product pipeline that will provide consumers with innovative power products offering a broad range of features and price points; an emphasis on development and marketing of products that are environmentally friendly; and improvements in operational execution; the expectation that the operating results of Mission Technology Group in 2008 will approximate its 2007 operating results; the expectation that we will not record any income tax expense in 2008; the expected availability of cash and liquidity; expected market and industry trends; beliefs relating to our distribution capabilities and brand identity; expectations regarding the success of new product introductions; the anticipated strength, and ability to protect, our intellectual property portfolio; and our expectations regarding the outcome and anticipated impact of various legal proceedings in which we are involved. These forward-looking statements are based largely on our management's expectations and involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance, achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include those set forth in other reports that we file with the SEC. Additional factors that could cause actual results to differ materially from those expressed in these forward-looking statements include, among others, the following:
• the loss of, and failure to replace, any significant customers;

• the inability to timely and successfully complete product development efforts and introduce new products, including internal development projects and those being pursued with strategic partners;

• the ineffectiveness of our sales and marketing strategy;

• the inability to create broad consumer awareness and acceptance for our products and technology;

• the timing and success of competitive product development efforts, new product introductions and pricing;

• the ability to expand and protect our proprietary rights and intellectual property;

• the timing of substantial customer orders;

• the lack of available qualified personnel;

• the inability to successfully resolve pending and unanticipated legal matters;

• the lack of available qualified suppliers and subcontractors and/or their inability to meet our specification, performance, and quality requirements; and

• market demand and industry and general economic or business conditions.

In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will prove to be accurate. We undertake no obligation to publicly update or revise any forward-looking statements, or any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements.
iGo® is a trademark or registered trademark of iGo, Inc. or its subsidiaries in the United States and other countries. Other names and brands may be claimed as the property of others.
Overview
Increased functionality and the ability to access and manage information remotely are driving the proliferation of mobile electronic devices and applications. The popularity of these devices is benefiting from reductions in size, weight and cost and improvements in functionality, storage capacity and reliability. Each of these devices needs to be powered and connected when in the home, the office, or on the road, and can be accessorized, representing opportunities for one or more of our products.
We use our proprietary technology to design and develop products that make computers and mobile electronic devices more efficient and cost effective, thus enabling professionals and consumers higher utilization of their mobile devices and the ability to access information more readily. Our products include power products for high-power mobile electronic devices, such as portable computers; power products for low-power mobile electronic devices, such as mobile phones, PDAs, and MP3 players; and accessory products. We are organized in three business segments, which consist of the High-Power Group, the Low-Power Group and the Connectivity Group. In February 2007, we sold substantially all of the assets, which consisted primarily of inventory, of our handheld hardware product line. The operating results of the handheld hardware product line were historically included in the results of the Connectivity Group. In April 2007, we sold substantially all of the remaining assets of our Connectivity Group. The operating results of Mission Technology Group, which purchased substantially all of the assets of our expansion and docking product line, are consolidated with our operating results pursuant to FIN 46R and are included in the Connectivity Group.
Sales to OEMs and private-label resellers accounted for approximately 49% of revenue for the nine months ended September 30, 2008 and approximately 52% of revenue for the nine months ended September 30, 2007. Sales through retailers and distributors accounted for approximately 48% of revenue for the nine months ended September 30, 2008 and approximately 37% of revenue for the nine months ended September 30, 2007. The balance of our revenue during these

