto.

In December 2007, the FASB issued Statement of FAS No. 160, Non controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51, (“FAS 160”). FAS 160 establishes accounting and reporting standards for the non controlling interest in a subsidiary and for the retained interest and gain or loss when a subsidiary is deconsolidated. This statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 with earlier adoption prohibited. The Company currently does not have any non-controlling interests or deconsolidated subsidiaries and therefore FAS 160 will not have any impact on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”). This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. This statement will be effective 60 days following the U.S. Securities and Exchange Commission’s (the “SEC’s”) approval of the Public Company Accounting Oversight Board amendment to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company believes that FAS 162 will have no effect on its financial statements.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”). SFAS 165 defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued, and establishes general standards of accounting for and disclosure of subsequent events. SFAS 165 also includes a required disclosure of the date through which an entity has evaluated subsequent events, which for public entities is the date upon which the financial statements are issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The Company does not believe the adoption of SFAS 165 will have an impact on the Company’s financial position, results of operations or liquidity.

14.	SUBSEQUENT EVENTS

On March 10, 2009, the Company executed a binding Letter of Intent (LOI) to enter into a merger agreement with U.S. Rental Housing REIT, Inc. (USRHR). Under the terms of the LOI, USRHR had agreed to provide funding to InPlay for audit and consulting fees and working capital. As of May 5, 2009, USRHR had not provided the agreed upon funding. On May 7, 2009, the Company announced that it had terminated pursuit of the merger.

As a result of a lack of funding, the Company significantly wound down operations during the first quarter of 2009 and focused its attention on the sale of assets. The Company’s goal is to negotiate outstanding obligations with creditors, satisfy legal and regulatory requirements associated with any sale and wind down of the Company, and close operations with the approval of stockholders.

In April 2009, the Nasdaq Stock Market notified the Company that its shares were subject to delisting due to non-payment of annual listing fees, among other deficiencies. The Company did not appeal the delisting and trading of its common shares on Nasdaq was suspended on April 27, 2009. Nasdaq subsequently filed a Form 25 with the Securities and Exchange Commission to complete the delisting.

On May 18, 2009, the Company filed a Form 15 with the SEC, deregistering its common shares and suspending reporting requirements under the Securities Exchange Act of 1934. The Company anticipates that the deregistration will become effective approximately 90 days after the filing.

On June 26, 2009, the Company executed an asset purchase agreement (APA) with Wacom Co. Ltd. pursuant to which the Company has agreed to sell all of its ownership right, title and interest in and to the intellectual property pertaining to the digital computer pen and digitizer segment of its business, including, without limitation, the human interface device technology used in the Magic Point Pen and the Write Sense products, which represents substantially all of the Company’s remaining assets. This transaction is conditioned on, among other things, stockholders approval of the APA. Upon completion of the transaction, the Company intends to negotiate settlements for amounts owed to creditors, cease business operations, and dissolve the Company and its subsidiaries, including FinePoint Innovations. If the Company is able to successfully negotiate settlements of its obligations, the Company believes it will be able to avoid bankruptcy. In connection with the dissolution, if any proceeds remain following the payment of transaction costs and the settlement and payment of its outstanding liabilities, the Company intends to distribute any remaining proceeds to its stockholders and dissolve the Company in accordance with the plan of liquidation and dissolution.

Wacom may terminate the APA if, among other reasons, the transaction is not consummated by October 5, 2009. If the Company is unable to consummate the transaction, the Company believes it will be forced to file for bankruptcy protection. If the Company is successful in the sale of the assets, bonus payments to management discussed in Note 11 will be made.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Note Regarding Forward-Looking Statements and Associated Risks

This Quarterly Report on Form 10-Q, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and documents incorporated herein by reference, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Private Securities Litigation Reform Act of 1995, as amended, provides a “safe harbor” for such forward-looking statements. The words “believe,” “expect,” “estimate,” “anticipate,” “intend,” “may,” “might,” “will,” “would,” “could,” “project,” and “predict,” or similar words and phrases regarding expectations, generally identify forward-looking statements.

We intend to qualify both our written or oral forward-looking statements made from time to time in connection with filings with the Securities and Exchange Commission or in public news releases for protection under the safe harbors discussed above. Forward-looking statements are based largely on our expectations and because they are estimates, such statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements, each of which speaks only as of the date the statement is made. Statements in this Form 10-Q, including those set forth in the Notes to the Consolidated Financial Statements, the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K for the year ended December 31, 2008 describe factors that could contribute to or cause actual results to differ materially from our expectations. Some factors that could cause actual results to differ materially from those expressed in such forward-looking statements include the following:

Our ability to successfully manage cash resources;

Our ability to protect our intellectual property;

Technological changes that impact our intellectual property;

Any material delay that may negatively impact our ability to complete the sale of our assets and dissolve our company;

Inability to obtain stockholder or other regulatory approvals needed to complete the sale of our assets and dissolve our company; and

Any unforeseen legal challenges affecting our business or intellectual property.

