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<SEC-DOCUMENT>0001019687-08-004309.txt : 20080926
<SEC-HEADER>0001019687-08-004309.hdr.sgml : 20080926
<ACCEPTANCE-DATETIME>20080926103207
ACCESSION NUMBER:		0001019687-08-004309
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		7
CONFORMED PERIOD OF REPORT:	20080630
FILED AS OF DATE:		20080926
DATE AS OF CHANGE:		20080926

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FRANKLIN WIRELESS CORP
		CENTRAL INDEX KEY:			0000722572
		STANDARD INDUSTRIAL CLASSIFICATION:	TELEPHONE & TELEGRAPH APPARATUS [3661]
		IRS NUMBER:				953733534
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14891
		FILM NUMBER:		081090174

	BUSINESS ADDRESS:	
		STREET 1:		5440 MOREHOUSE DR. #1000
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92121
		BUSINESS PHONE:		858-623-0000

	MAIL ADDRESS:	
		STREET 1:		5440 MOREHOUSE DR. #1000
		CITY:			SAN DIEGO
		STATE:			CA
		ZIP:			92121

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FRANKLIN TELECOMMUNICATIONS CORP
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ABM COMPUTER SYSTEMS
		DATE OF NAME CHANGE:	19870317

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AUTOMATED BUSINESS MACHINES INC
		DATE OF NAME CHANGE:	19830802
</SEC-HEADER>
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<SEQUENCE>1
<FILENAME>fkwl_10k-063008.txt
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K


[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

                       FOR FISCAL YEAR ENDED JUNE 30, 2008

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

          FOR THE TRANSITION PERIOD FROM _______________ TO ___________________.

                         COMMISSION FILE NUMBER: 0-11616

                             FRANKLIN WIRELESS CORP.
             (Exact name of Registrant as specified in its charter)

                   NEVADA                                95-3733534
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                Identification Number)

     5440 MOREHOUSE DRIVE, SUITE 1000,                      92121
           SAN DIEGO, CALIFORNIA                         (Zip code)
  (Address of principal executive offices)

       Registrant's Telephone Number, including area code: (858) 623-0000


SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.001 PER SHARE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the Registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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 [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

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.

Large accelerated filer [ ]                     Accelerated filer [ ]
Non-accelerated filer [ ]                       Smaller reporting company [X]

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate market value of the voting common stock held by non-affiliates of
the Registrant, based on the closing price of the Registrant's common stock on
September 22, 2008, as reported by The OTC Bulletin Board, was approximately
$12,166,670. For the purpose of this calculation, shares owned by officers,
directors (and their affiliates) and 5% or greater stockholders have been
excluded.

The Registrant has 13,231,491 shares of common stock outstanding as of September
22, 2008



<page>

                             FRANKLIN WIRELESS CORP.
                       INDEX TO ANNUAL REPORT ON FORM 10-K
                     FOR THE FISCAL YEAR ENDED JUNE 30, 2008


                                                                            PAGE
                                                                            ----

PART I
- ------

Item 1:       Business                                                         4
Item 1A:      Risk Factors                                                     7
Item 1B       Unresolved Staff Comments                                       10
Item 2:       Properties                                                      10
Item 3:       Legal Proceedings                                               11
Item 4:       Submission of Matters to a Vote of Security Holders             11

PART II
- -------

Item 5:       Market for Registrant's Common Equity, Related Stockholder
              Matters and Issuer Purchases of Equity Securities               11
Item 6:       Selected Financial Data                                         12
Item 7:       Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       12
Item 7A:      Quantitative and Qualitative Disclosures About Market Risk      22
Item 8:       Financial Statements and Supplementary Data                     22
Item 9:       Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure                                        22
Item 9A(T):   Controls and Procedures                                         22
Item 9B:      Other Information                                               23

PART III
- --------

Item 10:      Directors, Executive Officers and Corporate Governance          23
Item 11:      Executive Compensation                                          25
Item 12:      Security Ownership of Certain Beneficial Owners and Management
              and Related Stockholder Matters                                 25
Item 13:      Certain Relationships and Related Transactions,
              and Director Independence                                       26
Item 14:      Principal Accounting Fees and Services                          26

PART IV
- -------

Item 15:      Exhibits, Financial Statement Schedules                         26


Signatures                                                                    28
Index to Financial Statements                                                F-1


                                       2


<page>

INTRODUCTION AND NOTE ON FORWARD LOOKING STATEMENTS

Franklin Wireless Corp. is a Nevada corporation; its principal executive office
is located at 5440 Morehouse Drive, Suite 1000, San Diego, CA 92121.

You should keep in mind the following points as you read this Report on Form
10-K:

    o    the terms "we", "us", "our", "Franklin", "Franklin Wireless", or the
         "Company" refer to Franklin Wireless Corp.
    o    our fiscal year ends on June 30; references to fiscal 2008 and fiscal
         2007 and similar constructions refer to the fiscal year ended on June
         30 of the applicable year.

         This Annual Report on Form 10-K contains statements which, to the
extent they do not recite historical fact, constitute "forward looking"
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward looking statements are used under the captions "Business," "Management's
Discussion and Analysis of Financial Condition and Results of Operation", and
elsewhere in this Annual Report on Form 10-K. You can identify these statements
by the use of words like "may," "will," "could," "should," "project," "believe,"
"anticipate," "expect," "plan," "estimate," "forecast," "potential," "intend,"
"continue," and variations of these words or comparable words. Forward looking
statements do not guarantee future performance and involve risks and
uncertainties. Actual results may differ substantially from the results that the
forward looking statements suggest for various reasons, including those
discussed under the caption "Risk Factors." These forward looking statements are
made only as of the date of this Annual Report on Form 10-K. We do not undertake
to update or revise the forward looking statements, whether as a result of new
information, future events or otherwise.


                                       3


<page>

                                     PART I


ITEM 1.  BUSINESS.


BUSINESS OVERVIEW

         We design and sell broadband high speed wireless data communication
products such as third generation ("3G") and fourth generation ("4G") wireless
modules and modems. We focus on wireless broadband USB modems, which provide a
flexible way for wireless subscribers to connect to the wireless broadband
network with any laptop, tablet PC or desktop USB port without a PC card slot.
The broadband wireless data communication products are positioned at the
convergence of wireless communications, mobile computing and the Internet, each
of which we believe represents a growing market.

         We market our products through two channels: directly to wireless
operators, and indirectly through strategic partners and distributors. Our
global customer base extends from the United States to the Caribbean and South
American countries. Our Universal Serial Bus ("USB") modems are certified by
Sprint, Alltel, Cellular South, NTELOS and ACS in the United States, by IUSACELL
in Mexico, by Telefonica and Movilnet in Venezuela, and by TSTT in Trinidad and
Tobago. We have strategic marketing relationships with several of these
customers.

         For the years ended June 30, 2008, 2007, and 2006, the revenue
recognized from sales of our products was $34,723,299, $10,385,090, and
$1,002,953 respectively.


OUR STRUCTURE

         We were incorporated in 1982 under the laws of the State of California
and reincorporated as a Nevada corporation effective January 2, 2008. We are
qualified as a foreign corporation in the State of California, and the
reincorporation had no effect on the nature of our business or our management.

         Our headquarters office is located in San Diego, California. The San
Diego office is principally composed of marketing, sales, operations, finance
and administrative support. It is responsible for all customer-related
activities, such as marketing communications, product planning, product
management and customer support, along with sales and business development
activities on a worldwide basis. Our Korea-based subsidiary, ARG, has been
inactive since August 2003. On October 30, 2007, the Board of Directors approved
the dissolution of ARG, and as a part of the dissolution, we assumed a note
payable of $434,000. During the year ended June 30, 2008, we repaid $100,000 on
this note, and the remaining balance amounted to $334,000 at June 30, 2008. The
subsidiary did not have revenue, expense, asset or component of stockholders'
equity as of June 30, 2008, 2007, and 2006, or for the years then ended.

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires public companies to report financial and descriptive
information about their reportable operating segments. We identify our operating
segments based on how management internally evaluates separate financial
information, business activities and management responsibility. We operate in a
single business segment consisting of sale of wireless access products.


OUR PRODUCTS

         We are the first company to introduce USB-type mobile broadband modems
to the countries located in North America, the Caribbean, and South America. Our
mobile broadband and data products include wireless USB modems, embedded
modules, and stand-alone mobile broadband modems used for high-speed data
services. Our products are designed to operate on a majority of wireless
networks in the world, provide mobile subscribers with secure and convenient


                                       4


<page>

high speed access to wireless data communications networks using laptops,
handheld and desktop computers, and enable our customers to send and receive
email with large file attachments, play interactive games, and receive, send,
and download high resolution picture, video and music contents. Our products are
based on widely deployed cellular technologies and operate across 3G and 4G
networks, including:

    o    Code Division Multiple Access ("CDMA") technology 1xEVDO - Evolution
         Data Optimized technology in both revision 0 and revision A releases.
         Revision 0 modems have a download speed of up to 2.4 Mbps and the
         revision A products achieve broadband like speed of 3.1 Mbps.

    o    High Speed Packet Access ("HSPA") based on Universal Mobile
         Telecommunications System standard, sometimes referred to as Wideband
         Code Division Multiple Access ("WCDMA") technology. This technology
         allows download speed of up to 14.4 Mbps.

    o    Worldwide Interoperability for Microwave Access ("WIMAX") based on the
         IEEE 802.16 standard.

         Since we launched three new products, CDMA Revision A USB modem
CDU-680, CDMA Revision 0 CDU-650 USB modem, and CDMA Revision 0 CDX-650 Express
Card modem in 2007, we have continued to add new features and functionality to
our products to enhance value and ease of use that our products provide to our
customers and end users. In 2008, we launched the CGU-628A HSDPA USB modem,
which provides a flexible way for users to connect to high-speed downlink packet
access networks, and the CDM-650 Stand-alone Revision 0 USB modem, which
provides internet connection in remote locations without cable or DSL services.


The followings are a representative selection of our current CDMA and HSPA
wireless data products:

    USB Modems

    o    The CDU-550 Dual-band 800/1900 MHz EVDO rev 0 USB modem was the
         industry's first USB EVDO card to be launched in the countries in North
         America, the Caribbean, and South America. The modem has a downlink
         speed of 2.4 Mbps and an uplink speed of 153 Kbps. More flexible and
         versatile than the PCMCIA card, the CDU-550 not only works on laptop
         PCs, it also works on desktop PCs and Macintosh laptops where PCMCIA
         card slots are not available. The CDU-550 works with Windows OS,
         Macintosh and Linux.

    o    The CDU-650 Dual-band 800/1900 MHz EVDO rev 0 USB modem is the second
         generation EVDO USB modem with the same performance as the CDU-550, but
         features a retractable USB connector which rotates 270(degree). This
         allows the modem body and its antenna to be raised vertically for
         better wireless connection performance, and the USB connector can be
         folded away when not in use.

    o    The CDU-680 Dual band 800/1900 MHz rev A USB modem is a
         state-of-the-art product featuring an upgraded EVDO revision A radio
         with downlink speed of up to 3.1 Mbps and uplink speed of up to 1.8
         Mbps, it is the first product in its kind to incorporate onboard flash
         memory, a GPS receiver and a retractable USB connector which rotates
         more than 270(degree). The industry's first onboard flash memory
         feature allows the Connection Manager software for Windows, Macintosh
         OS X and driver for Linux to be stored on the device so that no CD or
         CD drive is required for software installation. The Quick Installation
         Guide is also stored in the memory and is always within easy reach of
         the user.

    o    The CGU-628A tri band 850/1900/2100 MHz HSDPA and quad band
         800/900/1800/1900 MHz GSM/GPRS USB modem features a downlink speed of
         up to 14.4 Mbps and an uplink speed of up to 384 Kbps. The tri band
         radio allows the modem to be used worldwide wherever there is HSDPA
         service and features a retractable USB connector.

                                       5


<page>

    o    The CGU-720A quad band plus AWS 850/1700/1900/2100 MHz HSPA and quad
         band 800/900/1800/1900 MHz GSM/GPRS USB modem features a downlink speed
         of up to 7.2 Mbps and an uplink speed of up to 5.76 Mbps. The quad band
         plus AWS radio allows the modem to be used worldwide wherever there is
         HSPA service and features a retractable USB connector.

    Wireless PC Cards

    o    The CDX-650 Dual-band 800/1900 MHz EVDO rev 0 Express Card modem has
         the same wireless connection performance as the CDU-650 but features an
         Express Card 34 form factor.

    o    The CDX-680 Dual-band 800/1900 MHz EVDO Rev A Express Card modem has
         the same wireless connection performance as the CDU-680 but features an
         Express Card 34 form factor.

    Stand-alone Modems

    o    The CDM-650 is a stand-alone Dual-band 800/1900 MHz EVDO rev 0 USB
         modem available for Machine-to-Machine and Vertical Application
         markets, such as customers who need internet connection in a kiosk or
         remote locations without cable or DSL services. The CDM-650 is a
         completely stand-alone modem with a metallic housing, external antenna,
         a serial port and a USB port for ease of integration with any
         applications and computer systems.


CUSTOMERS

         Our global customer base is comprised of wireless operators, strategic
partners and distributors, and it extends from the United States to the
Caribbean and South American countries. Our Universal Serial Bus ("USB") modems
are certified by Sprint, Alltel, Cellular South, NTELOS, Cincinnati Bell, Mobi
PCS, Qwest and ACS in the United States, by IUSACELL in Mexico, by Telefonica
and Movilnet in Venezuela, by Centennial in Puerto Rico, by Alegro in Ecuador
and by TSTT in Trinidad and Tobago. We have strategic marketing relationships
with several of these customers, and our strong customer relationships provide
us with the opportunity to expand our market reach and sales by combining our
expertise in wireless technologies with our customers' sales and marketing base
and access to additional indirect distribution channels.


SALES AND MARKETING

         We market our products primarily to wireless operators either directly
or indirectly through strategic partners and distributors located in countries
in North America, the Caribbean, and South America. Most of our sales to
wireless operators are through the use of our indirect strategic partners and
selected sales distributors. A significant portion of our revenue comes from the
Caribbean and South American countries, representing 73.0% of our total revenue,
and from the United States, representing 27.0% for the year ended June 30, 2008.

         CDMA Development Group ("CDG") test certifications are required to
launch and market new CDMA wireless data products with wireless operators in
countries in North America, the Caribbean, and South America, and PCS Type
Certification Review Board ("PTCRB") test certifications are required for HSPA
wireless data products. Certifications are issued as being a qualifier of CDG1,
CDG 2 and CDG 3 as well as PTCRB. We are currently selling our wireless
broadband modems with about seven wireless operators in the North American
countries and about ten wireless operators in the Caribbean and South American
countries. Our Universal Serial Bus ("USB") modems are certified by Sprint,
Alltel, Cellular South, NTELOS, Cincinnati Bell, Mobi PCS, Qwest and ACS in the
United States, by IUSACELL in Mexico, by Telefonica and Movilnet in Venezuela,
by Centennial in Puerto Rico, by Alegro in Ecuador and by TSTT in Trinidad and
Tobago.

                                       6


<page>

         In order to maintain and enhance our strong sales relationships, we are
expanding our sales and technical team as well as access to additional
distribution channels. We are also engaged in a variety of marketing activities,
such as co-marketing with our vendor, trade show support, and products marketing
development support. In the United States, we are continuing to expand our
strategic relationships with major wireless operators and industry leaders
through increased marketing activities in order to drive our market reach and
sales by combining our expertise in wireless technologies with their global
subscriber bases.


PRODUCTION AND MANUFACTURING OPERATIONS

         Our facility is located in San Diego, California. Manufacturing of our
products has been contracted out to C-Motech Co. Ltd. ("C-Motech"), located in
South Korea.

         In January 2005, we entered into an agreement with C-Motech for the
manufacture of the products. Under the manufacturing and supply agreement,
C-Motech provides us with services including all licenses, component
procurement, final assembly, testing, quality control, fulfillment and
after-sale service. The Agreement provides exclusive rights to market and sell
our CDMA wireless data products in countries in North America, the Caribbean,
and South America. Furthermore, the Agreement provides that we are responsible
for marketing, sales, field testing, and certifications of these products to
wireless service operators and other commercial buyers within a designated
territory, and C-Motech is responsible for design, development, testing,
certification, and completion of these products. Under the Agreement, products
include all access devices designed with Qualcomm's MSM 5100, 5500, 6500, and
6800 chipset solutions provided or designed by C-Motech or both companies. Both
companies own the rights to the products: USB modems, Card Bus, PCI Bus and
Module designed with MSM 5500 dual band products. On January 30, 2007, C-Motech
also certified that we have the exclusive right to sell CDU-680 EVDO USB modems
directly and indirectly in these territories.

         The initial term of the Agreement was for two years, commencing on
January 5, 2005. The agreement automatically renews for successive one year
periods, unless either party provides written notice to terminate at least sixty
days prior to the end of the term. This agreement may be amended or supplemented
by mutual agreement of the parties, as is necessary to document the addition of
any new products.


EMPLOYEES

         As of June 30, 2008, we had thirteen full time employees, and we also
use the services of consultants and contract workers from time to time. Our
employees are not represented by any collective bargaining organization, and we
have never experienced a work stoppage. We believe that our relationship with
our employees to be amicable.


ITEM 1A:  RISK FACTORS.

         An investment in our shares is highly speculative and involves a
significant degree of risk. Prospective investors should carefully consider the
following risk factors, in addition to the other information set forth in this
Annual Report or in any material accompanying this report. The following summary
of risk factors does not purport to be a complete explanation of the risks
involved in our business.

         WE HAVE EXPERIENCED LOSSES IN THE PAST. We had experienced significant
operating losses and negative cash flows from operating activities in the past,
including the fiscal year ended June 30, 2006. If our sales do not continue to
improve and operating expenses are not reduced and monitored, we may incur
additional significant net losses and negative cash flows from operations.

                                       7


<page>

            WE RELY ON A SINGLE SOURCE FOR THE MANUFACTURE OF OUR PRODUCTS. We
rely solely on C-Motech Co., Ltd., a company located in South Korea, to design,
manufacture and supply our products, which exposes us to a number of risks and
uncertainties outside our control. Our agreement with C-Motech is renewable
annually, and we cannot be certain it will be renewed each year. Thus, we rely
solely on C-Motech to manufacture and deliver all our products. If we were
unable to purchase products from C-Motech for any reason, we would be forced to
seek an alternative source of supply, which may not be available. Any
significant changes in C-Motech, such as a change in ownership, operations or
financial status may cause difficulties in our ability to deliver products to
customers on a timely basis.

         WE OPERATE IN AN INTENSIVELY COMPETITIVE MARKET. The wireless broadband
data access market is highly competitive, and we may be unable to compete
effectively. Many of our competitors or potential competitors have significantly
greater financial, technical and marketing resources than we do. To survive and
be competitive, we will need to continuously invest in research and development,
sales and marketing, and customer support. Increased competition could result in
price reductions and smaller customer orders. Our failure to compete effectively
could seriously impair our business.

         WE OPERATE IN THE HIGH-RISK TELECOM SECTOR. We are in a volatile
industry. In addition, our revenue model is evolving and relies substantially on
the assumption that we will be able to successfully complete the development and
sales of our products and services in the marketplace. Our prospects must be
considered in the light of the risks, uncertainties, expenses and difficulties
frequently encountered by companies in the early stages of development and
marketing. In order to be successful in the market we must, among other things:

    o    Complete development and introduction of functional and attractive
         products and services;
    o    Attract and maintain customer loyalty;
    o    Establish and increase awareness of our brand;
    o    Provide desirable products and services to customers at attractive
         prices;
    o    Establish and maintain strategic relationships with partners and
         affiliates;
    o    Rapidly respond to competitive and technological developments;
    o    Build operations and customer service infrastructure to support our
         business; and
    o    Attract, retain, and motivate qualified personnel.

         We cannot guarantee that we will be able to achieve these goals, and
our failure to achieve them could adversely affect our business, results of
operations, and financial condition. Moreover, there can be no assurance that we
will be able to obtain additional funding if our financial resources are
depleted. We expect that revenues and operating results will fluctuate in the
future. If our efforts are unsuccessful or other unexpected events occur,
purchasers of our shares could lose their entire investment.

         WE OPERATE IN A FIELD WITH RAPIDLY CHANGING TECHNOLOGY. Since our
products and services are new, we cannot be certain that these products and
services will function as anticipated or be desirable to our intended markets.
Our current or future products and services may fail to function properly, and
if our products and services do not achieve and sustain market acceptance, our
business, results of operations and profitability may suffer. If we are unable
to predict and comply with evolving wireless standards, our ability to introduce
and sell new products will be adversely affected. If we fail to develop and
introduce products on time, we may lose customers and potential product orders.

         WE DEPEND ON THE DEMAND FOR WIRELESS NETWORK CAPACITY. The demand for
our products is completely dependent on the demand for broadband wireless access
to networks. If wireless operators do not deliver acceptable wireless service,
our product sales may dramatically decline. Thus, if wireless operators
experience financial or network difficulties, it will likely reduce demand for
our products.

         WE DEPEND ON COLLABORATIVE ARRANGEMENTS. The development and
commercialization of our products and services depend in large part upon our
ability to selectively enter into and maintain collaborative arrangements with
developers, distributors, service providers, network systems providers, core
wireless communications technology providers and manufacturers, among others.

                                       8


<page>

         THE LOSS OF ANY OF OUR MATERIAL CUSTOMERS COULD ADVERSLY AFFECT OUR
REVENUES AND PROFITABILITY, AND THEREFORE SHAREHOLDER VALUE. We depend on a
small number of customers for a significant portion of our revenues. For the
year ended June 30, 2008, three customers represented approximately 84.6% of our
revenue. If any of these customers reduce their business with us or suffer from
business failure, our revenues and profitability could decline, perhaps
materially.

         OUR PRODUCT DELIVERIES ARE SUBJECT TO LONG LEAD TIMES. Due to our
limited capital resources, we are experiencing long-lead times to ship products
to our customers, often in excess of 45 days. This could cause us to lose
customers, who may be able to secure faster delivery times from our competitors,
and require us to maintain higher levels of working capital.

         OUR PRODUCT-TO-MARKET CHALLENGE IS CRITICAL. Our success depends on our
ability to quickly enter the market and establish an early mover advantage. We
must implement an aggressive sales and marketing campaign to solicit customers
and strategic partners. Any delay could seriously affect our ability to
establish and effectively exploit an early-to-market-strategy.

         AS OUR BUSINESS EXPANDS INTERNATIONALLY, WE WILL BE EXPOSED TO
ADDITIONAL RISKS RELATING TO INTERNATIONAL OPERATIONS. Our expansion into
international operations exposes us to additional risks unique to such
international markets, including the following:

    o    Increased credit management risks and greater difficulties in
         collecting accounts receivable;
    o    Unexpected changes in regulatory requirements, wireless communications
         standards, exchange rates, trading policies, tariffs and other
         barriers;
    o    Uncertainties of laws and enforcement relating to the protection of
         intellectual property;
    o    Language barriers; and
    o    Potential adverse tax consequences.

         Furthermore, if we are unable to further develop distribution channels
in countries in North America, the Caribbean and South America, we may not be
able to grow our international operations, and our ability to increase our
revenue will be negatively impacted.

