Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	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: 001-14891

FRANKLIN WIRELESS CORP.

(Exact name of Registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

95-3733534

(I.R.S. Employer Identification Number)

9707 Waples Street

Suite 150

San Diego, California

(Address of principal executive offices)

92121

(Zip code)

(858) 623-0000

Registrant's telephone number, including area code

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $.001 per share	FKWL	The Nasdaq Stock Market LLC

The Registrant has 11,784,280 shares of common stock outstanding as of November 14, 2023.

FRANKLIN WIRELESS CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2023

INDEX

		Page
PART I – Financial Information

Item 1:	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of September 30, 2023 (unaudited) and June 30, 2023	4
	Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (unaudited) for the three months ended September 30, 2023 and 2022	5
	Consolidated Statements of Stockholders' Equity (unaudited) for the three months ended September 30, 2023 and 2022	6-7
	Consolidated Statements of Cash Flows (unaudited) for the three months ended September 30, 2023 and 2022	8
	Notes to Consolidated Financial Statements	9
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4:	Controls and Procedures	27

PART II – Other Information

Item 1:	Legal Proceedings	28
Item 1A:	Risk Factors	28
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3:	Defaults Upon Senior Securities	28
Item 4:	Mine Safety Disclosures	28
Item 5:	Other Information	28
Item 6:	Exhibits	28

Signatures		29

NOTE ON FORWARD LOOKING STATEMENTS

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

The terms “we,” “us,” “our,” “Franklin,” “Franklin Wireless,” or the “Company” refer to Franklin Wireless Corp.

This Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements are used under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and elsewhere in this Quarterly Report on Form 10-Q. You can identify these statements by the use of words like “may,” “will,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue,” and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons, including those discussed under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2023. These forward looking statements are made only as of the date of this Report on Form 10-Q. We do not undertake to update or revise the forward looking statements, whether as a result of new information, future events or otherwise.

PART I – FINANCIAL INFORMATION

ITEM 1. Consolidated Financial Statements

FRANKLIN WIRELESS CORP.

Consolidated Balance Sheets


	September 30, 2023
	(Unaudited)			June 30, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	6,844,719		$	12,241,286
Short-term investments		26,802,145			26,728,313
Accounts receivable		9,921,362			8,949,802
Other receivables		20,971			14,438
Inventories, net		2,262,358			3,741,637
Prepaid expenses and other current assets		58,811			36,687
Loan to an employee		92,080			91,057
Advance payments to vendors		88,970			53,875
Total current assets		46,091,416			51,857,095
Property and equipment, net		92,125			101,088
Intangible assets, net		1,958,466			2,180,884
Deferred tax assets, non-current		2,286,375			2,235,515
Goodwill		273,285			273,285
Right of use assets		76,730			152,665
Other assets		124,152			126,546
TOTAL ASSETS	$	50,902,549		$	56,927,078

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	7,149,702		$	12,950,497
Income tax payable		–			6,556
Contract liabilities		227,454			146,488
Accrued legal contingency expense		2,400,000			2,400,000
Accrued liabilities		989,697			849,605
Lease liabilities, current		79,949			159,104
Total current liabilities		10,846,802			16,512,250
Total liabilities		10,846,802			16,512,250

Commitments and contingencies (Note 6)		–			–
Stockholders’ equity:
Parent Company stockholders’ equity
Preferred stock, par value $0.001 per share, authorized 10,000,000 shares; none issued and outstanding as of September 30, and June 30, 2023		–			–
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,784,280 shares issued and outstanding as of September 30, and June 30, 2023, respectively		14,263			14,263
Additional paid-in capital		14,489,785			14,438,196
Retained earnings		28,843,529			29,101,225
Treasury stock, 2,549,208 shares as of September 30, and June 30, 2023		(3,554,893	)		(3,554,893	)
Accumulated other comprehensive loss		(1,145,399	)		(1,071,930	)
Total Parent Company stockholders’ equity		38,647,285			38,926,861
Noncontrolling interests		1,408,462			1,487,967
Total stockholders’ equity		40,055,747			40,414,828
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	50,902,549		$	56,927,078

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

Consolidated Statements of Comprehensive Loss

(Unaudited)