periods was derived from direct sales to end-users. In the future, we expect that we will be dependent upon a relatively small number of customers for a significant portion of our revenue, including most notably RadioShack and Targus. We intend to develop relationships with a broader set of retailers and wireless carriers to expand the market availability of our iGo branded products. We expect that these relationships will allow us to diversify our customer base, add stability and decrease our traditional reliance upon a limited number of OEMs and private label resellers. We also expect that these relationships will significantly increase the availability and exposure of our products, particularly among large national and international retailers and wireless carriers.
Our continued focus is on proliferating power products that incorporate our tip technology for both high- and low-power mobile electronic devices and on developing complementary products. Our long-term goal is to establish an industry standard for all mobile electronic device power products based on our patented tip technology.
Our ability to execute successfully on our near and long-term objectives depends largely upon the general market acceptance of our tip technology which allows users to charge multiple devices with a single power product, our ability to protect our proprietary rights to this technology and on general economic conditions. Additionally, we must execute on the customer relationships that we have developed and continue to design, develop, manufacture and market new and innovative technology and products that are embraced by these customers and the overall market in general.
High-Power Group. Our High-Power Group is focused on the development, marketing and sales of power products and accessories for mobile electronic devices with high power requirements, which consist primarily of portable computers. These devices also allow users to simultaneously charge one or more low-power mobile electronic devices with our optional iGo dualpower and power splitter accessories. We sell these products to OEMs, private-label resellers, distributors, resellers and retailers. We supplied OEM-specific, high-power adapter products to Dell through the first quarter of 2007 and we supplied Lenovo through the first quarter of 2008. We have entered into a strategic reseller agreement with Targus to market and distribute high-power adapter products on a private-label basis. We also sell our iGo branded products directly to retailers such as RadioShack and through distributors such as Ingram Micro. High-Power Group revenue accounted for approximately 60% of revenue for the nine months ended September 30, 2008 and approximately 61% of revenue for the nine months ended September 30, 2007.
Low-Power Group. In April 2005, we formed the Low-Power Group, which is focused on the development, marketing and sales of power products for low-power mobile electronic devices, such as mobile phones, smartphones, PDAs, MP3 players and portable gaming consoles. These products include cigarette lighter adapters, mobile AC adapters, low-power universal AC/DC adapters, and low-power universal battery products. Each of these power devices is designed to incorporate our patented tip technology. The combination AC/DC adapter also allows users to simultaneously charge a second device with our optional iGo dualpower or iGo power splitter accessories. We sell these products to distributors, resellers and retailers. Low-power product revenue accounted for approximately 31% of revenue for the nine months ended September 30, 2008 and 30% of revenue for the nine months ended September 30, 2007.
During 2007, the market for foldable keyboards decreased significantly and we made the decision to discontinue the production and marketing of foldable keyboard products and we intend to sell the remaining inventory of these products in the ordinary course of business. Accordingly, revenue from this product line has decreased significantly in 2008. We account for our foldable keyboard business as part of our Low-Power Group. Sales of these foldable keyboard products represented approximately 1% of our total revenue for the nine months ended September 30, 2008 and 4% of our total revenue for the nine months ended September 30, 2007.
Connectivity Group. Our Connectivity Group consists primarily of the operating results of Mission Technology Group. The Connectivity Group was historically focused on the development, marketing and sales of connectivity and expansion and docking products. Our early focus was on the development of remote peripheral component interface, or PCI, bus technology and products based on proprietary Split Bridge® technology. We invested heavily in Split Bridge technology and while we had some success with Split Bridge in the corporate portable computer market with sales of universal docking stations, it became clear in early 2002 that this would not be the substantial opportunity we originally envisioned. In May 2005, we sold substantially all of our intellectual property relating to Split Bridge technology which resulted in a gain on the sale of these assets of $11.6 million. Recent Developments
In the fourth quarter of 2007, due to a decline in the market for foldable keyboards, we made the decision to discontinue production and marketing of our foldable keyboard product line and we intend to sell the remaining inventory of these products in the ordinary course of business. Accordingly, revenue from this product line has decreased significantly in

2008. We are currently engaged in seeking one or more purchasers for a portfolio of patents and patents pending associated with this product line.
In July 2007, we terminated the sales representative and distribution agreements that we had previously entered into with Motorola, Inc. in March 2005. As a result of the termination of these agreements, Motorola has forgone its right to receive a 24.5% share of the net profit generated from our sale of power products for low-power mobile electronic devices.
In the first quarter of 2007 we sold, or entered into agreements to sell, substantially all of the assets of our handheld connectivity and expansion and docking businesses, all of which we included in our Connectivity Group, in three separate transactions.
The first transaction, which was completed in February 2007, involved the sale of substantially all of the assets of our handheld connectivity business, which consisted primarily of inventory, to CradlePoint for $1.8 million plus potential additional consideration based on future performance. At the closing, we received $50,000 in cash and a promissory note for $1.5 million, bearing interest at the rate of 6% annually, to be paid within two years as CradlePoint sells the inventory acquired in the transaction. We received a cash payment of $250,000 in August 2007. We will also receive (1) 5% of CradlePoint's revenues for five years, with a minimum payment of $300,000 due within three years, and
(2) 100% of the first $200,000, and 50% thereafter, of any sales beyond the first $1.8 million of inventory purchased by CradlePoint at the closing. To date, CradlePoint has consistently made payments in accordance with the terms of the promissory note. The net remaining recorded balance of the $1.5 million promissory note is $253,000 at September 20, 2008. To date, we have not recorded any receivables related to the future royalty streams due to us under the terms of the CradlePoint sale. The second and third transactions involved the sale of substantially all of the assets of our expansion and docking business. The agreements for these transactions were executed in February 2007 and the transactions were completed in April 2007. In one transaction, we sold a portfolio of patents and patents pending relating to our PCI expansion and docking technology to A.H. Cresant Group LLC. In the other transaction, we sold substantially all of the assets related to our expansion and docking business to Mission Technology Group, an entity that is owned by Randy Jones, our former Senior Vice President and General Manager, Connectivity. As a result of these two transactions, the Company received total net proceeds of approximately $4.8 million consisting of $925,000 in cash and two promissory notes totaling approximately $3.9 million. At the closing, we also received a 15% fully-diluted equity interest in Mission Technology Group. Given the related party nature of this transaction, we retained an independent, third party financial advisor to assist us. In determining the sales price for these assets and liabilities, we evaluated past performance and expected future performance, and received an opinion from our financial advisor that the consideration to be received was fair from a financial point of view. Our Board of Directors approved these transactions following a separate review and recommended approval of the Mission Technology Group transaction by our Audit Committee. We include the assets, liabilities and operating results of Mission Technology Group in our consolidated financial statements pursuant to FIN 46R. Connectivity Group revenue accounted for approximately 9% of revenue for the nine months ended September 30, 2008 and September 30, 2007, respectively. The operating results of Mission Technology Group are included in the results of the Connectivity Group and constituted all of the operating income of this group for the nine months ended September 30, 2008.
Critical Accounting Policies and Estimates There were no changes in our critical accounting policies from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2007 during the nine months ended September 30, 2008.

