This discussion and analysis of financial condition and results of operations should be read in conjunction with the "Selected Financial Data" and our accompanying Consolidated Financial Statements and related notes, as well as the "Risk Factors" and other information contained in this Annual Report. Our management's discussion and analysis of financial condition and results of operations are based upon, among other things, our Consolidated Audited Financial Statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with GAAP requires us to, among other things, make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent liabilities at the financial statement dates and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we review our estimates and assumptions. Our estimates are based on our historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial position or results of operations, although they could. Our critical accounting policies, the policies we believe are most important to the presentation of our financial statements and require the most difficult, subjective and complex judgments, are outlined below in "Critical Accounting Policies". All references to results of operations in this discussion are references to results of continuing operations, unless otherwise noted.

Overview

We are one of the premier distributors and providers of wireless handsets and accessories in Central and South America. We provide end-to-end handset and wireless terminal solutions for carriers in both Central and South America. We distribute products of original equipment manufacturers (OEMs), including Samsung and others. We are also involved in designing, sourcing and distributing a proprietary line of products under our own verykoolŪ brand, which includes entry level, mid-tier and high-end products.

As an integral part of our customers' supply chain, we perform value added services and solutions, including product approval and certification, light assembly, warehousing, logistics services (packing, shipping and delivery), marketing campaigns, warranty services and end-user support. We provide these services for wireless handset manufacturers in order to facilitate sales to carriers, agents, resellers, distributors, independent dealers and retailers in Central and South America. We introduced our proprietary line of handsets and accessories under our own verykoolŪ brand in 2006.

Areas of Management Focus and Performance Indicators

We focus on the needs of our customers, developing and maintaining close relationships with manufacturers, expanding in current and entering into new markets, and sourcing and developing new and innovative products, while maintaining close attention to operational efficiencies and costs. We are focused on increasing shipping volumes and improving efficiencies to achieve higher levels of profitability and earnings growth, as well as monitoring and managing levels of accounts receivable and inventory. We provide distribution and other services for OEMs, such as Samsung, and our own proprietary line of verykoolŪ handsets. Performance indicators that are important for the monitoring and management of our business include operating and net income, cost of sales and gross margin percentage, operating expenses as a percent of revenues, and overall net sales growth. We make extensive use of our customized information system to closely monitor all aspects of our business, including customer relationship management, intelligent purchasing, inventory control, inventory flow, line item margin control for every order, and weighted average cost and statistical data for products, customers and suppliers, as deemed appropriate. We believe a strong focus on providing better service to customers leads to increased customer satisfaction and retention and potential increases in sales.

Management spends a significant amount of time traveling to Latin America and Asia with the purpose of spending time with key customers, suppliers and employees. We believe that these relationships are vital to our success and we will continue to dedicate a significant amount of time to this area.

Industry Trends and, Risks

According to a January 2009 report by Deutsche Bank, in 2008, overall worldwide wireless handset sales increased by approximately 6% in 2008; however, they are forecasted to decrease in 2009 by 10%, before returning to growth in 2010 and 2011, with growth estimated at 10% each year. This same report estimates Latin American (excluding Brazil) could decrease 17% in 2009, before returning to growth in 2010 and 2011 at a rate of 10% each year. A rapid decline in wireless handset sales in the Central and South American markets we serve has and could continue to negatively impact our net sales. Excess supply conditions and the current economic downturn have and may continue to reduce demand for our products and reduce the market prices of the products we sell and therefore affect our ability to generate net sales, margins and gross profit at expected levels and could continue to affect the value of our inventory. For example, the second half of 2008 saw a decrease in handset demand globally as well as in our sales regions and an increase in carrier inventory, which both had a negative impact on our financial results during 2008. Conversely, should manufacturers be unable to respond to an unanticipated increase in demand on a timely basis, we, along with others in our industry, could experience supply constraints that would affect our ability to deliver products. We are unable to quantify these effects, as it is difficult to predict future supply conditions and demand patterns which affect our ability to meet customer demand or sell handsets at an acceptable gross profit.

Company Specific Trends and Risks

Our long-term strategy incorporates overall market growth elements for our business, which we hope will result in future growth as global economic conditions recover. Certain of our manufacturers entered into the low-tier handset market during 2007 and continued to market them in 2008, which has had a positive impact on our volumes of handsets sold, but a negative impact on gross profit margin. Our verykoolŪ proprietary line of products, for which we had six models selling as of December 31, 2008, continued to show orders and sales during of 2008 and is expected to become an increasing part of our overall business in the future. During 2006, 2007 and 2008, our verykoolŪ products continued to increase product diversification in Central and South America, which should continue to be beneficial as we move forward and work towards profitability again. We have significant control over the

verykoolŪ line of products, whereas for OEM products we perform distribution and other services to the extent needed by the OEM's.

