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   &lt;p style="margin-top:6px;margin-bottom:0px; text-indent:4%"&gt;&lt;font style="font-family:times new roman" size="2"&gt;The accompanying unaudited condensed consolidated financial statements of BSQUARE Corporation (&amp;#8220;BSQUARE&amp;#8221;) have been prepared
   pursuant to the rules and regulations of the Securities and Exchange Commission (&amp;#8220;SEC&amp;#8221;) for interim financial reporting and include the accounts of BSQUARE and our wholly owned subsidiaries. Certain information and footnote disclosures
   normally included in the annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (&amp;#8220;GAAP&amp;#8221;) have been condensed or omitted pursuant to such rules and regulations. In our opinion, the
   unaudited condensed consolidated financial statements include all material adjustments, all of which are of a normal and recurring nature, necessary to present fairly our financial position as of June&amp;#160;30, 2013 and our operating results and cash
   flows for the three and six months ended June&amp;#160;30, 2013 and 2012. The accompanying financial information as of December&amp;#160;31, 2012 is derived from audited financial statements. Preparing financial statements requires us to make estimates and
   assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Examples include provisions for bad debts and income taxes, estimates of progress on professional engineering service arrangements and bonus accruals. Actual
   results may differ from these estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for
   the year ended December&amp;#160;31, 2012. All intercompany balances have been eliminated. &lt;/font&gt;&lt;/p&gt;
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   &lt;p style="margin-top:6px;margin-bottom:0px; text-indent:4%"&gt;&lt;font style="font-family:times new roman" size="2"&gt;In February 2013, the FASB issued ASU No.&amp;#160;2013-02, &amp;#8220;Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
   Income.&amp;#8221; Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (&amp;#8220;AOCI&amp;#8221;) by component. In addition, an entity is required to present, either on the
   face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting
   period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current
   requirements for reporting net income or other comprehensive income in the financial statements. Our adoption of ASU 2013-02 effective January&amp;#160;1, 2013 did not have any effect on our financial position, results of operations or cash flows.
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   &lt;p style="margin-top:18px;margin-bottom:0px; margin-left:2%"&gt;&lt;font style="font-family:times new roman" size="2"&gt;&lt;b&gt;&lt;i&gt;Income (Loss) Per Share &lt;/i&gt;&lt;/b&gt;&lt;/font&gt;&lt;/p&gt;
   &lt;p style="margin-top:6px;margin-bottom:0px; text-indent:4%"&gt;&lt;font style="font-family:times new roman" size="2"&gt;Basic income or loss per share is computed using the weighted average number of common shares outstanding during the period, and excludes
   any dilutive effects of common stock equivalent shares, such as options, restricted stock awards and restricted stock units. Restricted stock awards (&amp;#8220;RSAs&amp;#8221;) are considered outstanding and included in the computation of basic income or
   loss per share when underlying restrictions expire and the awards are no longer forfeitable. Restricted stock units (&amp;#8220;RSUs&amp;#8221;) are considered outstanding and included in the computation of basic income or loss per share only when vested.
   Diluted income per share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method. &lt;/font&gt;&lt;/p&gt;
   &lt;p style="margin-top:12px;margin-bottom:0px; text-indent:4%"&gt;&lt;font style="font-family:times new roman" size="2"&gt;Common stock equivalent shares of 978,661 and 913,911 and 1,219,774 and 1,119,688 were excluded from the computations of basic and
   diluted income per share for the three and six months ended June&amp;#160;30, 2013 and 2012, respectively, because their effect was anti-dilutive. Unvested but outstanding RSUs and RSAs which are forfeitable are included in the diluted income per share
   calculation. In a period where we are in a net loss position, the diluted loss per share is computed using the basic share count. &lt;/font&gt;&lt;/p&gt;
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