         WE MAY INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS. The
industry in which we operate has many participants that own, or claim to own,
proprietary intellectual property. In the past we have received, and in the
future may receive, claims from third parties alleging that we, and possibly our
customers, violate their intellectual property rights. Rights to intellectual
property can be difficult to verify and litigation may be necessary to establish
whether or not we have infringed the intellectual property rights of others. In
many cases, these third parties are companies with substantially greater
resources than us, and they may be able to, and may choose to, pursue complex
litigation to a greater degree than we could. Regardless of whether these
infringement claims have merit or not, we may be subject to the following:

    o    We may be liable for substantial damages, liabilities and litigation
         costs, including attorneys' fees;
    o    We may be prohibited from further use of the intellectual property and
         may be required to cease selling our products that are subject to the
         claim;
    o    We may have to license the third party intellectual property, incurring
         royalty fees that may or may not be on commercially reasonable terms.
         In addition, there is no assurance that we will be able to successfully
         negotiate and obtain such a license from the third party;
    o    We may have to develop a non-infringing alternative, which could be
         costly and delay or result in the loss of sales. In addition, there is
         no assurance that we will be able to develop such a non-infringing
         alternative;
    o    The diversion of management's attention and resources;
    o    Our relationships with customers may be adversely affected; and
    o    We may be required to indemnify our customers for certain costs and
         damages they incur in such a claim.

                                       9


<page>

         In the event of an unfavorable outcome in such a claim and our
inability to either obtain a license from the third party or develop a
non-infringing alternative, then our business, operating results and financial
condition may be materially adversely affected and we may have to restructure
our business.

         Absent a specific claim for infringement of intellectual property, from
time to time we have and expect to continue to license technology, intellectual
property and software from third parties. There is no assurance that we will be
able to maintain our third party licenses or obtain new licenses when required
and this inability could materially adversely affect our business and operating
results and the quality and functionality of our products. In addition, there is
no assurance that third party licenses we execute will be on commercially
reasonable terms.

         Under purchase orders and contracts for the sale of our products we may
provide indemnification to our customers for potential intellectual property
infringement claims for which we may have no corresponding recourse against our
third party licensors. This potential liability, if realized, could materially
adversely affect our business, operating results and financial condition.

         GOVERNMENT REGULATION COULD RESULT IN INCREASED COSTS AND INABILITY TO
SELL OUR PRODUCTS. Our products are subject to certain mandatory regulatory
approvals in the United States and other regions in which we operate. In the
United States, the Federal Communications Commission regulates many aspects of
communications devices. Although we have obtained all the necessary Federal
Communications Commission and other required approvals for the products we
currently sell, we may not obtain approvals for future products on a timely
basis, or at all. In addition, regulatory requirements may change or we may not
be able to obtain regulatory approvals from countries other than the United
States in which we may desire to sell products in the future.

         WE MAY NEED ADDITIONAL FINANCING DUE TO LIMITED RESOURCES. Our
financial resources are limited, and the amount of funding that is required to
develop and commercialize our products and technologies is highly uncertain.
Adequate funds may not be available when needed or on terms satisfactory to us.
Lack of funds may cause us to delay, reduce and/or abandon certain or all
aspects of our development and commercialization programs. If we seek additional
financing through the issuance of equity or convertible debt securities, the
percentage ownership of our stockholders will be reduced, stockholders may
experience additional dilution, and such securities may have rights, preferences
and privileges senior to those of our Common Stock. There can be no assurance
that additional financing will be available on terms favorable to us or at all.
If adequate funds are not available or are not available on acceptable terms, we
may not be able to fund our expansion, take advantage of desirable acquisition
opportunities, develop or enhance services or products or respond to competitive
pressures. Such inability could have a materially adverse effect on our
business, results of operations and financial conditions.


ITEM 1B. UNRESOLVED STAFF COMMENTS.

         Not applicable.


ITEM 2.  PROPERTIES.

         We lease approximately 6,000 square feet of office space in San Diego,
California, at a monthly rent of $9,105. In addition to the minimum annual
rental commitments, the lease provides for periodic cost of living increases in
the base rent and payment of common area costs. The lease expires on August 31,
2011. Our facility is covered by an appropriate level of insurance and we
believe it to be suitable for our respective use and adequate for our present
needs.

         We also lease a corporate housing facility for our vendors under a
lease that expires on October 2, 2008, at a rent of approximately $1,485 per
month.


                                       10


<page>

ITEM 3.  LEGAL PROCEEDINGS.

         We are not currently involved in any material legal proceedings. We
are, from time to time, involved in routine legal proceedings and claims arising
in the ordinary course of business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of our stockholders during the
fourth quarter of the 2008 fiscal year.



                                     PART II



ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.


MARKET INFORMATION

         Shares of our Common Stock are quoted and traded on the OTC Bulletin
Board under the trading symbol "FKWL.OB". The following table sets forth the
range of high and low bid quotation per share for the Common Stock as reported
during the years ending June 30, 2008 and 2007. The bid price reflects
inter-dealer prices and does not include retail mark-up, markdown, or
commission.

                                                          HIGH             LOW
                                                         ------           -----
             JUNE 30, 2007
                      First Quarter                       0.70            0.70
                      Second Quarter                      0.70            0.70
                      Third Quarter                       1.40            0.70
                      Fourth Quarter                      1.40            0.70
             JUNE 30, 2008
                      First Quarter                       3.50            0.70
                      Second Quarter                      3.15            1.40
                      Third Quarter                       3.00            1.72
                      Fourth Quarter                      2.75            1.85


         On January 8, 2008, we implemented a 1 for 70 reverse stock split in
connection with our reincorporation. The foregoing table has been adjusted to
reflect the effects of the reverse stock split.


NUMBER OF STOCKHOLDERS

         We have only one class of common stock. As of September 22, 2008, we
had approximately 816 shareholders of record. Since many of the shares of our
Common Stock are held by brokers and other institutions on behalf of
shareholders, it is impossible to determine the total number of beneficial
holders represented by these record holders.

                                       11


<page>

DIVIDENDS

         We have never declared or paid any dividends on any share of our common
stock. We currently intend to retain all available fund for use in the operation
and development of our business and, therefore, and do not expect to declare or
pay any cash dividends in the foreseeable future.


RECENT SALES OF UNREGISTERED SECURITIES

         During the fourth quarter of our fiscal year ended June 30, 2008, we
did not sell any unregistered securities.


REPURCHASES

         During the fourth quarter of our fiscal year ended June 30, 2008, we
did not repurchase any shares of our common stock, nor were any repurchases made
on our behalf.


ITEM 6.  SELECTED FINANCIAL DATA.

         Not applicable.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

         The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our financial
statements and related notes included elsewhere in this report. We are not
obligated to publicly update this information, whether as a result of new
information, future events or otherwise, except to the extent we are required to
do so in connection with our obligation to file reports with the SEC. For a
discussion of the important risks to our business and future operating
performance, see the discussion under the caption "Item 1A. Risk Factors" and
under the caption "Factors That May Influence Future Results of Operations"
below. In the lights of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.


BUSIENSS OVERVIEW

         We design and sell broadband high speed wireless data communication
products. Our products include third generation ("3G") and fourth generation
("4G") wireless modules and modems. Our products are designed to operate on a
majority of wireless networks in the world, provide mobile subscribers with
secure and convenient high speed access to wireless data communications networks
using laptops, handheld and desktop computers, and enable our customers to send
and receive email with large file attachments, play interactive games, and
receive, send, and download high resolution picture, video and music contents.

         We market our products primarily to wireless operators either directly
or indirectly through strategic partners and distributors located in countries
in North America, the Caribbean and South America. Most of our sales to wireless
operators are made through the use of our indirect strategic partners and
selected sales distributors. Our global customer base extends from the United
States to the Caribbean and South American countries. Our Universal Serial Bus
("USB") modems are certified by Sprint, Alltel, Cellular South, NTELOS,
Cincinnati Bell, Mobi PCS, Qwest and ACS in the United States, by IUSACELL in
Mexico, by Telefonica and Movilnet in Venezuela, by Centennial in Puerto Rico,
by Alegro in Ecuador and by TSTT in Trinidad and Tobago. We have strategic
marketing relationships with several of these customers.

                                       12


<page>

         In order to maintain and enhance our strong sales relationships, we are
expanding our sales and technical team as well as access to additional
distribution channels. We are also engaged in a variety of marketing activities,
such as co-marketing with our vendor, trade show support, and products marketing
development support. In the United States, we are continuing to expand our
strategic relationships with leading wireless operators and industry leaders
through increased marketing activities in order to drive our market reach and
sales by combining our expertise in wireless technologies with their global
subscriber bases.


FACTORS THAT MAY INFLUENCE FUTURE RESULTS OF OPERATIONS

         We believe that our revenue growth will be influenced largely by (1)
successful maintenance of our existing customers, (2) the rate of increase in
demand for wireless data products, (3) customer acceptance of our new products,
(4) new customer relationships and contracts, and (4) our ability to meet
customers' demands.

         We have an agreement with C-Motech for the manufacturing of our
products. Under our manufacturing agreements, C-Motech is responsible for
design, development, testing, certification, and completion of these products.
We believe that our cost of goods sold will depend on our ability to negotiate
with C-Motech based on our capability in market development in light of
increased competition.

         We have entered into and expect to continue to enter into new customer
relationships and contracts for the supply of our products, and this may require
significant demands on our resources, resulting in increased operating, selling,
and marketing expenses associated with such new customer development.


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The preparation of financial statements in conformity with accounting
principles generally accepted in the Untied States of America requires
management to make estimates and judgments that affect the reported amounts on
those financial statements. Note 2 to the financial statements (included in this
Annual Report on Form 10-K) describes the significant accounting policies and
methods used in the preparation of the financial statements. On an ongoing
basis, we evaluate those estimates including, but not limited to, those related
to our intangible assets and long-lived assets. We base those estimates on
historical experience and on various other assumptions we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different conditions or if our assumptions change.

         We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our financial
statements:

         ESTIMATES

         The preparation of financial statements 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
         revenue and expenses during the reporting periods. Actual results could
         differ from those estimates. Significant estimates include useful lives
         of intangible and long-lived assets.



                                       13


<page>

         REVENUE RECOGNITION

         We recognize revenue from product sales when persuasive evidence of an
         arrangement exists, the price is fixed or determinable, collection is
         reasonably assured and delivery of products has occurred or services
         have been rendered. Accordingly, we recognize revenues from product
         sales upon shipment of the product to the customers. We do not allow
         the right of return on product sales but provide a factory warranty for
         one year from the shipment, which is covered by our vendor.


         CASH AND CASH EQUIVALENTS

         For purposes of the statements of cash flow, we consider all highly
         liquid investments purchased with original maturities of six months or
         less to be cash equivalents.


         SHIPPING AND HANDLING COSTS

         Most of shipping and handling costs are paid by the customers directly
         to the shipping companies. We do not collect and incur shipping and
         handling costs to be capitalized.


         INVENTORIES

         Our inventories are made up of finished goods and are stated at the
         lower of cost or market, cost being determined on a first-in, first-out
         basis. We assess the inventory carrying value and reduce it, if
         necessary, to its net realizable value based on customer orders on hand
         and internal demand forecasts using management's best estimates given
         information currently available. Our customer demand is highly
         unpredictable, and can fluctuate significantly caused by factors beyond
         our control. We may maintain an allowance for inventories for
         potentially excess and obsolete inventories and inventories that are
         carried at costs that are higher than their estimated net realizable
         values.


         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. We provide for depreciation
         using the straight-line method over the estimated useful lives as
         follows:

         Computers and software                      5 years
         Machinery and equipment                     5 years
         Furniture and fixtures                      7 years

         Expenditures for maintenance and repairs are charged to operations as
         incurred while renewals and betterments are capitalized. Gains or
         losses on the sale of property and equipment are reflected in the
         statements of operations.


         INTANGIBLE ASSETS - LICENSES AND CERTIFICATIONS

         Licenses are stated at cost and are amortized using the straight-line
         method over the license periods of five years or life of the license.
         Certifications are stated at cost and are amortized using the
         straight-line method over the certification periods of three years or
         life of the certifications


                                       14


<page>

         VALUATION ON INTANGIBLE AND LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No. 144,
         "Accounting for Impairment on Disposal of Long-lived Assets", we review
         for impairment of long-lived assets and certain identifiable
         intangibles whenever events or circumstances indicate that the carrying
         amount of assets may not be recoverable. We consider the carrying value
         of assets may not be recoverable based upon our review of the following
         events or changes in circumstances: the asset's ability to continue to
         generate income from operations and positive cash flow in future
         periods; loss of legal ownership or title to the assets; significant
         changes in our strategic business objectives and utilization of the
         asset; or significant negative industry or economic trends. An
         impairment loss would be recognized when estimated future cash flows
         expected to result from the use of the asset is less than its carrying
         amount.

         For the year ended June 30, 2008, we wrote off intangible assets of
         CDU-550 test certifications in the amount of $171,280, resulting in a
         total loss of $73,171, as these certifications were deemed impaired due
         to their inability to continue to generate income from operations and
         positive cash flow in future periods.


         WARRANTIES

         We do not allow the right of return on product sales but provide a
         factory warranty for one year from the shipment, which is covered by
         our vendor. These products are shipped directly from our vendor to our
         customers. As a result, we do not accrue any warranty expenses.


         RESEARCH AND DEVELOPMENT COSTS

         We have an agreement with C-Motech for the manufacturing of our
         products, including services of component procurement, design,
         development, final assembly, testing, quality control, fulfillment and
         delivery of these products. As a result, we do not accrue any
         significant research and development costs, primarily made up of
         developmental activities relating to our products.


         ADVERTISING AND MARKETING COSTS

         We expense the costs of advertising and marketing as incurred. We
         incurred $1,370,125 and $302,522 of marketing and advertising expenses
         for the years ended June 30, 2008 and 2007, respectively. The increase
         was primarily due to the increase in sales and marketing effort for the
         year ended June 30, 2008, and we had an increase in sales commission
         expenses of $897,746 and an increase in marketing expenses of $169,857
         for the year ended June 30, 2008, compared to the corresponding period
         of 2007. The costs incurred by us for these marketing and promotional
         activities were included within advertising and marketing expenses in
         accordance with Financial Accounting Standards Board, or FASB, Emerging
         Issues Task Force, or EIFT, Issue No. 01-9, ACCOUNTING FOR
         CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF
         THE VENDOR'S PRODUCT), or EITF No. 01-9, which provides guidance on the
         application of generally accepted accounting principles to selected
         recognition issues on PAYMENTS FROM A VENDOR TO A CUSTOMER.


         INCOME TAXES

         We adopted the provisions of FASB interpretation ("FIN") No. 48,
         "Accounting for Uncertainty in Income Taxes -- an interpretation of
         FASB statement No. 109," which prescribes a recognition threshold and
         measurement process for recording, in the financial statements,
         uncertain tax positions taken or expected to be taken in a tax return.
         Under FIN 48, the impact of an uncertain income tax position on the
         income tax return must be recognized at the largest amount that is
         more-likely-not to be sustained upon audit by the relevant taxing
         authority. An uncertain income tax position will not be recognized if
         it has less than a 50% likelihood of being sustained.

                                       15


<page>

         We recognize federal and state tax liabilities or assets based on our
         estimate of taxes payable to or refundable by tax authorities in the
         current fiscal year. We also recognize federal and state tax
         liabilities or assets based on our estimate of future tax consequences
         attributable to differences between the financial statement carrying
         amounts of existing assets and liabilities and their respective tax
         bases. Deferred tax assets and liabilities are measured using enacted
         tax rates expected to apply to taxable income in the years in which
         those temporary differences are expected to be recovered or settled. A
         valuation allowance is required when it is more likely than not that we
         will not be able to realize all or a portion of our deferred tax
         assets.

         Income tax provision from continuing operations for the years ended
         June 30, 2008 and 2007 consists of the following:

                                                            YEAR ENDED JUNE 30,
                                                           ---------------------
                                                             2008         2007
                                                           --------     --------
   Current income taxes expense:
         Federal                                           $433,067     $ 26,409
         State                                              156,382        8,781
                                                           --------     --------
                                                            589,449       35,190
                                                           --------     --------

   Deferred income taxes expense (benefits):                     --           --
                                                           --------     --------
   Provision for income taxes                              $589,449     $ 35,190
                                                           ========     ========


         Deferred income taxes reflect the net effects of temporary differences
         between the carrying amounts of assets and liabilities for financial
         reporting purposes and the amounts used for income tax purposes.
         Significant components of our deferred tax assets are as follows:

                                                          YEAR ENDED JUNE 30
                                                     --------------------------
                                                         2008           2007
                                                     -----------    -----------
   Current deferred tax asset(liabilities):
     Net operating losses                            $   170,883    $        --
     Other, net                                           16,493        151,868

   Non-current deferred tax assets (liabilities):
     Net operating losses                              2,011,633      3,285,042
     Credit                                               30,196         30,996
     Other, net                                           (4,477)       (60,357)
                                                     -----------    -----------
   Total deferred tax assets                           2,224,728      3,407,549
   Less valuation allowance                           (2,224,728)    (3,407,549)
                                                     -----------    -----------
   Net deferred tax asset                            $        --    $        --
                                                     ===========    ===========

         The significant component of the deferred tax asset (liability) at June
         30, 2008 and 2007 was a federal net operating loss carry-forward in the
         amount of approximately $2,034,000 and $2,934,000, respectively, based
         on a federal tax rate of 34%. SFAS No. 109 requires a valuation
         allowance to be recorded when it is more likely than not that some or
         all of the deferred tax assets will not be realized. At June 30, 2008
         and 2007, management believes that it is more likely than not that most
         of the deferred tax assets will not be realized, and valuation
         allowances for the full amount of the net deferred tax asset were
         established to reduce the deferred tax assets to zero based on the
         level of historical taxable income and projections for future taxable
         income over the periods in which the deferred tax assets are
         deductible.

                                       16


<page>

         As of June 30, 2008, we have federal net operating loss carryforwards
         of approximately $5,983,000 and state net operating loss carryforwards
         of approximately $1,676,000 for income tax purposes, with application
         of IRC Section 382 limitation on net operating losses as result of the
         Company's ownership change in a prior period. The Federal and state net
         operating loss carryforwards will begin to expire from 2009 to 2026 and
         2009 to 2016, respectively.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 2006, the FASB issued FASB interpretation ("FIN") No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
statement No. 109," which prescribes a recognition threshold and measurement
process for recording, in the financial statements, uncertain tax positions
taken or expected to be taken in a tax return. In addition, FIN 48 provides
guidance on the derecognizing, classification, accounting in interim periods and
disclosure requirements for uncertain tax positions. We have currently adopted
and evaluated the impact, if any, that FIN 48 will have on our financial
statements. FIN 48 is not expected to have a material impact on our financial
statements.

         In September 2006, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 157, "FAIR VALUE MEASUREMENTS". This standard provides
guidance for using fair value to measure assets and liabilities. The standard
also responds to investors' requests for expanded information about the extent
to which companies measure assets and liabilities at fair value, the information
used to measure fair value, and the effect of fair value measurements on
earnings. The standard applies whenever other standards require (or permit)
assets or liabilities to be measured at fair value, but does not expand the use
of fair value in any new circumstances. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. There are numerous previously issued
statements dealing with fair values that are amended by SFAS No. 157. SFAS No.
157 is not expected to have a material impact on our financial statements.

         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 companies to choose to measure certain
financial instruments and other items at fair value. Most of the provisions in
SFAS 159 are elective; however the amendment to SFAS 115, ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES, applies to all entities with
available-for-sale securities. The fair value option established by SFAS 159
permits all entities to choose to measure eligible items at fair value at
specified election dates. The standard requires that unrealized gains and losses
are reported in earnings for items measured using the fair value option at each
subsequent reporting date. SFAS No. 159 is effective for the Company beginning
in the first quarter of fiscal year 2009. SFAS No. 159 and the amendments to
SFAS 115 are not expected to have a material impact on our financial statements.

         In June 2007, the FASB ratified Emerging Issues Task Force ("EITF")
07-3, Accounting for Nonrefundable Advance Payments for Goods or Services
Received for Use in Future Research and Development Activities ("EITF 07-3").
EITF 07-3 requires that nonrefundable advance payments for goods or services
that will be used or rendered for future research and development activities be
deferred and capitalized and recognized as an expense as the goods are delivered
or the related services are performed. EITF 07-3 is effective, on a prospective
basis, for fiscal years beginning after December 15, 2007. EITF 07-3 is not
expected to have a material impact on our financial statements.

         In December 2007, the FASB issued Statement No. 141 (revised), Business
Combinations ("SFAS No. 141(R)"). The standard changes the accounting for
business combinations including the measurement of acquirer shares issued in
consideration for a business combination, the recognition of contingent
consideration, the accounting for pre-acquisition gain and loss contingencies,
the recognition of capitalized in-process research and development, the
accounting for acquisition-related restructuring cost accruals, the treatment of
acquisition related transaction costs and the recognition of changes in the
acquirer's income tax valuation allowance. SFAS No. 141(R) is effective for
fiscal years beginning after December 15, 2008, with early adoption prohibited.
SFAS No. 141(R) is not expected to have a material impact on our financial
statements.

                                       17


<page>

         In December 2007, the FASB issued Statement No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51
("SFAS No. 160"). The standard changes the accounting for noncontrolling
(minority) interests in consolidated financial statements including the
requirements to classify noncontrolling interests as a component of consolidated
stockholders' equity, and the elimination of "minority interest" accounting in
results of operations with earnings attributable to noncontrolling interests
reported as part of consolidated earnings. Additionally, SFAS No. 160 revises
the accounting for both increases and decreases in a parent's controlling
ownership interest. SFAS No. 160 is effective for fiscal years beginning after
December 15, 2008, with early adoption prohibited. SFAS No. 160 is not expected
to have a material impact on our financial statements.

There are no other accounting standards issued as of September 22, 2008 that are
expected to have a material impact on our consolidated financial statements.


RESULT OF OPERATIONS

         The following table sets forth, for the years ended June 30, 2008, 2007
and 2006 (fiscal 2008, fiscal 2007, and fiscal 2006), our statements of
operations data expressed as a percentage of sales:


                                                       YEAR ENDED JUNE 30,
                                                   ---------------------------
                                                     2008       2007      2006
                                                   -------     -----     -----
                                                    (as a percentage of sales)

Net Sales                                            100.0%    100.0%    100.0%
Cost of goods sold                                    77.8%     74.0%     67.6%
                                                   -------     -----     -----
Gross profit                                          22.2%     26.0%     32.4%
                                                   -------     -----     -----
Operating expenses:
     Selling, general and administrative expenses      9.5%     13.3%     58.0%
     Research and development                          0.0%      0.0%      3.6%
                                                   -------     -----     -----
Total operating expenses                               9.5%     13.3%     61.6%
                                                   -------     -----     -----
Income (loss) from operations                         12.7%     12.7%    (29.2%)
                                                   -------     -----     -----
Other income (expense), net                            0.3%      0.2%      1.6%
Net income (loss) before income taxes                 13.0%     12.9%    (27.6%)
                                                   -------     -----     -----
Provision for income taxes                            (1.7%)    (0.4%)    (0.1%)
                                                   -------     -----     -----
Net income (loss)                                     11.3%     12.5%    (27.7%)
                                                   =======     =====     =====


YEAR ENDED JUNE 30, 2008 COMPARED TO YEAR ENDED JUNE 30, 2007

         NET SALES - Net sales increased by $24,338,209, or 234.4%, to
         $34,723,299 for the year ended June 30, 2008 from $10,385,090 for the
         corresponding period of 2007. The increase was primarily due to an
         increase in demand for our CDMA USB modem products in the Caribbean and
         South American countries. Our sales of CDMA USB modem products in the
         Caribbean and South American countries increased by $19,562,558, or
         337.9 %, to $25,352,232 for the year ended June 30, 2008 from
         $5,789,674 for the corresponding period of 2007. Our sales of CDMA USB
         modem products in North America also increased by $5,088,786, or
         118.9%, to $9,367,836 for the year ended June 30, 2008, from $4,279,050
         for the corresponding period of 2007. The overall net sales are
         expected to continue to depend primarily on, among other thing, the
         geographic region of our sales efforts and demand by our customers.