Results of Operations
   The following table presents certain selected consolidated financial data for
the periods indicated expressed as a percentage of total revenue:

                                            September 30,             September 30,
                                          2008         2007         2008         2007
       Revenue                           100.0 %      100.0 %      100.0 %      100.0 %
       Cost of revenue                    69.4 %       70.0 %       70.3 %       77.0 %

       Gross profit                       30.6 %       30.0 %       29.7 %       23.0 %


       Operating expenses:
       Sales and marketing                11.5 %       11.8 %       11.4 %       13.4 %
       Research and development            4.5 %        6.1 %        4.5 %        7.5 %
       General and administrative         11.9 %       17.8 %       15.8 %       20.4 %

       Total operating expenses           27.9 %       35.7 %       31.7 %       41.3 %

       Income (loss) from operations       2.7 %       (5.7 %)      (2.0 %)     (18.2 %)

       Other income (expense):
       Interest, net                       0.9 %        1.5 %        1.1 %        1.5 %
       Other, net                          0.6 %        0.5 %        0.7 %        3.9 %
       Litigation settlement income          -            -          1.2 %          -
       Minority interest                  (1.0 %)      (0.3 %)      (0.4 %)      (0.3 %)

       Net income (loss)                   3.2 %       (4.0 %)       0.6 %      (13.2 %)

Comparison of Three Months Ended September 30, 2008 and 2007 Revenue. Revenue generally consists of sales of products, net of returns and allowances. To date, our revenues have come predominantly from sales of power adapters, handheld products, expansion and docking products, and accessories. The following table summarizes the year-over-year comparison of our revenue for the periods indicated (amounts in thousands):

                                                    Three Months          Three Months
                                                       Ended                 Ended              Increase/(decrease)           Percentage change
                                                   September 30,         September 30,           from same period            from the same period
                                                        2008                  2007               in the prior year            in the prior year
High-Power Group                                   $       11,782        $       10,699        $               1,083                          10.1 %

Low-Power Group                                             6,295                 6,429                         (134 )                        (2.1 )%

Connectivity Group                                          2,014                 1,911                          103                           5.4 %


Total Revenue                                      $       20,091        $       19,039        $               1,052                           5.5 %