	Three Months Ended September 30,
	2023			2022
Net sales	$	9,655,546		$	8,108,940
Cost of goods sold		8,142,386			6,515,078
Gross profit		1,513,160			1,593,862
Operating expenses:
Selling, general and administrative		1,230,722			1,239,635
Research and development		866,955			970,120
Total operating expenses		2,097,677			2,209,755
Loss from operations		(584,517	)		(615,893	)
Other income (expense), net:
Interest income		254,015			60,062
Income from governmental subsidy		11,100			17,147
Loss from foreign currency transactions		(198,974	)		(948,887	)
Other income (expense), net		131,115			(42,382	)
Total other income (expense), net		197,256			(914,060	)
Loss before provision for income taxes		(387,261	)		(1,529,953	)
Income tax benefits		(50,060	)		(103,383	)
Net loss		(337,201	)		(1,426,570	)
Less: noncontrolling interests in net loss of subsidiary at 33.7%		(79,505	)		(299,579	)
Net loss attributable to Parent Company	$	(257,696	)	$	(1,126,991	)

Loss per share attributable to Parent Company stockholders
– Basic and diluted	$	(0.02	)	$	(0.10	)

Weighted average common shares outstanding
– Basic and diluted		11,784,280			11,684,280

Comprehensive loss:
Net loss	$	(337,201	)	$	(1,426,570	)
Translation adjustments		(73,469	)		(314,218	)
Comprehensive loss		(410,670	)		(1,740,788	)
Less: comprehensive loss attributable to noncontrolling interest		(79,505	)		(299,579	)
Comprehensive loss attributable to controlling interest	$	(331,165	)	$	(1,441,209	)

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended September 30, 2023
(Unaudited)


	Common Stock				Additional Paid-in		Retained			Treasury			Accumulated Other Comprehensive Income			Noncontrolling			Total Stockholders
	Shares		Amount		Capital		Earnings			Stock			(Loss)			Interest			Equity
Balance - June 30, 2023		11,784,280	$	14,263	$	14,438,196	$	29,101,225		$	(3,554,893	)	$	(1,071,930	)	$	1,487,967		$	40,414,828
Net loss attributable to Parent Company		–		–		–		(257,696	)		–			–			–			(257,696	)
Foreign exchange translation		–		–		–		–			–			(73,469	)		–			(73,469	)
Comprehensive loss attributable to noncontrolling interest		–		–		–		–			–			–			(79,505	)		(79,505	)
Stock based compensation		–		–		51,589		–			–			–			–			51,589
Balance – September 30, 2023 (unaudited)		11,784,280	$	14,263	$	14,489,785	$	28,843,529		$	(3,554,893	)	$	(1,145,399	)	$	1,408,462		$	40,055,747

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended September 30, 2022

(Unaudited)

	Common Stock				Additional Paid-in		Retained			Treasury			Accumulated Other Comprehensive Income			Noncontrolling			Total Stockholders
	Shares		Amount		Capital		Earnings			Stock			(Loss)			Interest			Equity
Balance - June 30, 2022		11,684,280	$	14,163	$	13,593,426	$	31,964,246		$	(3,554,893	)	$	(984,152	)	$	1,569,605		$	42,602,395
Net loss attributable to Parent Company		–		–		–		(1,126,991	)		–			–			–			(1,126,991	)
Foreign exchange translation		–		–		–		–			–			(314,218	)		–			(314,208	)
Comprehensive loss attributable to noncontrolling interest		–		–		–		–			–			–			(299,579	)		(299,579	)
Stock based compensation		–		–		180,745		–			–			–			–			180,745
Balance – September 30, 2022 (unaudited)		11,684,280	$	14,163	$	13,774,171	$	30,837,255		$	(3,554,893	)	$	(1,298,370	)	$	1,270,026		$	41,042,352

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

Consolidated Statements of Cash Flows
(Unaudited)


	Three Months Ended September 30,
	2023			2022
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$	(337,201	)	$	(1,426,570	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		11,390			15,819
Amortization of intangible assets		244,918			179,894
Stock based compensation		51,589			180,745
Amortization of right of use assets		75,935			72,836
Deferred tax benefit		(50,860	)		(104,183	)
Change in assets and liabilities:
Accounts receivable		(978,093	)		388,567
Inventories		1,479,279			(855,392	)
Prepaid expenses and other current assets		(22,124	)		8,707
Advance payments to vendors		(35,095	)		28,776
Other assets		2,394			9,909
Accounts payable		(5,800,795	)		537,395
Income tax payable		(6,556	)		(4,932	)
Advance payment from customers		21,434			–
Unearned revenue from customers		59,532			70,113
Lease liabilities		(79,155	)		(76,057	)
Accrued liabilities		140,092			(37,767	)
Net cash used in operating activities		(5,223,316	)		(1,012,140	)