In addition, new factors, other than those identified in this Form 10-Q or our most recent Annual Report on Form 10-K, may emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from forward-looking statements. We do not undertake, and we specifically disclaim, any obligation to publicly update or review any forward-looking statement contained in this Form 10-Q or in any document incorporated herein by reference, whether as a result of new information, future events or otherwise, except as required by applicable law. The Company will incorporate by reference this Form 10Q in a proxy statement it intends to file to obtain stockholder vote on the matter of selling the FinePoint technology.

Recent Developments and Liquidation of Business

On March 10, 2009, we executed a binding Letter of Intent (LOI) to enter into a merger agreement with U.S. Rental Housing REIT, Inc. (USRHR). Under the terms of the LOI, USRHR had agreed to provide funding to InPlay for audit and consulting fees and working capital. As of May 5, 2009, USRHR had not provided the agreed upon funding. On May 7, 2009, InPlay announced that it had terminated pursuit of the merger.

In April 2009, the Nasdaq Stock Market notified us that our shares were subject to delisting due to non-payment of annual listing fees, among other deficiencies. We did not appeal the delisting and trading of our common shares on Nasdaq was suspended on April 27, 2009. Nasdaq subsequently filed a Form 25 with the Securities and Exchange Commission to complete the delisting.

On May 18, 2009, we filed a Form 15 with the SEC, deregistering our common shares and suspending reporting requirements under the Securities Exchange Act of 1934. We anticipate that the deregistration will become effective approximately 90 days after the filing.

On June 26, 2009, we executed an asset purchase agreement (APA) with Wacom Co. Ltd. pursuant to which we have agreed to sell all of our ownership right, title and interest in and to the intellectual property pertaining to the digital computer pen and digitizer segment of our business, including, without limitation, the human interface device technology used in the Magic Point Pen and the Write Sense products, which represents substantially all of our remaining assets. This transaction is conditioned on, among other things, our stockholders approving the APA. Upon completion of the transaction, we intend to negotiate settlements for amounts owed to creditors, cease business operations, and dissolve our company and its subsidiaries, including FinePoint Innovations. If we are able to successfully negotiate settlements of our obligations, we believe we will be able to avoid bankruptcy. In connection with the dissolution, if any proceeds remain following the settlement and payment of our outstanding liabilities, we intend to distribute any remaining proceeds to our stockholders and dissolve our company in accordance with the plan of liquidation and dissolution. However, depending on the settlements with creditors, there may be no remaining proceeds to distribute to shareholders. If the Company is successful in the sale of the assets, $215,000 in bonus payments to management will be made prior to any distributions to stockholders.

Wacom may terminate the APA if, among other reasons, the transaction is not consummated by October 5, 2009. If we are unable to consummate the transaction, we believe we will be forced to file for bankruptcy protection.

Overview of Business

We have developed and patented innovative human interface devices (HIDs) for electronic products. Our FinePoint digital computing pen technology offers significant advancement in performance and feature enhancement over current analog products. Target markets for these products include tablet PCs and other mobile computing devices. This technology is intellectual property intending to be sold under the asset purchase agreement discussed above

The accompanying financial statements have been prepared at historical cost which assumes that the Company will continue as a going concern however management believes this basis of accounting approximates liquidation basis accounting. The Company has experienced significant operating losses since its inception and its accumulated net deficit is in excess of $33.5 million. During 2007, the Company completed production for our primary customer, Gateway. During 2008, the Company’s revenue was primarily related to non-recurring engineering fees and low volume production for Panasonic. Due to a lack of funding, the Company subsequently completed production and does not anticipate revenue from either customer. During the first quarter of 2009, the Company ceased ongoing operations, and as a result, will continue to incur losses. These factors, among others, indicate that the Company may be unable to continue as a going concern for a reasonable amount of time. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded assets amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company has focused its attention on the sale of its assets, negotiation of outstanding obligations with creditors, satisfaction of legal and regulatory requirements associated with any sale and wind down of the Company, and ultimately dissolving the corporation with the approval of stockholders.

