FRANKLIN WIRELESS CORP
For the period ended Mar 31, 2026. Filed May 15, 2026.
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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.
Mar 31, 2026 · Filed May 15, 2026
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 2025-12-31; filed 2026-02-17.
0001683168-26-001067
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-15.
0001683168-26-003982
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 48 previous paragraphs and 47 current paragraphs.
23 unchanged; 13 reworded; 11 added; 12 removed; 0 previous and 0 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 (11)
Current report
During the quarter ended March 31, 2026, we experienced a significant reduction in expected future demand from one of our major customers related to a legacy hotspot product. This decrease in demand was caused by difficulties working with an intermediary company regarding late payments, as well as other matters. In response to this, we are accelerating our strategic focus toward commercial and industrial routers and telecommunications modules through our subsidiary. These product lines are in earlier stages of commercialization, and there can be no assurance regarding the timing or level of future revenues from these initiatives.
Current report
Recent regulatory developments involving restrictions on certain foreign-manufactured telecommunications and networking equipment may impact the approval, importation, or commercialization of certain future wireless products. The Company is continuing to evaluate the applicability of these developments to its product roadmap, including upcoming consumer and enterprise networking products. The Company believes its currently approved mobile hotspot products are not materially impacted by these developments.
Current report
Net sales in North America decreased by $4,564,423, or 57.0%, to $3,442,614 for the three months ended March 31, 2026 from $8,007,037 for the corresponding period of 2025. The decrease in net sales in North America was primarily due to the discontinuation of a key product by a major carrier customer, which was expected to contribute a significant portion of revenue following its recent launch, as well as the timing of large deliveries in prior periods that resulted in reduced current-period demand as customers worked through existing inventory. As a result of the product discontinuation, the Company does not expect material future sales of this product to this customer.
Current report
Selling, general, and administrative expenses decreased by $1,277,652, or 50.6%, to $1,248,568 for the three months ended March 31, 2026, from $2,526,220 for the corresponding period of 2025. The decrease in operating expenses was primarily driven by the absence of a non-recurring accrued incentive bonus of $1,250,000 to OC Kim, the President, which was recorded in the prior period. Research and development (“R&D”) expense increased by $22,118, or 2.8%, to $816,331 for the three months ended March 31, 2026, from $794,213 for the corresponding period of 2025. The increase in research and development expense was primarily driven by an increase of approximately $15,000 in R&D payroll expenses and $7,000 in R&D costs. These fluctuations stem from the timing of R&D activities and the number of active projects, which typically vary from period to period.
Current report
OTHER INCOME (LOSS), NET - Other income (loss), net decreased by $1,589,436, or 119.4%, to ($257,997) for the three months ended March 31, 2026 from $1,331,439 for the corresponding period of 2025. The decrease was primarily driven by the absence of a non-recurring $1,000,000 legal settlement from OC Kim, the President, which was recorded in the prior period, as well as an unfavorable foreign currency exchange impact at FTI of approximately $500,000.
Current report
NINE MONTHS ENDED MARCH 31, 2026 COMPARED TO NINE MONTHS ENDED MARCH 31, 2025
Current report
Net sales in North America decreased by $11,053,996, or 28.2%, to $28,102,587 for the nine months ended March 31, 2026 from $39,156,583 for the corresponding period of 2025. The decrease in net sales in North America was primarily due to the discontinuation of a key product by a major carrier customer, which was expected to contribute a significant portion of revenue following its recent launch, as well as the timing of large deliveries in prior periods that resulted in reduced current-period demand as customers worked through existing inventory. As a result of the product discontinuation, the Company does not expect material future sales of this product to this customer.
Current report
Research and development (“R&D”) expense decreased by $202,862, or 7.4%, to $2,542,901 for the nine months ended March 31, 2026, from $2,745,763 for the corresponding period of 2025. The decrease in research and development expense was primarily driven by a reduction of approximately $130,000 in R&D costs and $73,000 in R&D payroll expenses. These fluctuations stem from the timing of R&D activities and the number of active projects, which typically vary from period to period.
Current report
OTHER INCOME (LOSS), NET - Other income, net decreased by $1,490,788, or 88.2%, to $199,021 for the nine months ended March 31, 2026 from $1,689,809 for the corresponding period of 2025. The decrease was primarily driven by the absence of a non-recurring $1,000,000 legal settlement from OC Kim, the President, which was recorded in the prior period, as well as an unfavorable foreign currency exchange impact at FTI of approximately $430,000.
