UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Wireless Ronin Technologies, Inc.

Minnesota		41-1967918
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

5929 Baker Road, Suite 475, Minnetonka MN 55345
(Address of principal executive offices, including zip code)

(952) 564-3500
(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 Exchange Act of 1934 during the preceding 12 month (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 þ No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

     As of November 3, 2008, the registrant had 14,764,454 shares of common stock outstanding.

 

 

WIRELESS RONIN TECHNOLOGIES, INC.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS			3
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			22
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			26
ITEM 4 CONTROLS AND PROCEDURES			27
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS			27
ITEM 1A RISK FACTORS			27
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			27
ITEM 3 DEFAULTS UPON SENIOR SECURITIES			28
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			28
ITEM 5 OTHER INFORMATION			28
ITEM 6 EXHIBITS			28
SIGNATURES			29
EXHIBIT INDEX			30
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

WIRELESS RONIN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
		2008				2007
		(unaudited)				(audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	10,576,983			$	14,542,280
Marketable securities — available for sale			6,928,129				14,657,635
Accounts receivable, net of allowance of $78,127 and $84,685			1,891,472				4,135,402
Income tax receivable			109,805				231,328
Inventories			925,209				539,140
Network equipment held for sale			1,937,162				—
Prepaid expenses and other current assets			325,776				817,511
Total current assets			22,694,536				34,923,296
Property and equipment, net			2,168,931				1,780,390
Intangible assets, net			2,593,124				3,174,804
Restricted cash			450,000				450,000
Other assets			37,768				40,217
TOTAL ASSETS		$	27,944,359			$	40,368,707
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of capital lease obligations		$	73,643			$	100,023
Accounts payable			1,856,041				1,387,327
Deferred revenue			443,835				1,252,485
Accrued purchase price consideration			999,974				999,974
Accrued liabilities			1,457,849				869,759
Total current liabilities			4,831,342				4,609,568
Capital lease obligations, less current maturities			15,413				70,960
TOTAL LIABILITIES			4,846,755				4,680,528
COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY
Capital stock, $0.01 par value, 66,666,666 shares authorized
Preferred stock, 16,666,666 shares authorized, no shares issued and outstanding			—				—
Common stock, 50,000,000 shares authorized; 14,764,454 and 14,537,705 shares issued and outstanding			147,645				145,377
Additional paid-in capital			80,194,295				78,742,311
Accumulated deficit			(57,312,066	)			(43,520,098	)
Accumulated other comprehensive income			67,730				320,589
Total shareholders’ equity			23,097,604				35,688,179
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	27,944,359			$	40,368,707

See accompanying Notes to Consolidated Financial Statements.

WIRELESS RONIN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Sales
Hardware		$	738,166			$	429,578			$	1,997,546			$	2,949,816
Software			432,430				119,179				734,658				472,018
Services and other			778,936				575,176				2,747,065				953,398
Total sales			1,949,532				1,123,933				5,479,269				4,375,232
Cost of sales
Hardware			665,723				263,961				1,751,653				1,999,669
Software			217,829				1,007				217,829				1,007
Services and other			963,705				444,797				2,946,912				685,376
Total cost of sales			1,847,257				709,765				4,916,394				2,686,052
Gross profit			102,275				414,168				562,875				1,689,180
Operating expenses:
Sales and marketing expenses			927,085				715,016				3,256,883				1,993,191
Research and development expenses			792,832				319,945				1,836,741				827,234
General and administrative expenses			3,134,171				2,210,632				9,801,140				5,486,439
Termination of partnership agreement			—				—				—				653,995
Total operating expenses			4,854,088				3,245,593				14,894,764				8,960,859
Operating loss			(4,751,813	)			(2,831,425	)			(14,331,889	)			(7,271,679	)
Other income (expenses):
Interest expense			(5,135	)			(11,758	)			(18,892	)			(32,273	)
Interest income			121,707				467,740				563,215				899,724
Other			(35	)			(7,081	)			(4,402	)			(8,572	)
Total other income			116,537				448,901				539,921				858,879
Net loss		$	(4,635,276	)		$	(2,382,524	)		$	(13,791,968	)		$	(6,412,800	)
Basic and diluted loss per common share		$	(0.31	)		$	(0.17	)		$	(0.94	)		$	(0.55	)
Basic and diluted weighted average shares outstanding			14,764,345				14,369,262				14,629,278				11,565,993

See accompanying Notes to Consolidated Financial Statements.

WIRELESS RONIN TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Nine Months Ended
		September 30,
		2008				2007
Operating Activities:
Net loss		$	(13,791,968	)		$	(6,412,800	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			467,374				265,617
Amortization of acquisition-related intangibles			416,273				—
Allowance for doubtful receivables			(6,286	)			35,981
Stock-based compensation expense			901,998				880,903
Change in operating assets and liabilities:
Accounts receivable			(214,740	)			(1,689,750	)
Income tax receivable			109,761				(13,734	)
Inventories			(383,943	)			(404,620	)
Prepaid expenses and other current assets			(97,032	)			(27,078	)
Other assets			1,351				2,495
Accounts payable			476,042				897,563
Deferred revenue			223,142				339,257
Accrued liabilities			645,721				409,964
Net cash used in operating activities			(11,252,307	)			(5,716,202	)
Investing activities
Purchase of McGill-Investment in Subsidiary, net of cash acquired			—				(2,817,568	)
Purchases of property and equipment			(884,566	)			(1,051,144	)
Purchases of marketable securities			(19,467,885	)			(14,564,800	)
Sales of marketable securities			27,186,607				16,422,597
Net cash provided by (used in) investing activities			6,834,156				(2,010,915	)
Financing activities
Change in restricted cash			—				(450,000	)
Payments on capital leases and other			(81,700	)			(76,817	)
Proceeds from exercise of warrants and stock options			370,899				904,721
Proceeds from issuance of common stock			181,353				27,093,032
Net cash provided by financing activities			470,552				27,470,936
Effect of exchange rate changes on cash			(17,698	)			32,279
Increase (decrease) in cash and cash equivalents			(3,965,297	)			19,776,098
Cash and cash equivalents, beginning of period			14,542,280				8,273,388
Cash and cash equivalents, end of period		$	10,576,983			$	28,049,486
Non-Cash Items:
Collateral received for settlement of note receivable		$	1,937,162			$	—

See accompanying Notes to Consolidated Financial Statements.

WIRELESS RONIN TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

     Wireless Ronin Technologies, Inc. (the “Company”) has prepared the consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”). The consolidated financial statements include all wholly-owned subsidiaries. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to ensure the information presented is not misleading. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.

     The Company believes that all necessary adjustments, which consist only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the year ending December 31, 2008.

Nature of Business and Operations

     The Company is a Minnesota corporation that provides dynamic digital signage solutions targeting specific retail and service markets. The Company has designed and developed RoninCast^®, a proprietary content delivery system that manages, schedules and delivers digital content over a wireless or wired network. The solutions, the digital alternative to static signage, provide business customers with a dynamic and interactive visual marketing system designed to enhance the way they advertise, market and deliver their messages to targeted audiences.

     The Company’s wholly-owned subsidiary, Wireless Ronin Technologies (Canada), Inc., an Ontario, Canada provincial corporation located in Windsor, Ontario, develops “e-learning, e-performance support and e-marketing” solutions for business customers. E-learning solutions are software-based instructional systems developed specifically for customers, primarily in sales force training applications. E-performance support systems are interactive systems produced to increase product literacy of customer sales staff. E-marketing products are developed to increase customer knowledge of and interaction with customer products.

     The Company and its subsidiary sell products and services primarily throughout North America.

Summary of Significant Accounting Policies

     Further information regarding the Company’s significant accounting policies can be found in the Company’s most recent Annual Report filed on Form 10-KSB for the year ended December 31, 2007.

