As previously reported, on November 18, 2008, BSQUARE Corporation and TestQuest entered into an Asset Purchase Agreement (the "Agreement") pursuant to which we purchased certain assets of TestQuest, primarily intellectual property, including automated mobile and embedded device and application testing products, equipment, customer contracts and accounts receivable, for an aggregate cash purchase price of $2.1 million, after making permitted adjustments. The purchase price was paid from our cash on hand. We also assumed $190,000 in current liabilities, including employee-related liabilities and expenses, as well as additional ongoing obligations related to continued operations of the TestQuest business. Of the total cash purchase price, $1.9 million was paid prior to, or at, closing, and the remaining amount was paid on December 5, 2008.

(a) Financial Statements of Business Acquired.

The audited consolidated financial statements of TestQuest, Inc. as of September 30, 2008 and for the nine months then ended are filed as Exhibit 99.1 hereto.

(b) Pro forma Financial Information.

The unaudited pro forma condensed combined consolidated balance sheet and condensed combined statement of operations as of September 30, 2008 and for the nine months then ended are filed as Exhibit 99.2 hereto.

(d) Exhibits.

The following exhibits are furnished with this report:

Exhibit
Number                               Exhibit Description
 23.1     Consent of Independent Public Accounting Firm

 99.1     Audited Consolidated Financial Statements of TestQuest, Inc. as of
          September 30, 2008 and for the nine months then ended

 99.2     Unaudited Pro Forma Condensed Combined Consolidated Financial Information