CREATIVE REALITIES, INC. - Quarter Report: 2008 March (Form 10-Q)

 

 

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 MARCH 31, 2008

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

FOR THE TRANSITION PERIOD FROM                      TO                     

Wireless Ronin Technologies, Inc.

Minnesota (State or other jurisdiction of incorporation or organization)		41-1967918 (I.R.S. Employer 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		Smaller reporting company o
		(Do not check if a smaller reporting company)

     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 May 1, 2008, the registrant had 14,544,593 shares of common stock outstanding.

 

 

WIRELESS RONIN TECHNOLOGIES, INC.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION							3
		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			25
		ITEM 4		CONTROLS AND PROCEDURES			26
PART II OTHER INFORMATION							26
		ITEM 1		LEGAL PROCEEDINGS			26
		ITEM 1A		RISK FACTORS			26
		ITEM 2		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			28
		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
Employment Agreement, dated as of August 16, 2007
Employment Agreement, dated as of February 11, 2008
Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a)
Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14(a)
Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350
Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350
Cautionary Statement, dated May 9, 2008

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

WIRELESS RONIN TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,
		2008				2007
		(unaudited)				(audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	11,436,844			$	14,542,280
Marketable securities — available for sale			14,220,141				14,657,635
Accounts receivable, net of allowance of $93,533 and $84,685			3,472,996				4,135,402
Income tax receivable			146,766				231,328
Inventories			621,703				539,140
Prepaid expenses and other current assets			836,104				817,511
Total current assets			30,734,554				34,923,296
Property and equipment, net			2,052,143				1,780,390
Intangible assets, net			2,911,620				3,174,804
Restricted cash			450,000				450,000
Other assets			38,057				40,217
TOTAL ASSETS		$	36,186,374			$	40,368,707
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of capital lease obligations		$	80,392			$	100,023
Accounts payable			1,302,009				1,387,327
Deferred revenue			1,211,439				1,252,485
Accrued purchase price consideration			999,974				999,974
Accrued liabilities			805,614				869,759
Total current liabilities			4,399,428				4,609,568
Capital lease obligations, less current maturities			52,055				70,960
TOTAL LIABILITIES			4,451,483				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; 14,544,260 and 14,537,705 shares issued and outstanding			145,443				145,377
Additional paid-in capital			79,137,714				78,742,311
Accumulated deficit			(47,717,354	)			(43,520,098	)
Accumulated other comprehensive income			169,088				320,589
Total shareholders’ equity			31,734,891				35,688,179
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	36,186,374			$	40,368,707

See accompanying Notes to Consolidated Financial Statements.

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

		Three Months Ended
		March 31,
		2008				2007
Sales
Hardware		$	763,293			$	36,105
Software			98,291				62,742
Services and other			1,071,930				97,589
Total sales			1,933,514				196,436
Cost of sales
Hardware			635,020				50,129
Services and other			899,776				53,134
Total cost of sales			1,534,796				103,263
Gross profit			398,718				93,173
Operating expenses:
Sales and marketing expenses			1,219,794				624,649
Research and development expenses			454,360				249,431
General and administrative expenses			3,186,707				1,756,589
Termination of partnership agreement			—				653,995
Total operating expenses			4,860,861				3,284,664
Operating loss			(4,462,143	)			(3,191,491	)
Other income (expenses):
Interest expense			(7,197	)			(10,881	)
Interest income			272,084				153,298
Other			—				(1,491	)
Total other income			264,887				140,926
Net loss		$	(4,197,256	)		$	(3,050,565	)
Basic and diluted loss per common share		$	(0.29	)		$	(0.31	)
Basic and diluted weighted average shares outstanding			14,544,181				9,832,288

See accompanying Notes to Consolidated Financial Statements.

