FRANKLIN WIRELESS CORP
For the period ended Dec 31, 2024. Filed Feb 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 14, 2025
FKWL$2.11-5.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001683168-24-008127
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-14.
0001683168-25-001052
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 44 previous paragraphs and 50 current paragraphs.
21 unchanged; 19 reworded; 9 added; 3 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (9)
Current report
Net sales in North America increased by $9,073,647, or 103.7%, to $17,827,098 for the three months ended December 31, 2024 from $8,753,451 for the corresponding period of 2023. The increase in net sales was primarily due to increased demand from our major carrier customers. Net sales in Asia decreased by $94,328, or 100%, to $0 for the three months ended December 31, 2023 from $94,328 for the corresponding period of 2023. The decrease in net sales was primarily due to the absence of revenue generated from Wi-Fi router sales by FTI, which typically vary from period to period.
Current report
Selling, general, and administrative expenses decreased by $20,569, or 1.3%, to $1,519,593 for the three months ended December 31, 2024, from $1,540,162 for the corresponding period of 2023. Research and development expense increased by $74,384, or 8.7%, to $927,238 for the three months ended December 31, 2024, from $852,854 for the corresponding period of 2023. The increase in research and development expense was primarily due to the increased research and development costs and the related payroll expense of approximately $64,000 and $10,000, respectively, which is the mixed result of the timing of research and development activities and the number of active projects and typically vary from period to period.
Current report
SIX MONTHS ENDED DECEMBER 31, 2024 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2023
Current report
Net sales in North America increased by $12,740,549, or 69.2%, to $31,149,546 for the six months ended December 31, 2024 from $18,408,997 for the corresponding period of 2023. The increase in net sales was primarily due to increased demand from our major carrier customers. Net sales in Asia decreased by $93,864, or 99.5%, to $464 for the six months ended December 31, 2024 from $94,328 for the corresponding period of 2023. The decrease in net sales was primarily due to the absence of revenue generated from Wi-Fi router sales by FTI, which typically vary from period to period.
Current report
**GROSS PROFIT –**Gross profit increased by $2,963,329, or 126.1%, to $5,313,564 for the six months ended December 31, 2024 from $2,350,235 for the corresponding period of 2023. The gross profit in terms of net sales percentage was 17.1% for the six months ended December 31, 2023 compared to 12.7% for the corresponding period of 2023. The increase in gross profit and gross profit in terms of net sales percentage for the six months ended December 31, 2024, was primarily due to the change in net sales as described above. The amortization expenses associated with the completed capitalized product development costs that are included in the cost of goods sold declined the gross profits and gross profits in terms of net sales percentages in both periods.
Current report
OPERATING EXPENSES– Operating expenses increased by $400,423, or 8.9%, to $4,891,116 for the six months ended December 31, 2024 from $4,490,693 for the corresponding period of 2023.
Current report
OTHER INCOME, NET– Other income, net decreased by $530,011, or 59.7%, to $358,370 for the six months ended December 31, 2024 from $888,381 for the corresponding period of 2023. The decrease was primarily due to the increased loss of $705,063 from the unfavorable changes in foreign currency exchange rates in FTI and the decreased interest income of approximately $50,000 from deposits, which was partially offset by the increased forgiven liabilities of approximately $250.000.
Current report
The $2,631,817 in net cash provided by investing activities for the six months ended December 31, 2024 was primarily due to the sales of short-term investments of $2,685,688, which were offset by the payments for capitalized product development and property and equipment of $31,981 and $24,784, respectively.
Current report
On or about December 7, 2023, we received an invoice from our prior landlord, Hunsaker & Associates, requesting payment of additional rent on our completed and expired lease of office space located at 9707 Waples Street, San Diego, CA as of December 31, 2023. This invoice of $142,978 purports to represent charges for variable cost increases during the prior 7 years of the lease, which was discounted by $46,274 and adjusted down to $96,704 for the three months ended June 30, 2024. We are currently reviewing these charges and will be requesting further validation of these charges, in accordance with our rights granted under the lease. For the year ended June 30, 2024, we recorded an additional rent expense of $96,704 and an accrued liability of $72,048 reflecting this pending invoice and a credit of $24,656 for our deposit on the leasehold property.