1. Revenue Recognition

     The Company recognizes revenue primarily from these sources:

•		Software and software license sales
•		System hardware sales
•		Professional service revenue
•		Software development services
•		Software design and development services

•		Implementation services
•		Maintenance and support contracts

     The Company applies the provisions of American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, “Software Revenue Recognition,” (“SOP 97-2”) as amended by SOP 98-9 “Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions” (“SOP 98-9”) to all transactions involving the sale of software licenses. In the event of a multiple element arrangement, the Company evaluates if each element represents a separate unit of accounting taking into account all factors following the guidelines set forth in Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21 (“EITF 00-21”) “Revenue Arrangements with Multiple Deliverables.”

     The Company recognizes revenue when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred, which is when product title transfers to the customer, or services have been rendered; (iii) customer payment is deemed fixed or determinable and free of contingencies and significant uncertainties; and (iv) collection is probable. The Company assesses collectability based on a number of factors, including the customer’s past payment history and its current creditworthiness. If it is determined that collection of a fee is not reasonably assured, the Company defers the revenue and recognizes it at the time collection becomes reasonably assured, which is generally upon receipt of cash payment. If an acceptance period is required, revenue is recognized upon the earlier of customer acceptance or the expiration of the acceptance period.

     Multiple-Element Arrangements — the Company enters into arrangements with customers that include a combination of software products, system hardware, maintenance and support, or installation and training services. The Company allocates the total arrangement fee among the various elements of the arrangement based on the relative fair value of each of the undelivered elements determined by vendor-specific objective evidence (VSOE). In software arrangements for which the Company does not have VSOE of fair value for all elements, revenue is deferred until the earlier of when VSOE is determined for the undelivered elements (residual method) or when all elements for which the Company does not have VSOE of fair value have been delivered.

     The Company has determined VSOE of fair value for each of its products and services. The fair value of maintenance and support services is based upon the renewal rate for continued service arrangements. The fair value of installation and training services is established based upon pricing for the services. The fair value of software and licenses is based on the normal pricing and discounting for the product when sold separately.

     Each element of the Company’s multiple element arrangements qualifies for separate accounting with the exception of undelivered maintenance and service fees. The Company defers revenue under the residual method for undelivered maintenance and support fees included in the price of software and amortizes fees ratably over the appropriate period. The Company defers fees based upon the customer’s renewal rate for these services.

     Software and software license sales

     The Company recognizes revenue when a fixed fee order has been received and delivery has occurred to the customer. The Company assesses whether the fee is fixed or determinable and free of contingencies based upon signed agreements received from the customer confirming terms of the transaction. Software is delivered to customers electronically or on a CD-ROM, and license files are delivered electronically.

     System hardware sales

     The Company recognizes revenue on system hardware sales generally upon shipment of the product or customer acceptance depending upon contractual arrangements with the customer. Shipping charges billed to customers are included in sales and the related shipping costs are included in cost of sales.

     Professional service revenue

     Included in services and other revenues is revenue derived from implementation, maintenance and support contracts, content development, software development and training. The majority of consulting and implementation services and accompanying agreements qualify for separate accounting. Implementation and content development services are bid either on a fixed-fee basis or on a time-and-materials basis. For time-and-materials contracts, the Company recognizes revenue as services are performed. For fixed-fee contracts, the Company recognizes revenue upon completion of specific contractual milestones or by using the percentage-of-completion method.

     Software development services

     Software development revenue is recognized monthly as services are performed per fixed-fee contractual agreements.

     Software design and development services

     Revenue from contracts for technology integration consulting services where the Company designs/redesigns, builds and implements new or enhanced systems applications and related processes for clients are recognized on the percentage-of-completion method in accordance with AICPA SOP 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” (“SOP 81-1”). Percentage-of-completion accounting involves calculating the percentage of services provided during the reporting period compared to the total estimated services to be provided over the duration of the contract. Estimated revenues for applying the percentage-of-completion method include estimated incentives for which achievement of defined goals is deemed probable. This method is followed where reasonably dependable estimates of revenues and costs can be made. Estimates of total contract revenue and costs are continuously monitored during the term of the contract, and recorded revenue and costs are subject to revision as the contract progresses. Such revisions may result in increases or decreases to revenue and income and are reflected in the financial statements in the periods in which they are first identified. If estimates indicate that a contract loss will occur, a loss provision is recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined to be the amount by which the estimated direct and indirect costs of the contract exceed the estimated total revenue that will be generated by the contract and are included in cost of sales and classified in accrued expenses in the balance sheet.

     Revenue recognized in excess of billings is recorded as unbilled services. Billings in excess of revenue recognized are recorded as deferred revenue until revenue recognition criteria are met.

     Uncompleted contracts are as follows:

		September 30,				December 31,
		2008				2007
Cost incurred on uncompleted contracts		$	130,690			$	155,246
Estimated earnings			506,882				616,174
			637,572				771,420
Less: billings to date			(859,788	)			(932,021	)
Amount included in deferred revenue		$	222,216			$	160,601

     Implementation services

     Implementation services revenue is recognized when installation is completed.

     Maintenance and support contracts

     Maintenance and support consists of software updates and support. Software updates provide customers with rights to unspecified software product upgrades and maintenance releases and patches released during the term of the support period. Support includes access to technical support personnel for software and hardware issues.

     Maintenance and support revenue is recognized ratably over the term of the maintenance contract, which is typically one to three years. Maintenance and support is renewable by the customer. Rates for maintenance and support, including subsequent renewal rates, are typically established based upon a specified percentage of net license fees as set forth in the arrangement.

2. Accounts Receivable

     Accounts receivable are usually unsecured and stated at net realizable value and bad debts are accounted for using the allowance method. The Company performs credit evaluations of its customers’ financial condition on an as-needed basis and generally requires no collateral. Payment is generally due 90 days or less from the invoice date and accounts past due more than 90 days are individually analyzed for collectability. In addition, an allowance is provided for other accounts when a significant pattern of uncollectability has occurred based on historical experience and management’s evaluation of accounts receivable. If all collection efforts have been exhausted, the account is written off against the related allowance. See Note 9 for further information on certain outstanding receivables at September 30, 2008.

3. Software Development Costs

     FASB Statement of Financial Accounting Standards (SFAS) No. 86 “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed” requires certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs requires considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Software development costs incurred beyond the establishment of technological feasibility have not been significant. No software development costs were capitalized during the three and nine months ended September 30, 2008 or 2007. Software development costs have been recorded as research and development expense.

4. Accounting for Stock-Based Compensation

     The Company accounts for stock-based compensation in accordance with SFAS No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS 123R”), which revised SFAS 123, “Accounting for Stock-Based Compensation” (SFAS 123). Stock-based compensation expense recognized during the period is based on the value of the portion of share-based awards that are ultimately expected to vest during the period. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The fair value of restricted stock is determined based on the number of shares granted and the closing price of the Company’s common stock on the date of grant. Compensation expense for all share-based payment awards is recognized using the straight-line amortization method over the vesting period.

     See Note 8 for further information regarding the Company’s stock-based compensation.

5. Use of Estimates

     The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates of the Company are the allowance for doubtful accounts, valuation allowance for deferred tax assets, deferred revenue, depreciable lives and methods of property and equipment, valuation of warrants and other stock-based compensation and valuation of recorded intangible assets. Actual results could differ from those estimates.

Recent Accounting Pronouncements

     During September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (“SFAS 157”). This statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, however, during December 2007, the FASB proposed FASB Staff Position SFAS 157-2 which delays the effective date of certain provisions of SFAS 157 until fiscal years beginning after November 15, 2008. Effective January 1, 2008, the Company adopted SFAS No. 157 for financial assets and liabilities recognized at fair value on a recurring basis. The partial adoption of SFAS No. 157 for financial assets and liabilities did not have a material impact on the Company’s financial position or results of operations. See Note 3 to the consolidated financial statements for further discussion.