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

		Three Months Ended
		March 31,
		2008				2007
Operating Activities:
Net loss		$	(4,197,256	)		$	(3,050,565	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			113,295				66,366
Amortization of acquisition-related intangibles			137,651				—
Allowance for doubtful receivables			9,120				—
Stock-based compensation expense			395,219				596,020
Change in operating assets and liabilities:
Accounts receivable			617,569				(1,520	)
Income tax receivable			76,908				—
Inventories			(82,564	)			(68,573	)
Prepaid expenses and other current assets			(20,369	)			14,940
Other assets			1,350				2,500
Accounts payable			(78,351	)			(337,361	)
Deferred revenue			(34,260	)			829,310
Accrued liabilities			(59,551	)			(215,576	)
Net cash used in operating activities			(3,121,239	)			(2,164,459	)
Investing activities
Purchases of property and equipment			(403,542	)			(151,416	)
Purchases of marketable securities			(6,754,422	)			(1,499,439	)
Sales of marketable securities			7,215,556				—
Net cash provided by (used in) investing activities			57,592				(1,650,855	)
Financing activities
Payments on capital leases			(38,309	)			(23,915	)
Proceeds from exercise of warrants and stock options			249				32,000
Net cash (used in) provided by financing activites			(38,060	)			8,085
Effect of exchange rate changes on cash			(3,729	)			—
Decrease in cash and cash equivalents			(3,105,436	)			(3,807,229	)
Cash and cash equivalents, beginning of period			14,542,280				8,273,388
Cash and cash equivalents, end of period		$	11,436,844			$	4,466,159

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 and majority-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

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

	•		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. The fair value of hardware is based on a stand-alone market price of cost plus margin.

     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.

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

      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:

		March 31,
		2008
Cost incurred on uncompleted contracts		$	119,655
Estimated earnings			307,836
			427,491
Less: billings to date			(557,524	)
		$	(130,033	)

      Implementation services

Implementation services revenue is recognized when installation is completed.

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

      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 security and collateral related to certain outstanding receivables at March 31, 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 months ended March 31, 2008 or 2007. Software development costs have been recorded as research and development expense.

4. Accounting for Stock-Based Compensation

     In the first quarter of 2006, the Company adopted SFAS No. 123 (Revised 2004), “Share-Based Payment,” (“SFAS 123R”), which revises SFAS 123, “Accounting for Stock-Based Compensation” (SFAS 123) and supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25). 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. The Company adopted SFAS 123R effective January 1, 2006, prospectively for new equity awards issued subsequent to January 1, 2006.

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

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

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

     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 impact the Company’s results of operations or financial position.

     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.

     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.

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

     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. The Company does not believe that the adoption of SFAS 161 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

		March 31,				December 31,
		2008				2007
Finished goods		$	331,344			$	318,451
Work-in-process			290,359				220,689
Total inventories		$	621,703			$	539,140

     The Company has recorded adjustments to reduce inventory values to the lower of cost or market for certain finished goods, product components and supplies.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

		March 31,				December 31,
		2008				2007
Deferred project costs		$	524,505			$	476,679
Prepaid expenses			311,599				340,832
Total prepaid expenses and other current assets		$	836,104			$	817,511

     Deferred project costs represent incurred costs to be recognized as cost of sales once all revenue recognition criteria have been met.

PROPERTY AND EQUIPMENT

		March 31,				December 31,
		2008				2007
Leased equipment		$	380,908			$	380,908
Equipment			1,048,983				923,549
Leasehold improvements			325,387				313,021
Demonstration equipment			141,311				127,556
Purchased software			430,836				226,003
Furniture and fixtures			576,987				581,355
Total property and equipment		$	2,904,412			$	2,552,392
Less: accumulated depreciation			(852,269	)			(772,002	)
Net property and equipment		$	2,052,143			$	1,780,390

OTHER ASSETS

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

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

DEFERRED REVENUE

		March 31,				December 31,
		2008				2007
Deferred customer billings		$	950,065			$	950,066
Deferred software maintenance			79,954				90,197
Customer deposits			135,360				166,162
Deferred project revenue			46,060				46,060
Total deferred revenue		$	1,211,439			$	1,252,485

ACCRUED LIABILITIES

		March 31,				December 31,
		2008				2007
Compensation		$	436,769			$	590,737
Accrued remaining lease obligations			149,968				170,793
Accrued rent			91,335				79,131
Sales tax and other			127,542				29,098
Total accrued liabilities		$	805,614			$	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 on investments. Comprehensive loss for the three months ended March 31, 2008 and 2007 was as follows:

