Item 2: Properties

The Company leases four buildings (51,851, 52,464, 15,392 and 76,379 square feet) in Sunnyvale, California pursuant to a lease which expires in November 1996. These buildings are used as the Company's headquarters and include development, engineering, production, marketing, and administrative offices.

The Company leases a 15,250 square foot building in Herndon, Virginia pursuant to a lease which expires in October 1998. This building houses a small development facility and marketing and administrative offices.

The Company leases a 6,300 square foot building in Jessup, Maryland pursuant to a lease which expires in September 1996. This building also houses a small development facility and marketing and administrative offices.

In addition, after the Company's fiscal year end and prior to this filing, the Company entered into new lease agreements with Lincoln Property Management Service, Inc., for two (2) new facilities to be constructed at the Company's headquarters in Sunnyvale, California. The Company will lease the first newly constructed building (58,000 square feet) commencing approximately July 1, 1995 through approximately November 1, 2011. The Company will lease the second newly constructed building (58,000 square feet) commencing approximately December 1, 1997 through November 1, 2011. See Exhibit 10.11, attached.

The Company's business requires that it maintain at each of its offices a facility clearance sponsored and approved by the United States government. This approval could be suspended or revoked if the Company is found not to have complied with security regulations applicable to such facilities. Any revocation of such approval, and any suspension of such approval that materially delayed the Company's delivery of its products to customers would materially adversely affect the Company's results of operations. Although the Company has adopted policies directed at assuring its compliance with relevant regulations, there can be no assurance that the approved status of the Company's facilities will continue without interruption.

Item 3: Legal Proceedings

In April 1994, the Company was served with a subpoena by the Department of Defense Office of Inspector General (OIG) in connection with approximately six contracts, several of which had been audited by the Defense Contract Audit Agency (DCAA) the previous year. As is routine in such matters involving government contracts, the OIG referred the matter to another government agency which also had contracts with the Company. Shortly thereafter, this second agency issued a request for information related to nine additional contracts. To date, the Company has not received any allegations of wrong-doing from the OIG or the other agency. At the request of the Board of Directors, the Company initiated its own review of the contracts in conjunction with its legal counsel. After review, management anticipates there will be no material impact on operations as a result of the investigation.

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

Not applicable.