Application of Critical Accounting Policies

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of results of operations and financial condition in the preparation of our financial statements in conformity with accounting principles generally accepted in the United States. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective, and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Basis of Presentation: The Company has presented the accompanying financial statements on the basis that contemplates the realization of assets and settlement of obligations in the normal course of conducting the business. In May 2009, Management decided that it would liquidate the assets of the Company and attempt to settle its obligations. Management has presented the 2008 and 2009 financial statements on a basis assuming the Company would continue as a going concern. Management alternatively considered whether presentation on a liquidation basis of accounting would be appropriate. Management determined that historical cost basis of the assets and liabilities was appropriate at March 31, 2008 because it continued to operate the business through its decision to liquidate in May 2009.

Revenue Recognition. Our FinePoint segment manufactures digital pens and digitizers for the convertible notebook and tablet PC market. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. Generally, all of these conditions are met at the time we deliver products to our customers.

Inventory Valuation. Our inventory is primarily comprised of certain raw materials that are used in the manufacture of digital pens and digitizers, and finished goods which are primarily pens and digitizers that are in transit to the customer. We record inventories at the lower of cost or market value, determined using the first-in, first-out method. Our policy is to write down our inventory for estimated obsolescence or unmarketable inventory to the extent the cost exceeds the estimated market value. We base the estimate on our assumptions about future demand and market conditions. If actual market conditions are less favorable than those assumed in our estimates, additional inventory write-downs might be required. We reflect any write-down of inventory in the period in which the facts giving rise to the inventory write-down become known to us.

Impairment or Disposal of Long-Lived Assets. We review our long-lived assets and identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Additionally, goodwill is reviewed on an annual basis. Our intangible assets are primarily our patents and the goodwill associated with the 2005 acquisition of FinePoint Innovations and the 1998 acquisition of Aztec Industries. If such assets were considered to be impaired, the impairment to be recognized would be measured by the amount by which the carrying amount of the assets exceeds the fair market value of the assets.

We evaluate the recoverability of property and equipment and intangibles (excluding goodwill) not held for sale by comparing the carrying amount of the asset or group of assets against the estimated undiscounted future net cash flows expected to result from the use of the asset or group of assets. If the undiscounted estimated cash flows are less than the carrying value of the asset or group of assets being reviewed, an impairment loss would be recorded. The loss would be measured based on the estimated fair value of the asset or group of assets compared to its carrying value. The estimated fair value would be based on the best information available under the circumstances, including prices for similar assets and the results of valuation techniques, including the present value of expected future cash flows using a discount rate commensurate with the risks involved.

We evaluate goodwill and other intangible assets for impairment at least annually, in accordance with Statement of Financial Accounting Standard No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). For goodwill, we first compare the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the fair value of a reporting unit, additional tests would be used to measure the amount of impairment loss, if any. We use present value and market value techniques to measure reporting unit fair value. If the carrying amount of any other intangible asset exceeds its fair value, we would recognize an impairment loss for the difference between fair value and the carrying amount. If other events occur and circumstances change, causing the fair value of a reporting unit to fall below its carrying amount, impairment losses may be recognized in the future. As the Company has entered into an Asset Purchase Agreement to sell the technology covered by the patents recorded on the accompanying balance sheet, Management believes that the $2,000,000 selling price provides evidence that the carrying value of those patents is not impaired at March 31, 2009.

In accordance with SFAS No. 142, we performed our annual impairment test in December 2008 and it was determined that the goodwill related to the FinePoint segment was impaired and goodwill was adjusted to a fair market value of zero.

In March 2009, upon winding down operations, it was determined that all property and equipment was impaired and as the net recoverable scrap value of the assets is expected to be minimal, an impairment charge of $241,696 was recorded to adjust the net book value of the property and equipment to zero. This amount is reported within selling, general and administrative expenses in the accompanying statement of operations for the three months ended March 31, 2009.

Income Taxes. Deferred taxes are provided on temporary differences between the tax basis of assets and liabilities for financial reporting purposes and income tax purposes. A valuation allowance reduces deferred tax assets to an amount that represents our best estimate, of the amount of such deferred tax assets that, more likely than not, will be realized. We regularly review our deferred tax assets for recoverability and, if necessary, establish a valuation allowance. Based on our review of the deferred tax assets at March 31, 2009, we have determined that a full valuation allowance was required against all of our deferred tax assets.

Results of Operations

Net Revenue. The following table summarizes our net revenue:

	Three months ended March 31,
Net Revenue	2009		2008		Increase (Decrease)		Increase (Decrease) %
FinePoint	$	217,527	$	8,951	$	208,576		2330	%

Net FinePoint Revenue. The increase in FinePoint revenue was due to increased shipments of products. Revenue during the quarter ended March 31, 2009 included $112,372 from Panasonic and $93,000 from Dakota International Trading for a Gateway program that was discontinued in 2007. We shipped all remaining orders for Panasonic and do not anticipate any future revenue from this customer.