Current report
INVESTING ACTIVITIES - Net cash provided by investing activities for the nine months ended March 31, 2026 and 2025 was $652,888 and $1,030,351.
Current report
The $652,888 in net cash provided by investing activities for the nine months ended March 31, 2026 was primarily due to the sales of short-term investments of $1,141,759, which was partially offset by the payments for purchase of capitalized product development and intangible assets of $481,954. The $1,030,351 in net cash provided by investing activities for the nine months ended March 31, 2025 was primarily due to the contribution in noncontrolling interest by a partner of $2,000,000, which was offset by the purchase of short-term investments of $730,024 and payments for purchase of capitalized product development and intangible assets of $224,442.
Removed paragraphs (12)
Previous report
Net sales in North America decreased by $5,900,176, or 33.1%, to $11,926,922 for the three months ended December 31, 2025 from $17,827,098 for the corresponding period of 2024. The decrease in net sales in North America was primarily due to decreased demand from our major carrier customers, which typically varies from period to period. Net sales in Asia increased by $1,942, or 100%, to $1,942 for the three months ended December 31, 2025 from $0 for the corresponding period of 2024.
Previous report
Research and development (“R&D”) expense decreased by $150,420, or 16.2%, to $776,818 for the three months ended December 31, 2025, from $927,238 for the corresponding period of 2024. The decrease was mainly attributable to a $64,000 reduction in R&D operational costs and a decline of approximately $87,000 in associated payroll expenses. These variances primarily reflect the cyclical nature of the Company's R&D projects and the specific timing of project activities, which typically result in period-over-period fluctuations.
Previous report
OTHER (EXPENSE) INCOME, NET- Other (expense) income, net increased by $1,165,163, or 163.9%, to $454,214 for the three months ended December 31, 2025 from ($710,949) for the corresponding period of 2024. The primary drivers for the increase were an $815,634 decrease in FTI’s foreign exchange losses and a $397,164 gain from debt forgiveness related to accounts payable and accruals, which was partially offset by a $42,456 decrease in interest income.
Previous report
SIX MONTHS ENDED DECEMBER 31, 2025 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2024
Previous report
Net sales in North America decreased by $6,489,573, or 20.8%, to $24,659,973 for the six months ended December 31, 2025 from $31,149,546 for the corresponding period of 2024. The decrease in net sales was primarily due to decreased demand from our major carrier customers. Net sales in Asia increased by $13,387, or 2,885.1%, to $13,851 for the six months ended December 31, 2025 from $464 for the corresponding period of 2024. The increase in net sales was primarily due to the revenue generated from material sales by FTI, which typically vary from period to period.
Previous report
Selling, general, and administrative (“SG&A”) expenses decreased by $361,403, or 12.3%, to $2,578,163 for the six months ended December 31, 2025, from $2,939,566 for the corresponding period of 2024. This decrease was primarily driven by a reduction of approximately $310,000 in legal fees.
Previous report
Research and development (“R&D”) expense decreased by $224,980, or 11.5%, to $1,726,570 for the six months ended December 31, 2025, from $1,951,550 for the corresponding period of 2024. The decrease was mainly attributable to a $137,000 reduction in R&D operational costs and an approximately $88,000 decline in associated payroll expenses. These variances primarily reflect the cyclical nature of the Company's R&D projects and the specific timing of project activities, which typically result in period-over-period fluctuations.
Previous report
OTHER INCOME, NET– Other income, net increased by $98,648, or 27.5%, to $457,018 for the six months ended December 31, 2025 from $358,370 for the corresponding period of 2024. The primary drivers for the increase were a $165,222 gain from debt forgiveness related to accounts payable and accruals, which was partially offset by the decrease in interest income.
Previous report
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 report
INVESTING ACTIVITIES– Net cash provided by investing activities for the six months ended December 31, 2025 and 2024 was $704,977 and $2,631,817, respectively.
Previous report
The $704,977 in net cash provided by investing activities for the six months ended December 31, 2025 was primarily due to the sales of short-term investments of $1,028,685, which were offset by the payments for capitalized product development and property and equipment of $316,780 and $6,928, respectively.