     In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of FASB Statement No 115.” SFAS No. 159 permits an entity to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 are elective; however, the amendment of SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” applies to all entities with available-for-sale or trading securities. For financial instruments elected to be accounted for at fair value, an entity will report the unrealized gains and losses in earnings. SFAS No. 159 was effective for the Company beginning in the first quarter of fiscal 2008. The adoption of SFAS No. 159 in the first quarter of fiscal 2008 did not materially impact the Company’s results of operations or financial position.

     During December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141 (Revised 2007)”). While this statement retains the fundamental requirement of SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations, SFAS 141 (Revised 2007) now establishes the principles and requirements for how an acquirer in a business combination: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in the acquiree; recognizes and measures the goodwill acquired in the business combination or the gain from a bargain purchase; and determines what information should be disclosed in the financial statements to enable the users of the financial statements to evaluate the nature and financial effects of the business combination. The Company will adopt SFAS 141 (Revised 2007) for acquisitions that occur on or after January 1, 2009.

     During December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51” (“SFAS 160”). This statement establishes accounting and reporting standards for noncontrolling interests in subsidiaries and for the deconsolidation of subsidiaries and clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This statement also requires expanded disclosures that clearly identify and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008. The Company does not believe that the adoption of SFAS 160 will have a material effect on its results of operations or financial position.

     In December 2007, the SEC issued SAB 110, which provides interpretive guidance regarding the use of a “simplified” method in developing an estimate of the expected term of “plain vanilla” share options in accordance with SFAS No. 123(R), “Share-Based Payments.” Accordingly, the SEC will continue to accept, under certain circumstances, the use of the “simplified” method beyond December 31, 2007, The Company has concluded that its historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term due to its limited existence as a publicly traded company. Therefore, the Company will continue to use the “simplified” method in developing its estimate of the expected term of “plain vanilla” options.

     During March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivatives Instruments and Hedging Activities, an Amendment of FASB Statement No. 133” (“SFAS 161”). This statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years beginning on or after November 15, 2008. The Company does not believe that the adoption of SFAS 161 will have a material effect on its results of operations or financial position.

     In April 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 142-3, “Determination of the Useful Life of Intangible Assets,” which aims to improve consistency between the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets” and the period of expected cash flows used to measure the fair value of the asset under FAS 141(R), especially where the underlying arrangement includes renewal or extension terms. The FSP is effective prospectively for fiscal years beginning after December 15, 2008 and early adoption is prohibited. The Company is currently evaluating the impact of this position on its financial statements

     In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162“). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS 162 is effective November 17, 2008. The Company does not believe that the adoption of this statement will have a material effect on its results of operations or financial position.

     In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – An interpretation of FASB Statement No. 60” (“SFAS 163”). SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The Company does not believe that the adoption of this statement will have a material effect on its results of operations or financial position.

     In May 2008, the FASB issued FASB FSP EITF No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“EITF 03-6-1”). EITF 03-6-1 addresses whether instruments granted in share-based payment transactions, with rights to dividend equivalents, are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”) under the two-class method described in FASB Statement No. 128, “Earnings Per Share.” Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. In contrast, the right to receive dividends or dividend equivalents that the holder will forfeit if the award does not vest does not constitute a participation right. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. All prior period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data). Early adoption of EITF 03-6-1 is prohibited. The Company does not believe that the adoption of this statement will have a material effect on its results of operations or financial position.

NOTE 2: OTHER FINANCIAL STATEMENT INFORMATION

     The following tables provide details of selected financial statement items:

INVENTORIES

		September 30,				December 31,
		2008				2007
Finished goods		$	405,277			$	318,451
Work-in-process			519,932				220,689
Total inventories		$	925,209			$	539,140

     No adjustments were made for the three or nine months ended September 30, 2008 or 2007, respectively, to reduce inventory values to the lower of cost or market.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

		September 30,				December 31,
		2008				2007
Deferred project costs		$	—			$	476,679
Prepaid expenses			325,776				340,832
Total prepaid expenses and other current assets		$	325,776			$	817,511

     Deferred project costs represent incurred costs to be recognized as cost of sales once all revenue recognition criteria have been met. See Note 11 for additional information on amounts reclassified related to our business with NewSight Corporation.

PROPERTY AND EQUIPMENT

		September 30,				December 31,
		2008				2007
Leased equipment		$	380,908			$	380,908
Equipment			1,379,368				923,549
Leasehold improvements			338,718				313,021
Demonstration equipment			150,891				127,556
Purchased software			539,906				226,003
Furniture and fixtures			635,064				581,355
Total property and equipment		$	3,424,855			$	2,552,392
Less: accumulated depreciation			(1,255,924	)			(772,002	)
Net property and equipment		$	2,168,931			$	1,780,390

OTHER ASSETS

     Other assets consist of long-term deposits on operating leases.

DEFERRED REVENUE

		September 30,				December 31,
		2008				2007
Deferred customer billings		$	—			$	950,066
Deferred software maintenance			65,347				90,197
Customer deposits			227,778				166,162
Deferred project revenue			150,710				46,060
Total deferred revenue		$	443,835			$	1,252,485

     See Note 11 for additional information on amounts reclassified related to our business with NewSight Corporation.

ACCRUED LIABILITIES

		September 30,				December 31,
		2008				2007
Compensation		$	1,103,197			$	590,737
Accrued remaining lease obligations			107,051				170,793
Accrued rent			87,143				79,131
Sales tax and other			160,458				29,098
Total accrued liabilities		$	1,457,849			$	869,759

     See Note 6 for additional information on accrued remaining lease obligations.

COMPREHENSIVE LOSS

     Comprehensive loss for the Company includes net loss, foreign currency translation and unrealized gain (loss) on investments. Comprehensive loss for the three and nine months ended September 30, 2008 and 2007, respectively, was as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net loss		$	(4,635,276	)		$	(2,382,524	)		$	(13,791,968	)		$	(6,412,800	)
Foreign currency translation adjustment			(106,458	)			290,616				(242,075	)			290,616
Unrealized gain (loss) on investments			(6,007	)			7,563				(10,784	)			(11,538	)
Comprehensive loss		$	(4,747,741	)		$	(2,084,345	)		$	(14,044,827	)		$	(6,133,722	)

SUPPLEMENTAL CASH FLOW INFORMATION

		Nine Months Ended
		September 30,
		2008				2007
Non-cash investing and financing activities
Cash paid for:
Interest		$	18,892			$	32,273
Stock issued in acquisition of McGill Digital Solutions, Inc.							312,000
Effect of foreign currency exchange rate changes on cash			(17,698	)			32,279
Collateral received for note receivable			1,937,162				—

NOTE 3: MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENT

     Short-term investments are classified as available-for-sale securities and are reported at fair value as follows:

		September 30, 2008
		Gross				Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				(Losses)				Value
Money market funds		$	9,437,938			$	26			$	(29	)		$	9,437,935
Total included in cash and cash equivalents			9,437,938				26				(29	)			9,437,935
Government and agency securities			6,921,700				11,222				(4,793	)			6,928,129
Total included in marketable securities			6,921,700				11,222				(4,793	)			6,928,129
Total available-for-sale securities		$	16,359,638			$	11,248			$	(4,822	)		$	16,366,064

		December 31, 2007
		Gross				Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				(Losses)				Value
Money market funds		$	14,045,738			$	43			$	(15	)		$	14,045,766
Total included in cash and cash equivalents			14,045,738				43				(15	)			14,045,766
Government and agency securities			14,651,501				7,797				(1,663	)			14,657,635
Total included in marketable securities			14,651,501				7,797				(1,663	)			14,657,635
Total available-for-sale securities		$	28,697,239			$	7,840			$	(1,678	)		$	28,703,401

     The Company measures certain financial assets, including cash equivalents and available-for-sale securities, at fair value on a recurring basis. In accordance with SFAS No. 157, fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-level hierarchy which prioritizes the inputs used in measuring fair value. The three hierarchy levels are defined as follows:

     Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets. The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. The Level 1 category at September 30, 2008 includes money market funds of $9.4 million, which are included in cash and cash equivalents in the consolidated balance sheets, and government agency securities of $6.9 million, which are included in marketable securities in the consolidated balance sheets.

     Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The Company had no Level 2 financial assets measured at fair value on the consolidated balance sheets as of September 30, 2008.

     Level 3 — Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing. The Company had no Level 3 financial assets measured at fair value on the consolidated balance sheets as of September 30, 2008.

     The hierarchy level assigned to each security in the Company’s available-for-sale portfolio is based on its assessment of the transparency and reliability of the inputs used in the valuation of such instrument at the measurement date. The Company did not have any financial liabilities that were covered by SFAS No. 157 as of September 30, 2008.

NOTE 4: TERMINATION OF PARTNERSHIP AGREEMENT

     On February 13, 2007, the Company terminated its strategic partnership agreement with Marshall Special Assets Group, Inc. (“Marshall”) by signing a mutual termination, release and agreement. By entering into the mutual termination, release and agreement, the Company regained the rights to directly control its sales and marketing process within the gaming industry and will obtain increased margins in all future digital signage sales in such industry. Pursuant to the terms of the mutual termination, release and agreement, the Company paid Marshall $653,995 in consideration of the termination of all of Marshall’s rights under the strategic partnership agreement and in full satisfaction of any future obligations to Marshall under the strategic partnership agreement. Pursuant to the mutual termination, release and agreement, the Company will pay Marshall a fee in connection with sales of the Company’s software and hardware to customers, distributors and resellers for use exclusively in the ultimate operations of or for use in a lottery (“End Users”). Under such agreement, the Company will pay Marshall (i) 30% of the net invoice price for the sale of the Company’s software to End Users, and (ii) 2% of the net invoice price for sale of hardware to End Users, in each case collected by the Company on or before February 12, 2012, with a minimum payment of $50,000 per year for the first three years. Marshall will pay 50% of the costs and expenses incurred by the Company in relation to any test installations involving sales or prospective sales to End Users.

NOTE 5: ACQUISITIONS AND INTANGIBLE ASSETS

     On August 16, 2007, the Company closed the transaction contemplated by the Stock Purchase Agreement by and between the Company, and Robert Whent, Alan Buterbaugh and Marlene Buterbaugh (the “Sellers”). Pursuant to such closing, the Company purchased all of the Sellers’ stock in holding companies that owned McGill Digital Solutions, Inc. (“McGill”), based in Windsor, Ontario, Canada. The holding companies acquired from the Sellers and McGill were amalgamated into one wholly-owned subsidiary of the Company. The results of operations of McGill (now renamed Wireless Ronin Technologies (Canada), Inc., (“WRT Canada”)) have been included in the Company’s consolidated financial statements since August 16, 2007. The Company acquired McGill for its custom interactive software solutions used primarily for e-learning and digital signage applications. Most of WRT Canada’s revenue is derived from products and solutions provided to the automotive industry.

     The Company acquired the shares from the Sellers for cash consideration of $3,190,563, subject to potential adjustments, and 50,000 shares of the Company’s common stock. The Company also incurred $178,217 in direct costs related to the acquisition. In addition, the Company agreed to pay earn-out consideration to the Sellers of up to $1,000,000 (CAD) and 50,000 shares of the Company’s common stock if specified earn-out criteria are met. The earn-out criteria for 2007 was at least $4,100,000 (CAD) gross sales and a gross margin equal to or greater than 50%. If the 2007 earn-out criteria had been met, 25% of the earn-out consideration would have been paid. The 2007 earn-out criteria were not met and no 2007 earn-out was paid. The earn-out criteria for 2008 consists of gross sales of at least $6,900,000 (CAD) and a gross margin equal to or greater than 50%. The Company has accrued the 2008 earn-out consideration of $999,974 as part of its valuation analysis which was completed in the fourth quarter of 2007.

     The purchase price of the acquisition consisted of the following:

Cash payment to sellers		$	3,190,563
Transaction costs			178,217
Accrued purchase price consideration			999,974
Stock issuance			312,000
Total purchase price		$	4,680,754

     The Company has allocated the cost of the acquisition, as follows:

		August 16,
		2007
Current assets		$	1,392,391
Intangible assets			3,221,652
Property and equipment			236,878
Total assets acquired			4,850,921
Current liabilities			151,075
Long-term liabilities			19,092
Total liabilities assumed			170,167
Net assets acquired		$	4,680,754

Pro Forma Operating Results (Unaudited)

     The following unaudited pro forma information presents a summary of consolidated results of operations of the Company as if the acquisition of McGill had occurred at January 1, 2007. The historical consolidated financial information has been adjusted to give effect to a decrease in interest income related to the amount paid as the purchase price to the former shareholders of McGill.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Sales		$	1,949,532			$	1,740,811			$	5,479,269			$	6,575,337
Loss from operations			(4,751,813	)			(2,687,388	)			(14,331,889	)			(7,399,328	)
Net loss			(4,635,276	)			(2,394,112	)			(13,791,968	)			(6,788,985	)
Basic and diluted loss per common share		$	(0.31	)		$	(0.17	)		$	(0.94	)		$	(0.58	)
Basic and diluted weighted average shares outstanding			14,764,345				14,419,262				14,629,278				11,615,993

     The unaudited pro forma condensed consolidated financial information is presented for informational purposes only. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the acquisition been completed on the dates indicated. In addition, the unaudited pro forma condensed consolidated financial information does not purport to project the future financial position or operating results of the Company after completion of the acquisition.

NOTE 6: CAPITAL LEASE OBLIGATIONS

     The Company leases certain equipment under three capital lease arrangements with imputed interest of 16% to 22% per year. The leases require monthly payments of $11,443 through May 2008, $7,151 through July 2009 and $5,296 through November 2009.

     Other information relating to the capital lease equipment is as follows:

		September 30,				December 31,
		2008				2007
Cost		$	380,908			$	380,908
Less: accumulated amortization			(310,987	)			(260,950	)
Total		$	69,921			$	119,958

     Amortization expense for capital lease assets was $16,679 and $26,825 for the three months ended September 30, 2008 and 2007, respectively, and $50,037 and $80,476 for the nine months ended September 30, 2008 and 2007, respectively, and is included in depreciation expense.

NOTE 7: COMMITMENTS AND CONTINGENCIES

Operating Leases

     The Company leases approximately 19,089 square feet of office and warehouse space under a lease that extends through January 31, 2013. In addition, the Company leases office space of approximately 14,930 square feet to support its Canadian operations at a facility located at 4510 Rhodes Drive, Suite 800, Windsor, Ontario under a lease that extends through June 30, 2009.

     The Company also leases equipment under a non-cancelable operating lease that requires minimum monthly payments of $769 through October 2012.

     Rent expense under the operating leases was $120,077 and $71,854 for the three months ended September 30, 2008 and 2007, respectively, and $357,215 and $121,269 for the nine months ended September 30, 2008 and 2007, respectively. The amounts for 2007 are exclusive of the lease accrual for our former office space explained below.