Removed paragraphs (3)
Previous report
Net sales in North America increased by $3,666,902, or 38.0%, to $13,322,448 for the three months ended September 30, 2024 from $9,655,546 for the corresponding period of 2023. The increase in net sales in North America was primarily due to the increased sales of approximately $6.4M for our two wireless products from two major carrier customers for the three months ended September 30, 2024, which was partially offset by the decreased sales of one wireless product by approximately $2.7M, compared to the corresponding period of 2023. Net sales in Asia increased by $464, or 100%, to $464 for the three months ended September 30, 2024 from $0 for the corresponding period of 2023.
Previous report
The increase in gross profit was primarily due to the change in net sales as described above. The decrease in gross profit margin in terms of net sales was primarily driven by a decline in the proportion of high-margin sales while overall sales increased for the three months ended September 30, 2024 compared to the corresponding period of 2023.
Previous report
The $334,785 in net cash used in financial activities for the three months ended September 30, 2024 was from the purchased short-term investments of $291,869 and the payments for property and equipment of $21,544, respectively.
Reworded paragraphs (19)
Previous wording
We have majority ownership of Franklin Technology Inc. (FTI), a research and development company based in Seoul, South Korea. FTI primarily provides design and development services for our wireless products.
Current wording
We hold a 66.3% ownership in Franklin Technology Inc. (“FTI”), a research and development company based in Seoul, South Korea. FTI primarily provides design and development services for our wireless products. We hold a 60% ownership interest in Sigbeat Inc., based in San Diego, California (“Sigbeat”), which will engage in worldwide sales, marketing, customer support and operations for telecommunications modules. Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our primary markets are in North America and Asia.
Previous wording
We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2024, that are both important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments. Typically, the circumstances that make these judgments difficult, subjective, and complex have to do with making estimates about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies for the three months ended September 30, 2024.
Current wording
We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2024, that are both important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments. Typically, the circumstances that make these judgments difficult, subjective, and complex have to do with making estimates about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies for the three and six months ended December 31, 2024.
Previous wording
The following table sets forth, for the three months ended September 30, 2024 and 2023, our statements of comprehensive income (loss) including data expressed as a percentage of sales:
Current wording
The following table sets forth, for the three and six months ended December 31, 2024 and 2023, our statements of comprehensive income (loss) (unaudited) including data expressed as a percentage of sales:
Previous wording
NET SALES - Net sales increased by $3,667,366, or 38.0%, to $13,322,912 for the three months ended September 30, 2024 from $9,655,546 for the corresponding period of 2023. For the three months ended September 30, 2024, net sales by geographic regions, consisting of North America and Asia, were $13,322,448 (100.0% of net sales) and $464 (0.0% of net sales), respectively. For the three months ended September 30, 2023, net sales by geographic regions, consisting of North America and Asia, were $9,655,546 (100.0% of net sales) and $0 (0.0% of net sales), respectively.
Current wording
NET SALES- Net sales increased by $8,979,319, or 101.5%, to $17,827,098 for the three months ended December 31, 2024 from $8,847,779 for the corresponding period of 2023. For the three months ended December 31, 2024, net sales by geographic regions, consisting of North America and Asia, were $17,827,098 (100% of net sales) and $0 (0% of net sales), respectively. For the three months ended December 31, 2023, net sales by geographic regions, consisting of North America and Asia, were $8,753,451 (98.9% of net sales) and $94,328 (1.1% of net sales), respectively.
Previous wording
**GROSS PROFIT -**Gross profit increased by $558,342, or 36.9%, to $2,071,502 for the three months ended September 30, 2024 from $1,513,160 for the corresponding period of 2023. The gross profit in terms of net sales percentage was 15.5% for the three months ended September 30, 2024 compared to 15.7% for the corresponding period of 2023.
Current wording
**GROSS PROFIT -**Gross profit increased by $2,404,987, or 287.3%, to $3,242,062 for the three months ended December 31, 2024 from $837,075 for the corresponding period of 2023. The gross profit in terms of net sales percentage was 18.2% for the three months ended December 31, 2024, compared to 9.5% for the corresponding period of 2023. The increase in gross profit and gross profit in terms of net sales percentage for the three months ended December 31, 2024, was primarily due to the increase in net sales as described above and the fact that the increased sales were of higher margin products. .