                                       18


<page>

         GROSS PROFIT - Gross profit margin increased by $4,998,924, or 185.5%,
         to $7,694,284 for the year ended June 30, 2008 from $2,695,360 for the
         corresponding period of 2007. The increase was primarily due to the
         increased sales volume of our CDMA USB modem products in the United
         States, the Caribbean, and South American countries. Our sales of CDMA
         USB modem products increased by $5,088,786, or 118.9%, in the Untied
         States and by $19,562,558, or 337.9 %, in the Caribbean and South
         American countries for the year ended June 30, 2008, compared to the
         corresponding period of 2007. Gross profit in terms of net sales
         percentage as the percentage of gross profit was 22.2% for the year
         ended June 30, 2008, compared to 26.0% for the corresponding period of
         2007. The gross profit decrease in terms of net sales percentage was
         primarily due to the increased sales of lower margin as a result of the
         competitive pricing pressures on our sales prices.

         SELLING, GENERAL, AND ADMINISTRATIVE - Selling, general, and
         administrative expenses increased by $1,917,644, or 138.7%, to
         $3,300,070 for the year ended June 30, 2008 from $1,382,426 for the
         corresponding period of 2007. The increase was primarily due to the
         increase in sales and marketing effort for the year ended June 30,
         2008, resulting in not only increased sales and marketing expenses but
         also increased salary and related expenditures, as our sales-force
         increased. For the year ended June 30, 2008, we had an increase in
         sales commission expenses of $897,746, an increase in other sales and
         marketing expenses of $169,857, an increase in travel expenses of
         $69,264, and an increase in payroll expenses of $559,735, compared to
         the corresponding period of 2007.

         OTHER INCOME (EXPENSE), NET - The net amount of other income increased
         by $89,795, or 401.7%, to $112,149 for the year ended June 30, 2008
         from $22,354 for the corresponding period of 2007. The increase was
         primarily due to increased interest income of $135,094, resulting from
         the increase in our average cash, for the year ended June 30, 2008. For
         the year ended June 30, 2008, we had an increase in interest income of
         $96,579, an increase in other income of $46,474, and an increase in the
         loss of $54,004 from the write-off of intangible assets, compared to
         the corresponding period of 2007.


YEAR ENDED JUNE 30, 2007 COMPARED TO YEAR ENDED JUNE 30, 2006

         NET SALES - Net sales increased by $9,382,137, or 935.5%, to
         $10,385,090 for the year ended June 30, 2007 from $1,002,953 for the
         corresponding period of 2006. The primary increase was due to sales of
         our CDMA USB modem products to a new carrier customer in North America,
         in the amount of $4,279,050 for the year ended June 30, 2007, as well
         as a strong increase in demand for our CDMA EV-DO data products in the
         Caribbean and South American countries. Our sales of CDMA EV-DO data
         products in the Caribbean and South American countries were $5,789,674
         for the year ended June 30, 2007, compared to $753,130 for the
         corresponding period of 2006, an increase of $5,036,544, or 668.8%.

         GROSS PROFIT - Gross profit margin increased by $2,370,562, or 729.9%,
         to $2,695,360 for the year ended June 30, 2007 from $324,798 for the
         corresponding period of 2006. Gross profit in terms of net sales
         percentage as the percentage of gross profit was 26.0% for the year
         ended June 30, 2007, compared to 32.4% for the corresponding period of
         2006. The gross profit decrease in terms of net sales percentage was
         due to one-time commission revenue recognized as a non-refundable
         brokerage fee in the amount of $57,280, and sales of products that were
         provided by our vendors at no cost as part of initial seed stock
         incentive in the amount of $48,860 for the year ended June 30, 2006.

         SELLING, GENERAL, AND ADMINISTRATIVE - Selling, general, and
         administrative expenses increased by $800,507, or 137.6%, to $1,382,426
         for the year ended June 30, 2007 from $581,919 for the corresponding
         period of 2006. The increase was primarily a result of an increase in
         sales and marketing efforts, which included hiring new personnel to
         expand our marketing and customer support functions, which increased
         salary and related expenses. For the year ended June 30, 2007, we had
         an increase in sales commission expense of $239,410, an increase in
         marketing expense of $54,850, an increase in travel expense of $71,425,
         and an increase in payroll expense of $291,475, compared to the
         corresponding period of 2006.

                                       19


<page>

         RESEARCH AND DEVELOPMENT - Research and development expenses decreased
         by $36,300, or 100.0%, to nil for the year ended June 30, 2007 from
         $36,300 for the corresponding period of 2006. We incurred research and
         development expense for design of Global Standard for Mobile
         Communications, or GSM, cellular phones, for the year ended June 30,
         2006. For the year ended June 30, 2007, we did not incur research and
         development expense, as we discontinued GSM products and have
         contracted out our research and development of CDMA USB modem products
         to C-Motech Co. Ltd, a designer and original equipment manufacturer
         ("OEMs") of our wireless broadband modems and modules located in South
         Korea.

         OTHER INCOME (EXPENSE), NET - The net of other income (expense)
         increased by $5,723 or 34.41%, to income of $22,354 for the year ended
         June 30, 2007 from income of $16,631 for the corresponding period of
         2006. The increase was due to increase in interest income of $38,515,
         offset by a loss of $19,934 from write-off of fixed assets and
         intangible assets for the year ended June 30, 2007.


LIQUIDITY AND CAPITAL RESOURCES

         Our principal liquidity requirements are for working capital and
capital expenditures. We fund our liquidity requirements with cash on hand, cash
flow from operations, and issuance of equity securities.

         OPERATING ACTIVITIES - Net cash provided by operating activities
         increased by $2,089,502 to $3,835,893 for fiscal 2008 from $1,746,391
         for fiscal 2007. The $3,835,893 in net cash provided by operating
         activities for fiscal 2008 was primarily due to our net income of
         $3,916,913. Net cash provided by operating activities for fiscal 2007
         was $1,746,391, and net cash used in operating activities for fiscal
         2006 was $205,239. The increase in net cash provided by operating
         activities for fiscal 2007 was primarily due to net income of
         $1,300,097 and increase in advance cash collections of $354,500 from
         customers as compared to fiscal 2006.

         INVESTING ACTIVITIES - Net cash used in investing activities for fiscal
         2008, fiscal 2007 and fiscal 2006 was $52,312, $137,185 and $60,916
         respectively, primarily consisting of capital expenditures. The net
         cash used in investing activities for fiscal 2008 was primarily due to
         purchases of long-lived assets. The net cash used in investing
         activities for fiscal 2007 was primarily due to purchases of CDMA
         Development Group certifications in the amount of $115,780.

         FINANCING ACTIVITIES - Net cash used in financing activities for fiscal
         2008 was $88,605, primarily due to repayment of a loan in the amount of
         $100,000, offset by $11,395 received from a stock subscription. Net
         cash provided by financing activities for fiscal 2007 was $300,000,
         primarily due to proceeds of $400,000 from the issuance of Common
         Stock, offset by repayment of a loan in the amount of $100,000. Net
         cash provided by financing activities in fiscal 2006 was $795,000,
         primarily due to proceeds of $905,000 from the issuance of Common
         Stock, offset by repayment of borrowings to shareholders and a line of
         credit in the amount of $110,000.


CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

         The following table summarizes our contractual obligations and
commitments as of June 30, 2008, and the effect such obligations could have on
our liquidity and cash flow in future periods:

<TABLE>
<S> <C>
                                                      PAYMENTS DUE BY JUNE 30,

        LEASE                                    2009           2010           2011           2012          TOTAL
        ---------------------------------     -----------    -----------    ----------    -----------    -----------
        Administrative office facility        $   91,050     $  109,260     $ 109,260     $   18,210     $  327,780
        Corporate housing facility                 4,701              -             -              -          4,701
                                              -----------    -----------    ----------    -----------    -----------
        TOTAL OBLIGATION                      $   95,751     $  109,260     $ 109,260     $   18,210     $  332,481
                                              ===========    ===========    ==========    ===========    ===========
</TABLE>


                                       20


<page>

         LEASES

         We lease our administrative facilities under a non-cancelable operating
         lease that expires on August 31, 2011. In addition to the minimum
         annual rental commitments, the lease provides for periodic cost of
         living increases in the base rent and payment of common area costs.
         Rent expense related to the operating lease was $62,848 and $59,420 for
         the years ended June 30, 2008 and 2007, respectively.

         We lease a corporate housing facility for our vendors under a
         non-cancelable operating lease that expires on October 2, 2008. Rent
         expense related to the operating lease was $17,829 and $2,770 for the
         years ended June 30, 2008 and 2007, respectively.

         We lease one automobile under an operating lease that expires on July
         22, 2009. The related lease expense was $6,452 and $6,795 for the years
         ended June 30, 2008 and 2007, respectively.


OFF-BALANCE SHEET ARRANGEMENT

         Our facility is located in San Diego, California. Manufacturing of our
products has been contracted out to C-Motech Co. Ltd. ("C-Motech"), located in
South Korea.

         In January 2005, we entered into an agreement with C-Motech for the
manufacture of the products. Under the manufacturing and supply agreement,
C-Motech provides us with services including all licenses, component
procurement, final assembly, testing, quality control, fulfillment and
after-sale service. The Agreement provides exclusive rights to market and sell
our CDMA wireless data products in countries in North America, the Caribbean,
and South America. Furthermore, the Agreement provides that we are responsible
for marketing, sales, field testing, and certifications of these products to
wireless service operators and other commercial buyers within a designated
territory, and C-Motech is responsible for design, development, testing,
certification, and completion of these products. Under the Agreement, products
include all access devices designed with Qualcomm's MSM 5100, 5500, 6500, and
6800 chipset solutions provided or designed by C-Motech or both companies. Both
companies own the rights to the products: USB modems, Card Bus, PCI Bus and
Module designed with MSM 5500 dual band products. On January 30, 2007, C-Motech
also certified that we have the exclusive right to sell CDU-680 EVDO USB modems
directly and indirectly in these territories.

         The initial term of the Agreement was for two years, commencing on
January 5, 2005. The agreement automatically renews for successive one year
periods, unless either party provides written notice to terminate at least sixty
days prior to the end of the term. This agreement may be amended or supplemented
by mutual agreement of the parties, as is necessary to document the addition of
any new products.


FUTURE LIQUIDITY AND CAPITAL REQUIREMENTS

         For the next twelve months, we expect to incur approximately $1.0
million to $2.0 million for capital expenditures and the acquisition of
additional certifications, excluding non-cash acquisitions.

         We believe we will be able to fund our future cash requirements for
operations from our cash available, operating cash flows and issuance of equity
securities. We believe these sources of funds will be sufficient to continue our
operations and planned capital expenditures. However, we may be required to
raise additional debt or equity capital if we are unable to generate sufficient
cash flow from operation to fund the continued expansion of our sales and to
satisfy the related working capital requirements for next twelve months. Our
ability to satisfy such obligations also depends upon our future performance,
which in turn is subject to general economic conditions and regional risks, and
to financial, business and other factors affecting our operations, including
factors beyond our control. See Item 1A, "Risk Factors." included in this
report.

                                       21


<page>

         If we are unable to generate sufficient cash flow from operations to
meet our obligations and commitments, we will be required to refinance or
restructure our indebtedness or raise additional debt or equity capital.
Additionally, we may be required to sell material assets or operations or delay
or forego expansion opportunities. We might not be able to affect these
alternative strategies on satisfactory terms, if at all.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not applicable.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The financial statements and the supplementary financial information
required by this Item and included in this report are listed in the Index to
Financial Statements beginning on page F-1.



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

         Not applicable.



ITEM 9A(T). CONTROLS AND PROCEDURES.

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         We maintain disclosure controls and procedures as defined under the
Securities Exchange Act of 1934. They are designed to help ensure that material
information is: (1) gathered and communicated to our management, including our
principal executive and financial officers, in a manner that allows for timely
decisions regarding required disclosures; and (2) recorded, processed,
summarized, reported and filed with the SEC as required under the Securities
Exchange Act of 1934 and within the time periods specified by the SEC.

         Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of June 30, 2008. Based
on such evaluation, which included a determination that the material weakness in
internal control over financial that existed as of June 30, 2007 and was
previously disclosed in our Annual Report on Form 10-KSB for the fiscal year
ended June 30, 2007 had been remediated, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective for their intended purpose described above as of June 30, 2008.


(b) MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

         Management is responsible for establishing and maintaining adequate
internal control over financial reporting, and for performing an assessment of
the effectiveness of internal control over financial reporting as of June 30,
2008. Internal control over financial reporting is defined in Rule 13a-15(f) or
15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process
designed by, or under the supervision of, the Company's principal executive and
principal financial officers and effected by the Company's board of directors,
management and other personnel, to provide reasonable assurance regarding the


                                       22


<page>

reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with U.S. generally accepted accounting
principles. Internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and
that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the Company's assets that could have a
material effect on the financial statements.

         Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

         Management performed an assessment of the effectiveness of the
Company's internal control over financial reporting as of June 30, 2008 based
upon criteria in Internal Control--Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this
assessment, management believes that the Company's internal control over
financial reporting was effective as of June 30, 2008 based on those criteria
issued by COSO.

         This report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's independent registered public accounting firm pursuant to temporary
rules of the SEC that permit the Company to provide only management's report in
this report.


ITEM 9B. OTHER INFORMATION.

         Not applicable.




                                    PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

         Set forth below are the names, ages, titles and business experience of
our directors and executive officers.

          NAME                  AGE   POSITION
          -------------------   ---   ------------------------------------------
          OC Kim                45    President, Acting Chief Financial Officer,
                                      and a Director
          Gary Nelson           67    Chairman of the Board and a Director
          Jaeman Lee            48    Director
          Nick Lim              55    Senior Vice President-Business and
                                      Technology
          Yun J. (David) Lee    46    Chief Operating Officer

         OC Kim has been a director since September 2003. Prior to joining us,
Mr. Kim was the Chief Operating Officer of Axesstel Inc., a pioneering developer
of CDMA Wireless Local Loop Products. Before joining Axesstel, he was the
president of the US Sales office for Kolon Data Communications Co., Ltd., one of
Korea's most prominent technology conglomerates. He began his career at Lucky
Goldstar (LG) Electronics. He has more than 18 years of experience in sales,
marketing and operations management in the telecommunications and information
systems industries. He earned a B.A. from Sogang University in Korea.

                                       23


<page>



         Gary Nelson has been a director since April 2001. He is also the
co-founder and current President of Churchill Mortgage Corporation, an income
property mortgage banking firm based in Los Angeles, California, which is the
loan correspondent for the general and real estate separate accounts of major
life insurance companies and their pension fund sources. Prior experience
includes computer marketing to the aerospace industry with Control Data
Corporation and design engineering on the Apollo Project with North American
Aviation. He holds a B.S. in Mechanical Engineering from Kansas State University
and an MBA from the University of Southern California.

         Jaeman Lee has been a director since September 2006. He currently
serves as Chief Executive Officer of C-Motech Co. Ltd, a Korea-based CDMA EV-DO
data products manufacturing firm.

         Nick Lim has been the Senior Vice President of Business and Technology
since September 2003. Prior to joining us, Mr. Lim was the co-founder and Vice
President of Business Development for eAnywhere Tech, Inc., a multi-national
company that provides wireless products and solutions to worldwide customers.
Before founding eAnywhere, Mr. Lim worked as a Director of Engineering for Sony
America Corp., where he was responsible for their CDMA technology development
and the world's first CDMA handset deployments in US markets. Before working for
Sony, Mr. Lim was a technical manager of Nokia Mobile Phone (USA), responsible
for building a software engineering team for the development of Nokia's CDMA
IS-95A protocol stack and handset software. Mr. Lim is an active member of the
IEEE Communications Society; he received his BS and MS degrees from San Diego
State University.

         Yun J. (David) Lee has been the Chief Operating Officer since September
2008. Mr. Lee has seventeen years of upper level management experience in
telecommunications, including experience in the cellular telephone business in
the U.S. and South America. Prior to joining the Company, he was President of
Ace Electronics, and served as Chief Financial Officer and Director of Sales and
Marketing for RMG Wireless. Prior to that, he served as Controller and Director
of International Sales for Focus Wireless in Chicago.


COMPIANCE WITH SECTION 16(A) OF EXCHAGE ACT

         Section 16(a) of the Securities Exchange Act of 1934 requires officers
and directors, and persons who own more than ten percent of our equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, directors and
greater than regulations to furnish us with copies of all forms they file
pursuant to Section 16(a). Based solely on our review of the copies of such
forms it received and written representations from reporting persons required to
file reports under Section 16(a), to our knowledge all of the Section 16(a)
filing requirements applicable to such persons with respect to fiscal 2008 were
complied with.


CODE OF ETHICS

         The Board of Directors has adopted a Code of Ethics, which is
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. The Code of Ethics covers all areas of professional conduct,
including honest and ethical conduct, conflicts of interest, compliance with
laws, disclosure obligation, and accountability for adherence to the Code.

                                       24


<page>

CORPORATE GOVERNANCE

         The Board of Directors has no committees, and directors do not receive
compensation for serving on the Board of Directors.


ITEM 11. EXECUTIVE COMPENSATION.

         The following table sets all compensation paid or accrued by us for the
years ended June 30, 2008, and 2007 to our Chief Executive Officer, President
and Chief Technology Officer and Chief Operating Officer. (The "Named Executive
Officers")


<TABLE>
<S>     <C>
                        ANNUAL COMPENSATION
- --------------------------------------------------------------------                NON-EQUITY     NONQUALIFIED
NAME AND                    FISCAL                                 STOCK    OPTION  INCENTIVE PLAN DEFERRED     OTHER
PRINCIPAL POSITION          YEAR          SALARY          BONUS    AWARDS   AWARDS  COMPENSATION   COMPENSATION COMPENSATION  TOTAL
- ------------------------- ---------- --------------- ------------ ----------------- -------------- ------------ ------------  ------
                            2006     $100,000 (1)    None           None      None    None         None          None       $100,000
OC Kim,                     2007     $110,000 (2)    $20,500        None      None    None         None          None       $165,500
President and Acting
Financial Officer           2008     $150,000 (3)    $58,137 (4)    None      None    None         None          None       $208,137
- ------------------------- ---------- --------------- ------------ ----------------- -------------- ------------ ------------  ------
Nick Lim,                   2007     $ 50,000 (5)    $18,500        None      None    None         None          None       $68,500
Senior Vice President       2008     $100,000        $38,137 (6)    None      None    None         None          None       $138,137
- ------------------------- ---------- --------------- ------------ ----------------- -------------- ------------ ------------  ------
Yun J. (David) Lee,         2008     $ 91,667 (7)    $35,137 (8)    None      None   None          None          None       $126,804
 Chief Operating
Officer
</TABLE>
         (1)  $13,750 of this amount was deferred in 2006
         (2)  $25,000 of this amount was deferred in fiscal 2007.
         (3)  $30,000 of this amount was deferred in fiscal 2008.
         (4)  $20,000 of this amount was accrued but not paid as of June 30,
              2008.
         (5)  Nick Lim has been Senior Vice President of Business Development
              and Technology since January 2007
         (6)  $10,000 of this amount was accrued but not paid as of June 30,
              2008.
         (7)  Dave Yun Lee has been  Chief Operating Officer since
              September 2007
         (8)  $10,000 of this amount was accrued but not paid as of June 30,
              2008.

         We had no outstanding employee stock options as of June 30, 2008.

         We have no compensation committee. All matters relating to executive
compensation are determined by the Board of Directors.

COMPENSATION DISCUSSION AND ANALYSIS

         General Philosophy. We compensate our executive officers through a mix
of base salary and bonus. We plan to add an equity incentive through adoption of
a Stock Option Plan in fiscal 2009. Our compensation policies are designed to be
competitive with comparable employers and to align management's incentives with
both near term and long-term interests of our stockholders. We use informal
methods of benchmarking our executive compensation, based on the experience of
our directors or, in some cases, studies of industry standards. Our compensation
is negotiated on a case by case basis, with attention being given to the amount
of compensation necessary to make a competitive offer and the relative
compensation among our executive officers.

         Base Salaries. We want to provide our senior management with a level of
assured cash compensation in the form of base salary that facilitates an
appropriate lifestyle given their professional status and accomplishments.

         Incentive Compensation. Our practice is to award cash bonuses based
upon performance objectives set by the Board of Directors. We maintain a bonus
plan which provides our executive officers and non-executive officers the
ability to earn cash bonuses based on the achievement of performance targets.
The performance targets are set annually by the Board of Directors, and bonuses
are awarded to executive officers and non-executive officers on a quarterly
basis. The actual amounts of cash bonuses to executive officers and
non-executive officers are in the sole discretion of the Board of Directors For
fiscal 2008, the performance targets were based on achieving revenue and
operating income targets.

         Severance Benefits. We are generally an at will employer, and have no
employment agreements with severance benefits.

         Retirement Plans. We do not maintain any retirement plans.

         REPORT OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION

         The Board of Directors is responsible for setting and overseeing the
administration of the policies governing annual compensation of our executive
officers. The Board of Directors reviews the performance and compensation levels
for executive officers, including our chief executive officer, and sets salary
levels. The Board of Directors has reviewed and discussed with our management
the "Compensation Discussion and Analysis" included earlier in this Annual
Report. Based upon that review and analysis, the Board of Directors determined
that the Compensation Discussion and Analysis be included in this Annual Report.

                                           Submitted by the Board of Directors:

                                                              OC Kim
                                                              Gary Nelson
                                                              Jaeman Lee


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

         The following table sets forth certain information regarding the
beneficial ownership of our Common Stock as of June 30, 2008 by each director
and executive officer of the Company, each person known to us to be the
beneficial owner of more than 5% of the outstanding Common Stock, and all
directors and executive officers of the Company as a group. Except as otherwise
indicated below, each person has sole voting and investment power with respect
to the shares owned, subject to applicable community property laws.

                                       25


<page>

                            SHARES BENEFICIALLY OWNED
- --------------------------------------------------------------------------------
                   NAME AND ADDRESS                          NUMBER      PERCENT
- ------------------------------------------------------  --------------   -------
OC Kim                                                   1,499,195        11.33%
5440 Morehouse Drive, Suite 1000, San Diego, CA 92121

Gary Nelson                                                269,562         2.04%
5440 Morehouse Drive, Suite 1000, San Diego, CA 92121

Nick Lim                                                   488,209         3.69%
5440 Morehouse Drive, Suite 1000, San Diego, CA 92121

Jaeman Lee                                               3,370,356 (1)    25.47%
5440 Morehouse Drive, Suite 1000, San Diego, CA 92121

All directors and executive officers of the Company
as a group (5 persons)                                   5,627,322        42.53%


(1) Consists of shares owned by C-Motech Co. Ltd., of which Jaeman Lee is an
officer.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.