		Three Months Ended
		March 31,
		2008				2007
Net loss		$	(4,197,256	)		$	(3,050,565	)
Foreign currency translation adjustment			(175,141	)			—
Unrealized gain on investments			23,640				27,533
Comprehensive loss		$	(4,348,757	)		$	(3,023,032	)

SUPPLEMENTAL CASH FLOW INFORMATION

		Three Months Ended
		March 31,
		2008				2007
Cash paid for:
Interest		$	6,310			$	10,881

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

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:

		March 31, 2008
		Gross				Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
		Cost				Gains				(Losses)				Value
Money market funds		$	10,753,849				—			$	(413	)		$	10,753,436
Total included in cash and cash equivalents			10,753,849				—				(413	)			10,753,436
Government and agency securities			14,087,068				133,073				—				14,220,141
Total included in marketable securities			14,087,068				133,073				—				14,220,141
Total available-for-sale securities		$	24,840,917			$	133,073			$	(413	)		$	24,973,577

		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			14,569,367				89,931				(1,663	)			14,657,635
Total included in marketable securities			14,569,367				89,931				(1,663	)			14,657,635
Total available-for-sale securities		$	28,615,105			$	89,974			$	(1,678	)		$	28,703,401

     The Company measures certain financial assets at fair value on a recurring basis, including cash equivalents and available-for-sale securities. 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 March 31, 2008 includes money market funds of $10.8 million, which are included in cash and cash equivalents in the consolidated balance sheets and $14.2 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 fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well established independent pricing vendors and broker-dealers. The Company had no Level 2 financial assets measured at fair value on the consolidated balance sheets as of March 31, 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 March 31, 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

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

measurement date. The Company did not have any financial liabilities that were covered by SFAS No. 157 as of March 31, 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

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

     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
		March 31,
		2008				2007
Sales		$	1,933,514			$	1,036,714
Loss from operations			(4,462,143	)			(3,289,035	)
Net loss			(4,197,256	)			(3,213,960	)
Basic and diluted loss per common share		$	(0.29	)		$	(0.33	)
Basic and diluted weighted average shares outstanding			14,544,181				9,882,288

     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:

		March 31,				December 31,
		2008				2007
Cost		$	380,908			$	380,908
Less: accumulated amortization			(277,629	)			(260,950	)
Total		$	103,279			$	119,958

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

     Amortization expense for capital lease assets was approximately $17,000 and $27,000 for the three months ended March 31, 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 $123,066 and $23,725 for the three months ended March 31, 2008 and 2007, respectively.

     Future minimum lease payments for operating leases are as follows:

At March 31, 2008		Lease Obligations
2008		$	324,799
2009			333,809
2010			204,730
2011			200,706
2012			192,472
Thereafter			15,398
Total future minimum obligations		$	1,271,914

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 March 31, 2008 was $149,968. 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:

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

		December 31,				Adjustments				March 31,
		2007				to Estimates				2008
Costs to be incurred:
Existing rental payments		$	148,787			$	(19,407	)		$	129,380
Expected operating		$	63,365			$	(8,265	)		$	55,100
Unamortized leasehold improvements		$	79,967			$	(10,431	)		$	69,536
Listing agent fee		$	30,429			$	(3,969	)		$	26,460
Sublease receipts
Expected sublease rental income		$	74,394			$	(9,704	)		$	64,690
Expected reimbursement of operating costs		$	63,365			$	(8,265	)		$	55,100

     As of March 31, 2008, the Company had incurred costs of $56,850 in rent for the former office space since vacating the property. Also, the former office space has not been subleased as of March 31, 2008, but the Company is actively searching for a sub-lessee. 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 statement of operations.