In the United States and Mexico, we halted substantially all sales during 2008. Much of our significant United States customer base completed the transitional stage as regional carriers, including some of our customers being acquired in 2007 by AT&T, T-Mobile USA and Verizon Wireless. With our potential United States customer base significantly reduced by the second quarter of 2008, we decided to discontinue this portion of our operations, together with the discontinuation of our operations in Mexico. We substantially completed the discontinuation of these operations by the end of 2008. These two areas accounted for less than 1% of our net sales in 2008, as compared to 13% of our net sales for 2007.

Generally, our industry was impacted by the economic slowdown impacting the United States and the rest of the world. We believe that some of the countries in the regions we operate, particularly in Central America, have close economic relations with the United States, and have been impacted by the economic situation in the United States during 2008 in particular, as well as, generally globally. We believe this impacted consumer demand for our wireless handsets and accessories in some of the countries we operate, and therefore our overall operations, including net sales, during 2008 were adversely impacted.

Recent Events

On July 10, 2008, we, received a Nasdaq Staff Deficiency letter indicating that for the last thirty consecutive business days the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Stock Market under Nasdaq Marketplace Rule 4450(a)(5). In accordance with Nasdaq Marketplace Rule 4450(e)(2), we were provided an initial period of 180 calendar days, or until January 6, 2009, to regain compliance. The Nasdaq Stock Market has extended the compliance date several times, with the current compliance date being on or about October 12, 2009.

During the compliance period on or about October 12, 2009, absent the occurrence of any unexpected events, our common stock is expected to continue to trade on The Nasdaq Global Market. If compliance with Nasdaq Marketplace Rule 4450(a)(5) cannot be demonstrated on or about October 12, 2009, the staff of The Nasdaq Stock Market Listing Qualifications department is expected to deliver a written notification to us that our securities will be delisted from The Nasdaq Global Market. If we receive a delisting notice, we may appeal the Nasdaq staff's determination to a Listing Qualifications Panel. Alternatively, we may apply to transfer our securities to The Nasdaq Capital Market or another exchange or trading market. We intend to monitor the bid price of our common stock and consider available options if our common stock does not trade at a level likely to result in our regaining compliance with Nasdaq's minimum bid price rule.

Results of Operations:

Year Ended December 31, 2008 Compared With Year Ended December 31, 2007

Net Sales

For the year ended December 31, 2008, our net sales from continuing operations of $213.2 million were generally consistent with our net sales from continuing operations of $214.5 million for 2007. Average selling price of wireless handsets sold in 2008 remained relatively constant, as compared to 2007. However, we experienced a 2% decrease in overall wireless handset sales volume, due primarily to the impact of the worsening economic slowdown in the markets we serve, most notably in Central America, during the second half of 2008. The geographic mix of net sales shifted in 2008 as sales in South America increased to more than 76% of net sales, as compared to 66% of net sales in 2007. Sales in Central America decreased to 24% of total net sales in 2008, as compared to 34% in 2007.

These regional shifts in net sales were the result of the factors discussed below. Further, we discontinued our operations in the United States and Mexico in 2008.

                                                   For the Year Ended
                                                      December 31,
                                                  2008            2007
                                                    (Dollar amounts
                                                     in thousands)
           Net sales                            $ 213,223       $ 214,462
           Units sold, increase (decrease)           (2.4 )%           20 %
           over prior year
           Average selling price, (decrease)         (0.1 )%          (15 )%
           over prior year

In South and Central America, we have continued to work to expand our customer base as well as our geographic presence by seeking additional customers and further business with existing customers. In addition, we continued efforts to market and sell our proprietary verykoolŪ line of products in South and Central America. In South America, net sales were $162.6 million for 2008, a 15% increase from 2007. This increase was primarily due to increased sales in existing countries, most notably Argentina, and the addition during the first half of 2008 of a new carrier relationship in Colombia. In Central America, net sales decreased 31% to $50.6 million for 2008, which was primarily due to the continuing unusually low demand during the third and fourth quarters of 2008. We believe the worsening worldwide economic downturn impacted that region also, especially during the second half of 2008.