         We purchased CDMA wireless data products in the amount of $27,090,347,
or 100.0% of total purchases, from C-Motech Co. Ltd., for the year ended June
30, 2008 and had related accounts payable of $3,697,893 as of June 30, 2008. We
also had an account receivable of $151,750 in connection with a marketing
development fund as of June 30, 2008. C-Motech owns 3,370,356 shares, or 25.5%,
of our outstanding Common Stock and Jaeman Lee, Chief Executive Officer of
C-Motech Co. Ltd., has served as a director of the Company since September 2006.


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

         The following table shows the fees paid or accrued for the audit and
other accounting services for the years ended June 30, 2008 and 2007.

                                                        FY 2008          FY 2007
                                                        -------          -------
       Audit Fees                                       $67,500          $38,000
       Audit-Related Fees                                 2,604               --
       Tax Fees                                          15,000               --
       All Other Fees                                    10,000               --
                                                        -------          -------
       Total Fees                                       $95,104          $38,000
                                                        =======          =======

         The fees set forth on the foregoing table were paid for the year ended
June 30, 2008, but relate to the audits of the fiscal years set forth. Audit
services of Choi, Kim & Park, LLP for the years ended June 30, 2008 and 2007
consisted of the examination of our consolidated financial statements. All of
the services described above were approved in advance by the Board of Directors.



                                     PART IV


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.


                                       26


<page>

         (a)  See Index to Financial Statements

         The following financial statement schedules for the years ended June
         30, 2008, 2007, and 2006 should be read in conjunction with the
         financial statements, and related notes thereto.

         (b)  Exhibits

         The following Exhibits are files as part of, or incorporated by
         reference into, this Report on Form 10-K:

         Exhibit
         No.                            Description
         -------  -------------------------------------------------------------
         2.1      Articles of Merger and Agreement and Plan of Reorganization,
                  filed January 2, 2008 with the Nevada Secretary of State. (1)

         3.1      Restated Articles of Incorporation of Franklin Wireless
                  Corp. (1)

         3.2      Bylaws of Franklin Wireless Corp. (1)

         10.1     Co-Development, Co-Ownership and Supply Agreement, dated
                  January 5, 2005 between the Company and C-Motech Co., Ltd. (2)


         10.2     Lease, dated May 1, 2008, between the Company and RDLFA, LLC,
                  a California Limited Liability Company

         14.1     Code of Ethics.

         31.1     Certificate of Chief Executive Officer pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002.

         31.2     Certificate of Acting Chief Financial Officer pursuant to
                  Section 302 of the Sarbanes-Oxley Act of 2002.
         32.1     Certificate of Chief Executive Officer pursuant to Section 906
                  of the Sarbanes-Oxley Act of 2002

         32.2     Certificate of Acting Chief Financial Officer pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002

         -------------------------
         (1) Incorporated by reference from Report on Form 10-QSB for the
         ----------------------------------------------------------------
         quarterly period ended March 31, 2008, filed on May 14, 2008
         ------------------------------------------------------------

         (2) Incorporated by reference from Annual Report on Form 10-KSB for the
         -----------------------------------------------------------------------
         year ended June 30, 2005, filed on May 23, 2006
         -----------------------------------------------


                                       27


<page>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                       Franklin Wireless Corp.

                                       By: /s/ OC Kim
                                           -----------------------------
                                           OC Kim, President

Dated: September 22, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<S>     <C>
                Signature                      Title                             Date
                ---------                      -----                             ----

(1) Principal Executive, Financial and Accounting Officer

           /s/ OC KIM                President, Acting Chief Financial
           --------------------      Officer and a Director                September 22, 2008
               OC Kim

(3) Directors

           /s/ GARY NELSON           Chairman of the Board of Directors    September 22, 2008
           --------------------
               Gary Nelson


           /s/ JAE MAN LEE           Director                              September 22, 2008

           --------------------
               Jae Man Lee
</TABLE>


                                       28


<page>

                             FRANKLIN WIRELESS CORP.

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>     <C>
                                                                                PAGE NO.
                                                                                --------

Index to Financial Statements                                                     F-1

Report of Independent Registered Public Accounting Firm                           F-2

Balance Sheets at June 30, 2008 and June 30, 2007                                 F-3

Statements of Operations for the years ended June 30, 2008, 2007, and 2006        F-4

Statements of Stockholders' Equity (Deficiency) for the years ended
June 30, 2008, 2007 and 2006                                                      F-5

Statements of Cash Flows for the years ended June 30, 2008, 2007, and 2006        F-6

Notes to Financial Statements                                                     F-7
</TABLE>


                                       F-1


<page>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Franklin Wireless Corp.
San Diego, California

We have audited the accompanying balance sheets of Franklin Wireless Corp. as of
June 30, 2008 and 2007 and the related statements of operations, changes in
stockholders' equity (deficiency), and cash flows for the years ended June 30,
2008, 2007 and 2006. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Franklin Wireless Corp. as of
June 30, 2008 and 2007, and the results of its operations and cash flows for the
years ended June 30, 2008, 2007 and 2006 in conformity with accounting
principles generally accepted in the United States of America.



Choi, Kim & Park, LLP
Los Angeles, California
September 22, 2008


                                      F-2


<page>

<TABLE>
<S>     <C>
                                     FRANKLIN WIRELESS CORP.
                                         BALANCE SHEETS

                                                                            FISCAL YEARS ENDED JUNE 30,
                                                                             -------------------------
                                                                                2008           2007
                                                                             -----------   -----------
                                                                                          (Consolidated)
ASSETS
     CURRENT ASSETS:
         Cash and cash equivalents                                           $ 6,172,569   $ 2,477,593
         Accounts receivable                                                   4,534,069        44,915
         Inventories                                                              72,162        10,830
         Prepaid income tax                                                      355,393            --
         Prepaid expenses                                                         23,430         6,649
                                                                             -----------   -----------
         Total current assets                                                 11,157,623     2,539,987
     Property and equipment, net                                                  68,012        26,218
     Intangible assets, net                                                           --       130,264
     Other assets                                                                 15,411         5,161
                                                                             -----------   -----------
     TOTAL ASSETS                                                            $11,241,046   $ 2,701,630
                                                                             ===========   ===========


LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
         Accounts payable                                                    $ 4,047,651   $    68,064
         Advanced payment from customers                                         390,000       354,500
         Accrued liabilities                                                     875,046       179,025
         Notes payable to a stockholder                                          334,000       434,000
                                                                             -----------   -----------
         Total current liabilities                                             5,646,697     1,035,589
                                                                             ===========   ===========

     STOCKHOLDERS' EQUITY:
     Preferred stock, par value of $0.001 per share, authorized 10,000,000
     shares; No preferred stock issued and outstanding as
     of June 30, 2008 and 2007                                                        --            --
     Common stock, par value of $0.001 per share, authorized 50,000,000
     shares; Common stock of 13,231,491 issued and outstanding as of
     June 30, 2008 and 2007                                                       13,232        13,232
     Additional paid-in capital                                                5,016,161     5,016,161
     Stock subscription receivable                                                    --       (11,395)
     Retained earnings (accumulated deficit)                                     564,956    (3,351,957)
                                                                             -----------   -----------
     Total stockholders' equity                                                5,594,349     1,666,041
                                                                             -----------   -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $11,241,046   $ 2,701,630
                                                                             ===========   ===========


See accompanying notes to financial statements.

                                      F-3


<page>

                                             FRANKLIN WIRELESS CORP.
                                            STATEMENTS OF OPERATIONS

                                                       --------------------------------------------
                                                                 FISCAL YEARS ENDED JUNE 30,
                                                       --------------------------------------------
                                                           2008            2007            2006
                                                       ------------    ------------    ------------
                                                                      (Consolidated)  (Consolidated)

Net sales                                              $ 34,723,299    $ 10,385,090    $  1,002,953
Cost of goods sold                                       27,029,015       7,689,730         678,155
                                                       ------------    ------------    ------------
Gross profit                                              7,694,284       2,695,360         324,798
                                                       ------------    ------------    ------------

Operating expenses:
     Research and development                                    --              --          36,300
     Selling, general, and administrative                 3,300,071       1,382,426         581,919
                                                       ------------    ------------    ------------
Total operating expenses                                  3,300,071       1,382,426         618,219
                                                       ------------    ------------    ------------

Income (loss) from operations                             4,394,213       1,312,934        (293,421)

Other income (expense):
     Interest expense                                            --              --            (559)
     Interest income                                        135,094          38,515           2,359
     Loss on disposal of property and                            --            (767)             --
     equipment
     Loss on write-off of intangible assets                 (73,171)        (19,167)             --
     Other income (expense), net                             50,226           3,772          14,831
                                                       ------------    ------------    ------------
Total other income (expense), net                           112,149          22,353          16,631
                                                       ------------    ------------    ------------

Net income (loss) before income taxes                     4,506,362       1,335,287        (276,790)

Provision for income taxes                                  589,449          35,190             800
                                                       ------------    ------------    ------------

Net income (loss)                                      $  3,916,913    $  1,300,097    $   (277,590)
                                                       ============    ============    ============


Basic earnings (loss) per share                        $       0.30    $       0.10    $      (0.02)
Diluted earnings (loss) per share                      $       0.30    $       0.10    $      (0.02)

Weighted average common shares outstanding - basic       13,231,491      12,824,643      11,685,382
Weighted average common shares outstanding - diluted     13,231,491      12,824,643      11,685,382


See accompanying notes to financial statements.


                                      F-4


<page>

                                             FRANKLIN WIRELESS CORP.
                                 STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)


                                       COMMON STOCKS
                                -------------------------
                                                                                                          TOTAL
                                                            ADDITIONAL                                 STOCKHOLDERS'
                                                              PAID-IN     ACCUMULATED     STOCK SUB       EQUITY
                                  SHARES        AMOUNT        CAPITAL       DEFICIT      -SCRIPTION     (DEFICIENCY)
                                -----------   -----------   -----------   -----------    -----------    -----------
Balance - June 30, 2006          12,602,911   $    12,603   $ 4,616,790   $(4,652,054)   $   (17,395)   $   (40,056)
Issuance of common stock            628,580           629       399,371            --             --        400,000
Payment of stock subscription            --            --            --            --          6,000          6,000
receivables
Net income                               --            --            --     1,300,097             --      1,300,097
                                -----------   -----------   -----------   -----------    -----------    -----------
Balance - June 30, 2007          13,231,491        13,232     5,016,161    (3,351,957)       (11,395)     1,666,041

Receipt of stock subscription
receivables                              --            --            --            --         11,395         11,395
Net income                               --            --            --     3,916,913             --      3,916,913
                                -----------   -----------   -----------   -----------    -----------    -----------
Balance - June 30, 2008          13,231,491   $    13,232   $ 5,016,161   $   564,956    $        --    $ 5,594,349
                                ===========   ===========   ===========   ===========    ===========    ===========

See accompanying notes to financial statements.


                                      F-5


<page>

                                     FRANKLIN WIRELESS CORP.
                                    STATEMENTS OF CASH FLOWS

                                                              -----------------------------------------
                                                                     FISCAL YEARS ENDED JUNE 30,
                                                              -----------------------------------------
                                                                  2008          2007           2006
                                                              -----------    -----------    -----------
                                                                           (Consolidated)  (Consolidated)
CASH FLOWS FROM OPERATIONS ACTIVITIES:
     Net income (loss)                                        $ 3,916,913    $ 1,300,097    $  (277,590)
     Adjustments to reconcile net income (loss) to net cash
     provided by (used in) operating activities:
         Loss on disposal of property and equipment                    --            767             --
         Loss on impairment of intangible assets                   73,171         19,167             --
         Depreciation                                              10,518          7,135          7,622
         Amortization of intangible assets                         57,093         70,544         49,222
         Bad debt                                                   2,200
         Increase (decrease) in cash due to change in:
             Accounts receivable                               (4,491,354)       (43,165)        (1,750)
             Inventory                                            (61,332)       (10,830)            --
             Prepaid expense                                      (16,781)        (6,649)            --
             Prepaid income tax                                  (355,393)
             Other assets                                         (10,250)          (709)        (2,346)
             Accounts payable                                   3,979,587         67,478        (17,340)
             Accrued liabilities                                  696,021        (11,944)        40,821
             Advanced payment from customers                       35,500        354,500             --
            Other liabilities                                          --             --         (3,878)
                                                              -----------    -----------    -----------
Net cash provided by (used in) operating activities             3,835,893      1,746,391       (205,239)
                                                              -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of property and equipment                        (52,312)       (21,405)        (5,416)
       Purchases of intangible assets                                  --       (115,780)       (55,500)
                                                              -----------    -----------    -----------
Net cash used in investing activities                             (52,312)      (137,185)       (60,916)
                                                              -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Payment to stockholders                                           --             --        (10,000)
     Cash payment for common stock repurchase                          --             --       (100,000)
     Payment of note payable                                     (100,000)      (100,000)            --
     Proceeds from issuance of common stock                            --        400,000        905,000
     Receipt of stock subscription receivable                      11,395             --             --
                                                              -----------    -----------    -----------
Net cash provided by financing activities                         (88,605)       300,000        795,000
                                                              -----------    -----------    -----------

Net increase in cash and cash equivalents                       3,694,976      1,909,206        528,845
Cash and cash equivalents, beginning of year                    2,477,593        568,387         39,542
                                                              -----------    -----------    -----------
Cash and cash equivalents, end of year                        $ 6,172,569    $ 2,477,593    $   568,387
                                                              ===========    ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the year for:
         Interest                                             $        --    $        --    $       559
         Income taxes                                         $   259,842    $       800    $       800

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITY:
     Common stock conversion from note payable                $        --    $        --    $   (40,000)

See accompanying notes to financial statements.


                                      F-6
</TABLE>


<page>

                             FRANKLIN WIRELESS CORP.
                          NOTES TO FINANCIAL STATEMENTS
                             JUNE 30, 2008 AND 2007


NOTE 1 - BUSINESS OVERVIEW

         We design and sell broadband high speed wireless data communication
products such as 3G wireless modules and modems. We focus on wireless broadband
USB modems, which provide a flexible way for wireless subscribers to connect to
the wireless broadband network with any laptop, tablet PC or desktop USB port
without a PC card slot. The broadband wireless data communication products are
positioned at the convergence of wireless communications, mobile computing and
the Internet, each of which we believe represents a growing market.

         Our products are based on Evolution Data Optimized technology ("EV-DO
technology") of Code Division Multiple Access ("CDMA") and High-Speed Packet
Access technology ("HSPA technology") of Wideband Code Division Multiple Access
("WCDMA"), which are wireless radio broadband data standards adopted by many
CDMA and WCDMA mobile service providers, and enable end users to send and
receive email with large file attachments, play interactive games, receive, send
and download high resolution picture, video, and music contents.

         We market our products through two channels: directly to wireless
operators, and indirectly through strategic partners and distributors. Our
global customer base extends from the United States to the Caribbean and South
American countries. Our Universal Serial Bus ("USB") modems are certified by
Sprint, Alltel, Cellular South, NTELOS, Cincinnati Bell, Mobi PCS, Qwest and ACS
in the United States, by IUSACELL in Mexico, by Telefonica and Movilnet in
Venezuela, by Centennial in Puerto Rico, by Alegro in Ecuador and by TSTT in
Trinidad and Tobago. We have strategic marketing relationships with several of
these customers.

         Since we launched three new products, CDMA Revision A USB modem
CDU-680, CDMA Revision 0 CDU-650 USB modem, and CDMA Revision 0 CDX-650 Express
card modem in 2007, we have continued to add new features and functionality to
our products to enhance value and ease of use that our products provide to our
customers and end users. In 2008, we additionally launched the CGU-628 HSDPA USB
modem, which provides a flexible way for users to connect to high-speed downlink
packet access network, and the CDM-650 Stand-alone Revision 0 USB modem, which
provides internet connection for users who are in remote locations where there
are not cable or DSL services.

         For the years ended June 30, 2008, 2007, and 2006, the revenue
recognized from sales of our products was $34,723,299, $10,385,090, and
$1,002,953, respectively.


NOTE 2 - DISCONTINUED OPERATIONS

         On October 30, 2007, the Board of Directors approved the dissolution of
its only subsidiary, ARG, which has been inactive since August 2003. As a part
of the dissolution, we assumed a note payable of $434,000, a note payable.
During the year ended June 30, 2008, we repaid $100,000 on this note, and the
remaining balance amounted to $334,000 at June 30, 2008. The subsidiary did not
have revenue, expense, asset or component of stockholders' equity as of June 30,
2008 and June 30, 2007, and for the years ended June 30, 2008 and 2007.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         SEGMENT REPORTING

         SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
         Information," requires public companies to report financial and
         descriptive information about their reportable operating segments. We
         identify our operating segments based on how management internally
         evaluates separate financial information, business activities and
         management responsibility. We operate in a single business segment
         consisting of sale of wireless access products.

                                      F-7


<page>

         ESTIMATES

         The preparation of financial statements 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
         revenue and expenses during the reporting periods. Actual results could
         differ from those estimates. Significant estimates include useful lives
         of intangible and long-lived assets.

         REVENUE RECOGNITION

         We recognize revenue from products sales when persuasive evidence of an
         arrangement exists, the price is fixed or determinable, collection is
         reasonably assured and delivery of products has occurred or services
         have been rendered. Accordingly, we recognize revenues from product
         sales upon shipment of the product to the customers. We do not allow
         the right of return on product sales but provide a factory warranty for
         one year from the shipment, which is covered by our vendor.

         CASH AND CASH EQUIVALENTS

         For purposes of the statements of cash flow, we consider all highly
         liquid investments purchased with original maturities of six months or
         less to be cash equivalents.

         SHIPPING AND HANDLING COST

         Most of shipping and handling costs are paid by the customers directly
         to the shipping companies. We do not collect and incur shipping and
         handling costs to be capitalized.

         INVENTORIES

         Our inventories are made up of finished goods and are stated at the
         lower of cost or market, cost being determined on a first-in, first-out
         basis. We assess the inventory carrying value and reduce it, if
         necessary, to its net realizable value based on customer orders on
         hand, and internal demand forecasts using management's best estimates
         given information currently available. Our customer demand is highly
         unpredictable, and can fluctuate significantly caused by factors beyond
         our control. We may maintain an allowance for inventories for
         potentially excess and obsolete inventories and inventories that are
         carried at costs that are higher than their estimated net realizable
         values.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. We provide for depreciation
         using the straight-line method over the estimated useful lives as
         follows:

         Computers and software                      5 years
         Machinery and equipment                     5 years
         Furniture and fixtures                      7 years

         Expenditures for maintenance and repairs are charged to operations as
         incurred while renewals and betterments are capitalized. Gains or
         losses on the sale of property and equipment are reflected in the
         statements of operations.

                                      F-8


<page>

         INTANGIBLE ASSETS - LICENSES AND CERTIFICATIONS

         Licenses are stated at cost and are amortized using the straight-line
         method over the license periods of five years or life of the licenses.
         Certifications are stated at cost and are amortized using the
         straight-line method over the certification periods of three years or
         life of the certifications.

         VALUATION ON INTANGIBLE AND LONG-LIVED ASSETS

         In accordance with Statement of Financial Accounting Standards No. 144,
         "Accounting for Impairment on Disposal of Long-lived Assets", we review
         for impairment of long-lived assets and certain identifiable
         intangibles whenever events or circumstances indicate that the carrying
         amount of assets may not be recoverable. We consider the carrying value
         of assets may not be recoverable based upon our review of the following
         events or changes in circumstances: the asset's ability to continue to
         generate income from operations and positive cash flow in future
         periods; loss of legal ownership or title to the assets; significant
         changes in our strategic business objectives and utilization of the
         asset; or significant negative industry or economic trends. An
         impairment loss would be recognized when estimated future cash flows
         expected to result from the use of the asset is less than its carrying
         amount.

         For the year ended June 30, 2008, we wrote off intangible assets of CDG
         test certifications in the amount of $171,280, resulting in a total
         loss of $73,171, as these certifications were deemed impaired due to
         their inability to continue to generate income from operations and
         positive cash flow in future periods.

         WARRANTIES

         We do not allow the right of return on product sales but provides a
         factory warranty for one year from the shipment, which is covered by
         our vendor. These products are shipped directly from our vendor to our
         customers. As a result, we do not accrue any warranty expenses.

         RESEARCH AND DEVELOPMENT COSTS

         We have an agreement with C-Motech for the manufacturing of our
         products, including services of component procurement, design,
         development, final assembly, testing, quality control, fulfillment and
         delivery of these products. As a result, we do not accrue any
         significant research and development costs, primarily made up of
         developmental activities relating to our products.

         ADVERTISING AND MARKETING COSTS

         We expense the costs of advertising and marketing as incurred. We
         incurred $1,370,125 and $302,522 of marketing and advertising expenses
         for the years ended June 30, 2008 and 2007, respectively. The increase
         was primarily due to the increase in sales and marketing effort for the
         year ended June 30, 2008, and we had an increase in sales commission
         expenses of $897,746 and an increase in marketing expenses of $169,857
         for the year ended June 30, 2008, compared to the corresponding period
         of 2007. The costs incurred by us for these marketing and promotional
         activities were included within advertising and marketing expenses in
         accordance with Financial Accounting Standards Board, or FASB, Emerging
         Issues Task Force, or EIFT, Issue No. 01-9, ACCOUNTING FOR
         CONSIDERATION GIVEN BY A VENDOR TO A CUSTOMER (INCLUDING A RESELLER OF
         THE VENDOR'S PRODUCT), or EITF No. 01-9, which provides guidance on the
         application of generally accepted accounting principles to selected
         recognition issues on PAYMENTS FROM A VENDOR TO A CUSTOMER.


                                      F-9


<page>

         INCOME TAXES

         We adopted the provisions of FASB interpretation ("FIN") No. 48,
         "Accounting for Uncertainty in Income Taxes -- an interpretation of
         FASB statement No. 109," which prescribes a recognition threshold and
         measurement process for recording in the financial statements,
         uncertain tax positions taken or expected to be taken in a tax return.
         Under FIN 48, the impact of an uncertain income tax position on the
         income tax return must be recognized at the largest amount that is
         more-likely-not to be sustained upon audit by the relevant taxing
         authority. An uncertain income tax position will not be recognized if
         it has less than a 50% likelihood of being sustained.

         We recognize federal and state tax liabilities or assets based on our
         estimate of taxes payable to or refundable by tax authorities in the
         current fiscal year. We also recognize federal and state tax
         liabilities or assets based on our estimate of future tax consequences
         attributable to differences between the financial statement carrying
         amounts of existing assets and liabilities and their respective tax
         bases. Deferred tax assets and liabilities are measured using enacted
         tax rates expected to apply to taxable income in the years in which
         those temporary differences are expected to be recovered or settled. A
         valuation allowance is required when it is more likely than not that we
         will not be able to realize all or a portion of our deferred tax
         assets.

