<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                AMENDMENT NO.1 TO
                                    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>

                                EXPLANATORY NOTE

On February 17, 2009 Franklin Wireless Corp. received a letter from the
Securities and Exchange Commission (the "SEC") regarding our Form 10-K for the
year ended June 30, 2008. We have responded to the SEC's comments to our Form
10-K (the "ORIGINAL REPORT") in this Amendment No. 1 (the "AMENDMENT"). The
purpose of the Amendment is to disclose the restatement of our financial
statements for the fiscal year ended June 30, 2008 and to make appropriate
changes to the Management's Discussion and Analysis of Financial Condition and
Results of Operation. As a result of the restatement, the following adjustments
were made to our financial statements and our Management's Discussion and
Analysis of Financial Condition and Results of Operation for the fiscal year
ended June 30, 2008:

1. The subsection entitled "Cash and Cash Equivalents" in the section entitled
"Summary of Significant Accounting Policies" in the Management's Discussion and
Analysis of Financial Condition and Results of Operations (Item 7 of Amendment
No. 1) has been revised to disclose that we classify only highly liquid
investments with original maturities of three months or less to be cash
equivalents, consistent with Paragraph 8 of SFAS No. 95. A similar change was
made to Note 3 of Notes to Financial Statements.

2. The subsection entitled "Advertising and Marketing Costs" in the section
entitled "Summary of Significant Accounting Policies" in the Management's
Discussion and Analysis of Financial Condition and Results of Operations has
been revised to separately state sales commission expenses and marketing
development fund arrangements. A similar change was made to Note 3 of Notes to
Financial Statements.

3. The subsection entitled "Income Taxes" in the section entitled "Summary of
Significant Accounting Policies" in the Management's Discussion and Analysis of
Financial Condition and Results of Operations has been revised to describe our
policies with respect to provision for income taxes. Corresponding changes have
been made to Note 14 of Notes to Financial Statements.

4. The table in Note 14 of Notes to Financial Statements, summarizing the
components of our income tax expense, has been revised to report separately the
benefits of operating loss carryforwards, pursuant to Paragraph 45e of SFAS No.
109.

5. A table has been added to Note 14 of the Notes to Financial Statements to
provide the disclosure required by Paragraph 47 of SFAS No. 109.

The disclosures in this Amendment continue to speak as of the date of the
Original Report, and do not reflect events occurring after the filing of the
Original Report, except as specifically noted. Accordingly, this Amendment
should be read in conjunction with our other filings made with the Securities
and Exchange Commission subsequent to the filing of the Original Report,
including any amendments to those filings. The filing of this Amendment shall
not be deemed to be an admission that the Original Report, when made, included
any untrue statement of a material fact or omitted to state a material fact
necessary to make a statement not misleading.


                                       2
<PAGE>


                                     PART I

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.

         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


                                       3
<PAGE>


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.


         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

         We consider all highly liquid investments purchased with original
         maturities of three 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.


                                       4
<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 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


         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 $232,969 and $63,112 of advertising and marketing expenses for
         the years ended June 30, 2008 and 2007, respectively. The increase was
         primarily due to the net effect of the increase in marketing
         development fund arrangements of $218,000 and the decrease in other
         advertising and promotion expenses of approximately $48,000 for the
         year ended June 30, 2008, compared to the corresponding period of 2007.

         The costs of $218,000 incurred by us for the marketing development fund
         arrangements were included within advertising and marketing costs 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.


         SALES COMMISSION COSTS

         We expense the costs of sales commission as incurred. We incurred
         $1,137,156 and $239,410 of sales commission expenses for the years
         Ended June 30, 2008 and 2007, respectively.

                                       5
<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.

         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
                                                           ========     ========

         The provisions for income taxes reconcile to the amount computed by
         Applying effective federal statutory income tax rate to income before
         Provision for income taxes as follows:

<TABLE>
<S> <C>
                                                                YEAR ENDED JUNE 30,
                                                   --------------------------------------------
                                                      2008          %         2007          %
                                                   -----------    ------  -----------    ------
        Federal tax provision, at statutory rate   $ 1,532,163      34.0  $   453,998      34.0
        State tax, net of fed tax benefit              329,327       7.3      118,358       8.8
        Nondeductible expenses                           5,957       0.1        5,217       0.4
        Credit                                         (23,291)     (0.5)          --        --
        Valuation allowance                         (1,213,017)    (26.9)    (546,519)    (40.9)
        Others                                         (41,690)     (0.9)       4,136       0.3
                                                   -----------    ------  -----------    ------
        Provision for income taxes                 $   589,449      13.1  $    35,190       2.6
                                                   ===========    ======  ===========    ======

         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                                              --         30,996
               Other, net                                      (4,477)       (60,357)
                                                          -----------    -----------
         Total deferred tax assets                          2,194,532      3,407,549
         Less valuation allowance                          (2,194,532)    (3,407,549)
                                                          -----------    -----------
         Net deferred tax asset                           $        --    $        --
                                                          ===========    ===========
</TABLE>

                                       6
<PAGE>

         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, we established a full
         valuation allowance on our net deferred tax assets based on the
         available evidences, both positive and negative, to determine whether
         valuation allowance is needed. Based on our losses before income taxes
         in the past years before the fiscal year of 2007 and our estimated
         losses in the future three years, management believed that it was more
         likely than not that most of the deferred tax assets will not be
         realized. 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 period of three years. At June 30, 2008,
         the established valuation allowance for the net deferred tax asset was
         decreased by $1,213,017.