Previous 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 $39,587 and $24,784, respectively.
Reworded paragraphs (13)
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, 2025, 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, 2025.
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, 2025, 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 nine months ended March 31, 2026.
Previous wording
The following table sets forth, for the three and six months ended December 31, 2025 and 2024, our statements of comprehensive income (unaudited) including data expressed as a percentage of sales:
Current wording
The following table sets forth, for the three and nine months ended March 31, 2026 and 2025, our statements of comprehensive (loss) income (unaudited) including data expressed as a percentage of sales:
Previous wording
NET SALES- Net sales decreased by $5,898,234, or 33.1%, to $11,928,864 for the three months ended December 31, 2025 from $17,827,098 for the corresponding period of 2024. For the three months ended December 31, 2025, net sales by geographic regions, consisting of North America and Asia, were $11,926,922 (100.0% of net sales) and $1,942 (0.0% of net sales), respectively. 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.
Current wording
NET SALES - Net sales decreased by $4,565,436, or 57.0%, to $3,444,183 for the three months ended March 31, 2026 from $8,009,619 for the corresponding period of 2025. For the three months ended March 31, 2026, net sales by geographic regions, consisting of North America and Asia, were $3,442,614 (100.0% of net sales) and $1,569 (0.0%), respectively. For the three months ended March 31, 2025, net sales by geographic regions, consisting of North America and Asia, were $8,007,037 (100.0% of net sales) and $2,582 (0.0%), respectively.
Previous wording
**GROSS PROFIT -**Gross profit decreased by $1,208,002, or 37.3%, to $2,034,060 for the three months ended December 31, 2025 from $3,242,062 for the corresponding period of 2024. The gross profit in terms of net sales percentage was 17.1% for the three months ended December 31, 2025, compared to 18.2% for the corresponding period of 2024. The decrease in gross profit and gross profit in terms of net sales percentage for the three months ended December 31, 2025, was primarily due to the decrease in net sales as well as a shift in sales mix toward lower-margin products during the period.
Current wording
**GROSS PROFIT -**Gross profit decreased by $800,436, or 59.1%, to $553,444 for the three months ended March 31, 2026 from $1,353,880 for the corresponding period of 2025. The gross profit in terms of net sales percentage was 16.1% for the three months ended March 31, 2026 compared to 16.9% for the corresponding period of 2025. The decrease in gross profit and gross profit in terms of net sales percentage for the three months ended March 31, 2026, was primarily due to the decrease in net sales, which was driven in part by the discontinuation of a key product by a major customer, as well as a shift in sales mix toward lower-margin products during the period.
Previous wording
OPERATING EXPENSES- Operating expenses decreased by $461,488, or 18.9%, to $1,985,343 for the three months ended December 31, 2025 from $2,446,831 for the corresponding period of 2024.
Current wording
OPERATING EXPENSES - Operating expenses decreased by $1,255,534, or 37.8%, to $2,064,899 for the three months ended March 31, 2026 from $3,320,433 for the corresponding period of 2025.
Previous wording
NET SALES- Net sales decreased by $6,476,186, or 20.8%, to $24,673,824 for the six months ended December 31, 2025 from $31,150,010 for the corresponding period of 2024. For the six months ended December 31, 2025, net sales by geographic regions, consisting of North America and Asia, were $24,659,973 (99.9% of net sales) and $13,851 (0.1% of net sales), respectively. 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.
Current wording
NET SALES - Net sales decreased by $11,041,622, or 28.2%, to $28,118,007 for the nine months ended March 31, 2026 from $39,159,629 for the corresponding period of 2025. For the nine months ended March 31, 2026, net sales by geographic regions, consisting of North America and Asia, were 28,102,587 (99.9% of net sales) and $15,420 (0.1% of net sales), respectively. For the nine months ended March 31, 2025, net sales by geographic regions, consisting of North America and Asia, were $39,156,583 (100.0% of net sales) and $3,046 (0.0% of net sales), respectively.