     Future minimum lease payments for operating leases are as follows:

At September 30, 2008		Lease Obligations
2008		$	99,560
2009			332,634
2010			204,730
2011			196,022
2012			192,472
Thereafter			15,398
Total future minimum obligations		$	1,040,816

Remaining Lease Obligation

     On July 9, 2007, the Company moved from its former office space at 14700 Martin Drive in Eden Prairie to its new office space at 5929 Baker Road in Minnetonka. Due to the move occurring during the third quarter of 2007, a liability for the costs that will continue to be incurred under the prior lease for its remaining term without economic benefit to the Company was recognized and measured at the fair value on the cease use date, July 9, 2007. The lease accrual was charged to rent in general and administrative expenses. The remaining liability at September 30, 2008 was $107,051. The prior lease termination date is November 30, 2009. Since the prior lease is an operating lease, the fair value of the liability is based on the remaining lease rentals, reduced by estimated sublease rentals that could be reasonably obtained for the property, even though the Company has not entered into a sublease to date. Other costs included in the fair value measurement are the amortization of the remaining book values of the leasehold improvements on the premises and the listing agent fee paid on the property. The existing rental obligations, additional costs incurred and expected sublease receipts are as follows:

		December 31,				Adjustments				September 30,
		2007				to Estimates				2008
Costs to be incurred:
Existing rental payments		$	148,787			$	(58,221	)		$	90,566
Expected operating costs		$	63,365			$	(24,795	)		$	38,570
Unamortized leasehold improvements		$	79,967			$	(31,292	)		$	48,675
Listing agent fee		$	30,429			$	(11,907	)		$	18,522
Sublease receipts
Expected sublease rental income		$	74,394			$	(29,111	)		$	45,283
Expected reimbursement of operating costs		$	63,365			$	(24,795	)		$	38,570

     As of September 30, 2008, the Company had incurred costs of $95,349 in rent for the former office space since vacating the property. Also, the former office space had not been subleased as of September 30, 2008, but the Company is attempting to sub-lease this facility. The Company calculated the present value based on a straight line allocation of the above costs and receipts over the term of the prior lease and a credit-adjusted risk-free rate of 8 percent. The costs listed above have been aggregated in the general and administrative line of the consolidated statements of operations.

Litigation

     The Company was not party to any material legal proceedings as of November 1, 2008.

NOTE 8: STOCK-BASED COMPENSATION AND BENEFIT PLANS

Expense Information under SFAS 123R

     On January 1, 2006, the Company adopted SFAS 123R, which requires measurement and recognition of compensation expense for all stock-based payments including warrants, stock options and restricted stock grants based on estimated fair values. A summary of compensation expense recognized for the issuance of stock options and warrants follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Stock-based compensation costs included in:
Cost of sales		$	30,787			$	—			$	30,787			$	—
Sales and marketing expenses			51,599				27,732				148,050				85,158
Research and development expenses			33,035				18,767				70,811				68,811
General and administrative expenses			85,448				102,045				652,350				726,934
Total stock-based compensation expenses		$	200,869			$	148,544			$	901,998			$	880,903

     At September 30, 2008, there was approximately $1,528,082 of total unrecognized compensation expense related to unvested share-based awards. Generally, the expense will be recognized over the next four years and will be adjusted for any future changes in estimated forfeitures.

Valuation Information under SFAS 123R

     For purposes of determining estimated fair value under SFAS 123R, the Company computed the estimated fair values of stock options using the Black-Scholes model. The weighted average estimated fair value of stock options granted was $3.12 and $4.56 per share for the three months ended September 30, 2008 and 2007, respectively. These values were calculated using the following weighted average assumptions:

		Three Months Ended
		September 30,
		2008				2007
Expected life		3.25 years					3.45 to 3.75 years
Dividend yield			0	%			0	%
Expected volatility			98.4	%			97.0 to 97.2	%
Risk-free interest rate			2.5	%			5.0	%

     The risk-free interest rate assumption is based on observed interest rates appropriate for the term of the Company’s stock options. The expected life of stock options represents the weighted-average period the stock options are expected to remain outstanding. The Company used historical closing stock price volatility for a period equal to the period its common stock has been trading publicly. The Company used a weighted average of other publicly traded stock volatility for the remaining expected term of the options granted. The dividend yield assumption is based on the Company’s history and expectation of future dividend payouts.

2007 Associate Stock Purchase Plan

     In November 2007, the Company’s shareholders approved the 2007 Associate Stock Purchase Plan, under which 300,000 shares were originally reserved for purchase by the Company’s associates. The purchase price of the shares under the plan is the lesser of 85% of the fair market value on the first or last day of the offering period. Offering periods are every six months ending on June 30 and December 31. Associates may designate up to ten percent of their compensation for the purchase of shares under the plan. The first purchase date under the plan took place June 30, 2008, on which date approximately 74,000 shares were purchased.

Employee Benefit Plan

     In 2007, the Company began to offer a defined contribution 401(k) retirement plan for eligible associates. Associates may contribute up to 15% of their pretax compensation to the plan. There is currently no plan for an employer contribution match.

NOTE 9: SEGMENT INFORMATION AND MAJOR CUSTOMERS

     The Company views its operations and manages its business as one reportable segment, providing digital signage solutions to a variety of companies, primarily in its targeted vertical markets. Factors used to identify the Company’s single operating segment include the financial information available for evaluation by the chief operating decision maker in making decisions about how to allocate resources and assess performance. The Company markets its products and services through its headquarters in the United States and its wholly-owned subsidiary operating in Canada.

     Net sales per geographic region, based on the billing location of end customer, are summarized as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
United States		$	1,816,657			$	1,013,008			$	4,702,912			$	4,175,291
Canada			132,875				110,925				772,218				199,941
Mexico			—				—				4,139				—
Total Sales		$	1,949,532			$	1,123,933			$	5,479,269			$	4,375,232

     Geographic segments of property and equipment and intangible assets are as follows:

		September 30,				December 31,
		2008				2007
Property and equipment, net:
United States		$	1,436,918			$	1,425,351
Canada			732,013				355,039
Total		$	2,168,931			$	1,780,390
Intangible assets, net:
United States		$	—			$	—
Canada			2,593,124				3,174,804
Total		$	2,593,124			$	3,174,804

     A significant portion of the Company’s revenue is derived from a few major customers. Customers with greater than 10% of total sales are represented on the following table:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
Customer		2008				2007				2008				2007
NewSight Corporation			*				*				*				56.1	%
Chrysler (BBDO Detroit/Windsor)			17.3	%			32.8	%			32.4	%			*
KFC			22.9	%			*				21.2	%			*
Dimensional Innovations			26.6	%			*				*				*
			66.8	%			32.8	%			53.6	%			56.1	%

     Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. As of September 30, 2008 and 2007, a significant portion of the Company’s accounts receivable was concentrated with a few customers:

		September 30,				September 30,
Customer		2008				2007
NewSight Corporation			*				56.7	%
Dimensional Innovations			22.5	%			*
KFC			19.6	%			*
Chrysler (BBDO Detroit/Windsor)			18.1	%			12.0	%
			58.7	%			68.7	%

NOTE 10: NET LOSS PER SHARE

     In accordance with SFAS No. 128, “Earnings Per Share,” (“SFAS 128”), basic net income (loss) per share for the three and nine months ended September 30, 2008 and 2007 is computed by dividing net income (loss) by the weighted average common shares outstanding during the periods presented. Diluted net income per share is computed by dividing income by the weighted average number of common shares outstanding during the period, increased to include dilutive potential common shares issuable relating to outstanding restricted stock, and upon the exercise of stock options and awards that were outstanding during the period. For all net loss periods presented, diluted net loss per share is the same as basic net loss per share because the effect of outstanding restricted stock, options and warrants is antidilutive.