Litigation

     The Company was not party to any material legal proceedings as of May 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
		March 31,
		2008				2007
Stock-based compensation costs included in:
Sales and marketing expenses		$	50,483			$	30,521
Research and development expenses			26,517				30,359
General and administrative expenses			318,219				535,140
Total stock-based compensation expenses		$	395,219			$	596,020

     At March 31, 2008, there was approximately $2,761,000 of total unrecognized compensation expense related to unvested share-based awards. The expense will be recognized ratably over the next 4 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 $2.64 and $3.74 per share for the three months ended March 31, 2008 and 2007, respectively. These values were calculated using the following weighted average assumptions:

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

		Three Months Ended
		March 31,
		2008				2007
Expected life		3.75 Years				3.57 Years
Dividend yield			0	%			0	%
Expected volatility			98.4	%			97.0	%
Risk-free interest rate			2.8	%			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 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 have been 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 will be June 30, 2008.

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 location of end customer, are summarized as follows:

		Three Months Ended
		March 31,
		2008				2007
United States		$	1,536,337			$	147,161
Canada			393,038				49,275
Mexico			4,139				—
Total Sales		$	1,933,514			$	196,436

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

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

		March 31,				March 31,
		2008				2007
Property and equipment, net:
United States		$	1,512,681			$	608,888
Canada			539,462				—
Total		$	2,052,143			$	608,888
Intangible assets, net:
United States		$	—			$	—
Canada			2,911,620				—
Total		$	2,911,620			$	—

     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
		March 31,
Customer		2008				2007
NewSight Corporation			*				21.2	%
Chrysler (BBDO Detroit/Windsor)			34.0	%			*
KFC			27.2	%			*
BigEye Productions			*				24.2	%
Frio River Consultants, Inc.			*				13.1	%
			61.2	%			58.5	%

     Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of accounts receivable. As of March 31, 2008, a significant portion of the Company’s accounts receivable was concentrated with one customer. Customers with greater than 10% of total accounts receivable are represented on the following table:

		March 31,				March 31,
Customer		2008				2007
NewSight Corporation			69.4	%			21.2	%
Chrysler (BBDO Detroit/Windsor)			12.2	%			*
BigEye Productions			*				24.3	%
Frio River Consultants, Inc.			*				13.1	%
			81.6	%			58.6	%

     If NewSight Corporation (“NewSight”) (see Note 11) fails to make payment when due under its $2.3 million promissory note, the Company would seek to enforce the security agreement and utilize collateral to satisfy NewSight’s debt obligation to the Company. Although the Company believes that the security agreement with NewSight is valid and enforceable, that the subordination agreement with Prentice Capital Management provides the Company with a first priority position with respect to the collateral, and that the financing statement the Company filed with the Delaware Secretary of State is valid and enforceable, NewSight’s debt obligation to the Company might not be fully collectible. Although the Company believes that no valuation allowance is

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

presently necessary for the NewSight net receivable balance of $2.3 million due to its estimate of the value of the collateral, including collateral held in warehouses and its estimate of the value of the hardware composing the Meijer Network, in the case of insolvency by NewSight, the Company may not be able to fully recover the amount of the note receivable, which could adversely affect the Company’s financial position.

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 months ended March 31, 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 loss per share is the same as basic 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 per share:

		Three Months Ended
		March 31,
		2008				2007
Net loss		$	(4,197,256	)		$	(3,050,565	)
Shares used in computing basic net loss per share			14,544,181				9,832,288
Outstanding dilutible stock options			—				—
Shares used in computing diluted net loss per share			14,544,181				9,832,288
Basic net loss per share		$	(0.29	)		$	(0.31	)
Diluted net loss per share		$	(0.29	)		$	(0.31	)

     Shares reserved for outstanding stock warrants and options totaling 3,630,545 and 3,602,019 for the three months ended March 31, 2008 and 2007, respectively, were excluded from the computation of loss per share as their effect was antidilutive.

NOTE 11: SUBSEQUENT EVENTS

Agreements with NewSight

     In January 2008, the Company extended the maturity date of the Secured Promissory Note (the “Note”) issued by NewSight to the Company in October 2007. Pursuant to such extension, the Note was to mature on the first to occur of (1) successful completion of NewSight’s financing efforts, or (2) March 31, 2008. NewSight subsequently advised the Company that it was still in the process of raising capital, and requested that the maturity date of the Note be further extended.