CASH FLOW FROM INVESTING ACTIVITIES:
(Purchases) sales of short-term investments		(73,832	)		1,080,659
Purchases of property and equipment		(2,427	)		(26,674	)
Payments for capitalized product development costs		(22,500	)		(493,250	)
Purchases of intangible assets		–			(6,854	)
Net cash (used in) provided by investing activities		(98,759	)		553,881

CASH FLOW FROM FINANCING ACTIVITIES:
Loan to an employee		(1,023	)		–
Net cash used in financing activities		(1,023	)		–

Effect of foreign currency translation		(73,469	)		(314,218	)
Net decrease in cash and cash equivalents		(5,396,567	)		(772,477	)
Cash and cash equivalents, beginning of year		12,241,286			26,277,418
Cash and cash equivalents, end of year	$	6,844,719		$	25,504,941

Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Income taxes	$	(45,800	)	$	(800	)

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary, Franklin Technology Inc. (“FTI”), with a majority voting interest of 66.3% (approximately 33.7% is owned by noncontrolling interests) as of September 30, 2023 and 2022. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to noncontrolling interests.

As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the noncontrolling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of September 30, 2023, or June 30, 2023.

Noncontrolling Interest in a Consolidated Subsidiary

As of September 30, 2023, the noncontrolling interest was $1,408,462, which represents a $79,505 decrease from $1,487,967 as of June 30, 2023. The decrease in the noncontrolling interest of $79,505 was from loss in the subsidiary of $236,217 incurred for the three months ended September 30, 2023.

Segment Reporting

Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. We have one reportable segment, consisting of the sale of wireless access products.

Segment information by geographic areas
	Three Months Ended September 30,
Net sales:	2023		2022
North America	$	9,655,546	$	8,107,451
Asia		–		1,489
Totals	$	9,655,546	$	8,108,940


Long-lived assets, net (property and equipment and intangible assets):	September 30, 2023		June 30, 2023
North America	$	1,860,218	$	2,083,902
Asia		190,373		198,070
Totals	$	2,050,591	$	2,281,972

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Allowance for Doubtful Accounts

On July 1, 2023, we adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to Off-Balance Sheet (“OBS”) credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments and leases recognized by a lessor in accordance with Topic 842 on leases. Upon adoption of ASC 326 and based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, as of September 30, 2023, we did not record any reserve for unfunded commitments and doubtful accounts.

Cash Flows Reporting

We follow ASC 230, Statements of Cash Flows, for cash flows reporting, which classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category. We use the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and all items that are included in net (loss) income that do not affect operating cash receipts and payments.

Related Parties

We follow ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of our management and policies of the Company. (Refer to NOTE 8–RELATED PARTY TRANSACTIONS)

Foreign Currency Translations

We have a majority-owned subsidiary in a foreign country, South Korea. Fluctuations in foreign currency impact the amount of total assets, liabilities, earnings and cash flows that we report for our foreign subsidiary upon the translation of these amounts into U.S. Dollars for, and as of the end of, each reporting period. In particular, the strengthening of the U.S. Dollar generally will reduce the reported amount of our foreign-denominated cash, cash equivalents, total revenues and total expense that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period. However, a majority of our consolidated revenue is denominated in U.S. Dollars, and therefore, our revenue is not directly subject to foreign currency risk.

In accordance with ASC 830, when an operation has transactions denominated in a currency other than its functional currency, they are measured in the functional currency. Changes in the expected functional currency cash flows caused by changes in exchange rates are included in net income (loss) for the period.

Leases

In accordance with ASC 842, we determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, we determine whether it should be classified as an operating or finance lease. Operating leases are recorded in the balance sheet as right-of-use asset (“ROU asset”) and operating lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assts and liabilities.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

Revenue Recognition

In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (ASU 2016-10), which amends and adds clarity to certain aspects of the guidance set forth in the original revenue standard (ASU 2014-09) related to identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update No. 2016-11, Revenue Recognition (Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09. In May 2016 the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which provides narrow scope improvements and practical expedients related to ASU 2014-09. The Company adopted ASU 2014-09 on July 1, 2018 using the modified retrospective method.