Previous wording
OPERATING EXPENSES - Operating expenses increased by $346,608, or 16.5%, to $2,444,285 for the three months ended September 30, 2024 from $2,097,677 for the corresponding period of 2023.
Current wording
OPERATING EXPENSES- Operating expenses increased by $53,815, or 2.2%, to $2,446,831 for the three months ended December 31, 2024 from $2,393,016 for the corresponding period of 2023.
Previous wording
TOTAL OTHER INCOME, NET - Other income, net increased by $872,063, or 442.1%, to $1,069,319 for the three months ended September 30, 2024 from $197,256 for the corresponding period of 2023. The increase was primarily due to the favorable changes in foreign currency and the gain from the appreciation on the currency exchange rates in FTI of approximately $650,000 and the forgiven accrued commission from a customer of approximately $250,000.
Current wording
OTHER (EXPENSE) INCOME, NET- Other (expense) income, net decreased by $1,402,074, or 202.9%, to ($710,949) for the three months ended December 31, 2024 from $691,125 for the corresponding period of 2023. The decrease was primarily due to the increased loss of $1,355,984 from the unfavorable changes in foreign currency exchange rates in FTI.
Previous wording
Selling, general, and administrative expenses increased by $189,251, or 15.4%, to $1,419,973 for the three months ended September 30, 2024, from $1,230,722 for the corresponding period of 2023. The increase in selling, general, and administrative expenses was primarily due to the increased legal expenses and payroll expenses of approximately $74,000 and $70,000, respectively.
Current wording
Selling, general, and administrative expenses increased by $168,682, or 6.1%, to $2,939,566 for the six months ended December 31, 2024, from $2,770,884 for the corresponding period of 2023. The increase in selling, general, and administrative expenses was primarily due to the increased payroll expenses, legal fees, and compensation expenses related to stock options of approximately $150,000, $85,000, and $66,000, respectively, which was offset by the decreased rent expense of the operating leases by approximately $130,000.
Previous wording
Research and development expense increased by $157,357, or 18.2%, to $1,024,312 for the three months ended September 30, 2024, from $866,955 for the corresponding period of 2023. The increase in research and development expense was primarily due to the increased sample generations to test new products of approximately $150,000, which typically vary from period to period.
Current wording
Research and development expense increased by $231,741, or 13.5%, to $1,951,550 for the six months ended December 31, 2024, from $1,719,809 for the corresponding period of 2023. The increase in research and development expense was primarily due to the increased research and development costs and the related payroll expense of approximately $216,000 and $16,000, respectively, which is the mixed result of the timing of research and development activities and the number of active projects and typically vary from period to period.
Previous wording
Our principal source of liquidity as of September 30, 2024 consisted of cash and cash equivalents, as well as short-term investments, of $40,678,153. We believe we have sufficient available capital to cover our existing operations and obligations through at least one year from the date of the filing of this Form 10-Q. Our long-term future cash requirements will depend on numerous factors, including our revenue base, profit margins, product development activities, market acceptance of our products, future expansion plans and ability to control costs. If we are unable to achieve our current business plan or secure additional funding that may be required, we would need to curtail our operations or take other similar actions outside the ordinary course of business in order to continue to operate as a going concern.
Current wording
Our principal source of liquidity as of December 31, 2024 consisted of cash and cash equivalents, as well as short-term investments, of $42,160,072. We believe we have sufficient available capital to cover our existing operations and obligations through at least one year from the date of the filing of this Form 10-Q. Our long-term future cash requirements will depend on numerous factors, including our revenue base, profit margins, product development activities, market acceptance of our products, future expansion plans and ability to control costs. If we are unable to achieve our current business plan or secure additional funding that may be required, we would need to curtail our operations or take other similar actions outside the ordinary course of business in order to continue to operate as a going concern.
Previous wording
OPERATING ACTIVITIES - Net cash provided by operating activities for the three months ended September 30, 2024 was $2,670,900, and net cash used in operating activities for the three months ended September 30, 2023 was $5,223,316.
Current wording
OPERATING ACTIVITIES– Net cash provided by operating activities for the six months ended December 31, 2024 was $5,412,542, and net cash used in operating activities for the six months ended December 31, 2023 was $6,193,534.