     The following table presents the computation of basic and diluted net income (loss) per share:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net loss		$	(4,635,276	)		$	(2,382,524	)		$	(13,791,968	)		$	(6,412,800	)
Shares used in computing basic net loss per share			14,764,345				14,369,262				14,629,278				11,565,993
Outstanding dilutive stock options			—				—				—				—
Shares used in computing diluted net loss per share			14,764,345				14,369,262				14,629,278				11,565,993
Basic net loss per share		$	(0.31	)		$	(0.17	)		$	(0.94	)		$	(0.55	)
Diluted net loss per share		$	(0.31	)		$	(0.17	)		$	(0.94	)		$	(0.55	)

     Shares reserved for outstanding stock warrants and options totaling 3,147,933 and 3,364,258 at September 30, 2008 and 2007, respectively, were excluded from the computation of net loss per share as their effect was antidilutive.

NOTE 11: OTHER EVENTS

Agreements with NewSight

     As previously reported, effective October 8, 2007, NewSight Corporation (“NewSight”) issued the Company a Secured Promissory Note (the “Note”) for goods provided and services rendered. In connection with the issuance of the Note, the Company also entered into a Security Agreement, dated October 12, 2007, with NewSight pursuant to which the Company acquired a security interest in certain collateral of NewSight, consisting of all existing and after-acquired video screens and monitors and other equipment for digital signage then or thereafter provided by the Company to NewSight, including all such equipment located in the Fashion Square Mall in Saginaw, Michigan and the Asheville Mall in Asheville, North Carolina, and any grocery store premises operated by Meijer, Inc. (“Meijer”) and its affiliates (the “Meijer Network”) and all related hardware, software and parts used in connection with such equipment or the Meijer Network and all proceeds from such personal property, but not including any intellectual property of NewSight (the “Collateral”).

     The Note, as amended, matured on August 15, 2008. NewSight’s aggregate indebtedness to the Company, including the Note, accrued interest, and all accrued warehousing fees and expenses and network operating and maintenance expenses, totaled $2,761,608 at such date (the “Aggregate Indebtedness”). Given NewSight’s inability to obtain financing that would have allowed it to repay this obligation and given the termination of NewSight’s business relationship with Meijer regarding the Meijer Network, the Company entered into negotiations with NewSight and its principal creditor, Prentice Capital Management, L.P. (“Prentice”), to obtain ownership of the Collateral (other than the Released Collateral (as defined below)) (the “Surrendered Collateral”) in recognition of the Company’s rights as a secured creditor. The “Released Collateral” represented Collateral presently installed at the stores operated by CBL Associated at the Fashion Square Mall and the Asheville Mall.

     On August 21, 2008, the Company entered into a Turnover and Surrender Agreement with NewSight (the “Turnover and Surrender Agreement”) under which NewSight surrendered, transferred and turned over to the Company, and the Company accepted, the Surrendered Collateral in full satisfaction of the Aggregate Indebtedness. The Company agreed that, except for the obligations under the Turnover and Surrender Agreement, NewSight has no further obligations to the Company. The Surrendered Collateral was turned over and surrendered to the Company on an “as is” and “where is” basis.

     Under the Turnover and Surrender Agreement, NewSight granted the Company an irrevocable license and consent to enter into any properties licensed to or leased by NewSight for the purpose of taking possession and control of such collateral. NewSight further agreed to indemnify and hold the Company and its subsidiary, and all of its shareholders, agents, officers and directors harmless against any and all claims, losses and expenses (including attorneys fees) related to any claims against the Company as a result of a breach of any covenant, representation or warranty by NewSight in the Turnover and Surrender Agreement, and claims by any creditor, shareholder or trustee of NewSight relating to the transfer and surrender under the Turnover and Surrender Agreement. The Company and NewSight also agreed to a mutual release of all claims except obligations arising under the Turnover and Surrender Agreement.

In addition, the Company entered into a Consent Agreement with Prentice on August 21, 2008 (the “Consent Agreement”) pursuant to which Prentice consented to the terms and conditions of the Turnover and Surrender Agreement. The Consent Agreement also provides for the allocation of any future proceeds received or paid to the Company in connection with the Surrendered Collateral or the Meijer Network. In general, such funds would be applied in the following manner: (1) first to payment of the Company’s expenses in connection with the turnover and surrender, (2) second to payment of the Company’s expenses in connection with replacing, modifying or enhancing the Surrendered Collateral, (3) third to the Company in payment of the Aggregate Indebtedness, (4) fourth the next $100,000 of proceeds would be allocated 70% to the Company and 30% to Prentice, and (5) fifth all remaining proceeds would be allocated 50% to the Company and 50% to Prentice. These allocations also apply in the event of the sale or contribution by the Company of the Surrendered Collateral or the Meijer Network. However, such allocations do not apply to amounts paid or payable to the Company in payment or reimbursement of its monthly costs to operate or service the Meijer Network. The rights and interests granted by the Company to Prentice under the Consent Agreement expire on the third anniversary of the Consent Agreement. The Company and Prentice also generally agreed to a mutual release of all claims.

     On August 21, 2008, the Company also entered into an Interim Operating Agreement with ABC National Television Sales, Inc. (“ABC”) and Met/Hodder, Inc. (“MH”) pursuant to which the parties will continue to operate the Meijer Network through October 31, 2008 (the “Interim Operating Agreement”). The Company will operate the monitors in Meijer stores, monitoring content and providing certain advertisement tracking services. MH will provide programming content, manage content play lists and perform certain monitoring tasks. ABC will provide sales representation services. The Company entered into the Interim Operating Agreement to continue to run the Meijer Network for an interim period necessary to establish a more permanent arrangement with respect to the Meijer Network ownership and placement in Meijer stores. To the extent that such funds are available from advertising revenues on the Meijer Network, the Company will receive $51,000 to compensate it for expenses incurred to operate and monitor the Meijer Network on this interim basis.

     Meijer sent a request for proposal to several national network providers, including the Company, to build out the remaining network of 82 stores and continue to support the existing network of 102 stores in which the Company presently owns the network hardware. The Company expects Meijer to choose one of these network providers in the fourth quarter of 2008, with which to move forward.

     As of September 30, 2008, the Company reclassified the NewSight account receivable balance of $2,429,884, deferred revenue of $1,029,796, deferred costs of $585,538, and the accrued finders fees of $48,464 to Network equipment held for sale totaling $1,937,162. This asset appears as a separate line on the balance sheet as a current asset.

Reduction in Work Force

     On November 3, 2008, the Company announced that it had reduced its workforce by 35 individuals, including both employees and contractors across all areas of the organization. This workforce reduction results in an approximately 22 percent decrease in the Company’s staff. This workforce reduction is intended to align the Company’s expense base with the current level of sales and projects, and improve the overall efficiency of the organization.

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

Forward-Looking Statements

     The following discussion contains various forward-looking statements within the meaning of Section 21E of the Exchange Act. Although we believe that, in making any such statement, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. When used in the following discussion, the words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates” and similar expressions, as they relate to us or our management, are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated. Factors that could cause actual results to differ materially from those anticipated, certain of which are beyond our control, are set forth herein and in our Form 10-Q for the period ended March 31, 2008 under the caption “Cautionary Statement.”

     Our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking statements. Accordingly, we cannot be certain that any of the events anticipated by forward-looking statements will occur or, if any of them do occur, what impact they will have on us. We caution you to keep in mind the cautions and risks described in this document and to refrain from attributing undue certainty to any forward-looking statements, which speak only as of the date of the document in which they appear. We do not undertake to update any forward-looking statement.

Overview

     Wireless Ronin Technologies, Inc. is a Minnesota corporation that has designed and developed application-specific visual marketing solutions. We provide dynamic digital signage solutions targeting specific retail and service markets through a suite of software applications collectively called RoninCast^®. RoninCast^® is an enterprise-level content delivery system that manages, schedules and delivers digital content over wireless or wired networks. Our solutions, digital alternatives to static signage, provide our customers with a dynamic visual marketing system designed to enhance the way they advertise, market and deliver their messages to targeted audiences. Our technology can be combined with interactive touch screens to create new platforms for conveying marketing messages.