Contracts with Customers

Revenue from sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hotspot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provisions for the quarters ended September 30, 2023 and 2022 were not material.

Disaggregation of Revenue

In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Contract Balances

We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. We, however, recognize a contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services.

The balances of our trade receivables are as follows:

Schedule of receivables
	September 30, 2023		June 30, 2023
Accounts Receivable	$	9,921,362	$	8,949,802

The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended September 30, 2023, and June 30, 2023.

Our contract liabilities are as follows:

Schedule of contract liabilities
	September 30, 2023		June 30, 2023
Undelivered products	$	227,455	$	146,488

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Our performance obligations are primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 99.9% of net sales for the three months ended September 30, 2023 and 2022. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 0.1% of net sales for the three months ended September 30, 2023 and 2022. The majority of our revenue recognized at a point in time is for the sale of hotspot router products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process.

As of September 30, 2023 and 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Cost of Goods Sold

All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of goods sold also includes amortization expenses of approximately $239,624 and $166,000 associated with capitalized product development costs associated with complete technology for the three months ended September 30, 2023 and 2022, respectively.

Capitalized Product Development Costs

Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and is accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding.

The costs of product development that are capitalized once technological feasibility is determined (noted as technology in progress in the Intangible Assets table in NOTE 4-INTANGIBLE ASSETS, NET) include related licenses, certification costs, payroll, employee benefits, and other headcount-related expenses associated with product development. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved. Once the products are available for general release to our customers, we cease capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers.

As of September 30, 2023, and June 30, 2023, capitalized product development costs in progress were $131,588 and $203,838, respectively, and are included in intangible assets in our consolidated balance sheets. During the three months ended September 30, 2023 and 2022, we incurred $22,500 and $493,250, respectively, in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income.

Research and Development Costs

Costs associated with research and development are expensed as incurred. Research and development costs were $866,955 and $970,120 for the three months ended September 30, 2023 and 2022, respectively.

Warranties

We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures.

Shipping and Handling Costs

Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the consolidated statements of comprehensive income (loss), were $51,073 and $40,553 for the three months ended September 30, 2023 and 2022, respectively.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value.

Short Term Investments

We have invested excess funds in short-term liquid assets, such as certificates of deposit and government bonds, etc.

Inventories

Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, 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 the control of the Company. We may write down our inventory value for potential obsolescence and excess inventory. As of September 30, 2023, and June 30, 2023, we have recorded inventory reserves in the amount of $585,274 for inventories for obsolete or slow-moving.

Property and Equipment

Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:


Machinery		6 years
Office equipment		5 years
Molds		3 years
Vehicles		5 years
Computers and software		5 years
Furniture and fixtures		7 years
Facilities improvements		5 years or life of the lease, whichever is shorter

Long-lived Assets

In accordance with ASC 360, “Property, Plant, and Equipment,” 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 are less than its carrying amount.

As of September 30, 2023, and June 30, 2023, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Stock-based Compensation

Our employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. Compensation costs are recognized over the period that an employee provides service in exchange for the award, i.e., the vesting period. We estimate the fair value of stock options using a Black-Scholes option pricing model. Transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles within the Company.

Income Taxes

We use the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes.

We assess its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, we record the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. We classify interest and penalties associated with such uncertain tax positions as a component of income tax expense.

As of September 30, 2023, we have no material unrecognized tax benefits. We recorded income tax benefits of $50,060 and $103,383 for the three months ended September 30, 2023, and 2022, respectively. We also recorded an increase in deferred tax asset, non-current, of $50,860 and $104,183 for the three months ended September 30, 2023, and 2022, respectively.

Earnings (loss) per Share Attributable to Common Stockholders

Earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income (loss) by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan.

Concentrations

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 provide for an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods presented.

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. For the three months ended September 30, 2023, sales to our two largest customers accounted for 91% of our consolidated net sales, and 98% of our accounts receivable balance as of September 30, 2023. In the same period of 2022, sales to our one largest customer accounted for 92% of our consolidated net sales, and 0% of our accounts receivable balance as of September 30, 2022. No other customers accounted for more than ten percent of total net sales for the three months ended September 30, 2023 and 2022.