         The significant component of the deferred tax asset (liability) at June
         30, 2008 and 2007 was federal net operating loss carry-forward in the
         amount of approximately $2,034,000 and $2,934,000, respectively, based
         on federal tax rate of 34%. SFAS No. 109 requires a valuation allowance
         to be recorded when it is more likely than not that some or all of the
         deferred tax assets will not be realized. At June 30, 2008 and 2007,
         management believes that it is more likely than not that most of the
         deferred tax assets will not be realized, and valuation allowances for
         the full amount of the net deferred tax asset were established to
         reduce the deferred tax assets to zero based on the level of historical
         taxable income and projections for future taxable income over the
         periods in which the deferred tax assets are deductible. As of June 30,
         2008, we have federal net operating loss carryforwards of approximately
         $5,983,000 and state net operating loss carryforwards of approximately
         $1,676,000 for income tax purposes with application of IRC Section 382
         limitation on net operating losses as result of the Company's ownership
         change in prior period. The Federal and state net operating loss
         carryforwards will begin to expire from 2009 to 2026 and 2009 to 2016,
         respectively.

         EARNINGS PER SHARE

         We report earnings per share in accordance with Statement of Financial
         Accounting Standards No. 128, "Earnings Per Share". Basic earning per
         share is computed using the weighted average number of shares
         outstanding during the fiscal year. Diluted earnings per share include
         the potentially dilutive effect of outstanding common stock options and
         warrants which are convertible to common shares.

         On January 8, 2008, a 1 for 70 reverse stock split was implemented in
         connection with the reincorporation, under which each shareholder
         received one share for each 70 shares held. As result of the reverse
         stock split, a conversion was made to the weighted average number of
         shares outstanding for the fiscal years of 2008, 2007 and 2006 that
         took into consideration the effect of a reverse split on the total
         number of shares outstanding, in order to compare the current weighted
         average number of shares outstanding to its historical numbers in a
         consistent form of valuation. In order to adjust a weighted average
         number of shares outstanding of the Company, the pre-split outstanding
         shares were divided by the split ratio.

         CONCENTRATIONS OF CREDIT RISK

         We extend credit to our customers and perform ongoing credit
         evaluations of such customers. We evaluate our accounts receivable on a
         regular basis for collectability and provides for an allowance for
         potential credit losses as deemed necessary.

                                      F-10


<page>

         Substantially all of our revenues are derived from sales of wireless
         data products. Any significant decline in market acceptance of our
         products or in the financial condition of our existing customers could
         impair our ability to operate effectively.

         A significant portion of our revenue is derived from a small number of
         customers. Three customers accounted for 37.0%, 34.3%, and 13.3% of
         total revenues for the year ended June 30, 2008, and had related
         account receivables in the amount of $611,820, $3,250,000, and $0, or
         13.5%, 71.7% and 0% of total account receivables at June 30, 2008,
         respectively. For the year ended June 30, 2007, two customers accounted
         for 41.2% and 38.6% of revenues and had related accounts receivable in
         the amount of $12,025 and $1,800, or 26.8% and 4.0% of total accounts
         receivable at June 30, 2007, respectively.

         We purchase our wireless products from one design and manufacturing
         company located in South Korea. If this company were to experience
         delays, capacity constraints or quality control problems, product
         shipments to our customers could be delayed, or our customers could
         consequently elect to cancel the underlying product purchase order,
         which would negatively impact our revenue. We purchased wireless data
         products in the amount of $27,090,347 and $7,565,040 for the years
         ended June 30, 2008 and 2007, respectively, and had related accounts
         payable of $3,697,893 and $3,875 at June 30, 2008 and 2007,
         respectively. However, there were no significant delays, capacity
         constraints, or quality control problems that negatively impacted the
         Company's revenue during those fiscal years.

         We maintain our cash accounts with established commercial banks. Such
         cash deposits periodically exceed the Federal Deposit Insurance
         Corporation insured limit of $100,000 for each account. However, we do
         not anticipate any loss on excess deposits.


         RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In July 2006, the FASB issued FASB interpretation ("FIN") No. 48,
         "Accounting for Uncertainty in Income Taxes -- an interpretation of
         FASB statement No. 109," which prescribes a recognition threshold and
         measurement process for recording in the financial statements,
         uncertain tax positions taken or expected to be taken in a tax return.
         In addition, FIN 48 provides guidance on the derecognizing,
         classification, accounting in interim periods and disclosure
         requirements for uncertain tax positions. We have currently adopted and
         evaluated the impact, if any, that FIN 48 will have on our financial
         statements. FIN 48 is not expected to have a material impact on our
         financial statements.

         In September 2006, the FASB issued Statement of Financial Accounting
         Standards ("SFAS") No. 157, "FAIR VALUE MEASUREMENTS". This standard
         provides guidance for using fair value to measure assets and
         liabilities. The standard also responds to investors' requests for
         expanded information about the extent to which companies measure assets
         and liabilities at fair value, the information used to measure fair
         value, and the effect of fair value measurements on earnings. The
         standard applies whenever other standards require (or permit) assets or
         liabilities to be measured at fair value, but does not expand the use
         of fair value in any new circumstances. SFAS No. 157 is effective for
         financial statements issued for fiscal years beginning after November
         15, 2007, and interim periods within those fiscal years. There are
         numerous previously issued statements dealing with fair values that are
         amended by SFAS No. 157. SFAS No. 157 is not expected to have a
         material impact on our financial statements.

         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 companies to choose to
         measure certain financial instruments and other items at fair value.
         Most of the provisions in SFAS 159 are elective; however the amendment
         to SFAS 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
         SECURITIES, applies to all entities with available-for-sale securities.
         The fair value option established by SFAS 159 permits all entities to
         choose to measure eligible items at fair value at specified election
         dates. The standard requires that unrealized gains and losses are
         reported in earnings for items measured using the fair value option at
         each subsequent reporting date. SFAS No. 159 is effective for the
         Company beginning in the first quarter of fiscal year 2009. SFAS No.
         159 and the amendments to SFAS 115 are not expected to have a material
         impact on our financial statements.

                                      F-11


<page>

         In June 2007, the FASB ratified Emerging Issues Task Force ("EITF")
         07-3, Accounting for Nonrefundable Advance Payments for Goods or
         Services Received for Use in Future Research and Development Activities
         ("EITF 07-3"). EITF 07-3 requires that nonrefundable advance payments
         for goods or services that will be used or rendered for future research
         and development activities be deferred and capitalized and recognized
         as an expense as the goods are delivered or the related services are
         performed. EITF 07-3 is effective, on a prospective basis, for fiscal
         years beginning after December 15, 2007. EITF 07-3 is not expected to
         have a material impact on our financial statements.

         In December 2007, the FASB issued Statement No. 141 (revised), Business
         Combinations ("SFAS No. 141(R)"). The standard changes the accounting
         for business combinations including the measurement of acquirer shares
         issued in consideration for a business combination, the recognition of
         contingent consideration, the accounting for pre-acquisition gain and
         loss contingencies, the recognition of capitalized in-process research
         and development, the accounting for acquisition-related restructuring
         cost accruals, the treatment of acquisition related transaction costs
         and the recognition of changes in the acquirer's income tax valuation
         allowance. SFAS No. 141(R) is effective for fiscal years beginning
         after December 15, 2008, with early adoption prohibited. SFAS No.
         141(R) is not expected to have a material impact on our financial
         statements.

         In December 2007, the FASB issued Statement No. 160, Noncontrolling
         Interests in Consolidated Financial Statements, an amendment of ARB No.
         51 ("SFAS No. 160"). The standard changes the accounting for
         noncontrolling (minority) interests in consolidated financial
         statements including the requirements to classify noncontrolling
         interests as a component of consolidated stockholders' equity, and the
         elimination of "minority interest" accounting in results of operations
         with earnings attributable to noncontrolling interests reported as part
         of consolidated earnings. Additionally, SFAS No. 160 revises the
         accounting for both increases and decreases in a parent's controlling
         ownership interest. SFAS No. 160 is effective for fiscal years
         beginning after December 15, 2008, with early adoption prohibited. SFAS
         No. 160 is not expected to have a material impact on our financial
         statements.

         There are no other accounting standards issued as of September 22, 2008
         that are expected to have a material impact on our consolidated
         financial statements.


NOTE 4 - ACCOUNTS RECEIVABLE

         Accounts receivable at June 30, 2008 and 2007 consisted of receivables
         from customers in the amounts of $4,534,069 and $44,915, respectively.
         The increase was primarily due to a single customer, representing 72%
         of the total accounts receivable, whose purchase order was shipped on
         June 30, 2008.


NOTE 5 - PREPAID EXPENSES

         Prepaid expenses at June 30 consisted of the following:

                                                            2008          2007
                                                           -------       -------
              Prepaid insurance                            $ 2,725       $   244
              Prepaid marketing fee                         11,600            --
              Prepaid office lease fee                       9,105         6,405
                                                           -------       -------
              TOTAL                                        $23,430       $ 6,649
                                                           =======       =======

NOTE 6 - PREPAID INCOME TAX

                                      F-12


<page>

        Prepaid income tax at June 30 consisted of the following:

                                                               2008        2007
                                                             --------    -------
              Prepaid income tax expense
                       Federal                               $296,535    $    --
                       State                                   58,858         --
                                                             --------    -------
              TOTAL                                          $355,393    $    --
                                                             ========    =======


NOTE 7 - PROPERTY AND EQUIPMENT

        Property and equipment at June 30 consisted of the following:

                                                         2008           2007
                                                       ---------      ---------
              Computers and software                   $  48,827      $  38,084
              Furniture and fixtures                      52,894         11,325
                                                       ---------      ---------
                                                         101,721         49,409
              Less accumulated depreciation              (33,709)       (23,191)
                                                       ---------      ---------
              TOTAL                                    $  68,012      $  26,218
                                                       =========      =========


NOTE 8 - INTANGIBLE ASSETS

         Intangible assets at June 30 consisted of the following:

                                                            2008         2007
                                                          ---------   ---------
              CDG Certifications                          $      --   $ 171,280
              Less accumulated amortization                      --     (41,016)
                                                          ---------   ---------
              TOTAL                                       $      --   $ 130,264
                                                          =========   =========


         CDG test certifications are required to launch and market new CDMA
wireless data products with carriers in the countries located in North America,
the Caribbean, and South America. Certifications are issued as being a qualifier
of CDG1 (CDMA Development Group Stage 1), CDG 2 and CDG 3. The estimated life of
CDG test certifications are three years, based on the life of the CDMA wireless
data product. Certifications have a life of three years or the life of the CDG
test.

         As of June 30, 2008, we wrote off certifications in the amount of
$171,280 as these certifications were deemed impaired due to their inability to
continue to generate income from operations and positive cash flow in future
periods.


NOTE 9 - OTHER ASSETS

         Security deposits at June 30 consisted of the following:

                                                              2008         2007
                                                             -------     -------
              Lease deposit, corporate housing                   709         709
              Lease deposit, administrative office            14,003       4,170
              Utility deposit                                    282         282
              Other deposit                                      417          --
                                                             -------     -------
              TOTAL                                          $15,411     $ 5,161
                                                             =======     =======

                                      F-13


<page>

NOTE 10 - NOTES PAYABLE TO STOCKHOLDERS

         Notes payable as of June 30, 2008 and 2007 consisted of the following:

                                                        2008             2007
                                                      ---------       ---------
              Non-interest bearing note               $ 334,000       $ 434,000
                                                      ---------       ---------
              Total                                     334,000         434,000
              Less current portion                     (334,000)       (434,000)
                                                      ---------       ---------
              TOTAL                                   $      --       $      --
                                                      =========       =========

         Our Korea-based subsidiary, ARG, has been inactive since August 2003.
On October 30, 2007, the Board of Directors approved the dissolution of ARG. As
a part of the dissolution, we assumed a note payable of ARG of $434,000. During
the year ended June 30, 2008, we repaid $100,000, and the remaining balance of
the note amounted to $334,000 at June 30, 2008.


NOTE 11 - ACCRUED LIABILITIES

         Accrued liabilities at June 30 consisted of the following:

                                                             2008         2007
                                                           --------     --------
              Salaries payable                             $135,000     $ 94,418
              Accrued professional fees payable              31,500       50,217
              Tax payable                                   689,421       34,390
              Other accrued liabilities                      19,125           --
                                                           --------     --------
              TOTAL                                        $875,046     $179,025
                                                           ========     ========

         The increase in accrued liabilities for the year ended June 30, 2008
was primarily due to an increase in tax payable, which was estimated federal and
state income tax at $685,000 for the fourth quarter of the fiscal 2008.


NOTE 12 - COMMITMENTS AND CONTINGENCIES


         LEASES

         We lease our administrative facilities under a non-cancelable operating
         lease that expires on August 31, 2011. In addition to the minimum
         annual rental commitments, the lease provides for periodic cost of
         living increases in the base rent and payment of common area costs.
         Rent expense related to the operating lease was $62,848 and $59,420 for
         the years ended June 30, 2008 and 2007, respectively.

         We lease a corporate housing facility for our vendors under a
         non-cancelable operating lease that expires on October 2, 2008. Rent
         expense related to the operating lease was $17,829 and $2,770 for the
         years ended June 30, 2008 and 2007, respectively.

         We lease one automobile under an operating lease that expires on July
         22, 2009. The related lease expense was $6,452 and $6,795 for the years
         ended June 30, 2008 and 2007, respectively.

         Future minimum lease payments under operating leases as of June 30,
         2008 are as follows:

                                      F-14


<page>

<TABLE>
<S> <C>
                                                        PAYMENTS DUE BY JUNE 30,

         LEASE                              2009       2010       2011       2012       TOTAL
         ------------------------------   --------   --------   --------   --------   --------
         Administrative office facility   $ 91,050   $109,260   $109,260   $ 18,210   $327,780
         Corporate housing facility          4,701         --         --         --      4,701
                                          --------   --------   --------   --------   --------
         TOTAL OBLIGATION                 $ 95,751   $109,260   $109,260   $ 18,210   $332,481
                                          ========   ========   ========   ========   ========
</TABLE>

         LITIGATION

         We are from time to time involved in certain legal proceedings and
         claims arising in the ordinary course of business. Management believes
         that there is no legal proceeding that has a material adverse effect on
         our financial condition for the year ended June 30, 2008. There is no
         legal proceeding that is pending or terminated for the 4th quarter of
         the fiscal year of 2008.


         CO-DEVELOPMENT, CO-OWNERSHIP AND SUPPLY AGREEMENT

         Our facility is located in San Diego, California. Manufacturing of our
         products has been contracted out to C-Motech Co. Ltd. ("C-Motech"),
         located in South Korea.

         In January 2005, we entered into an agreement with C-Motech for the
         manufacture of the products. Under the manufacturing and supply
         agreement, C-Motech provides us with services including all licenses,
         component procurement, final assembly, testing, quality control,
         fulfillment and after-sale service. The Agreement provides exclusive
         rights to market and sell our CDMA wireless data products in countries
         in North America, the Caribbean, and South America. Furthermore, the
         Agreement provides that we are responsible for marketing, sales, field
         testing, and certifications of these products to wireless service
         operators and other commercial buyers within a designated territory,
         and C-Motech is responsible for design, development, testing,
         certification, and completion of these products. Under the Agreement,
         products include all access devices designed with Qualcomm's MSM 5100,
         5500, 6500, and 6800 chipset solutions provided or designed by C-Motech
         or both companies. Both companies own the rights to the products: USB
         modems, Card Bus, PCI Bus and Module designed with MSM 5500 dual band
         products. On January 30, 2007, C-Motech also certified that we have the
         exclusive right to sell CDU-680 EVDO USB modems directly and indirectly
         in these territories.

         The initial term of the Agreement was for two years, commencing on
         January 5, 2005. The agreement automatically renews for successive with
         automatic renewable of additional one year periods unless either party
         provides a written notice to terminate at least sixty days prior to the
         end of the term. This agreement may be amended or supplemented by
         mutual agreement of the parties, as is necessary to document the
         addition of any new products.


         OFFICER EMPLOYMENT AGREEMENT

         On September 8, 2006, we entered into a renewable two-year employment
         agreement with our president. The annual salary for the officer is
         $150,000.


NOTE 13 - STOCKHOLDERS' EQUITY

         COMMON STOCK

         We authorized 50,000,000 shares of Common Stock, par value of $0.001
         per share, and Common Stock of 13,231,491 was issued and outstanding as
         of June 30, 2008 and 2007. We authorized 10,000,000 shares of Preferred
         Stock, par value of $0.001 per share, and no Preferred Stock was issued
         or outstanding as of June 30, 2008 and 2007. No dividends have been
         declared or paid during fiscal years 2008 and 2007.

                                      F-15


<page>

         STOCK ISSUANCES & REPURCHASES

         For the years ended June 30, 2008, 2007 and 2006, we completed the
         following common stock transactions:


   o     November 11, 2005

         o    We converted our $30,000 note payable to the shareholder to Common
              Stock. As a result, we issued 6,000,000 shares to a stockholder at
              $0.005 per share. The Common Stock share price approximated its
              fair market value at the date of the conversion and, as a result,
              no compensation expense was required or booked during the year
              ended June 30, 2006.
         o    We issued 36,000,000 shares to unaffiliated investors at $0.0085
              per share in the amount of $305,000. The Common Stock share price
              approximated its fair market value at the date of the issuance
              and, as a result, no compensation expense was required or booked
              during the year ended June 30, 2006.

   o     May 15, 2006 - We purchased 20,000,000 shares of our Common Stock from
         our former Chief Executive Officer and board member, Hajin Jhun, at
         $0.005 per share, or the price purchased by Mr. Jhun. The purchased
         share price approximated its fair market value at the date of the
         purchase and, as a result, no compensation expense was required or
         booked for the year ended June 30, 2006.

   o     June 27, 2006

         o    We issued 1,000,000 shares to a stockholder holding a $10,000 note
              payable. These shares were converted at $0.01 per share for
              $10,000. The converted share price approximated its fair market
              value at the date of the conversion and, as a result, no
              compensation expense was required or booked for the year ended
              June 30, 2006.
         o    We issued 66,000,000 shares to an unaffiliated investor
              approximately at $0.0091 per share in the gross proceeds of
              $600,000.00. The Common Stock share price approximated its fair
              market value at the date of the issuance and a result, no
              compensation expense was required or booked for the year ended
              June 30, 2006.

   o     October 18, 2006 - We issued 15,000,000 shares of our Common Stock to
         an unaffiliated investor for $0.0091 per share, total valued at
         $136,364. The Common stock share price approximated its fair market
         value at the date of the issuance and, as a result, no compensation
         expense was required or booked for the year ended June 30, 2007.

   o     On April 27, 2007 - We issued an additional 29,000,000 shares of our
         Common Stock to the unaffiliated investor for $0.0091 per share, total
         valued at $263,636. The common stock share price approximated its fair
         market value at the date of the issuance and, as a result, no
         compensation expense was required or booked for the year ended June 30,
         2007.

   o     On January 8, 2008, the reverse stock split was implemented in
         connection with the reincorporation, under which the shareholders will
         receive one share of Franklin-Nevada for each 70 shares held in
         Franklin-California. As result of the reverse stock split, the
         50,000,000 shares of Common stock, par value of $0.001 per share, were
         authorized, and the 13,231,491 shares were issued and outstanding as of
         June 30, 2008.

         We believe the foregoing issuances of Common Stock were exempt from the
registration requirements of the Securities Act of 1933, as amended, by reason
of Section 4(2) thereof.


NOTE 14 - INCOME TAXES

                                      F-16


<page>

         We adopted the provisions of FASB interpretation ("FIN") No. 48,
         "Accounting for Uncertainty in Income Taxes -- an interpretation of
         FASB statement No. 109," which prescribes a recognition threshold and
         measurement process for recording in the financial statements,
         uncertain tax positions taken or expected to be taken in a tax return.
         Under FIN 48, the impact of an uncertain income tax position on the
         income tax return must be recognized at the largest amount that is
         more-likely-not to be sustained upon audit by the relevant taxing
         authority. An uncertain income tax position will not be recognized if
         it has less than a 50% likelihood of being sustained.

         We recognize federal and state tax liabilities or assets based on our
         estimate of taxes payable to or refundable by tax authorities in the
         current fiscal year. We also recognize federal and state tax
         liabilities or assets based on our estimate of future tax consequences
         attributable to differences between the financial statement carrying
         amounts of existing assets and liabilities and their respective tax
         bases. Deferred tax assets and liabilities are measured using enacted
         tax rates expected to apply to taxable income in the years in which
         those temporary differences are expected to be recovered or settled. A
         valuation allowance is required when it is more likely than not that we
         will not be able to realize all or a portion of our deferred tax
         assets.

         Income tax provision from continuing operations for the years ended
         June 30, 2008 and 2007 consists of the following:


                                                            YEAR ENDED JUNE 30,
                                                           ---------------------
                                                             2008         2007
                                                           --------     --------
         Current income taxes expense:
               Federal                                     $433,067     $ 26,409
               State                                        156,382        8,781
                                                           --------     --------
         Deferred income taxes expense (benefits):          589,449       35,190
                                                           --------     --------
         Provision for income taxes                        $589,449     $ 35,190
                                                           ========     ========


         Deferred income taxes reflect the net effects of temporary differences
         between the carrying amounts of assets and liabilities for financial
         reporting purposes and the amounts used for income tax purposes.
         Significant components of our deferred tax assets are as follows:

                                                          YEAR ENDED JUNE 30
                                                     --------------------------
                                                        2008           2007
                                                     -----------    -----------

   Current deferred tax asset(liabilities):
     Net operating losses                            $   170,883    $        --
     Other, net                                           16,493        151,868

   Non-current deferred tax assets (liabilities):
     Net operating losses                              2,011,633      3,285,042
     Credit                                               30,196         30,996
     Other, net                                           (4,477)       (60,357)
                                                     -----------    -----------
   Total deferred tax assets                           2,224,728      3,407,549
   Less valuation allowance                           (2,224,728)    (3,407,549)
                                                     -----------    -----------
   Net deferred tax asset                            $        --    $        --
                                                     ===========    ===========

         The significant component of the deferred tax asset (liability) at June
         30, 2008 and 2007 was federal net operating loss carry-forward in the
         amount of approximately $2,034,000 and $2,934,000, respectively, based
         on federal tax rate of 34%. SFAS No. 109 requires a valuation allowance
         to be recorded when it is more likely than not that some or all of the


                                      F-17


<page>

         deferred tax assets will not be realized. At June 30, 2008 and 2007,
         management believes that it is more likely than not that most of the
         deferred tax assets will not be realized, and valuation allowances for
         the full amount of the net deferred tax asset were established to
         reduce the deferred tax assets to zero based on the level of historical
         taxable income and projections for future taxable income over the
         periods in which the deferred tax assets are deductible.

         As of June 30, 2008, we have federal net operating loss carryforwards
         of approximately $5,983,000 and state net operating loss carryforwards
         of approximately $1,676,000 for income tax purposes with application of
         IRC Section 382 limitation on net operating losses as result of the
         Company's ownership change in prior period. The Federal and state net
         operating loss carryforwards will begin to expire from 2009 to 2026 and
         2009 to 2016, respectively.