High-Power Group. The increase in High-Power Group revenue was primarily due to increases in sales to private-label resellers and retailers of iGo branded products. Specifically, revenue from sales to Targus increased by $2.4 million, or 40.9% to $8.3 million for the three months ended September 30, 2008 as compared to $5.9 million for the three months ended September 30, 2007, primarily as a result of Targus' increased market penetration into consumer electronics and office supply superstore retail outlets. In addition, revenue from direct sales of iGo branded high-power products to retailers and distributors increased by $409,000, or 13.9%, to $3.4 million during the three months ended September 30, 2008 as compared to $3.0 million during the three months ended September 30, 2007, primarily as a result of improvements in RadioShack's merchandising of our products. These increases were partially offset by decreased revenue from sales to OEM's. Overall sales of OEM-specific, high-power products decreased by $1.6 million, or 96.4%, to $60,000 during the three months ended September 30, 2008 as compared to $1.7 million during the three months ended September 30, 2007, primarily as the result of the termination of our relationship with Lenovo in the first quarter of 2008. Specifically, sales to Lenovo decreased by $1.5 million, to $0 for the three months ended September 30, 2008 from $1.5 million for the three months ended September 30, 2007. We do not anticipate significant future revenue from sales to OEM's.
Low-Power Group. The decrease in Low-Power Group revenue was primarily due to our decision to discontinue the production and marketing of foldable keyboard products during the fourth quarter of 2007. Revenue from sales of foldable keyboard products decreased by approximately $728,000, or 100.1%, to $(1,000) for the three months ended September 30, 2008 compared to $727,000 for the three months ended September 30, 2007, as a result of our decision in the fourth quarter of 2007 to no longer manufacture and market these products. This decrease was offset by an increase in revenue from sales of low-power products to RadioShack, which increased by approximately $472,000, or 11.2% to $4.6 million for the three months ended September 30, 2008 compared to $4.2 million for the three months ended September 30, 2007. Revenue from sales of low-power products to other customers increased by approximately $91,000 or 5.5% to $1.8 million for the three months ended September 30, 2008 compared to $1.7 million for the three months ended September 30, 2007, primarily as a result of improvements made by AT&T in the merchandising of our products in their wireless retail stores. We expect Low-Power Group revenue to increase during the remainder of 2008 as a result of anticipated further gains in market penetration of our iGo branded products into mobile wireless carriers, distributors and retailers largely as a result of our continuing sales efforts and increased consumer awareness of our products and technology.
Connectivity Group. Connectivity Group revenue consisted of approximately $2.0 million in Mission Technology Group's sales of docking and expansion products for the three months ended September 30, 2008, compared to approximately $1.9 million in Mission Technology Group revenue for the three months ended September 30, 2007. We anticipate Mission Technology Group's future revenues will be consistent with historical results.

Cost of revenue, gross profit and gross margin. Cost of revenue generally consists of costs associated with components, outsourced manufacturing and in-house labor associated with assembly, testing, packaging, shipping and quality assurance, depreciation of equipment and indirect manufacturing costs. Gross profit is the difference between revenue and cost of revenue. Gross margin is gross profit stated as a percentage of revenue. The following table summarizes the year-over-year comparison of our cost of revenue, gross profit and gross margin for the periods indicated (amounts in thousands):

                                                 Three Months          Three Months
                                                    Ended                 Ended             Increase from same          Percentage change from
                                                September 30,         September 30,         period in the prior         the same period in the
                                                     2008                  2007                    year                       prior year
Cost of revenue                                  $    13,946           $    13,334            $         612                            4.6 %

Gross profit                                     $     6,145           $     5,705            $         440                            7.7 %

Gross margin                                            30.6 %                30.0 %                    0.6 %                          2.0 %

The increase in gross profit was primarily due to a decrease in indirect product overhead expenses of $416,000, or 27.4%, to $1.1 million, or 5.4% of revenue, during the three months ended September 30, 2008 as compared to $1.5 million, or 7.9% of revenue, during the three months ended September 30, 2007. The decrease in indirect product overhead costs was due primarily to a decrease in offsite storage and freight charges of $370,000. Offsetting these improvements, direct margin, which excludes labor and overhead costs, decreased to 36.1% for the three months ended September 30, 2008 compared to 38.3% for the three months ended September 30, 2007, due primarily to increasing pricing pressure from private-label resellers in the high-power retail channel. As a result of these factors, cost of revenue as a percentage of revenue decreased to 69.4% for the three months ended September 30, 2008 from 70.0% for the three months ended September 30, 2007.
Sales and marketing. Sales and marketing expenses generally consist of salaries, commissions and other personnel-related costs of our sales, marketing and support personnel, advertising, public relations, promotions, printed media and travel. The following table summarizes the year-over-year comparison of our sales and marketing expenses for the periods indicated (amounts in thousands):

                                                 Three Months          Three Months
                                                    Ended                 Ended                 Increase              Percentage change
                                                September 30,         September 30,         from same period         from the same period
                                                     2008                  2007             in the prior year         in the prior year
Sales and marketing                              $     2,315           $     2,242             $       73                         3.2 %

The increase in sales and marketing expenses primarily resulted from the addition of new sales personnel which resulted in an increase of $226,000 in personnel related expenses. Web site development costs also increased by $116,000 for the three months ended September 30, 2008 compared to the three months ended September 30, 2007, due primarily to the launch of a redesigned website during the three months ended September 30, 2008. These increases were partially offset by decreases of $37,000 in advertising and market research expense as well as a decrease in retail programs expense of $215,000 for the three months ended September 30, 2008 as compared to the three months ended September 30, 2007. As a percentage of revenue, sales and marketing expenses decreased to 11.5% for the three months ended September 30, 2008 from 11.8% for the three months ended September 30, 2007.
Research and development. Research and development expenses consist primarily of salaries and personnel-related costs, outside consulting, lab costs and travel-related costs of our product development group. The following table summarizes the year-over-year comparison of our research and development expenses for the periods indicated (amounts in thousands):

. . .