Net Sales by Geographic Region


                             For the Year Ended December 31,        Increase
                                 2008                2007          (Decrease)
                                     (Dollar amounts
                                      in thousands)
         Central America    $        50,617     $        73,282            (31 )%
         South America              162,606             141,180             15 %

         Total              $       213,223     $       214,462             (1 )%

Cost of Sales, Gross Profit and Gross Margin

For the year ended December 31, 2008, cost of sales was $203.2 million, or 95.3% of net sales, and gross margin was 4.7%, as compared with $202.8 million, or 94.6% of net sales, and 5.4% for gross margin for the year ended December 31, 2007. The increase in our cost of sales both in dollars and as a percentage of net sales and decrease in gross margin were primarily due to inventory write downs, sales of some products at or below cost and the product mix shift, including increased sales of low-margin products. Inventory write downs during 2008 were approximately $2.5 million, or 1.2% of cost of sales, and in addition, we sold product below our cost in order to reduce inventory levels and incurred costs of $3.0 million on these products. These actions primarily resulted from of the abrupt shift in market conditions and resulted in decreased demand, particularly in Central America, in the second half of 2008. We had immaterial inventory write down in 2007. Some of our OEM partners that had previously entered into the low-tier handset range continued to sell a higher amount of low-tier handsets, which had less margin opportunity than mid-tier and high-end handsets sales. Our gross margin continues to be impacted by the change of product and regional mix of our sales, as different products and different regions have varying margins. The worsening economic downturn has also reduced consumer demand for higher-priced and higher-margin products.

For the year ended December 31, 2008, our gross profit decreased to $10.0 million from $11.7 million, as compared with the year ended December 31, 2007, a decrease of 14%. This decrease in gross profit was primarily the result of the inventory write down of $2.5 million during 2008 as well

as sales of certain products below cost in efforts to reduce inventory levels and carrying costs. In addition, a decrease in gross margin due to product mix shift, as well as other factors resulting from the general economic downturn, negatively impacted gross profit.

                            For the Year Ended December 31,        Increase
                                2008                2007          (Decrease)
                                    (Dollar amounts
                                     in thousands)
          Net sales        $       213,223     $       214,462             (1 )%
          Cost of sales            203,210             202,803              1 %

          Gross profit     $        10,013     $        11,659            (14 )%

          Gross margin                 4.7 %               5.4 %          (14 )%

Operating Expense and Operating Loss from Continuing Operations

For the year ended December 31, 2008, operating expense increased almost 5%, to $13.9 million as compared with last year. As a percentage of net sales from continuing operations, operating expense increased to 6.5% in the year ended December 31, 2008, as compared with 6.2% for last year. The increase in operating expense as a percentage of net sales was primarily due to the increase in marketing activities related to sales of our products, as we continue to create brand awareness at the point of sale. Marketing expenses increased approximately $0.7 million in 2008 as compared to 2007. In addition we had product tooling and engineering expenses related to the verykoolŪ products during 2008 increase $1.1 million in 2008 as compared to 2007. Marketing, tooling and engineering increases were primarily due to the increased penetration and by sales of our verykoolŪ branded products. We believe that pursuant to our efforts, and assuming economic conditions improve, future sales and margins could provide gross profits to better cover operational costs. In addition, management continues to review expenses in an effort to better match the operational costs with the future business opportunities. We believe such measures will assist us as we strive to return to profitability. Operating expense for the year ended December 31, 2008 included non-cash expense related to stock options of $94,000, as compared to $143,000 in the year ended December 31, 2007.

For the year ended December 31, 2008, our operating loss from continuing operations was $3.9 million, as compared with a loss of $1.6 million for the year ended December 31, 2007. As a percentage of net sales, operating loss from continuing operations was 2% for the year ended December 31, 2008, compared to a loss of 1% for the year ended December 31, 2007. The increase in operating loss from continuing operations was a result of the decrease in gross margin and gross profit (related primarily to inventory write downs and product sales below cost) and the increase in operational expenses (most notably relating to marketing, product tooling and engineering) as discussed above.

                               Operating Expense


                                 For the Year Ended December 31,        Increase
                                     2008                2007          (Decrease)
                                         (Dollar amounts
                                          in thousands)
     Net sales                  $       213,223     $       214,462             (1 )%
     Operating expense          $        13,900     $        13,255              5 %
     Percentage of net sales                6.5 %               6.2 %            5 %

                   Operating Loss from Continuing Operations

                                         For the Year Ended
                                            December 31,             Increase
                                        2008            2007        (Decrease)
                                          (Dollar amounts
                                           in thousands)
       Net sales                      $ 213,223       $ 214,462              (1 )%
       Operating loss from            $  (3,887 )     $  (1,595 )           144 %
       continuing operations
       Percentage of net sales             (1.8 )%         (0.7 )%          157 %

Other Income

During 2008, we settled an outstanding claim against a former service provider in which we received a gross amount of $655,000, of which $87,000 represented reimbursement for legal fees, and also had a gain from an insurance settlement. During 2007, we received $2.1 million in compensation from our early lease termination and relocation of our corporate headquarters. During 2008, we also incurred $545,000 of interest expense, compared to $901,000 for last year, primarily due to a lower average outstanding balance on our line of credit as well as generally lower borrowing rates. We expect to regularly utilize our revolving line of credit, which will impact our interest expense in future periods, depending on applicable interest rates and amounts drawn from the line.