NOTE 15 - RELATED PARTY TRANSACTIONS

         We purchased CDMA wireless data products in the amount of $27,090,347,
or 100.0% of total purchases, from C-Motech Co. Ltd., for the year ended June
30, 2008 and had related accounts payable of $3,697,893 as of June 30, 2008. We
also had account receivable of $151,750 in connection with marketing development
fund as of June 30, 2008. C-Motech owns 3,370,356 shares, or 25.5%, of our
Common Stock and Jaeman Lee, Chief Executive Officer of C-Motech Co. Ltd., has
served as a director of the Company since. September 2006. Jaeman Lee must
abstain from voting on any matters where the interests or benefits of C-Motech
conflict or appear to conflict with our interests or benefits.


NOTE 16 - SUBSEQUENT EVENTS

         We plan to adopt an incentive stock ("ISO") option and nonstatutory
stock option ("NSO") for key employees and directors of the Company, to
encourage a proprietary interest in the Company, to encourage such key employees
to remain in the employ of the Company, and to attract new employees with
outstanding qualifications.


         The option plans will be administered by the Board of the Company in
order to obtain required approvals and qualifications as planned. However, as of
September 22, 2008, the Stock Option Plan has not been adopted.

                                      F-18



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>2
<FILENAME>fkwl_10kex10-2.txt
<DESCRIPTION>LEASE
<TEXT>
<PAGE>

EXHIBIT 10.2

                   STANDARD MULTI-TENANT OFFICE LEASE - GROSS
                     AIR COMMERCIAL REAL ESTATE ASSOCIATION

1. Basic Provisions ("Basic Provisions").

      1.1 PARTIES: This Lease ("Lease"), dated for reference purposes only May
1, 2008 is made by and between RDLFA, LLC a California Limited Liability Company
("Lessor") and Franklin Wireless Corporation, a Nevada Corporation ("Lessee"),
(collectively the "Parties", or individually a "Party").

      1.2(a) PREMISES: That certain portion of the Project (as defined below),
known as Suite Numbers(s) 1000 first (1st) floor(s), consisting of approximately
6,070 rentable square feet and approximately 5,220 useable square
feet("Premises"). The Premises are located at 5440 Morehouse Drive in the City
of San Diego, County of San Diego State of California, with zip code 92121. In
addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall NOT have any
rights to the roof, the exterior walls, the area above the dropped ceilings, or
the utility raceways of the building containing the Premises ("Building") or to
any other buildings in the Project. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Project." The
Project consists of approximately 46, 004 rentable square feet. (See also
Paragraph 2)

      1.2(b) PARKING: Open unreserved parking spaces on a 5.5/1,000 USF Basis
and zero (0) reserved employee vehicle parking spaces on the upper parking lot
at a monthly cost of $ zero (0) per unreserved space and $ zero (0) per reserved
space. (See Paragraph 2.6)

      1.3 TERM: Three (3) years and zero (0) months ("Original Term") commencing
September 1, 2008 ("Commencement Date") and ending August 31, 2011 ("Expiration
Date"). (See also Paragraph 3)

      1.4 EARLY POSSESSION: July 1, 2008 ("Early Possession Date"). (See also
Paragraphs 3.2 and 3.3)

      1.5 BASE RENT: $9,105.00 per month ("Base Rent)", payable on the first
(1st) day of each month commencing September 1, 2008. (See also Paragraph 4)

[X] If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted. SEE ADDENDUM #50

      1.6 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: Thirteen and two tenths
percent (13.2%) ("Lessee's Share"). Lessee's Share has been calculated by
dividing the approximate rentable square footage of the Premises by the total
approximate square footage of the rentable space contained in the Project and
shall not be subject to revision except in connection with an actual change in
the size of the Premises or a change in the space available for lease in the
Project.

      1.7 BASE RENT AND OTHER MONIES PAID UPON EXECUTION:

         (a) Base Rent: $9,105.00 for the period September 1-30, 2008

         (b) Security Deposit: $9,833.40 ("Security Deposit"). (See also
             Paragraph 5)

         (c) Parking: $ zero (0) for the period________________________________.

         (d) Other: $ zero (0) for_____________________________________________.

         (e) Total Due Upon Execution of this Lease: $18,938.40

      1.8 AGREED USE: General office use for software and technology company.
(See also Paragraph 6)

      1.9 BASE YEAR INSURING PARTY. The Base Year is 2008. Lessor is the
"Insuring Party". (See also Paragraphs 4.2 and 8)

      1.10 REAL ESTATE BROKERS: (See also Paragraph 15)

            (a) Representation: The following real estate brokers ( the
"Brokers") and brokerage relationships exist in this transaction (check
applicable boxes):
[_]__________________________ represents Lessor exclusively ("Lessor's Broker");

[_]__________________________ represents Lessee exclusively ("Lessee's Broker");
   or
[X] Commercial Realty Advisers represents both Lessor and LESSEE ("Dual
    Agency").

            (b) Payment to Brokers: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement dated January 2, 2007.

      1.11 GUARANTOR. The obligations of the Lessee under this Lease shall be
guaranteed by N/A ("Guarantor"). (See also Paragraph 37)

<PAGE>

      1.12 BUSINESS HOURS FOR THE BUILDING: 7:00 a.m. to 7:00 p.m., Mondays
through Fridays (except Building Holidays) and 10:00 a.m. to 3:00 p.m. on
Saturdays (except Building Holidays). "Building Holidays" shall mean the dates
of observation of New Years Day, President's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, Day after Thanksgiving Day, Christmas Day, and
Martin Luther King's Day

      1.13 Lessor Supplied Services. Notwithstanding the provisions of Paragraph
11.1, Lessor is NOT obligated to provide the following:

|x| Janitorial services

|x| Electricity

|_| Other (specify):______________________________________________________


      1.14 Attachments. Attached hereto are the following, all of which
constitute a part of this Lease:


|x| Addendum consisting of Paragraphs     50    through  56
                                        -------         -----

|x| plot plan depicting the Premises; EXHIBIT A
|_| a current set of the Rules and Regulations;
|X| a Work Letter; EXHIDIT B - Construction Plan
|_| a janitorial schedule;
|_| other (specify): _______________________________________________________
____________________________________________________________________________


2.    Premises.

      2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating Rent, is an approximation which the Parties agree is
reasonable and any payments based thereon are not subject to revision whether or
not the actual size is more or less. Note: Lessee is advised to verify the
actual size prior to executing this Lease.

      2.2 Condition. Lessor shall deliver the Premises to Lessee in a clean
condition on the Commencement Date or the Early Possession Date, whichever first
occurs ("Start Date"), and warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"),
and all other items which the Lessor is obligated to construct pursuant to the
Work Letter attached hereto, If any, other than those constructed by Lessee,
shall be in good operating condition on said date, that the structural elements
of the roof, bearing walls and foundation of the Unit shall be free of material
defects, and that the Premises do not contain hazardous levels of any mold or
fungi defined as toxic under applicable state or federal law.

      2.3 Compliance. Lessor warrants to the best of its knowledge that the
improvements comprising the Premises and the Common Areas comply with the
building codes that were in effect at the time that each such improvement, or
portion thereof, was constructed, and also with all applicable laws, covenants
or restrictions of record, regulations, and ordinances ("Applicable
Requirements") In effect on the Start Date. Said warranty does not apply to the
use to which Lessee will put the Premises, modifications which may be required
by the Americans with Disabilities Act or any similar laws as a result of
Lessee's use (see Paragraph 49), or to any Alterations or Utility Installations
(as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee Is
responsible for determining whether or not the zoning and other Applicable
Requirements are appropriate for Lessee's Intended use, and acknowledges that
past uses of the Premises may no longer be allowed. If the Premises do not
comply with said warranty, Lessor shall, except as otherwise provided, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify the same. If the Applicable
Requirements are hereafter changed so as to require during the term of this
Lease the construction of an addition to or an alteration of the Premises, the
remediation of any Hazardous Substance, or the reinforcement or other physical
modification of the Premises ("Capital Expenditure"), Lessor and Lessee shall
allocate the cost of such work as follows:

      (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are
required as a result of the specific and unique use of the Premises by Lessee as
compared with uses by tenants in general, Lessee shall be fully responsible for
the cost thereof, provided, however that if such Capital Expenditure is required
during the last 2 years of this Lease and the cost thereof exceeds 6 months'
Base Rent, Lessee may instead terminate this Lease unless Lessor notifies
Lessee, in writing, within 10 days after receipt of Lessee's termination notice
that Lessor has elected to pay the difference between the actual cost thereof
and the amount equal to 6 months' Base Rent. If Lessee elects termination,
Lessee shall immediately cease the use of the Premises which requires such
Capital Expenditure and deliver to Lessor written notice specifying a
termination date at least 90 days thereafter. Such termination date shall,
however, in no event be earlier than the last day that Lessee could legally
utilize the Premises without commencing such Capital Expenditure.


<PAGE>

      (b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor shall pay for such Capital Expenditure and Lessee
shall only be obligated to pay, each month during the remainder of the term of
this Lease, on the date that on which the Base Rent is due, an amount equal to
144th of the portion of such costs reasonably attributable to the Premises.
Lessee shall pay Interest on the balance but may prepay its obligation at any
time. If, however, such Capital Expenditure is required during the last 2 years
of this Lease or if Lessor reasonably determines that it is not economically
feasible to pay its share thereof, Lessor shall have the option to terminate
this Lease upon 90 days prior written notice to Lessee unless Lessee notifies
Lessor, in writing, within 10 days after receipt of Lessors termination notice
that Lessee will pay for such Capital Expenditure. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure, Lessee
may advance such funds and deduct same, with Interest, from Rent until Lessors
share of such costs have been fully paid. If Lessee is unable to finance
Lessor's share, or if the balance of the Rent due and payable for the remainder
of this Lease is not sufficient to fully reimburse Lessee on an offset basis,
Lessee shall have the right to terminate this Lease upon 30 days written notice
to Lessor.

      (c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to nonvoluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall
either: (I) immediately cease such changed use or intensity of use and/or take
such other steps as may be necessary to eliminate the requirement for such
Capital Expenditure, or (ii) complete such Capital Expenditure at its own
expense. Lessee shall not have any right to terminate this Lease.

      2.4 Acknowledgements. Lessee acknowledges that: (a) Lessee has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use, (b)
Lessee has made such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to its
occupancy of the Premises, and (c) neither Lessor, Lessors agents, nor Brokers
have made any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease. in addition, Lessor acknowledges
that: (i) Brokers have made no representations, promises or warranties
concerning Lessee's ability to honor the Lease or suitability to occupy the
Premises, and (ii) it is Lessors sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.

      2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date, Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

      2.6 Vehicle Parking. So long as Lessee is not in default, and subject to
the Rules and Regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use the number of parking
spaces specified in Paragraph 1.2(b) at the rental rate applicable from time to
time for monthly parking as sat by Lessor and/or its licensee.

      (a) If Lessee commits, permits or allows any of the prohibited activities
described in the Lease or the rules then in effect, then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to Lessee,
which cost shall be immediately payable upon demand by Lessor.

      2.7 Common Areas - Definition. The term 'Common Areas' is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project and interior utility raceways and Installations within the
Premises that are provided and designated by the Lessor from time to time for
the general nonexclusive use of Lessor, Lessee and other tenants of the Project
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including, but not limited to, common entrances, lobbies, corridors,
stairwells, public restrooms, elevators, parking areas, loading and unloading
areas, trash areas, roadways, walkways, driveways and landscaped areas.

      2.8 Common Areas - Lessee's Rights. Lessor grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the nonexclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rut - - d regulations or
restrictions governing THE use of the Project. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.




<PAGE>
      2.9 Common Areas - Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to adopt, modify,
amend and enforce reasonable rules and regulations ("Rules and Regulations") for
the management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Project and
their invitees. The Lessee agrees to abide by and conform to all such Rules and
Regulations, and shall use its best efforts to cause its employees, suppliers,
shippers, customers, contractors and invitees to so abide and conform. Lessor
shall not be responsible to Lessee for the noncompliance with said Rules and
Regulations by other tenants of the Project.

      2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

          (a) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

          (b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

          (c) To designate other land outside the boundaries of the Project to
be a part of the Common Areas;

          (d) To add additional buildings and improvements to the Common Areas;

          (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and

          (f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Project as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.

3.    Term.

      3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

      3.2 Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Lessee's Share of the
Operating Expense Increase) shall be in effect during such period. Any such
early possession shall not affect the Expiration Dale.

      3.3 Delay In Possession. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession by such date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease. Lessee shall not,
however, be obligated to pay Rent or perform its other obligations until Lessor
delivers possession of the Premises and any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession
and continue for a period equal to what Lessee would otherwise have enjoyed
under the terms hereof, but minus any days of delay caused by the acts or
omissions of Lessee. If possession is not delivered within 60 days after the
Commencement Date, as the same may be extended under the terms of any Work
Letter executed by Parties, Lessee may, at its option, by notice in writing
within 10 days after the end of such 60 day period, cancel this Lease, in which
event the Parties shall be discharged from all obligations hereunder. If such
written notice is not received by Lessor within said 10 day period, Lessee's
right to cancel shall terminate. If possession of the Premises is not delivered
within 120 days after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.

      3.4 Lessee Compliance. Lessor shall not be required to deliver possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.

4.    Rent.

      4.1.Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").

      4.2 Operating Expense Increase. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share of the amount by which all
Operating Expenses for each Comparison Year exceeds the amount of all Operating
Expenses for the Base Year, such excess being hereinafter referred to as the
"Operating Expense Increase" shall not Increase by more than seven percent (7%.)
YEAR OVER YEAR, in accordance with the following provisions:


<PAGE>

          (a) "Base Year' is as specified in Paragraph 1.9.

          (b) "Comparison Year" is defined as each calendar year during the term
of this Lease subsequent to the Base Year; provided, however, Lessee shall have
no obligation to pay a share of the Operating Expense Increase applicable to the
first 12 months of the Lease Term (other than such as are mandated by a
governmental authority, as to which government mandated expenses Lessee shall
pay Lessee's Share, notwithstanding they occur during the first twelve (12)
months). Lessee's Share of the Operating Expense Increase for the first and last
Comparison Years of the Lease Term shall be prorated according to that portion
of such Comparison Year as to which Lessee Is responsible for a share of such
increase.

          (c)The following costs relating to the ownership and operation of the
Project, calculated as if the Project was at least 95% occupied, are defined as
'Operating Expenses"

            (i) Costs relating to the operation, repair, and maintenance in
neat, clean, safe, good order and condition, but not the replacement (see
subparagraph (g)), of the following:

                  (aa)The Common Areas, including their surfaces, coverings,
decorative items, carpets, drapes and window coverings, and including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
stairways, parkways, driveways, landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities, building exteriors and roofs, fences
and gates;

                  (bb) All heating, air conditioning, plumbing, electrical
systems, life safety equipment, communication systems and other equipment used
in common by, or for the benefit of, tenants or occupants of the Project,
including elevators and escalators, tenant directories, fire detection systems
including sprinkler system maintenance and repair.

            (ii) The cost of trash disposal, janitorial and security services,
pest control services, and the costs of any environmental inspections;

            (iii) The cost of any other service to be provided by Lessor that is
elsewhere in this Lease stated to be an "Operating Expense";

            (iv) The cost of the premiums for the insurance policies maintained
by Lessor pursuant to paragraph 8 and any deductible portion of an insured loss
concerning the Building or the Common Areas;

            (v)The amount of the Real Property Taxes payable by Lessor pursuant
to paragraph 10; except for increase in property taxes DUE TO re-assessment from
sale or transfer of the property.

            (vi)The cost of water, sewer, gas, electricity, and other publicly
mandated services not separately metered;

            (vii) Labor, salaries, and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Project
and accounting and management fees attributable to the operation of the Project;

            (viii) The cost of any capital improvement to THE Building or the
Project not covered under the provisions of Paragraph 2.3 provided; however,
that Lessor shall allocate the cost of any such capital improvement over a 12
year period and Lessee shall not be required to pay more than Lessee's Share of
1/144th of the cost of such Capital Expenditure in any given month;

            (ix) The cost to replace equipment or improvements that have a
useful life for accounting purposes of 5 years or less. (X) Reserves set aside
for maintenance, repair and/or replacement of Common Area improvements and
equipment.

          (d) Any item of Operating Expense that is specifically attributable to
the Premises, the Building or to any other building in the Project or to the
operation, repair and maintenance thereof, shall be allocated entirely to such
Premises, Building, or other building. However, any such item that is not
specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably allocated by
Lessor to all buildings In the Project.

          (e) The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(c) shell not be deemed to Impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Project already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.

          (f) Lessee's Share of Operating Expense Increase is payable monthly on
the same day as the Base Rent is due hereunder. The amount of such payments
shall be based on Lessor's estimate of the Operating Expense Expenses. Within 60
days after written request (but not more than once each year) Lessor shall
deliver to Lessee a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee's payments during such Year exceed Lessee's Sham, Lessee shall credit the
amount of such over-payment against Lessee's future payments. If Lessee's
payments during such Year were less than Lessee's Sham, Lessee shall pay to
Lessor the amount of the deficiency within 10 days after delivery by Lessor to

<PAGE>

Lessee of said statement. Lessor and Lessee shall forthwith adjust between them
by cash payment any balance determined to exist with respect to that portion of
the last Comparison Year for which Lessee Is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.

          (g) Operating Expenses shall not include the costs of replacement for
equipment or capital components such as the roof, foundations, exterior walls or
a Common Area capital improvement, such as the parking lot paving, elevators,
fences that have a useful life for accounting purposes of 5 years or more.

          (h) Operating Expenses shall not include any expenses paid by any
tenant directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or by insurance proceeds.

      4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States on or before the day on which it is due,
without offset or deduction (except as specifically permitted in this Lease).
All monetary amounts shall be rounded to the nearest whole dollar. in the event
that any invoice prepared by Lessor Is Inaccurate such inaccuracy shall not
constitute a waiver and Lessee shall be obligated to pay the amount set forth in
this Lease. Rent for any period during the term hereof which is for less than
one full calendar month shall be prorated based upon the actual number of days
of said month. Payment of Rent shall be made to Lessor at its address slated
herein or to such other persons or place as Lessor may from time to time
designate in wilting. Acceptance of a payment which is less than the amount then
due shall not be a waiver of Lessor's rights to the balance of such Rent,
regardless of Lessor's endorsement of any check so stating. In the event that
any check, draft, or other instrument of payment given by Lessee to Lessor is
dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in
addition to any Late Charge and Lessor, at Its option, may require all future
Rent be paid by cashier's check. Payments will be applied first to accrued late
charges and attorney's fees, second to accrued Interest, then to Base Rent and
Common Area Operating Expenses, and any remaining amount to any other
outstanding charges or costs.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due already due Lessor, for Rents
which will be due in the future, and/ or to reimburse or compensate Lessor for
any liability, expense, loss or damage which Lessor may suffer or incur by
reason thereof. if Lessor uses or applies all or any portion of the Security
Deposit, Lessee shall within 10 days after written request therefor deposit
monies with Lessor sufficient to restore said Security Deposit to the full
amount required by this Lease. If the Base Rent increases during the term of
this Lease, Lessee shall, upon written request from Lessor, deposit additional
monies with Lessor so that the total amount of the Security Deposit shall at all
times bear the same proportion to the increased Base Rent as the initial
Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended
to accommodate a material change in the business of Lessee or to accommodate a
sublessee or assignee, Lessor shall have the right to increase the Security
Deposit to the extent necessary, in Lessor's reasonable judgment, to account for
any increased wear and tear that the Premises may suffer as a result thereof. If
a change in control of Lessee occurs during this Lease and following such change
the financial condition of Lessee is, in Lessor's reasonable judgment,
significantly reduced, Lessee shall deposit such additional monies with Lessor
as shall be sufficient to cause the Security Deposit to be at a commercially
reasonable level based on such change in financial condition. Lessor shall not
be required to keep the Security Deposit separate from its general accounts.
Within 90 45 days after the expiration or termination of this Lease, Lessor
shall return that portion of the Security Deposit not used or applied by Lessor.
No part of the Security Deposit shall be considered to be held in trust, to bear
interest or to be prepayment for any monies to be paid by Lessee under this
Lease.

6.    Use.

      6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises In a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties. Other than guide, signal
and seeing eye dogs, Lessee shall not keep or allow In the Premises any pets,
animals. birds, fish, or reptiles. Lessor shall not unreasonably withhold or
delay its consent to any written request for a modification of the Agreed Use,
so long as the same will not Impair the structural integrity of the improvements
of the Building, will not adversely affect the mechanical, electrical, HVAC, and
other systems of the Building, and/or will not affect the exterior appearance of
the Building. If Lessor elects to withhold consent, Lessor shall within 7 days
after such request give written notification of same, which notice shall include
an explanation of Lessor's objections to the change in the Agreed Use.

      6.2 Hazardous Substances.

            (a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, or waste whose
presence, use, manufacture, disposal, transportation, or release, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the

<PAGE>

environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, byproducts or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use such as ordinary
office supplies (copier toner, liquid paper, glue, etc.) and common household
cleaning materials, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit.

            (b) Duty to inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

            (c) Lessee Remediation. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, comply with all Applicable Requirements and take
all investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party.

            (d) Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of The Project not caused or contributed
to by Lessee). Lessee's obligations shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created or suffered by Lessee, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of this Lease. No termination, cancellation or release agreement
entered Into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.

            (e) Lessor Indemnification. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees AND lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which result from Hazardous Substances which existed on the
Premises prior to Lessee's occupancy or which are caused by the gross negligence
or willful misconduct of Lessor, its agents or employees. Lessor's obligations,
as and when required by the Applicable Requirements, shall include, but not be
limited to, the cast of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

            (f) Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to Lessee's occupancy, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment. Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessors agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor's investigative and remedial responsibilities.

            (g) Lessor Termination Option. If a Hazardous Substance Condition
(see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor's rights under

<PAGE>

Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessors expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within 30 days after
receipt by Lessor of knowledge of the occurrence of such Hazardous Substance
Condition, of Lessor's desire to terminate this Lease as of the date 60 days
following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within 30 days
following such commitment. In such event, this Lease shall continue in full
force and effect, and Lessor shall proceed to make such remediation as soon as
reasonably possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
time provided, this Lease shall terminate as of the date specified in Lessors
notice of termination.

      6.3 Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessors engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor's written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements. Likewise, Lessee shall
immediately give written notice to Lessor of: (i) any water damage to the
Premises and any suspected seepage, pooling, dampness or other condition
conducive to the production of mold; or (ii) any mustiness or other odors that
might indicate the presence of mold in the Premises.

      6.4 Inspection; Compliance. Lessor and Lessor's "Lender (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at any
time, in the case of an emergency, and otherwise at reasonable times, after
reasonable notice, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease. The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a Hazardous Substance Condition (see paragraph 9.1e) is found
to exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination. In addition, Lessee shall provide
copies of all relevant material safety data sheets (MSDS) to Lessor within 10
days of receipt of written request therefor.

7.    Maintenance; Repairs; Utility Installations; Trade Fixtures and
      Alterations.

      7.1 Lessee's Obligations. Notwithstanding Lessor's obligation to keep the
Premises in good condition and repair, Lessee shall be responsible for payment
of the cost thereof to Lessor as additional rent for that portion of the cost of
any maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is attributable
to abuse or misuse. Lessee shall be responsible for the cost of painting,
repairing or replacing wall coverings, and to repair or replace any improvements
with the Premises. Lessor may, at its option, upon reasonable notice, elect to
have Lessee perform any particular such maintenance or repairs the cost of which
is otherwise Lessee's responsibility hereunder.