Previous wording
The $2,670,900 in net cash provided by operating activities for the three months ended September 30, 2024 was primarily due to the increase in accounts payable of $3,550,907 as well as our operating results (net income adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by the increase of inventories of $1,127,477
Current wording
The $5,412,542 in net cash provided by operating activities for the six months ended December 31, 2024 was primarily due to the increase in accounts payable and accrued liabilities of $6,501,820 and $838,564 as well as our operating results (net income adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by the increase in inventories of $2,751,477.
Previous wording
The $5,223,316 in net cash used in operating activities for the three months ended September 30, 2023 was primarily due to the decrease in accounts payable of $5,800,795 and the increase of accounts receivable of $978,093 of as well as our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by the decrease in inventory of $1,479,279.
Current wording
The $6,193,534 in net cash used in operating activities for the six months ended December 31, 2023 was primarily due to the increase in accounts receivable of $4,495,638 and the decrease in accounts payable of $3,869,191 as well as our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by the decrease in inventories of $2,581,682.
Previous wording
INVESTING ACTIVITIES – Net cash used in investing activities for the three months ended September 30, 2024, and 2023 was $334,785 and $98,759, respectively.
Current wording
INVESTING ACTIVITIES– Net cash provided by investing activities for the six months ended December 31, 2024 was $2,631,817, and net cash used in investing activities for the six months ended December 31, 2023 was $869,481.
Previous wording
The $98,759 in net cash used in investing activities for the three months ended September 30, 2023 was primarily due to the increased short-term investments of $73,832 and the payments for capitalized product development of $22,500.
Current wording
The $869,481 in net cash used in investing activities for the six months ended December 31, 2023 was primarily due to the purchase of short-term investments of $779,571 and the payments for capitalized product development of $68,733.
Previous wording
FINANCING ACTIVITIES - Net cash used in financing activities for the three months ended September 30, 2024, and 2023 was $0 and $1,023, respectively. The $1,023 in net cash used in financial activities for the three months ended September 30, 2023 was from the increased loan interest to an employee.
Current wording
FINANCING ACTIVITIES - Net cash used in financing activities for the six months ended December 31, 2024, and 2023 was $0 and $2,046, respectively. The $2,046 in net cash used in financial activities for the six months ended December 31, 2023 was from the increased loan interest to an employee.
Previous wording
We lease approximately 11,400 square feet of office space in San Diego, California, at a monthly rent of $27,789, which commenced on January 1, 2024. This lease will expire on May 31, 2029. In addition to monthly rent, the lease includes payment for certain common area costs. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs.
Current wording
We leased approximately 12,775 square feet of office space in San Diego, California, at a monthly rent of $25,754, pursuant to a lease that expired in December 2023. On October 19, 2023, we signed a lease for office space consisting of approximately 11,400 square feet, located in San Diego, California, at a monthly rent of $27,789, which commenced on January 1, 2024. In addition to monthly rent, the lease includes payment for certain common area costs. The term of the lease for the office space is 65 months from the lease commencement date. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs.
Previous wording
We lease one corporate housing facility, located in Seoul, South Korea, primarily for our employees who travel, under a non-cancelable operating lease that expires on September 4, 2025.
Current wording
We lease one corporate housing facility, located in Seoul, South Korea, primarily for our employees who travel, under a non-cancelable operating lease that expires on September 4, 2025. We lease one corporate vehicle on December 1, 2024, in San Diego, California, for our employees, under a non-cancelable lease that expires on November 30, 2027.
Previous wording
Rent expenses for the three months ended September 30, 2024, and 2023 were $112,757 and $111,417, respectively.
Current wording
Rent expenses for the three months ended December 31, 2024 and 2023 were $112,352 and $254,402, respectively. Rent expenses for the six months ended December 31, 2024 and 2023 were $225,109 and $365,829, respectively.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
NET SALES- Net sales increased by $12,646,685, or 68.3%, to $31,150,010 for the six months ended December 31, 2024 from $18,503,325 for the corresponding period of 2023. For the six months ended December 31, 2024, net sales by geographic regions, consisting of North America and Asia, were $31,149,546 (100% of net sales) and $464 (0.0% of net sales), respectively. For the six months ended December 31, 2023, net sales by geographic regions, consisting of North America and Asia, were $18,408,997 (99.5% of net sales) and $94,328 (0.5% of net sales), respectively.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our primary markets are in North America and Asia.