Our Sources of Revenue

     We generate revenues through system sales, license fees and separate service fees, including consulting, content development and implementation services, as well as ongoing customer support and maintenance, including product upgrades. We currently market and sell our software and service solutions through our direct sales force and value added resellers.

Our Expenses

     Our expenses are primarily comprised of three categories: sales and marketing, research and development and general and administrative. Sales and marketing expenses include salaries and benefits for our sales associates and commissions paid on sales. This category also includes amounts spent on the hardware and software we use to prospect new customers, including those expenses incurred in trade shows and product demonstrations. Our research and development expenses represent the salaries and benefits of those individuals who develop and maintain our software products including RoninCast^® and other software applications we design and sell to our customers. Our general and administrative expenses consist of corporate overhead, including administrative salaries, real property lease payments, salaries and benefits for our corporate officers and other expenses such as legal and accounting fees.

Significant Accounting Policies and Estimates

     A discussion of the Company’s significant accounting policies was provided in Item 7 of our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007. There were no significant changes to these accounting policies during the first nine months of 2008.

Results of Operations

Three Months Ended September 30, 2008 and 2007

     The following table sets forth, for the periods indicated, certain unaudited consolidated statements of operations information:

		Three Months Ended
		September 30,				% of total				September 30,				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
Sales		$	1,949,532				100	%		$	1,123,933				100	%		$	825,599				73	%
Cost of sales			1,847,257				95	%			709,765				63	%			1,137,492				160	%
Gross profit			102,275				5	%			414,168				37	%			(311,893	)			-75	%
Sales and marketing expenses			927,085				47	%			715,016				64	%			212,069				30	%
Research and development expenses			792,832				41	%			319,945				28	%			472,887				148	%
General and administrative expenses			3,134,171				161	%			2,210,632				197	%			923,539				42	%
Termination of partnership agreement			—				0	%			—				0	%			—				0	%
Total operating expenses			4,854,088				249	%			3,245,593				289	%			1,608,495				50	%
Operating loss			(4,751,813	)			-244	%			(2,831,425	)			-252	%			(1,920,388	)			-68	%
Other income (expenses):
Interest expense			(5,135	)			0	%			(11,758	)			-1	%			(6,623	)			-56	%
Interest income			121,707				6	%			467,740				42	%			(346,033	)			-74	%
Other			(35	)			0	%			(7,081	)			-1	%			(7,046	)			-100	%
Total other income (expense)			116,537				6	%			448,901				40	%			(332,364	)			-74	%
Net loss		$	(4,635,276	)			-238	%		$	(2,382,524	)			-212	%		$	(2,252,752	)			-95	%

		Three Months Ended
		September 30,				% of total				September 30,				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
United States		$	1,816,657				93	%		$	1,013,008				90	%		$	803,649				79	%
Canada			132,875				7	%			110,925				10	%			21,950				20	%
Total Sales		$	1,949,532				100	%		$	1,123,933				100	%		$	825,599				73	%

Sales

     Our sales increased $825,599, or 73%, to $1,949,532 for the three months ended September 30, 2008, compared to $1,123,933 for the same period in the prior year. The increase was due primarily to increased sales of hardware and software as well as a full quarter of sales from our Canadian operations. For the quarter, hardware sales and installations increased approximately $309,000, software sales increased approximately $313,000, and network hosting and other services increased $204,000, due primarily to our acquisition of McGill Digital Solutions, Inc. in August 2007.

Cost of Sales

     Our cost of sales increased $1,137,492, or 160%, for the three months ended September 30, 2008, compared to the same period in the prior year. The increase in cost of sales for the quarter was due to a higher mix of lower margin hardware sales and the continued impact of prior investment in our Network Operations Center.

Operating Expenses

     Our operating expenses increased 50%, or $1,608,495, to $4,854,088 for the three months ended September 30, 2008, compared to $3,245,593 in the same period in the prior year. This increase was driven by increases in operating expenses of $626,397 related to our acquisition of McGill Digital Solutions, Inc., which is in our results for a full quarter in 2008 versus approximately one-half a quarter in 2007. For our Minneapolis operations, salaries and benefits increased approximately $830,327, which was directly related to our increase in headcount and severance payments, while professional fees and other costs increased $151,771 for the three months ended September 30, 2008, largely due to the expense of being a public entity and growth of our business.

Interest Expense

     Interest expense decreased by $6,623 to $5,135 for the three months ended September 30, 2008, compared to $11,758 for the same period in the prior year. The decrease was the result of reduced debt balances under our capital leases.

Interest Income

     Interest income decreased by $346,033 for the three months ended September 30, 2008 compared to the same period in the prior year. Invested cash was lower for the quarter as a result of the use of funds for operations from the follow-on public offering of securities we closed in June 2007.

Nine Months Ended September 30, 2008 and 2007

     The following table sets forth, for the periods indicated, certain unaudited consolidated statements of operations information:

		Nine Months Ended
		September 30				% of total				September 30				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
Sales		$	5,479,269				100	%		$	4,375,232				100	%		$	1,104,037				25	%
Cost of sales			4,916,394				90	%			2,686,052				61	%			2,230,342				83	%
Gross profit			562,875				10	%			1,689,180				39	%			(1,126,305	)			-67	%
Sales and marketing expenses			3,256,883				59	%			1,993,191				46	%			1,263,692				63	%
Research and development expenses			1,836,741				34	%			827,234				19	%			1,009,507				122	%
General and administrative expenses			9,801,140				179	%			5,486,439				125	%			4,314,701				79	%
Termination of partnership agreement			—				0	%			653,995				15	%			(653,995	)			-100	%
Total operating expenses			14,894,764				272	%			8,960,859				205	%			5,933,905				66	%
Operating loss			(14,331,889	)			-262	%			(7,271,679	)			-166	%			(7,060,210	)			-97	%
Other income (expenses):
Interest expense			(18,892	)			0	%			(32,273	)			-1	%			(13,381	)			-41	%
Interest income			563,215				10	%			899,724				21	%			(336,509	)			-37	%
Other			(4,402	)			0	%			(8,572	)			0	%			(4,170	)			-49	%
Total other income (expense)			539,921				10	%			858,879				20	%			(318,958	)			-37	%
Net loss		$	(13,791,968	)			-252	%		$	(6,412,800	)			-147	%		$	(7,379,168	)			-115	%

		Nine Months Ended
		September 30				% of total				September 30				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
United States		$	4,702,912				86	%		$	4,175,291				95	%		$	527,621				13	%
Canada			772,218				14	%			199,941				5	%			572,277				286	%
Mexico			4,139				0	%			—				0	%			4,139				413900	%
Total Sales		$	5,479,269				100	%		$	4,375,232				100	%		$	1,104,037				25	%

Sales

     Our sales increased $1,104,037, or 25%, for the nine months ended September 30, 2008, compared to the same period in the prior year. The overall increase in our sales was due primarily to our acquisition of McGill Digital Solutions, Inc. For the nine months ended September 30, 2008, hardware sales and installations decreased approximately $952,270 due primarily to the significant sales of hardware to a single customer in the nine months ended September 30, 2007, software sales increased approximately $262,640, due to the growth in our business, and network hosting and other services increased $1,793,667, due primarily to our acquisition of McGill Digital Solutions, Inc.

Cost of Sales

     Our cost of sales increased $2,230,342, or 83%, for the nine months ended September 30, 2008, compared to the same period in the prior year. The increase in cost of sales for was due to a higher mix of lower margin hardware sales in the first nine months of 2008 as well as investments in our Network Operations Center.

Operating Expenses

     Operating expenses increased $5,933,905, or 66%, for the nine month period ended September 30, 2008. This increase was attributable to higher expenses to support growth opportunities and investments in our Company. More specifically, there was an increase in operating expenses of $2,544,767 related to our acquisition of McGill Digital Solutions, Inc. and for our Minneapolis operations, there was an increase of $2,606,181 in salaries and benefits related to an increase in headcount, our professional fees and other costs increased by $1,247,892 largely due to the expense of being a public entity and growth of our business, and our advertising costs increased by $189,060 as a result of tradeshow participation and the continued marketing of RoninCast.