     On April 4, 2008, the Company entered into a letter agreement with NewSight (the “Letter Agreement”) pursuant to which the Note will now mature on the first to occur of (1) May 30, 2008 or (ii) the completion of NewSight’s next financing transaction, generally excluding any financing solely from Prentice Capital Management, L.P. or its affiliates.

     Under the Letter Agreement, NewSight agreed to pay the Company a total of $59,517, in immediately available funds, representing the amount due for network operating and maintenance services the Company provided to NewSight in February and March 2008, and reimbursement of warehouse fees the Company paid for the storage of equipment owned by NewSight in which the Company has a security interest.

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

     The Letter Agreement provides that the amount due under the Note will be due and payable immediately upon the occurrence of one or more of the following events: (1) termination of NewSight’s relationship with its banker; (2) NewSight’s breach of or default under any agreement by and between NewSight and the Company, including the Letter Agreement (in each case after giving effect to any applicable cure periods described therein); (3) NewSight’s completion of a financing transaction which yields gross proceeds of at least $5,000,000, including any financing from Prentice Capital Management, L.P. or its affiliates; or (4) NewSight’s failure to pay the amount set forth above by the close of business on April 7, 2008. The Letter Agreement specifies that, except as the Company and NewSight may subsequently agree in writing, no additional credit will be extended to NewSight by the Company pursuant to the Note or on trade credit terms.

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 in this document under “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 solution, a digital alternative to static signage, provides 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

     See Note 1, Nature of Operations and Summary of Significant Accounting Policies.

Results of Operations

     The following table sets forth, for the periods indicated, certain unaudited Consolidated Statements of Operations information:

		Three Months Ended
		March 31,				% of total				March 31,				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
Sales		$	1,933,514				100	%		$	196,436				100	%		$	1,737,078				884	%
Cost of sales			1,534,796				79	%			103,263				53	%			1,431,533				1386	%
Gross profit (loss)			398,718				21	%			93,173				47	%			305,545				328	%
Sales and marketing expenses			1,219,794				63	%			624,649				318	%			595,145				95	%
Research and development expenses			454,360				23	%			249,431				127	%			204,929				82	%
General and administrative expenses			3,186,707				165	%			1,756,589				894	%			1,430,118				81	%
Termination of partnership agreement			—				0	%			653,995				333	%			(653,995	)			-100	%
Total operating expenses			4,860,861				251	%			3,284,664				1672	%			1,576,197				48	%
Operating loss			(4,462,143	)			-231	%			(3,191,491	)			-1625	%			(1,270,652	)			40	%
Other income (expenses):
Interest expense			(7,197	)			0	%			(10,881	)			-6	%			3,684				-34	%
Interest income			272,084				14	%			153,298				78	%			118,786				77	%
Other			—				0	%			(1,491	)			-1	%			1,491				-100	%
Total other income (expense)			264,887				14	%			140,926				72	%			123,961				88	%
Net loss		$	(4,197,256	)			-217	%		$	(3,050,565	)			-1553	%		$	(1,146,691	)			38	%

		Three Months Ended
		March 31,				% of total				March 31,				% of total				$ Increase				% Increase
		2008				sales				2007				sales				(Decrease)				(Decrease)
United States		$	1,536,337				80	%		$	147,161				75	%		$	1,389,176				944	%
Canada			393,038				20	%			49,275				25	%			343,763				698	%
Mexico			4,139				0	%			—				0	%			4,139				413900	%
Total Sales		$	1,933,514				100	%		$	196,436				100	%		$	1,737,078				884	%

Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007

Sales

     Our sales increased 884% or $1,737,078 to $1,933,514 for the three months ended March 31, 2008, compared to the same period in the prior year. Sales increased $1,018,300 resulting from our acquisition of McGill Digital Solutions, Inc. in August 2007, while hardware sales and installations increased approximately $597,000 and software, network hosting and other services increased approximately $122,000 due to the growth in our business.