Previous wording
**GROSS PROFIT –**Gross profit decreased by $369,734, or 7.0%, to $4,943,830 for the six months ended December 31, 2025 from $5,313,564 for the corresponding period of 2024. The gross profit in terms of net sales percentage was 20.0% for the six months ended December 31, 2025 compared to 17.1% for the corresponding period of 2024. The decrease in gross profit for the six months ended December 31, 2025, was primarily due to the change in net sales as described above. The increase in gross profit margin in terms of net sales was primarily driven by an increased proportion of high-margin sales and decreased production costs while overall sales decreased for the six months ended December 31, 2025 compared to the corresponding period of 2024.
Current wording
**GROSS PROFIT -**Gross profit decreased by $1,170,170, or 17.6%, to $5,497,274 for the nine months ended March 31, 2026 from $6,667,444 for the corresponding period of 2025. The gross profit in terms of net sales percentage was 19.6% for the nine months ended March 31, 2026 compared to 17.0% for the corresponding period of 2025. The decline in gross profit for the nine months ended March 31, 2026, was primarily attributable to the decrease in net sales, which was driven in part by the discontinuation of a key product by a major customer. The increase in gross profit margin in terms of net sales percentage was primarily driven by an increased proportion of high-margin sales and decreased production costs while overall sales decreased for the nine months ended March 31, 2026 compared to the corresponding period of 2025.
Previous wording
OPERATING EXPENSES– Operating expenses decreased by $586,383, or 12.0%, to $4,304,733 for the six months ended December 31, 2025 from $4,891,116 for the corresponding period of 2024.
Current wording
OPERATING EXPENSES - Operating expenses decreased by $1,841,917, or 22.4%, to $6,369,632 for the nine months ended March 31, 2026 from $8,211,549 for the corresponding period of 2025.
Previous wording
Selling, general, and administrative (“SG&A”) expenses decreased by $311,068, or 20.5%, to $1,208,525 for the three months ended December 31, 2025, from $1,519,593 for the corresponding period of 2024. This decrease was primarily driven by a reduction of approximately $200,000 in legal fees and an $80,000 decline in stock-based compensation expenses related to stock options.
Current wording
Selling, general, and administrative expenses decreased by $1,639,055, or 30.0%, to $3,826,731 for the nine months ended March 31, 2026, from $5,465,786 for the corresponding period of 2025. The decrease in operating expenses was primarily driven by the absence of a non-recurring accrued incentive bonus of $1,250,000 to OC Kim, the President, which was recorded in the prior period as well as a reduction of approximately $300,000 in legal fees and a $170,000 decline in stock-based compensation expenses related to stock options.
Previous wording
Our principal source of liquidity as of December 31, 2025 consisted of cash and cash equivalents, as well as short-term investments, of $33,623,292. 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 March 31, 2026 consisted of cash and cash equivalents, as well as short-term investments, of $32,937,546. 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 used in operating activities for the six months ended December 31, 2025 was $5,574,688, and net cash provided by operating activities for the six months ended December 31, 2024 was $5,412,542.
Current wording
OPERATING ACTIVITIES - Net cash used in operating activities for the nine months ended March 31, 2026 and 2025 was $5,563,433 and $490,230, respectively.
Previous wording
The $5,574,688 in net cash used in operating activities for the six months ended December 31, 2025 was primarily due to the increase in accounts receivable of $9,084,042, which was partially offset by the increase in accounts payable of $2,522,942 as well as our operating results (net income adjusted for depreciation, amortization, and other non-cash charges. Notably, for the six months ended December 31, 2025, we recorded a total write-off of $412,814 from forgiven accounts payable and accrued liabilities.)
Current wording
The $5,563,433 in net cash used in operating activities for the nine months ended March 31, 2026 was primarily due to the increases in inventories of $5,627,077. The $490,230 in net cash used in operating activities for the nine months ended March 31, 2025 was primarily due to the increases in accounts receivable of $1,957,056 as well as the decrease in accounts payable of $1,025,639, which was offset by the increase in accrued liabilities of $2,376,154.
Previous wording
FINANCING ACTIVITIES - Net cash used in financing activities for the six months ended December 31, 2025, and 2024 was $471,371 and $0, respectively. The $471,371 in net cash used in financial activities for the six months ended December 31, 2025 was attributable to the payment of cash dividends.
Current wording
FINANCING ACTIVITIES - Net cash used in financing activities for the nine months ended March 31, 2026 and 2025 was $471,371 and $0, respectively. The $471,371 in net cash used in financial activities for the nine months ended March 31, 2026 was attributable to the payment of cash dividends