                               Year Ended December 31,
                               2008               2007         Increase (Decrease)
                            (Dollar amounts in thousands)
    Other Income            $        583       $      2,080                     (72 )%
    Interest expense                (545 )             (901 )                   (40 )%

    Other income, total     $         38       $      1,179                     (97 )%

Loss from Continuing Operations

During the year ended December 31, 2008, our loss from continuing operations was $6.3 million, as compared to income from continuing operations of $0.7 million for the year ended December 31, 2007. Included in this loss is a non-cash valuation allowance of $3.2 million related to our deferred tax assets (see Note 10-Income Taxes), in addition to the $2.5 million of inventory write downs taken during the year, which enabled us to significantly reduce inventory levels and the associated carrying costs. This loss from continuing operations was also impacted by the decreases in gross margin and gross profit, impacted by sales at or below cost on certain products, increased operational expenses (marketing, product tooling and engineering), and the impact of the general economic downturn which affected our sales regions. The prior year's income from continuing operations of $0.7 million primarily resulted from the compensation we received from our early lease termination of our former corporate headquarters.

                                         For the Year Ended
                                            December 31,            Increase
                                        2008            2007       (Decrease)
                                         (Dollar amounts in
                                             thousands)
       Net sales                      $ 213,223       $ 214,462              (1 )%
       Net income (loss) from         $  (6,309 )     $     685          (1,021 )%
       continuing operations
       Percentage of net sales             (3.0 )%          0.3 %        (1,100 )%

Loss from Discontinued Operations

During the second quarter of 2008, we assessed opportunities in the United States and Mexico and decided to implement actions necessary to close sales operations in both of those countries, which we substantially completed in the second half of the year. For the year ended December 31, 2008, we incurred a loss of $4.1 million from discontinued operations, as compared to a loss of $2.3 million for the year ended December 31, 2007. The loss was a result of very low sales in the U.S. and Mexico during 2008, as we wound down our business in these areas. As of December 31, 2008, our plans for the discontinued operations were substantially completed; however, we will continue to record adjustments and expenses through the discontinued operations as necessary.

Net Loss

    During the year ended December 31, 2008, our net loss was $10.4 million,
compared to net loss of $1.6 million in the same period in 2007. This loss was
primarily related to the factors discussed above, including the inventory write
down, marketing, engineering and tolling expense as well as the non-cash
valuation allowance for the deferred tax assets.

                                         For the Year Ended
                                            December 31,             Increase
                                        2008            2007        (Decrease)
                                         (Dollar amounts in
                                             thousands)
       Net sales                      $ 213,223       $ 214,462               (1 )%
       Net loss                       $ (10,415 )     $  (1,615 )           (544 )%
       Percentage of net sales             (4.9 )%         (0.8 )%          (713 )%

Year Ended December 31, 2007 Compared With Year Ended December 31, 2006

Net Sales

For the year ended December 31, 2007, our net sales of $214.5 million decreased from our net sales of $228.8 million for the year ended December 31, 2006. Handsets sold during the year ended December 31, 2007 increased 20%, as compared to the same period in 2006; however, this increase was more than offset by a decrease in the average selling price of 15%. The geographic mix of net sales slightly shifted for the year ended December 31, 2007, as compared to the same period of 2006. Our net sales in Central America decreased to 34% of our net sales for the year ended December 31, 2007, as compared to 35% of net sales for the same period of 2006. Our South America region continued to represent the majority of our business, accounting for 66% of our net sales for 2007, as compared to 65% for 2006. The Central America region had excess inventory in the channel during the first quarter of 2007, however, channel inventory began to return to normalized levels during the second quarter and remained so for the balance of 2007 enabling sales to increase and end the year at nearly one-third of total net sales. In South America, our efforts enabled sales to new customers and new countries as well as additional sales to existing customers. These increases were offset by the decrease in overall average product unit selling price due to our manufacturing partners entering into the low-tier product segment.

                                                    For the Year Ended
                                                       December 31,
                                                   2007            2006
                                                    (Dollar amounts in
                                                        thousands)
          Net sales                                214,462         228,825
          Units sold, increase over prior               20 %           119 %
          year
          Average selling price, decrease              (15 )%          (24 )%
          over prior year

Net Sales by Geographic Region


                             Year ended December 31,
                              2007               2006        Increase (Decrease)
                          (Dollar amounts in thousands)
      South America       $       141,180       $ 148,626                      (5 )%
      Central America              73,282          80,199                      (9 )%

      Totals              $       214,462       $ 228,825                      (6 )%