Cost of Sales

     Our cost of sales increased 1,386% or $1,431,533 to $1,534,796 for the three months ended March 31, 2008 compared to the same period in the prior year. The increase in cost of sales was due to a higher mix of lower margin hardware sales.

Operating Expenses

     Our operating expenses increased 48% or $1,576,197 to $4,860,861 for the three months ended March 31, 2008 compared to the same period in the prior year. The acquisition of McGill accounted for approximately $912,000 of this increase in operating expenses for the three month period ended March 31, 2008. In addition, salaries and benefits increased approximately $742,000 directly related to our increase in headcount from 37 to 61 associates, partially offset by a decrease in stock compensation expense of approximately $201,000. Our rent and utilities increased approximately $61,000 for the three months ended March 31, 2008 due to moving to larger office space. We also increased our advertising costs by approximately $158,000 as a result of tradeshow participation and the continued marketing of RoninCast. Our expenses also increased due to higher professional fees of approximately $414,000 for the three months ended March 31, 2008, largely due to the expense of being a

public entity and growth of our business. Depreciation, insurance, telephone, travel and other expenses increased approximately $144,000 mainly due to the growth of our business. The increases above for the three months ended March 31, 2008 were partially offset by a decrease of approximately $654,000 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 $654,000 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 by $3,684 to $7,197 from $10,881 for the three months ended March 31, 2008 compared to the same period in the prior year. The decrease was the result of reduced debt balances under our capital leases.

Interest Income

     Interest income increased by $118,786 for the three months ended March 31, 2008 compared to the same period in the prior year. The increase in interest income was due to significantly higher cash balances as a result of the follow-on offering we closed in June 2007.

Liquidity and Capital Resources

Operating Activities

     We do not currently generate positive cash flow. Our investments in infrastructure have been greater than sales generated to date. As of March 31, 2008, we had an accumulated deficit of $47,717,354. The cash flow used in operating activities was $3,121,239 and $2,164,459 for the three months ended March 31, 2008 and 2007, respectively. The increase in cash used in operations was due to the increase in our net loss during the three months ended March 31, 2008 as compared to the three months ended March 31, 2007. Based on our current expense levels, 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 $57,592 in the three months ended March 31, 2008, versus cash used of $1,650,855 for the three months ended March 31, 2007. The increase in cash was due to net sales of marketable securities of $461,134 offset by purchases of capital equipment of $403,542 in the three months ended March 31, 2008. For the three months ended March 31, 2007, cash used in investing activities was due to net purchases of marketable securities of $1,499,439 and purchases of capital equipment of $151,416. Marketable securities consisted of debt securities issued by federal government agencies with maturity dates in 2008.

Financing Activities

     We have financed our operations primarily from sales of common stock, exercise of warrants, and the issuance of notes payable to vendors, shareholders and investors. For the three months ended March 31, 2008 and 2007, these activities were insignificant.

     We believe we can continue to develop our sales to a level at which we will become cash flow positive. Based on our current expense levels and existing capital resources, 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 March 31, 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 March 31, 2008 was $149,968.

     The following table summarizes our obligations under contractual agreements as of March 31, 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)		$	150,321			$	74,051			$	76,270			$	—			$	—
Operating Lease Obligations			1,271,913				324,798				538,539				393,178				15,398
Total		$	1,422,234			$	398,849			$	614,809			$	393,178			$	15,398

     Based on our working capital position at March 31, 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 losses on our deposits of our cash, cash equivalents, or marketable securities.

     We currently have outstanding approximately $132,000 of capital lease obligations at a fixed interest rate. 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/(loss).

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 March 31, 2008, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

     There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 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 May 1, 2008.

Item 1A. Risk Factors

     The discussion of our business and operations should be read together with the risk factors set forth in this document under “Cautionary Statement.” 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.

     The following risk factors, which were originally presented on our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007, are hereby amended and restated:

Our operations and business are subject to the risks of an early stage company with limited revenue and a history of operating losses. We have incurred losses since inception, and we have had only nominal revenue. We may not ever become or remain profitable.