         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 after 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.


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.

                                       7
<PAGE>

         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.


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.

                                       8
<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.

                                       9
<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:


PAYMENTS DUE BY JUNE 30,

<TABLE>
<S> <C>
        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>

                                       10
<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.

         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.


                                       11
<PAGE>

                                     PART II

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.


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

         (a)  See Index to Financial Statements

         (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 (previously filed)

         14.1     Code of Ethics (previously filed).

         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
         -----------------------------------------------



                                       12
<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 Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       Franklin Wireless Corp.

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

Dated: April 2, 2009

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                April 2, 2009
               OC Kim

(3) Directors

           /s/ GARY NELSON           Chairman of the Board of Directors    April 2, 2009
           --------------------
               Gary Nelson


           /s/ JAE MAN LEE           Director                              April 2, 2009
           --------------------
               Jae Man Lee
</TABLE>

                                       13
<PAGE>

                             FRANKLIN WIRELESS CORP.

                          INDEX TO FINANCIAL STATEMENTS


                                                                        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


                                      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.

The disclosures to the financial statements for the year ended June 30, 2008 in
Notes 3 and 14 have been amended.

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, except for Paragraphs 4, 14, 15, and 16 of Note 3, and
Paragraphs 3 through 7 of Note 14, as to which the date is April 1, 2009


                                      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.

         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.

                                      F-7
<PAGE>

         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

         We consider all highly liquid investments purchased with original
         maturities of three 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.

         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.

                                      F-8
<PAGE>

         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 $232,969 and $63,112 of advertising and marketing expenses for
         the years ended June 30, 2008 and 2007, respectively. The increase was
         primarily due to the net effect of the increase in marketing
         development fund arrangements of $218,000 and the decrease in other
         advertising and promotion expenses of approximately $48,000 for the
         year ended June 30, 2008, compared to the corresponding period of 2007.

         The costs of $218,000 incurred by us for the marketing development fund
         arrangements were included within advertising and marketing costs 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.

         SALES COMMISSION COSTS

         We expense the costs of sales commission as incurred. We incurred
         $1,137,156 and $239,410 of sales commission expenses for the years
         Ended June 30, 2008 and 2007, respectively.

         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.

                                      F-9
<PAGE>

         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.

         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.

                                      F-10
<PAGE>

         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.

         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.

                                      F-11
<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.


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

         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
                                                       =========      =========


                                      F-12
<PAGE>

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
                                                             =======     =======


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.

                                      F-13
<PAGE>

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:

<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.

                                      F-14
<PAGE>

         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.

         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.

                                      F-15
<PAGE>

   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

         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:

                                      F-16
<PAGE>

                                                            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
                                                           ========     ========

              The provisions for income taxes reconcile to the amount computed
         by applying effective federal statutory income tax rate to income
         before provision for income taxes as follows:

<TABLE>
<S> <C>
                                                                   YEAR ENDED JUNE 30,
                                                   ----------------------------------------------
                                                       2008          %          2007         %
                                                   -----------    ------    -----------    ------
        Federal tax provision, at statutory rate   $ 1,532,163      34.0    $   453,998      34.0
        State tax, net of fed tax benefit              329,327       7.3        118,358       8.8
        Nondeductible expenses                           5,957       0.1          5,217       0.4
        Credit                                         (23,291)     (0.5)            --        --
        Valuation allowance                         (1,213,017)    (26.9)      (546,519)    (40.9)
        Others                                         (41,690)     (0.9)         4,136       0.3
                                                   -----------    ------    -----------    ------
        Provision for income taxes                 $   589,449      13.1    $    35,190       2.6
                                                   ===========    ======    ===========    ======

         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                                              --         30,996
               Other, net                                      (4,477)       (60,357)
                                                          -----------    -----------
         Total deferred tax assets                          2,194,532      3,407,549
         Less valuation allowance                          (2,194,532)    (3,407,549)
                                                          -----------    -----------
         Net deferred tax asset                           $        --    $        --
                                                          ===========    ===========
</TABLE>

         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, we established a full
         valuation allowance on our net deferred tax assets based on the
         available evidences, both positive and negative, to determine whether
         valuation allowance is needed. Based on our losses before income taxes
         in the past years before the fiscal year of 2007 and our estimated
         losses in the future three years, management believed that it was more
         likely than not that most of the deferred tax assets will not be
         realized. 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 period of three years. At June 30, 2008,
         the established valuation allowance for the net deferred tax asset was
         decreased by $1,213,017.

                                      F-17
<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 after 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