      7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject
to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition
and repair the foundations, exterior walls, structural condition of interior
bearing walls, exterior roof, fire sprinkler system, fire alarm and/or smoke
detection systems, fire hydrants, and the Common Areas. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.

         7.3 Utility Installations; Trade Fixtures; Alterations.

            (a) Definitions. The term "Utility Installations" refers to all
floor and window coverings, air lines, vacuum lines, power panels, electrical
distribution, security and fire protection systems, communication cabling,
lighting fixtures, HVAC equipment, and plumbing in or on the Premises. The term
"Trade Fixtures" shall mean Lessee's machinery and equipment that can be removed
without doing material damage to the Premises. The term " Alterations" shall
mean any modification of the improvements, other than Utility Installations or
Trade Fixtures, whether by addition or deletion. 'Lessee Owned Alterations
and/or Utility Installations" are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor pursuant to
Paragraph 7.4(a).

<PAGE>


            (b) Consent. Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the Interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor, as
long as they are not visible from the outside, do not involve puncturing,
relocating or removing the roof, ceilings, floors or any existing walls, will
not affect the electrical, plumbing, HVAC, and/or life safety systems, and the
cumulative cost thereof during this Lease as extended does not exceed $2000.
Notwithstanding the foregoing, Lessee shall not make or permit any roof
penetrations and/or Install anything on the roof without the prior written
approval of Lessor. Lessor may, as a precondition to granting such approval,
require Lessee to utilize a contractor chosen and/or approved by Lessor. Any
Alterations or Utility Installations that Lessee shall desire to make and which
require the consent of the Lessor shall be presented to Lessor in written form
with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i)
acquiring all applicable governmental permits, (ii) furnishing Lessor with
copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements In a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with asbuilt plans and specifications. For work which costs an
amount in excess of one month's Base Rent, Lessor may condition its consent upon
Lessee providing a lien and completion bond in an amount equal to 150% of the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor.

            (c) Liens; Bonds. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than 10 days notice prior to the commencement of any work
in, on or about the Premises, and Lessor shall have the right to post notices of
non-responsibility. if Lessee shall contest the validity of any such lien, claim
or demand, then Lessee shall, at its sole expense defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof. If
Lessor shall require, Lessee shall furnish a surety bond in an amount equal to
150% of the amount of such contested lien, claim or demand, Indemnifying Lessor
against liability for the same. If Lessor elects to participate in any such
action, Lessee shall pay Lessor's attorneys' fees and costs.

      7.4   Ownership; Removal; Surrender; and Restoration.

            (a) Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

            (b) Removal. By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of this
Lease, Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

            (c) Surrender; Restoration. Lessee shall surrender the Premises by
the Expiration Dale or any earlier termination date, with all of the
improvements, parts and surfaces thereof clean and free of debris, and in good
operating order, condition and state of repair, ordinary wear and tear excepted.
"Ordinary wear and tear" shall not include any damage or deterioration that
would have been prevented by good maintenance practice. Notwithstanding the
foregoing, if this Lease is for 12 months or less, then Lessee shall surrender
the Premises in the same condition as delivered to Lessee on the Start Date with
NO allowance for ordinary wear and tear. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
owned Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee. Lessee shall
also completely remove from the Premises any and all Hazardous Substances
brought onto the Premises by or for Lessee, or any third party (except Hazardous
Substances which were deposited via underground migration from areas outside of
the Premises) even if such removal would require Lessee to perform or pay for
work that exceeds statutory requirements. Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee. Any personal property of
Lessee not removed on or before the Expiration Dale or any earlier termination
date shall be deemed to have been abandoned by Lessee and may be disposed of or
retained by Lessor as Lessor may desire. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below. 8. insurance; Indemnity.

      8.1 Insurance Premiums. The cost of the premiums for the insurance
policies maintained by Lessor pursuant to paragraph 8 are included as Operating
Expenses (see paragraph 4.2 (c)(iv)). Said costs shall include increases in the
premiums resulting from additional coverage related to requirements of the

<PAGE>

holder of a mortgage or deed of trust covering the Premises, Building and/or
Project, increased valuation of the Premises, Building and/or Project, and/or a
general premium rate increase. Said costs shall not however, include any premium
Increases resulting from the nature of the occupancy of any other tenant of the
Building. If the Project was not insured for the entirety of the Base Year, then
the base premium shall be the lowest annual premium reasonably obtainable for
the required insurance as of the Start Date, assuming the most nominal use
possible of the Building and/or Project. In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable to liability
insurance coverage in excess of $2,000,000 procured under Paragraph 8.2(b).

      8.2 Liability Insurance.

            (a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such Insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000. Lessee shall add Lessor as an additional insured by means of an
endorsement at least as broad as the Insurance Service Organization's
'Additional Insured-Managers or Lessors of Premises" Endorsement and coverage
shall also be extended to include damage caused by heat, smoke or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions as
between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an "Insured contract" for the performance
of Lessee's indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. Lessee shall provide an endorsement on its liability
policy(ies) which provides that its insurance shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.

            (b) Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

      8.3 Property Insurance - Building, Improvements and Rental Value.

            (a) Building and Improvements. Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Building and/or Project. The amount of such insurance shall be equal to the full
insurable replacement cost of the Building and/or Project, as the same shall
exist from time to time, or the amount required by any Lender, but in no event
more than the commercially reasonable and available insurable value thereof.
Lessee Owned Alterations and Utility Installations, Trade Fixtures, and Lessee's
personal property shall be insured by Lessee under Paragraph 8.4. If the
coverage is available and commercially appropriate, such policy or policies
shall insure against all risks of direct physical loss or damage (except the
perils of flood and/or earthquake unless required by a Lender), including
coverage for debris removal and the enforcement of any Applicable Requirements
requiring the upgrading, demolition, reconstruction or replacement of any
portion of the Premises as the result of a covered loss. Said policy or policies
shall also contain an agreed valuation provision in lieu of any coinsurance
clause, waiver of subrogation, and inflation guard protection causing an
increase in the annual property insurance coverage amount by a factor of not
less than the adjusted U.S. Department of Labor Consumer Price Index for All
Urban Consumers for the city nearest to where the Premises are located. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence.

            (b) Rental Value. Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one year with an extended period
of indemnity for an additional 180 days ("Rental Value insurance"). Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month period.

            (c) Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Project if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.

            (d) Lessee's Improvements. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the Item in question has become the property of Lessor
under the terms of this Lease.

      8.4 Lessee's Property; Business Interruption insurance.

            (a) Property Damage. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility


<PAGE>

Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

            (b) Business Interruption. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.

            (c) No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of Insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

      8.5 Insurance Policies. insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least A-, VI, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after 10 days prior written notice
to Lessor. Lessee shall, at least 30 days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length of
the remaining term of this Lease, whichever is less. If either Party shall fail
to procure and maintain the insurance required to be carried by it, the other
Party may, but shall not be required to, procure and maintain the same.

      8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.

      8.7 Indemnity. Except for Lessor's gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, LOSS of rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. if any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.

      8.8 Exemption of Lessor and its Agents from Liability. Notwithstanding the
negligence or breach of this Lease by Lessor or its agents, neither Lessor nor
its agents shall be liable under any circumstances for: (i) Injury or damage to
the person or goods, wares, merchandise or other property of Lessee, Lessee's
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, indoor air quality, the presence of mold
or from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any
other cause, whether the said injury or damage results from conditions arising
upon the Premises or upon other portions of the Building, or from other sources
or places, (ii) any damages arising from any act or neglect of any other tenant
of Lessor or from the failure of Lessor or its agents to enforce the provisions
of any other lease in the Project, or (Iii) injury to Lessee's business or for
any loss of income or profit therefrom. Instead, it is intended that Lessee's
sole recourse in the event of such damages or injury be to file a claim on the
insurance policy(ies) that Lessee is required to maintain pursuant to the
provisions of paragraph 8.

      8.9 Failure to Provide Insurance, Lessee acknowledges that any failure on
its part to obtain or maintain the Insurance required herein will expose Lessor
to risks and potentially cause Lessor to incur costs not contemplated by this
Lease, the extent of which will be extremely difficult to ascertain.
Accordingly, for any month or portion thereof that Lessee does not maintain the
required insurance and/or does not provide Lessor with the required binders or
certificates evidencing the existence of the required insurance within three (3)
business days following written notice from Lessor, the Base Rent shall be
automatically increased, without any further requirement for notice to Lessee,
by an amount equal to 10% of the then existing Base Rent or $100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee's failure to maintain the required insurance. Such increase in
Base Rent shall in no event constitute a waiver of Lessee's Default or Breach
with respect to the failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease.

<PAGE>

      9. Damage or Destruction.

         9.1 Definitions.

            (a) "Premises Partial Damage" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in 3 months or less from
the date of the damage or destruction, and the cost thereof does not exceed a
sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within
30 days from the date of the damage or destruction as to whether or not the
damage is Partial or Total.

            (b) "Premises Total Destruction" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

            (c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.

            (d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

            (e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition Involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises which requires repair, remediation, or restoration.

      9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $5,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, If the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said 10 day period, the
party responsible for making the repairs shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
such funds or assurance are not received, Lessor may nevertheless elect by
written notice to Lessee within 10 days thereafter to: (i) make such restoration
and repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled
to reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.

      9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
30 days after receipt by Lessor of knowledge of the occurrence of such damage.
Such termination shall be effective 60 days following the date of such notice.
In the event Lessor elects to terminate this Lease, Lessee shall have the right
within 10 days after receipt of the termination notice to give written notice to
Lessor of Lessee's commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days after making such commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Lessee does not make The required commitment, this Lease
shall terminate as of the date specified in the termination notice.

      9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate 60 days following
such Destruction. If the damage or destruction was caused by the gross


<PAGE>

negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

      9.5 Damage Near End of Term. If at any time during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month's Base
Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written
termination notice to Lessee within 30 days after the date of occurrence of such
damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and (b) providing Lessor with
any shortage in insurance proceeds (or adequate assurance thereof) needed to
make the repairs on or before the earlier of (i) the date which is 10 days after
Lessee's receipt of Lessor's written notice purporting to terminate this Lease,
or (ii) the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds. Lessor
shall. at Lessor's commercially reasonable expense, repair such damage as soon
as reasonably possible and this Lease shall continue in full force and effect.
If Lessee fails to exercise such option and provide such funds or assurance
during such period, then this Lease shall terminate on the date specified In the
termination notice and Lessee's option shall be extinguished.

      9.6   Abatement of Rent; Lessee's Remedies.

            (a) Abatement. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

            (b) Remedies. If Lessor is obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within 90 days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee's election to terminate this Lease on a date not less than 60 days
following the giving of such notice. If Lessee gives such notice and such repair
or restoration is not commenced within 30 days thereafter, this Lease shall
terminate as of the date specified in said notice. If the repair or restoration
is commenced within such 30 days, this Lease shall continue in full force and
effect. "Commence" shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs.

      9.7 Termination; Advance Payments. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, In addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.

10.   Real Property Taxes.

      10.1 Definitions. As used herein, the term "Real Property Taxes" shall
include any form of assessment; real estate, general, special, ordinary or
extraordinary, or rental levy or tax (other than inheritance, personal income or
estate taxes); improvement bond; and/or license fee imposed upon or levied
against any legal or equitable interest of Lessor in the Project, Lessor's right
to other income therefrom, and/or Lessor's business of leasing, by any authority
having the direct or indirect power to tax and where the funds are generated
with reference to the Project address and where the proceeds so generated are to
be applied by the city, county or other local taxing authority of a jurisdiction
within which the Project is located. "Real Property Taxes" shall also include
any tax, fee, levy, assessment or charge, or any increase therein: (i) imposed
by reason of events occurring during the term of this Lease, including but not
limited to, a change in the ownership of the Project, (ii) a change in the
improvements thereon, and/or (iii) levied or assessed on machinery or equipment
provided by Lessor to Lessee pursuant to this Lease.

      10.2 Payment of Taxes. Except as otherwise provided in Paragraph 10.3,
Lessor shall pay the Real Property Taxes applicable to the Project, and said
payments shall be included in the calculation of Operating Expenses in
accordance with the provisions of Paragraph 4.2.

      10.3 Additional Improvements. Operating Expenses shall not include Real
Property Taxes specified in the tax assessor's records and work sheets as being
caused by additional improvements placed upon the Project by other lessees or by
Lessor for the exclusive enjoyment of such other lessees. Notwithstanding
Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time
Operating Expenses are payable under Paragraph 4.2, the entirety of any increase
in Real Property Taxes if assessed solely by reason of Alterations, Trade
Fixtures or Utility Installations placed upon the Premises by Lessee or at
Lessee's request or by reason of any alterations or improvements to the Premises
made by Lessor subsequent to the execution of this Lease by the Parties.




<PAGE>
      10.4 Joint Assessment. If the Building Is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessors work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in god
faith, shall be conclusive.


      10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee's property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.

11.   Utilities and Services.

      11.1 Services Provided by Lessor. Lessor shell provide heating,
ventilation, air conditioning, reasonable amounts of electricity for normal
lighting and office machines, water for reasonable and normal drinking and
lavatory use in connection with an office, , and replacement light bulbs and/or
fluorescent tubes and ballasts for standard overhead fixtures. Lessor shall also
provide janitorial services to the Premises-and Common Areas 5 times per week,
excluding Building Holidays, or pursuant to the attached janitorial schedule, if
any. Lessor shell not, however, be required to provide janitorial services to
kitchens or storage areas Included within the Premises.

      11.2 Services Exclusive to Lessee. Lessee shall pay for all water, gas,
light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If a service is deleted by Paragraph 1.13 and
such service Is not separately metered to the Premises, Lessee shall pay at
Lessor's option, either Lessee's Share or a reasonable proportion to be
determined by Lessor of all charges for such jointly metered service.

      11.3 Hours of Service. Said services and utilities shall be provided
during times set forth in Paragraph 1.12. Utilities-and-Services-required

      11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security and trash services,
over standard office usage for the Project. Lessor shall require Lessee to
reimburse Lessor for any excess expenses or costs that may arise out of a breach
of this subparagraph by Lessee. Lessor may, in its sole discretion, install at
Lessee's expense supplemental equipment and/or separate metering applicable to
Lessee's excess usage or loading.

      11.5 Interruptions. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage, intimation
or discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor's reasonable control or
in cooperation with governmental request or directions.

12.      Assignment and Subletting.

      12.1 Lessor's Consent Required.

            (a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment') or sublet
all or any part of Lessee's interest In this Lease or in the Premises without
Lessor's prior written consent.

            (b) Unless Lessee is a corporation and its stock is publicly traded
on a national stock exchange, a change in the control of Lessee shall constitute
an assignment requiring consent. The transfer, on a cumulative basis, of 25% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

            (c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buyout or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25%
of such Net Worth as it was represented at the time of the execution of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. Net Worth of
Lessee" shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.


            (d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to

<PAGE>

treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may either (i) terminate this Lease, or (ii) upon 30 days written notice,
increase the monthly Base Rent to 110% of the Base Rent then in effect. Further,
in the event of such Breach and rental adjustment, (i) the purchase price of any
option to purchase the Premises held by Lessee shall be subject to similar
adjustment to 110% of the price previously in effect, and (ii) all fixed and
non-fixed rental adjustments scheduled during the remainder of the Lease term
shall be increased to 110% of the scheduled adjusted rent.

            (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or Injunctive relief.

            (f) Lessor may reasonably withhold consent to a proposed assignment
or subletting if Lessee is in Default at the time consent is requested.


            (g) Notwithstanding the foregoing, allowing a de minimis portion of
the Premises, i e. 20 square feet or less, to be used by a third party vendor in
connection with the installation of a vending machine or payphone shall not
constitute a subletting.

      12.2  Terms and Conditions Applicable to Assignment and Subletting.

            (a) Regardless of Lessor's consent, no assignment or subletting
shall: (i) be effective without the express written assumption by such assignee
or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee
of any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

            (b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.

            (c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.

            (d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.

            (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $500 as
consideration for Lessor's considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested. (See also Paragraph 36)

            (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment, entering into such sublease, or entering into
possession of the Premises or any portion thereof, be deemed to have assumed and
agreed to conform and comply with each and every term, covenant, condition and
obligation herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to or
inconsistent with provisions of an assignment or sublease to which Lessor has
specifically consented to in writing.

            (g) Lessor's consent to any assignment or subletting shall not
transfer to the assignee or sublessee any Option granted to the original Lessee
by this Lease unless such transfer is specifically consented to by Lessor in
writing. (See Paragraph 39.2)


      12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

            (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur In the performance of Lessee's obligations,
Lessee may collect said Rent. In the event that the amount collected by Lessor
exceeds Lessee's then outstanding obligations any such excess shall be refunded
to Lessee. Lessor shall not, by reason of the foregoing or any assignment of
such sublease, nor by reason of the collection of Rent, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublessee. Lessee hereby irrevocably authorizes and directs
any such sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease, to
pay to Lessor all Rent due and to become due under the sublease. Sublessee shall
rely upon any such notice from Lessor and shall pay all Rents to Lessor without
any obligation or right to inquire as to whether such Breach exists,
notwithstanding any claim from Lessee to the contrary.

<PAGE>


            (b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attom to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or breaches of such
sublessor.

            (c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.

            (d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.

            (e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.

13.   Default; Breach; Remedies.

      13.1 Default; Breach. A "Default is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A 'Breach" Is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:

            (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.

            (b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A
PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY
OF LESSOR'S RIGHTS, INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE
PREMISES.

            (c) The failure of Lessee to allow Lessor and/or its agents access
to the Premises or the commission of waste, act or acts constituting public or
private nuisance, and/or an illegal activity on the Premises by Lessee, where
such actions continue for a period of 3 business days following written notice
to Lessee.

            (d) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate or financial statements, (v) a requested subordination, (vi)
evidence concerning any guaranty and/or Guarantor, (vii) any document requested
under Paragraph 41, (viii) material data safety sheets (MSDS), or (ix) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period of 10
days following written notice to Lessee.

            (e) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of 30 days after written notice; provided,
however, that if the nature of Lessee's Default is such that more than 30 days
are reasonably required for its cure, then it shall not be deemed to be a Breach
if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.

            (f) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. ss. 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within 30 days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within 30
days; provided, however, in the event that any provision of this subparagraph is
contrary to any applicable law, such provision shall be of no force or effect,
and not affect the validity of the remaining provisions.

            (g) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.

            (h) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a

<PAGE>

bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

      13.2 Remedies.. If Lessee fails to perform any of its affirmative duties
or obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and
expenses incurred by Lessor in such performance upon receipt of an invoice
therefor. In the event of a Breach, Lessor may, with or without further notice
or demand, and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such Breach:

            (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of retelling, Including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (II) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent. Efforts by Lessor to mitigate damages
caused by Lessee's Breach of this Lease shall not waive Lessor's right to
recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

            (b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

            (c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

      13.3 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions am hereinafter referred to as "Inducement Provisions",
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which Initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.

      13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within 5 business days after such amount shall

<PAGE>

be due, then, without any requirement for notice to Lessee, Lessee shall
immediately pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor will
Incur by reason of such late payment Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with respect
to such overdue amount, nor prevent the exercise of any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for 3 consecutive installments of Base
Rent, then notwithstanding any provision of this Lease to the contrary, Base
Rent shall, at Lessor's option, become due and payable quarterly in advance.

      13.5 interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for nonscheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to nonscheduled payments. The interest
("Interest") charged shall be computed at the rate of 10% per annum but shall
not exceed the maximum rate allowed by law. Interest is payable in addition to
the potential late charge provided for in Paragraph 13.4.

      13.6 Breach by Lessor.

            (a) Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than 30 days after receipt by Lessor, and any
Lender whose name and address shall have been furnished Lessee In writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than 30 days are reasonably required for its performance, then
Lessor shall not be in breach if performance Is commenced within such 30 day
period and thereafter diligently pursued to completion.

            (b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within 30 days after receipt of said
notice, or if having commenced said cure they do not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee's expense and
offset from Rent the actual and reasonable cost to perform such cure, provided
however, that such offset shall not exceed an amount equal to the greater of one
month's Base Rent or the Security Deposit, reserving Lessee's right to seek
reimbursement from Lessor for any such expense in excess of such offset. Lessee
shall document the cost of said cure and supply said documentation to Lessor.


14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than 10% of the rentable Nor area of the Premises, or more
than 25% of Lessee's Reserved Parking Spaces, if any, are taken by Condemnation,
Lessee may, at Lessee's option, to be exercised in writing within 10 days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation paid by the condemnor
for Lessee's relocation expenses, loss of business goodwill and/or Trade
Fixtures, without regard to whether or not this Lease is terminated pursuant to
the provisions of this Paragraph. All Alterations and Utility Installations made
to the Premises by Lessee, for purposes of Condemnation only, shall be
considered the property of the Lessee and Lessee shall be entitled to any and
all compensation which is payable therefor. In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.

15. Brokerage Fees.

      15.1 Additional Commission. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: d) if Base Rent is increased, whether by agreement
or operation of an escalation clause herein, then, Lessor shall pay Brokers a
fee in accordance with the schedule of the Brokers in effect at the time of the
execution of this Lease.

      15.2 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Brokers shall be third party beneficiaries of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts
due as and for brokerage fees pertaining to this Lease when due, then such
amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts
to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor
and Lessee of such failure and if Lessor falls to pay such amounts within 10
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a

<PAGE>

third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker for the limited purpose of collecting any
brokerage fee owed.

      15.3 Representations and Indemnities of Broker Relationships. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other then said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the Indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.

16. Estoppel Certificates.

            (a) Each Party (as 'Responding Party") shall within 10 days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current 'Estoppel Certificate" form published by the
AIR Commercial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

            (b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may execute
an Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's performance, and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrances may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

            (c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee and all Guarantors shall within 10 days after
written notice from Lessor deliver to any potential lender or purchaser
designated by Lessor such financial statements as may be reasonably required by
such lender or purchaser, including but not limited to Lessee's financial
statements for the past 3 years. All such financial statements shall be received
by Lessor and such lender or purchaser in confidence and shall be used only for
the purposes herein set forth.

17. Definition of Lessor. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest In the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Upon such transfer or assignment and delivery
of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as hereinabove defined.

18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. The obligations of Lessor under this Lease shall
not constitute personal obligations of Lessor or its partners, members,
directors, officers or shareholders, and Lessee shall look to the Project, and
to no other assets of Lessor, for the satisfaction of any liability of Lessor
with respect to this Lease, and shall not seek recourse against Lessor's
partners, members, directors, officers or shareholders, or any of their personal
assets for such satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and Is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the use, nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.

23. Notices.

      23.1 Notice Requirements. All notices required or permitted by this Lease
or applicable law shall be in writing and may be delivered in person (by hand or
by courier) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail. with postage prepaid, or by facsimile transmission,
and shall be deemed sufficiently given if served in a manner specified in this

<PAGE>

Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

      23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given 72 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantee next day
delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mall. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day. 24.
Waivers.

            (a) No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to. or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent.

            (b) The acceptance of Rent by Lessor shall not be a waiver of any
Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on
account of moneys or damages due Lessor, notwithstanding any qualifying
statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit of
such payment.