     Since inception, we have had limited revenue from the sale of our products and services, and we have incurred net losses. We incurred net losses of $10,086,385 and $14,787,737 for the years ended December 31, 2007 and 2006, respectively, and a net loss of $4,197,256 for the three months ended March 31, 2008. As of March 31, 2008, we had an accumulated deficit of $47,717,354. We expect to increase our spending significantly as we continue to expand our infrastructure and our sales and marketing efforts and continue research and development.

     We have not been profitable in any year of our operating history and anticipate incurring additional losses into the foreseeable future. We do not know whether or when we will become profitable. Even if we are able to achieve profitability in future periods, we may not be able to sustain or increase our profitability in successive periods. We may require additional financing in the future to support our operations. For further information, please review the risk factor “Adequate funds for our operations may not be available, requiring us to curtail our activities significantly” below.

     We have formulated our business plans and strategies based on certain assumptions regarding the acceptance of our business model and the marketing of our products and services. However, our assessments

regarding market size, market share, market acceptance of our products and services and a variety of other factors may prove incorrect. Our future success will depend upon many factors, including factors which may be beyond our control or which cannot be predicted at this time.

During 2007, sales to one customer generated over 40 percent of our revenue and any decrease in revenue from, or credit loss associated with, this customer, who has reprioritized its digital signage projects and recently negotiated an extension of the maturity date of the $2.3 million promissory note it has issued us, or any credit loss associated with any other customer, could have an adverse effect on our net revenue and operating results.

     Due to our dependence on a limited number of customers, we are subject to a concentration of credit risk with respect to a single note receivable and accounts receivable in general. The note receivable due from our largest customer amounted to $2.3 million as of March 31, 2008. As noted above, this customer has advised us of its re-prioritization of its planned digital signage implementations. In January 2008, we extended the maturity date of this promissory note pursuant to which it was scheduled to mature on the first to occur of (1) successful completion of this customer’s financing efforts, or (2) March 31, 2008. In April 2008, we further extended the maturity date of this promissory note. It is now scheduled to mature on the first to occur of (1) May 30, 2008 or (2) the completion of this customer’s next financing transaction (excluding financing solely from a particular party or its affiliates).

     In the case of insolvency by one of our significant customers, a note receivable or an account receivable with respect to that customer might not be collectible, might not be fully collectible, or might be collectible over longer than normal terms, each of which could adversely affect our financial position. In addition, in the case of insolvency by our largest customer and notwithstanding the related security agreement pursuant to which we acquired a security interest in certain collateral, we may not be able to fully recover the amount of the note receivable, which could adversely affect our financial position. Furthermore, the value of the collateral which serves to secure such obligation is likely to deteriorate over time due to obsolescence caused by new product introductions and due to wear and tear suffered by those portions of the collateral installed and in use. There can be no assurance that we will not suffer credit losses in the future.

Our ability to execute our business strategy depends on our ability to protect our intellectual property, and if any third parties make unauthorized use of our intellectual property, or if our intellectual property rights are successfully challenged, our competitive position and business could suffer.

     Our success and ability to compete depends substantially on our proprietary technologies. We regard our copyrights, service marks, trademarks, trade secrets and similar intellectual property as critical to our success, and we rely on trademark and copyright law, trade secret protection and confidentiality agreements with our employees, customers and others to protect our proprietary rights. Despite our precautions, unauthorized third parties might copy certain portions of our software or reverse engineer and use information that we regard as proprietary. In addition, confidentiality agreements with employees and others may not adequately protect against disclosure of our proprietary information.

     As of April 14, 2008, we had one U.S. patent and three U.S. and one Canadian patents pending relating to various aspects of our RoninCast^® system. We cannot provide assurance that any additional patents will be granted. Even if they are granted, our patents may be successfully challenged by others or invalidated. In addition, any patents that may be granted to us may not provide us a significant competitive advantage. Although we have been granted patents and trademarks, they could be challenged in the future. If future trademark registrations are not approved because third parties own these trademarks, our use of these trademarks would be restricted unless we enter into arrangements with the third party owners, which might not be possible on commercially reasonable terms or at all. If we fail to protect or enforce our intellectual property rights successfully, our competitive position could suffer. We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and may lose competitive position in the market. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share.