     The increases described above for the nine months ended September 30, 2008 were partially offset by a decrease of $653,995 related to the 2007 termination of a partnership agreement described below and in Note 4, Termination of Partnership Agreement.

     On February 13, 2007, we terminated a strategic partnership agreement with Marshall Special Assets Group, Inc., a company that provides financing services to the Native American gaming industry, by signing a Mutual Termination, Release and Agreement. We paid $653,995 in consideration of the termination of all rights under the strategic partnership agreement and in full satisfaction of any further obligations under the strategic partnership agreement. Going forward, we will pay a fee in connection with sales of our software and hardware to customers, distributors and resellers for use exclusively in the ultimate operations of or for use in a lottery (“End Users”). Under such agreement, we will pay a percentage of the net invoice price for the sale of our software and hardware to End Users, in each case collected by us on or before February 12, 2012, with a minimum annual payment of $50,000 for three years. We will be reimbursed for 50% of the costs and expenses incurred by us in relation to any test installations involving sales or prospective sales to End Users.

Interest Expense

     Interest expense decreased $13,381 to $18,892 for the nine months ended September 30, 2008, compared to $32,273 for the same period in the prior year. The decrease was the result of reduced debt balances under our capital leases.

Interest Income

     Interest income decreased $336,509 for the nine months ended September 30, 2008, compared to the same period in the prior year. Invested funds for the nine months ended September 30, 2008 were lower than the same period in the previous year as a result of our use of funds for operations from the follow-on public offering of securities we closed in June 2007.

Liquidity and Capital Resources

Operating Activities

     We do not currently generate positive cash flows. Our investments in infrastructure have been greater than sales generated to date. As of September 30, 2008, we had an accumulated deficit of $57,312,066. The cash flow used in operating activities was $11,252,307 and $5,716,202 for the nine months ended September 30, 2008 and 2007, respectively. The increase in cash used in operations was due to the increase in our net loss during the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007. Based on our existing capital resources and current expense levels, which we recently aligned to the current level of sales and projects to improve the overall efficiency of the organization, we anticipate that our cash will be adequate to fund our operations for the next twelve months.

Investing Activities

     Net cash provided by investing activities was $6,834,156 in the nine months ended September 30, 2008, compared to cash used in investing activities of $2,010,915 for the nine months ended September 30, 2007. The increase in cash was primarily due to net sales of marketable securities of $7,718,722 offset by purchases of capital equipment of $884,566 as well as the use of funds to purchase McGill Digital Solutions, Inc. in the third quarter of 2007. Marketable securities consisted of debt securities issued by federal government agencies with maturity dates in 2008.

Financing Activities

     We have financed our operations primarily through sales of common stock, exercise of warrants, and the issuance of notes payable to vendors, shareholders and investors. For the nine months ended September 30, 2008 and 2007, net cash provided by financing activities was $470,552 and $27,470,936, respectively. Exercises of warrants and issuances of stock through our employee stock purchase plan contributed funds in 2008, while funds for 2007 were the result of the follow-on public offering of securities we closed in June 2007.

     We believe we can continue to develop our sales to a level at which we will become cash flow positive. Based on our existing capital resources and our current expense levels, which we recently aligned to the current level of sales and projects to improve the overall efficiency of the organization, we anticipate that our cash will be adequate to fund our operations for the next twelve months.

Contractual Obligations

     Although we have no material commitments for capital expenditures, we anticipate continued capital expenditures consistent with our anticipated growth in operations, infrastructure and personnel. We expect that our operating expenses will continue to grow as our overall business grows and that they will be a material use of our cash resources.

Operating and Capital Leases

     At September 30, 2008, our principal commitments consisted of long-term obligations under operating leases. We lease approximately 19,089 square feet of office and warehouse space under a lease that extends through January 31, 2013. In addition, we lease office space of approximately 14,930 square feet to support our Canadian operations at a facility located at 4510 Rhodes Drive, Suite 800, Windsor, Ontario under a lease that extends through June 30, 2009. We also lease our former headquarters facility of approximately 8,610 square feet at 14700 Martin Drive, Eden Prairie, Minnesota. We do not occupy this building and are currently attempting to sub-lease this facility through the expiration of our lease on November 30, 2009. In the third quarter of 2007, we recognized a liability for anticipated remaining net costs on this lease obligation. The remaining liability at September 30, 2008 was $107,051.

     The following table summarizes our obligations under contractual agreements as of September 30, 2008 and the time frame within which payments on such obligations are due.

Payment Due by Period
		Total																More
		Amount			Less Than													Than
Contractual Obligations		Committed				1 Year				1-3 Years				3-5 Years				5 Years
Capital Lease Obligations (including interest)		$	89,056			$	73,643			$	15,413			$	—			$	—
Operating Lease Obligations			1,040,816				99,560				733,386				207,870				—
Total		$	1,129,872			$	173,203			$	748,799			$	207,870			$	—

     Based on our working capital position at September 30, 2008, we believe we have sufficient working capital to meet our current obligations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, and accounts receivables. We maintain our accounts for cash and cash equivalents and marketable securities principally at one major bank. We invest our available cash in United States government securities and money market funds. We have not experienced any significant losses on our deposits of our cash, cash equivalents, or marketable securities.

     We currently have outstanding approximately $89,000 of capital lease obligations at fixed interest rates. We do not believe our operations are currently subject to significant market risks for interest rates or other relevant market price risks of a material nature.

     Foreign exchange rate fluctuations may adversely impact our consolidated financial position as well as our consolidated results of operations. Foreign exchange rate fluctuations may adversely impact our financial position as the assets and liabilities of our Canadian operations are translated into U.S. dollars in preparing our consolidated balance sheet. These gains or losses are recognized as an adjustment to shareholders’ equity through accumulated other comprehensive income.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     We maintain a system of disclosure controls and procedures that is 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 our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

     Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of September 30, 2008, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

     On July 1, 2008, we converted to a new Microsoft Dynamics Great Plains accounting package for our Canadian operations. This accounting system enhances our financial accounting and reporting controls over the previous package.

     There were no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     We were not party to any material legal proceedings as of November 1, 2008.

Item 1A. Risk Factors

     The discussion of our business and operations should be read together with the risk factors set forth in our “Cautionary Statement” in our Form 10-Q for the period ended March 31, 2008. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flow, strategies or prospects in a material and adverse manner.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     On the date shown below during the three months ended September 30, 2008, an accredited investor who held warrants for the purchase of an aggregate of 10,000 shares of common stock exercised such warrants. We obtained gross proceeds of $32,000 in connection with this warrant exercise. The proceeds of the exercise were applied to working capital for general corporate purposes. Details regarding this warrant exercise appear in the table below:

						Exercise
Date		Shares				Price				Proceeds
7/3/2008			10,000			$	3.20			$	32,000

     The foregoing issuance was made in reliance upon the exemption provided in Section 4(2) of the Securities Act. The certificate representing such securities contains a restrictive legend preventing the sale, transfer, or other disposition, absent registration or an applicable exemption from registration requirements. The recipient of such securities received, or had access to, material information concerning our company, including, but not limited to, our reports on Form 10-KSB, Form 10-Q and Form 8-K, as filed with the Securities and Exchange Commission. No discount or commission was paid in connection with the issuance of common stock upon exercise of such warrants.

Item 3. Defaults Upon Senior Securities

     None.

Item 4. Submission of Matters to a Vote of Security Holders

     None.

Item 5. Other Information

     None.

Item 6. Exhibits

     See “Exhibit Index.”

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.