Cost of Goods Sold and Gross Profit. The following tables summarize our cost of goods sold (COGS) and gross profit:

	Three months ended March 31,
Cost of Goods Sold	2009		2008		Increase (Decrease)		Increase (Decrease) %
FinePoint	$	128,397	$	9,618	$	118,779		1235	%

Gross Profit		2009				2008				Increase (Decrease)				Increase (Decrease) %
FinePoint		$	89,130			$	(667	)		$	89,797				N/A

FinePoint. FinePoint gross profit was generated primarily from the sale of replacement pens for Gateway products as we were able to recover inventory that was previously classified as obsolete.

Selling, General and Administrative Expenses. The following table summarizes our selling, general and administrative expenses (SG&A):

	Three months ended March 31,
	2009		2008		Increase (Decrease)			Increase (Decrease) %
FinePoint	$	65,054	$	239,981	$	(174,927	)		(73	)%
Corporate		479,097		544,693		(65,596	)		(12	)%
Total SG&A	$	544,151	$	784,674	$	(240,523	)		(31	)%

Selling, general and administrative expenses consist mainly of salaries, commissions, and other compensation expense for sales and administrative personnel, sales commissions and fees for external sales representatives, and corporate administrative expenses.

FinePoint SG&A. The decrease in expenses for the three-months ended March 31, 2009 from the previous year was primarily due to decreased headcount and reduced spending on sales and marketing efforts as operations were ceased during the quarter.

Corporate SG&A. The overall decrease for the three-months ended March 31, 2009 from the previous year is due to decrease in headcount as operations were ceased during the quarter.

Research, Development and Commercial Application Engineering Expenses. The following table summarizes our research, development and commercial application engineering expenses (R&D):

	Three months ended March 31,
R&D	2009		2008		Increase (Decrease)			Increase (Decrease)
FinePoint	$	296,292	$	948,754	$	(652,462	)		(69	)%

FinePoint R&D. Research and development expenses consist primarily of compensation for our engineering personnel, consulting expenses, project materials and patent amortization expenses. The decrease in expenses for the three-months ended March 31, 2009 from the previous year was due to decreased spending as we ceased further development of our technologies and reduced headcount.

Other Income – net. Other income includes interest income of $460 for the three months ended March 31, 2009, compared to $33,881 for the three months ended March 31, 2008. The decrease was due to lower cash balances than the previous year. Other income also includes an impairment charge for property and equipment of $241,686 for the three months ended March 31, 2009.

Liquidity and Capital Resources.

Prior to entering into the asset purchase agreement with Wacom, we did not have sufficient working capital to meet our obligations to comply with the conditions required to consummate the transaction. Therefore, of the $2,000,000 purchase price for the asset purchase transaction, $100,000 was previously paid by Wacom to us in connection with a letter of intent signed by us and Wacom on April 2, 2009 to help us meet these obligations. We also entered into a loan and security agreement with Wacom on June 26, 2009 pursuant to which Wacom is lending the remaining $1,900,000 to us, of which amount (a) $350,000 has been disbursed to us upon execution of the asset purchase agreement and (b) $1,550,000 has been deposited in a depository account, with such amount to be distributed to us and certain of our creditors upon consummation of the asset purchase transaction. We believe that the funds provided by Wacom will be sufficient to meet our capital needs through such date that the asset purchase transaction is consummated.

We had cash and cash equivalents of $34,142 on March 31, 2009. Cash decreased $338,479 from December 31, 2008.

Net cash used in operating activities was $359,979 for the three months ended March 31, 2009. The cash used in operating activities consisted primarily of cash used for ongoing operating activities and expenses.

Net cash provided by investing activities was $21,500 for the three months ended March 31, 2009. The net cash provided by investing activities was due to the redemption of the restricted cash for $20,000 and the sale of equipment for $1,500.

The Company intends to complete the Wacom transaction and begin settlement of its obligations upon receipt of the funds from Wacom. Management has not yet begun settlement discussions with creditors. There may be no residual cash or other assets to distribute to shareholders upon making final payments to creditors and employees.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in applicable securities laws.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report to provide reasonable assurance that material information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Evaluation of Internal Control Over Financial Reporting

In connection with the preparation of the Quarterly Report on Form 10Q for the three months ended March 31, 2009 and the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, our management, with the participation of our Chief Executive Officer and Chief Financial Officer and the assistance of external advisors and our audit committee, has assessed the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Our management has concluded that the design and operation of our internal control over financial reporting are ineffective as of December 31, 2008 due to the identification of a material weakness, as defined in Public Company Accounting Oversight Board Standard No. 2, related to a lack of segregation of duties over our financial reporting function.