Our results of operations may depend upon selling our products to customers requiring large-scale rollouts and large-scale monitoring and maintenance, which we have not previously conducted.

     Our results of operations may depend upon selling our products to those companies, and within those industries, that have many sites that could benefit from digital signage systems. Digital signage systems installation projects deploying hundreds or even thousands of systems present significant technical and logistical challenges that we have not yet demonstrated our ability to overcome. Digital signage technology employs sophisticated hardware and software that constantly evolves. Sites into which digital signage systems may be installed vary widely, including such factors as interference with wireless networks, ambient light, extremes of temperature and other factors that may make each individual location unique. Managing the process of installing hundreds or thousands of dynamic, complicated digital signage systems into unique environments may present difficulties that we have not yet faced on projects performed to date with smaller numbers of digital signage systems. If our customers opt to engage us to provide system monitoring and maintenance services through our network operations center (“NOC”) on one or more large-scale implementations, we may not successfully or profitably monitor and maintain the hardware, software and content in a manner satisfactory to our customers or in compliance with our contractual obligations. The efficiency and effectiveness of NOC monitoring and maintenance are directly affected by our software and that software’s ability to monitor our customers’ systems. For large-scale implementations, we may need to further develop our software to facilitate efficient and effective system monitoring and maintenance. We cannot assure you that we will succeed in developing our software, digital signage systems, project management and infrastructure to successfully implement, monitor, manage and maintain large-scale implementation projects or ongoing operations. Our failure to do so could harm our business and financial condition.

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

     On January 18, 2008, an accredited investor who held a five-year warrant for the purchase of 555 shares of common stock at $0.45 per share exercised such warrant. We obtained gross proceeds of $250 in connection with this warrant exercise. The proceeds of the exercise were applied to working capital for general corporate purposes.

     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 receipt of such securities received, or had access to, material information concerning our company, including, but limited to, our reports on Form 10-KSB, Form 10-QSB 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 warrant.

Item 3. Defaults Upon Senior Securities

     None.

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

     None.

Item 5. Other Information

     We are filing herewith a Cautionary Statement pursuant to the Private Securities Litigation Reform Act of 1995 for use as a readily available written document to which reference may be made in connection with forward-looking statements, as defined in such act. Such Cautionary Statement appears as Exhibit 99 to this report and is incorporated by reference herein.

Item 6. Exhibits

     See “Exhibit Index.”

SIGNATURES

In accordance with 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.

EXHIBIT INDEX

Exhibit
Number		Description
3.1		Articles of Incorporation of the Registrant, as amended (incorporated by reference to our Pre-Effective Amendment No. 1 to our Form SB-2 filed on October 12, 2006 (File No. 333-136972)).
3.2		Bylaws of the Registrant, as amended (incorporated by reference to our Quarterly Report on Form 10-QSB filed on November 14, 2007 (File No. 001-33169)).
4.1		See exhibits 3.1 and 3.2.
4.2		Specimen common stock certificate of the Registrant (incorporated by reference to Pre-Effective Amendment No. 1 to our Form SB-2 filed on October 12, 2006 (File No. 333-136972)).
10.1		Letter Agreement by and between the Registrant and NewSight Corporation, dated January 7, 2008 (incorporated by reference to our Current Report on Form 8-K filed on January 9, 2008 (File No. 001-33169)).
10.2		Employment Agreement, dated as of August 16, 2007, between Wireless Ronin Technologies (Canada), Inc. and Robert W. Whent.
10.3		Employment Agreement, dated as of February 27, 2008, between the Registrant and Katherine A. Bolseth.
10.4		Letter Agreement by and between the Registrant and NewSight Corporation, dated April 4, 2008 (incorporated by reference to our Current Report on Form 8-K filed on April 8, 2008 (File No. 001-33169)).
31.1		Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a).
31.2		Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14(a).
32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350.
32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350.
99		Cautionary Statement, dated May 9, 2008.