            (C) THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH
REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY
PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH
THIS LEASE.

 25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

            (a) When entering into a discussion with a real estate agent
regarding a real estate transaction, a Lessor or Lessee should from the outset
understand what type of agency relationship or representation it has with the
agent or agents in the transaction. Lessor and Lessee acknowledge being advised
by the Brokers in this transaction, as follows:

                  (i) Lessor's Agent. A Lessor's agent under a listing agreement
with the Lessor acts as the agent for the Lessor only. A Lessor's agent or
subagent has the following affirmative obligations: To the Lessor. A fiduciary
duty of utmost care, integrity, honesty, and loyalty in dealings with the
Lessor. To the Lessee and the Lessor a. Diligent exercise of reasonable skills
and care in performance of the agent's duties. b. A duty of honest and fair
dealing and good faith. c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent Is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

                  (ii) Lessee's Agent. An agent can agree to act as agent for
the Lessee only. In these situations, the agent is not the Lessor's agent, even
if by agreement the agent may receive compensation for services rendered, either
in full or in part from the Lessor. An agent acting only for a Lessee has the
following affirmative obligations. To the Lessee: A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee
and the Lessor: a. Diligent exercise of reasonable skills and care in
performance of the agent's duties. b. A duty of honest and fair dealing and good
faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

                  (iii) Agent Representing Both Lessor and Lessee. A real estate
agent, either acting directly or through one or more associate licenses, can
legally be the agent of both the Lessor and the Lessee in a transaction, but
only with the knowledge and consent of both the Lessor and the Lessee. In a dual
agency situation, the agent has the following affirmative obligations to both
the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Lesser or the Lessee. b. Other
duties to the Lessor and the Lessee as stated above in subparagraphs (i) or
(ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that the
Lessor will accept rent in an amount less than that indicated in the listing or
that the Lessee Is willing to pay a higher rent than that offered. The above

<PAGE>

duties of the agent in a real estate transaction do not relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional.

            (b) Brokers have no responsibility with respect to any default or
breach hereof by either Party. The Parties agree that no lawsuit or other legal
proceeding involving any breach of duty, error or omission relating to this
Lease may be brought against Broker more than one year after the Start Date and
that the liability (including court costs and attorneys' fees), of any Broker
with respect to any such lawsuit and/or legal proceeding shall not exceed the
fee received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker's liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

            (c) Buyer and Seller agree to identify to Brokers as "Confidential"
any communication or information given Brokers that is considered by such Party
to be confidential.

26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
150% of the Base Rent applicable immediately preceding the expiration or
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this
 Lease to be observed or performed by Lessee are both covenants and conditions.
 In construing this Lease, all headings and titles are for the convenience of
 the Parties only and shall not be considered a part of this Lease. Whenever
 required by the context, the singular shall include the plural and vice versa.
 This Lease shall not be construed as if prepared by one of the Parties, but
 rather according to its fair meaning as a whole, as if both Parties had
 prepared it.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30. Subordination; Atonement; Non-Disturbance.

      30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

      30.2 Atonement. In the event that Lessor transfers title to the Premises,
or the Premises are acquired by another upon the foreclosure or termination of a
Security Devise to which this Lease is subordinated (i) Lessee shall, subject to
the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and
upon request, enter into a new lease, containing all of the terms and provisions
of this Lease, with such new owner for the remainder of the term hereof, or, at
the election of the new owner, this Lease will automatically become a new lease
between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved
of any further obligations hereunder and such new owner shall assume all of
Lessor's obligations, except that such new owner shall not: (a) be liable for
any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (b) be subject to any offsets or defenses
which Lessee might have against any prior lessor, (c) be bound by prepayment of
more than one month's rent, or (D) be liable for the return of any security
deposit paid to any prior lessor which was not paid or credited to such new
owner.

      30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorn to the record owner of the
Premises. Further, within 60 days after the execution of this Lease, Lessor
shall, if requested by Lessee, use its commercially reasonable efforts to obtain
a Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's

<PAGE>

option, directly contact Lender and attempt to negotiate for the execution and
delivery of a Non-Disturbance Agreement.

      30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, atonement and/or Non-Disturbance Agreement provided for herein.

31. Attorneys' Fees. If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys' fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach ($200 is a reasonable minimum per
occurrence for such services and consultation).

32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times after reasonable prior notice for the purpose
of showing the same to prospective purchasers, lenders, or tenants, and making
such alterations, repairs, improvements or additions to the Premises as Lessor
may deem necessary or desirable and the erecting, using and maintaining of
utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect on Lessee's use of the
Premises. All such activities shall be without abatement of rent or liability to
Lessee.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.

34. Signs. Lessor may place on the Premises ordinary "For Sale' signs at any
time and ordinary *For Lease" signs during the last 6 months of the term hereof.

35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36. Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessors consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any than existing Default
or Breach, except as may be otherwise specifically stated In writing by Lessor
at the lime of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.

37. Guarantor.

      37.1 Execution. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the AIR Commercial Real Estate Association.

      37.2 Default. It shall constitute a Default of the Lessee If any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d)
written confirmation that the guaranty is still in effect.


<PAGE>


38. Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39. Options. If Lessee is granted an Option, as defined below, then the
following provisions shall apply.

      39.1 Definition. "Option" shall mean: (a) the right to extend or reduce
the term of or renew this Lease or to extend or reduce the term of or renew any
lease that Lessee has on other property of Lessor, (b) the right of first
refusal or first offer to lease either the Premises or other property of Lessor;
(c) the right to purchase, the right of first offer to purchase or the right of
first refusal to purchase the Premises or other property of Lessor.

      39.2 Options Personal To Original Lessee. Any Option granted to Lessee in
this Lease Is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

      39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.

      39.4 Effect of Default on Options.

            (a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given 3 or more notices of separate Default, whether or not the Defaults
are cured, during the 12 month period immediately preceding the exercise of the
Option.

            (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

            (c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term or completion of the
purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), or (Ii) if
Lessee commits a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to
 Lessor hereunder does not include the cost of guard service or other security
 measures, and that Lessor shall have no obligation whatsoever to provide same.
 Lessee assumes all responsibility for the protection of the Premises, Lessee,
 its agents and invitees and their property from the acts of third parties. In
 the event, however, that Lessor should elect to provide security services, then
 the cost thereof shall be an Operating Expense.

41. Reservations.

            (a) Lessor reserves the right: (i) to grant, without the consent or
joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, (iii)
to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably Interfere with the use of the Premises by Lessee. Lessor may also:
change the name, address or title of the Building or Project upon at least 90
days prior written notice; provide and install, at Lessee's expense, Building
standard graphics on the door of the Premises and such portions of the Common
Areas as Lessor shall reasonably deem appropriate; grant to any lessee the
exclusive right to conduct any business as long as such exclusive right does not
conflict with any rights expressly given herein; and to place such signs,
notices or displays as Lessor reasonably deems necessary or advisable upon the
roof, exterior of the Building or the Project or an signs in the Common Areas.
Lessee agrees to sign any documents reasonably requested by Lessor to effectuate
such rights. The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall In no way affect this Lease or impose any liability upon Lessor.

            (b) Lessor also reserves the right to move Lessee to other space of
comparable size in the Building or Project. Lessor must provide at least 45 days
prior written notice of such move, and the new space must contain improvements
of comparable quality to those contained within the Premises. Lessor shall pay
the reasonable out of pocket costs that Lessee incurs with regard to such
relocation, including the expenses of moving and necessary stationary revision
costs. In no event, however, shall Lessor be required to pay an amount in excess
of two months Base Rent. Lessee may not be relocated more than once during the
term of this Lease.

            (c) Lessee shall not: (i) use a representation (photographic or
otherwise) of the Building or Project or their name(s) in connection with


<PAGE>

Lessee's business; or (ii) suffer or permit anyone, except in emergency, to go
upon the roof of the Building.

42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest' and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to Institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay. A Party who does not initiate
suit for the recovery of sums paid "under protest" within 6 months shall be
deemed to have waived its right to protest such payment.

43. Authority; Multiple Parties; Execution

            (a) If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she Is
duly authorized to execute and deliver this Lease on its behalf. Each Party
shall, within 30 days after request, deliver to the other Party satisfactory
evidence of such authority.

            (b) If this Lease is executed by more than one person or entity as
"Lessee", each such person or entity shall be jointly and severally liable
hereunder. It is agreed that any one of the named Lessees shall be empowered to
execute any amendment to this Lease, or other document ancillary thereto and
bind all of the named Lessees, and Lessor may rely on the same as if all of the
named Lessees had executed such document.


                  (c) This Lease may be executed by the Parties in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.

44. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

45. Offer. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in wilting, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable nonmonetary modifications to this Lease as may be reasonably required
by a Lender In connection with the obtaining of normal financing or refinancing
of the Premises.

47. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT
OF THIS AGREEMENT.

48. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease |_| is |X| is not attached to this Lease.

49. Americans with Disabilities Act. Since compliance with the Americans with
Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises,
Lessor makes no warranty or representation as to whether or not the Premises
comply with ADA or any similar legislation. In the event that Lessee's use of
the Premises requires modifications or additions to the Premises in order to be
in ADA compliance, Lessee agrees to make any such necessary modifications and/or
additions at Lessee's expense.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING AND SIZE OF THE PREMISES, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS,
COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE
PREMISES FOR LESSEE'S INTENDED USE.



<PAGE>

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

<TABLE>
<CAPTION>
<S>     <C>

Executed at:  San Diego, CA                        Executed at:  San Diego, CA
On:  05-19-08                                      On:  05-16-08

By:  LESSOR:                                       By:  LESSEE:

RDLFA, LLC                                         Franklin Wireless Corporation,
a California Limited Liability Company             a Nevada Corporation
c/o SD Commercial LLC, Management Company

By:  /s/ David Wick                                By:  /s/ OC Kim
   ----------------------------------                  --------------------------
Name Printed:  David Wick                          Name Printed:  OC Kim
Title:  President, SD Commercial LLC               Title:  President

By:                                                By:  /s/ David J. Lee
   ----------------------------------                  --------------------------
Name Printed:                                      Name Printed:  David J. Lee
Title:                                             Title:  COO
Address:  5440 Morehouse Drive, Suite 4000         Address:  9823 Pacific Heights Blvd., Suite J
          San Diego, CA  92121                               San Diego, CA  92121
Telephone:  (858)623.9000                          Telephone:  (858)623.0000
Facsimile:  (858)623.9009                          Facsimile:  (858)623.0500
Federal ID No.                                     Federal ID No.  95-3733534

LESSOR'S BROKER:                                   LESSEE'S BROKER:

Commercial Realty Advisers                         Commercial Realty Advisors
Attn:  Brandon Keith                               Attn:  Jeffrey Chasan
Address:  4275 Executive Square, Suite 100         Address:  4275 Executive Square, Suite 100
          La Jolla, CA  92037                                La Jolla, CA  92037

Telephone:(858) 875.3600                           Telephone: (858) 875.3600
Facsimile:(858) 875.3636                           Facsimile: (858) 875.3636
</TABLE>


NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the moat
current form: AIR Commercial Real Estate Association, 8OO W 6th Street, Suite
800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.: (213)
687-8616.




           @Copyright 1999-By AIR Commercial Real Estate Association.
                              All rights reserved.
          No part of these works may he reproduced In any form without
                             permission In writing.




<PAGE>

                                 LEASE ADDENDUM

This is an Addendum to that certain AIR Standard Multi-Tenant Office Lease --
Gross (the "Agreement") dated May 1, 2008 for reference purposes, by and between
Franklin Wireless Corporation, a Nevada Corporation ("Lessee") and RDLFA, LLC
("Lessor"):


50.   BASE RENT INCREASES:

      Base Monthly Rent per Section 1.5 of the Agreement shall increase on
      each anniversary of the Commencement per the following schedule:
      Month 1-12:          $9,105.00
      Month 13-24:         $9,469.00
      Month 25-36:         $9,848.00


51.   LEASE OPTION TO EXTEND:

      Provided Lessee is not in default of the Lease, Lessee shall have one (1)
      Option to renew the Agreement for three (3) additional years, by providing
      Landlord a minimum of one hundred fifty (150) days prior written notice of
      its intent. Base Monthly Rent in first year of the Option Period shall be
      fair market rent for comparable office space in the Sorrento Mesa office
      market.

52.   SIGNAGE:

      Lessor shall grant to Lessee exclusive Eyebrow signage (above Lessee's
      Main Entry) during the term of the Lease and any extension, at no rental
      cost to Lessee. Any such signage shall receive Lessor's prior written
      consent, meet applicable City of San Diego Signage Codes, and shall be
      installed (and ultimately removed) by Lessee at Lessee's sole cost and
      expense.

      Lessor, at Lessor's sole cost, shall pay for the installation of Lessee's
      initial lobby directory and Suite entry placard consisting of Lessee's
      trade name to Lessor's existing signage.

      Lessor, at its sole cost and expense, shall remove the prior tenant's
      signage throughout the Premises.

53.   TENANT IMPROVEMENTS & CONDITION OF PREMISES:

      Lessor, at Lessor's sole cost and expense, shall provide Lessee with a
      Modify-to-Suit configuration based upon the Exhibit B Tenant Improvement
      Plan, using building standard materials (i.e. installation of new Shaw 26
      oz. glue down carpet & Behr paint -- single main color with up to four (4)
      accent walls).

      With regard to Section 49 of the Agreement, Lessee shall have no liability
      for any ADA compliance issues for the Premises as it related to Tenant
      Improvements being completed for Lessee.

      Lessor shall be responsible, at Lessor's cost, for removal of all rubbish
      and FF&E's currently in the Premises that Lessee does not intend to
      retain. Lessor shall be responsible for the removal and reinstallation of
      the Furniture, Fixtures, and Equipment (FF&E's) that are to remain within
      the Premises, at Lessor's cost, following Lessor's construction of Tenant
      Improvements. Lessee and Lessor shall mutually agree on the location of
      any new electrical outlets (which shall be constructed at Lessor's
      expense), plus voice and data locations (which shall be installed at
      Lessee's expense).

      The HVAC Systems and all Building Systems need to be in good working order
      prior to Tenant's possession of the Premises at Landlords sole cost and
      expense. Further, all window coverings, ceiling tiles, ceiling grid,
      lighting, exterior door thresholds sealed , and damaged interior doors,
      need to be cleaned, replaced or repaired to appear in a new type
      condition, at Landlords sole cost and expense. In particular, any noisy in
      suite HVAC units shall be serviced prior to Landlord's delivery of the
      Premises to Tenant.

54.   RIGHT OF MST REFUSAL:

      Lessee shall have the Right of First Refusal on any available adjacent or
      contiguous space, which Right shall be exercised by Lessee within five (5)
      days of written notice from Lessor that such space is available. The
      rental terms shall be based on the market at time First Right is
      exercised.

55.   ROOF RIGHTS:

      Lessor shall allow Lessee, at Lessee's sole cost and expense, the right to
      place one (1) satellite dish and necessary equipment on the roof of the
      building, at no additional rent, for the term of the lease and any
      extension thereof. Lessee shall be required, at Lessee's expense, to use
      Lessor's roofing contractor in conjunction with any such installation in
      order to avoid invalidation of the roof warranty. Any such installation
      shall be done by a licensed contractor with specifications of such
      installation approved by Lessor in writing.

<PAGE>


56.   FURNITURE:

      Lessee shall have the right, not the obligation, to use at no additional
      cost to Lessee, the FF&E's owned by Landlord currently in Suite 1000
      (except for microwaves, and refrigerators -- which will be removed prior
      to Early Possession Date). Tenant shall identify those FF&E's it intends
      to use, within one week following Lease execution and Landlord shall
      remove all the FF&E's that Tenant does not want.

57.   OPERATING EXPENSE CLARIFICATION:

      Operating Expense Clarification: The Base Rental for the first year for
      Lessee shall incorporate a Base Year 2008. Such Base Year 2008 shall
      include the Lessee's 13.3 percentage share of the total Operating Expenses
      for the Building during the year 2008. Lessee shall be responsible for
      their 13.3 percentage share difference when the Base Year is compared to
      any total annual operating expenses in any comparative year. The annual
      Operating Expenses shall not increase more than 7% year over year, as
      noted in Section 4.2 of the Lease.


LESSEE: Franklin Wireless Corporation                 LESSOR: RDLFA, LLC

BY:  /s/ OC Kim                                       BY: SD Commercial, LLC,
   ------------------------------------
   OC Kim
                                                     ITS:  Management Company

DATE:  5/16/08                                       BY:  /s/ David Wick
                                                         ----------------------
                                                         David Wick - President
                                                          of SD Commercial LLD

BY:  /s/ David J. Lee                                DATE:  5/19/08
   --------------------------
    David J. Lee

ITS:  Chief Operating Officer

DATE:  09/16/08






<PAGE>


                                    EXHIBIT A



<PAGE>


                               EXISTING FLOOR PLAN



                             [graphic appears here]






<PAGE>


                                    EXHIBIT B

                         CONSTRUCTION WORK LETTER / PLAN

   Lessor shall install Shaw 26 oz. carpet and Behr paint of Lessee's selection,
   and deliver the Premises with new conference room, double door glass entry to
   the conference room, new offices / lab room at eastern end of the Premises,
   and all other Tenant Improvements detailed in the attached Exhibit below:



                             [graphic appears here]







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-14.1
<SEQUENCE>3
<FILENAME>fkwl_10kex14-1.txt
<DESCRIPTION>CODE OF ETHICS
<TEXT>
<PAGE>

EXHIBIT 14.1

                             FRANKLIN WIRELESS CORP.
                             -----------------------
                                 Code of Ethics

         The Board of Directors of FRANKLIN WIRELESS CORP (the "Company") has
adopted this Code of Ethics for its chief executive officer and all senior
financial personnel, including the chief financial officer, principal accounting
officer, controller and other personnel performing similar functions (the
"Company Officers").

         This Code has been reasonably designed to deter wrongdoing and to
promote:

               o   Honest and ethical conduct, including the ethical handling of
                   actual or apparent conflicts of interest between personal and
                   professional relationships;

               o   Full, fair, accurate, timely, and understandable disclosure
                   in reports and documents that are filed with the Securities
                   and Exchange Commission and in other public communications;

               o   Compliance with applicable governmental laws, rules and
                   regulations;

               o   The prompt internal reporting to an appropriate person or
                   persons identified in this Code of violations of this Code;
                   and

               o Accountability for adherence to this Code.

1. Honest and Ethical Conduct

         The Company Officers are expected to act and perform their duties
ethically and honestly. Honest conduct is considered to be conduct that is free
from fraud or deception. Ethical conduct is considered to be conduct conforming
to accepted professional standards of conduct. Ethical conduct includes the
ethical handling of actual or apparent conflicts of interest between personal
and professional relationships, as discussed below.

II. Conflicts of Interest

         A conflict of interest exists where the interests or benefits of one
person or entity conflict or appear to conflict with the interests or benefits
of the Company. While it is not possible to describe every situation in which a
conflict of interest may arise, Company Officers must never use or attempt to
use their position with Company to obtain improper personal benefits. Any
Company Officer who is aware of a conflict of interest, or is concerned that a
conflict might develop, is required to discuss the matter with a higher level of
management or the Chief Financial Officer promptly. Company Officers may, in
addition to speaking with the Chief Financial Officer, also discuss the matter
with any member of the Audit Committee of the Board of Directors.




<PAGE>

III. Disclosure

         Company Officers are responsible for ensuring that the disclosure in
the Company's periodic reports is full and accurate. In doing so, they should
take such action as is reasonably appropriate to (i) establish and comply with
disclosure controls and procedures and accounting and financial controls that
are designed to ensure that material information relating to Company is made
known to them; (ii) confirm that the Company's periodic reports comply with the
requirements of the Securities Exchange Act of 1934; and (iii) ensure that
information contained in the Company's periodic reports fairly presents in all
material respects its financial condition and results of operations.

         Company Officers may not knowingly (i) make materially false or
misleading entries in its financial statements or records; (ii) fail to correct
materially false and misleading financial statements or records; (iii) sign a
document containing materially false and misleading information; or (iv) falsely
respond, or fail to respond, to specific inquiries of its independent auditors
or legal counsel.

IV. Internal Reporting

         Company Officers shall take all appropriate action to stop any known
misconduct by fellow Company Officers that violate this Code. To this end,
Company Officers should report any known or suspected misconduct to the Chief
Financial Officer or to the Chair of the Company's Audit Committee.

V. Accountability

         Any violation of this Code may result in disciplinary action, including
termination, and legal proceedings. This Code is a statement of certain
principles, policies and procedures that govern the Company Officers in the
conduct of the Company's business and is not intended to create any rights in
any employee, customer, supplier, competitor, shareholder or any other person or
entity.

VI. Waivers and Amendments of the Code

         The Company is committed to continuously reviewing and updating its
policies and procedures. Therefore, this Code is subject to modification. Any
amendment or waiver of any provision of this Code must be approved in writing by
the Board of Directors and promptly disclosed pursuant to applicable laws and
regulations.


    Agreed and accepted by

/s/ OC Kim
- ------------------------------------
OC Kim, President
Date:


                                       2

<PAGE>



/s/ David Lee
- ------------------------------------
David Lee, Chief Operating Officer
Date:    06/01/2008


/s/ Nick Lim
- ------------------------------------
Nick Lim, EVP of Technology
Date:



/s/ Carrie Choi
- ------------------------------------
Carrie Choi, Accounting Manager
Date:    May 31, 2008


                                       3


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>4
<FILENAME>franklin_10kex31-1.txt
<TEXT>
<PAGE>

EXHIBIT 31.1

                     RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, OC Kim, certify that:

1. I have reviewed this annual report on Form 10-K of Franklin Wireless Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period covered by
this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: September 22, 2008

/s/ OC KIM

- -------------------------------
OC Kim
President



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>5
<FILENAME>franklin_10kex31-2.txt
<TEXT>
<PAGE>

EXHIBIT 31.2

                     RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, OC Kim, certify that:

1. I have reviewed this annual report on Form 10-K of Franklin Wireless Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report.

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:

a) designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures as of the end of the period covered by
this report based on such evaluation; and

d) disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: September 22, 2008

/s/ OC KIM

- -------------------------------
OC Kim
Acting Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>6
<FILENAME>franklin_10kex32-1.txt
<TEXT>
<PAGE>

EXHIBIT 32.1

    CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Franklin Wireless Corp. (the
"COMPANY") on Form 10-K for the year ending June 30, 2008 as filed with the
Securities and Exchange Commission on the date hereof (the "REPORT"), I, OC Kim,
President of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

/s/ OC KIM

- ---------------------------------
OC Kim
President
September 22, 2008


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>7
<FILENAME>franklin_10kex32-2.txt
<TEXT>
<PAGE>

EXHIBIT 32.2

    CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the Annual Report of Franklin Wireless Corp. (the
"COMPANY") on Form 10-K for the year ending June 30, 2008, as filed with the
Securities and Exchange Commission on the date hereof (the "REPORT"), I, OC Kim,
Acting Chief Financial Officer the Company, certify, pursuant to 18 U.S.C. 1350,
as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.

/s/ OC KIM

- ------------------------------
OC Kim
Acting Chief Financial Officer
September 22, 2008

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