We are aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, at this time, due to the winding down of the business, we have decided that, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation are increased but that the potential benefits of adding additional employees to clearly segregate duties do not justify the expenses associated with such increases.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or intentional circumvention of the established process.

Changes in Internal Control Over Financial Reporting

There were changes in our internal control over financial reporting during the three months ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. Due to the reduction in personnel, the function of recording transactions and performing the financial closing and reporting function was conducted by one individual. The Company’s CEO and members of the Board of Directors provide some high level review of this information.

PART II. OTHER INFORMATION

Item 6.

Exhibits.

Exhibit No.		Description of Exhibit

2.2		Agreement and Plan of Merger, dated as of July 27, 2005, among InPlay Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by reference to Exhibit 2.2 on Form 8-K filed on August 2, 2005)

2.3		Amendment No. 1 to Agreement and Plan of Merger, dated as of July 27, 2005, among InPlay Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by reference to Exhibit 2.3 on Form 8-K filed on September 8, 2005)

2.4		Asset Purchase Agreement between InPlay Technologies, Inc. and Memtron Technologies, Co. (incorporated herein by reference to Exhibit 2.4 on Form 8-K, filed October 29, 2008)

2.5		Asset Purchase Agreement dated June 26, 2009, among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd (incorporated herein by reference to Exhibit 2.5 on Form 8-K, filed July 26, 2009)

2.6		Loan and Security Agreement dated June 26, 2009 among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd. (incorporated herein by reference to Exhibit 2.6 on Form 10-K, filed August 11, 2009)

2.7		Patent, Trademark and Copyright Security Agreement dated June 26, 2009 among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd. (incorporated herein by reference to Exhibit 2.7 on Form 10-K, filed August 11, 2009)

3.1		Amended and Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 on Form 10-QSB filed August 5, 2005)

3.2		Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 on Form 10-QSB filed April 2, 2007)

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Duraswitch Industries, Inc.
	InPlay Technologies, Inc.
	(Registrant)		~~(Registrant)~~
Date: October 30, 2003		By:	/s/ Robert J. Brilon
Date: August 13, 2009	By:	/s/ Van H. Potter
			Robert J. Brilon, President & Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer (Principal Executive, Financial and Accounting Officer)
	Van H. Potter
	Chief Executive Officer
Date: August 13, 2009	By:	/s/ Mark R. Sokolowski
	Mark R. Sokolowski
	Chief Financial Officer

12 21

~~Exhibit~~INDEX TO ~~Index~~ EXHIBITS

Exhibit No.	Description of Exhibit	~~Incorporated by Reference to:~~	~~Filed Herewith:~~
31	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended		X
2.2	Agreement and Plan of Merger, dated as of July 27, 2005, among InPlay Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by reference to Exhibit 2.2 on Form 8-K filed on August 2, 2005)
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		X
2.3	Amendment No. 1 to Agreement and Plan of Merger, dated as of July 27, 2005, among InPlay Technologies, Inc., FPI Acquisition, Inc., FinePoint Innovations, Inc., and Stephen Caldwell (incorporated herein by reference to Exhibit 2.3 on Form 8-K filed on September 8, 2005)
2.4	Asset Purchase Agreement between InPlay Technologies, Inc. and Memtron Technologies, Co. (incorporated herein by reference to Exhibit 2.4 on Form 8-K, filed October 29, 2008)
2.5	Asset Purchase Agreement dated June 26, 2009, among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd (incorporated herein by reference to Exhibit 2.5 on Form 8-K, filed July 26, 2009)
2.6	Loan and Security Agreement dated June 26, 2009 among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd. (incorporated herein by reference to Exhibit 2.6 on Form 10-K, filed August 11, 2009)
2.7	Patent, Trademark and Copyright Security Agreement dated June 26, 2009 among InPlay Technologies, Inc., FinePoint Innovations, Inc. and Wacom Co. Ltd. (incorporated herein by reference to Exhibit 2.7 on Form 10-K, filed August 11, 2009)
3.1	Amended and Restated Articles of Incorporation (incorporated herein by reference to Exhibit 3.1 on Form 10-QSB filed August 5, 2005)
3.2	Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.2 on Form 10-QSB filed April 2, 2007)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of 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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