For the three months ended September 30, 2023, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If these manufacturing companies 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 the Company's revenue. For the three months ended September 30, 2023, we purchased wireless data products from this manufacturer in the amount of $6,361,553, or 99.8% of total purchases, and had related accounts payable of $6,917,202 as of September 30, 2023. For the three months ended September 30, 2022, we purchased the majority of our wireless data products from two manufacturing companies located in Asia and purchased wireless data products from these manufacturers in the amount of $7,067,055, or 99% of total purchases, and had related accounts payable of $7,990,867 as of September 30, 2022.

We maintain our cash accounts with established commercial banks. Such cash deposits exceed the Federal Deposit Insurance Corporation insured limit of $250,000 for each financial institution. However, we do not anticipate any losses on excess deposits.

Recently Issued Accounting Pronouncements

In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50). The ASU requires disclosure of the key terms of outstanding supplier finance programs and a rollforward of the related obligations. The ASU does not affect the recognition, measurement or financial statement presentation of supplier finance program obligations. The ASU is effective for annual and interim periods beginning after December 15, 2022, except for the rollforward requirement, which is effective for annual periods beginning after December 15, 2023. There was no impact to the consolidated financial statements.

NOTE 2 - BUSINESS OVERVIEW

We are a leading provider of integrated wireless solutions utilizing the latest in 5G (fifth generation) and 4G LTE (fourth generation long-term evolution) technologies including mobile hotspots, routers, fixed wireless routers, and various trackers. Our integrated software subscription services provide users remote capabilities including mobile device management (MDM) and software defined wide area networking (SD-WAN).

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.

Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our global customer base primarily extends from North America and the Caribbean and South America to Asia.

NOTE 3 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Franklin Wireless Corp. have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q. In the opinion of management, the financial statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the financial position, the results of operations and comprehensive income (loss) and cash flows of the Company for the periods presented. These financial statements and notes hereto should be read in conjunction with the financial statements and notes thereto for the fiscal year ended June 30, 2023 included in our Form 10-K filed on September 28, 2023. The operating results or cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

NOTE 4 – INTANGIBLE ASSETS, NET

The definite lived intangible assets consisted of the following as of September 30, 2023:


Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		131,588		–		131,588
Software	5 years	1.4 years		423,762		351,063		72,699
Patents	10 years	6.8 years		59,975		22,568		37,407
Certifications & licenses	3 years	1.8 years		3,853,990		2,137,218		1,716,772
Total as of September 30, 2023			$	4,487,712	$	2,529,246	$	1,958,466

The definite lived intangible assets consisted of the following as of June 30, 2023:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		203,838		–		203,838
Software	5 years	1.6 years		423,762		347,228		76,534
Patents	10 years	7.0 years		59,975		21,108		38,867
Certifications & licenses	3 years	2.0 years		3,759,240		1,897,595		1,861,645
Total as of June 30, 2023			$	4,465,212		2,284,328		2,180,884

Amortization expense recognized during the three months ended September 30, 2023 and 2022 was $244,918 and $179,894, respectively.

The amortization expenses of the definite lived intangible assets for the future are as follows:

Schedule of future amortization expense
	FY2024		FY2025		FY2026		FY2027		FY2028		Thereafter
Total	$	739,840	$	752,789	$	295,501	$	18,296	$	12,200	$	8,252

NOTE 5 - ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

Schedule of accrued liabilities
	September 30, 2023		June 30, 2023
Accrued payroll deductions owed to government entities	$	53,500	$	52,923
Accrued salaries and bonuses		500,000		375,000
Accrued vacation		157,355		141,590
Accrued commission for service providers		31,250		32,500
Accrued commission to a customer		247,592		247,592
Total	$	989,697	$	849,605

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Leases

We adopted ASC 842 new lease accounting on July 1, 2019. We had an operating lease principally for both Franklin Wireless Corp. and Franklin Technologies Inc., in accordance with ASC 842.

We determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. Operating leases are recorded in the balance sheet as right-of-use asset (“ROU asset”) and operating lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assts and liabilities. Lease expense for operating lease is recognized on a straight-line basis over the lease term. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.

On September 9, 2015, we signed a lease for office space consisting of approximately 12,775 square feet, located in San Diego, California, at a monthly rent of $23,115, which commenced on October 28, 2015. In addition to monthly rent, the lease includes payment for certain common area costs. The term of the lease for the office space was four years from the lease commencement date and was then extended at a monthly rent of $25,754, by an additional fifty months, to December 31, 2023. 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. Rent expense for this office space was $77,263 for the three months ended September 30, 2023, and 2022.

Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases expired on August 31, 2023 and were extended by an additional twelve months to August 31, 2024. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. Rent expense related to these leases was approximately $32,100 for the three months ended September 30, 2023, and 2022.

We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2023 and was extended by an additional twelve months to September 4, 2024. Rent expense related to this lease were $2,054 and 1,930 for the three months ended September 30, 2023 and 2022, respectively.

Short-term leases with initial terms of twelve months or less are not capitalized, and our leases of the South Korean offices and corporate housing facility have been considered as short-term lease.

We used discount rates of 4.0% and 2.8% in determining our operating lease liabilities for the office spaces in San Diego, California, and South Korea, respectively. These rates represented our incremental borrowing rates at that time. Short-term leases with initial terms of twelve months or less are not capitalized. Both our San Diego and Korean office leases were extensions of previous leases and neither contains any further extension provisions. Rent expenses for the three months ended September 30, 2023, and 2022 were $111,417 and $111,293, respectively. In accordance with ASC 842, the components of the lease expense and supplemental cash flow information related to leases for the three months ended September 30, 2023, and 2022 are as follows:

Schedule of components of lease expense
	Three Months Ended September 30,
	2023		2022
Operating lease expense	$	77,263	$	77,263
Short term lease cost		34,154		34,030
Total lease expense	$	111,417	$	111,293

Remaining lease term-operating leases		0.3 year
Discount rate-operating lease			4%


	Operating Leases
Fiscal 2024	$	80,483
Total lease payments		80,483
Less imputed interest		(534	)
Total	$	79,949

Litigation

We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business.

Verizon Jetpack Recall

On April 8, 2021, Verizon issued a press release announcing that it was working with the U.S. Consumer Product Safety Commission (CPSC) to conduct a voluntary recall of certain Verizon Ellipsis Jetpack mobile hotspot devices, indicating that the lithium-ion battery in the devices can overheat, posing a fire and burn hazard. According to the CPSC release, the recall affects approximately 2.5 million devices. We imported the devices and supplied to Verizon.

Verizon first advised us of one alleged Jetpack device failure at the end of February 2021. We immediately began meeting with Verizon and requested access to the device. We also began internal testing to evaluate device performance. We did not receive any further incident information until the last week of March 2021. On April 1, 2021 we issued a press release announcing that we had received reports from Verizon about potential issues with the batteries in the devices. On April 9, 2021 we issued a press release announcing the voluntary recall by Verizon.

As of the date of this report, we have been unable to recreate any device failures of the type identified by Verizon. All internal testing conducted to date has confirmed that the Jetpack devices are performing within normal parameters. We are not currently aware of any aspect of the Jetpack design that could cause the devices to fail in the way described in Verizon’s recall notice.

Future Impact on Financial Performance

We are striving to avoid any litigation with Verizon arising from the recall and have not been served with any legal action by Verizon relating to the products covered by the recall. We are not currently able to estimate the financial impact of the recall on our future operations. At this time, we do not have information that identifies the cause of the alleged incidents. We also do not have any specific legal claims or theories of causation for device failure incidents that would help us estimate the cost of potential future litigation. No liability has been recorded for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time.

Shareholder Litigation

Ali

A shareholder action, Ali vs. Franklin Wireless Corp. et al. Case #3:21-cv-00687-AJB-MSB, was filed in the U.S. District Court, Southern District of California (San Diego) on April 16, 2021, alleging, among other things, that we had prior knowledge that the Verizon recall was likely and that we did not disclose that information to investors in a timely manner. The Class and Defendants have executed a Stipulation and Agreement of Settlement under which the Class releases all claims against Defendants in exchange for a payment by Defendants of $2.4 million (the “Settlement Amount”), which is reflected in liabilities under “accrued legal contingency expense” with a corresponding charge to “loss from a legal contingency”. The Class has submitted a motion for preliminary approval of the settlement, which the Court has not yet ruled on. If and when the Court grants preliminary approval of the Settlement, Defendants will be required to deposit the Settlement Amount into an escrow account established to administer the Settlement.

Harwood / Martin

A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Stephen Harwood, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv01837-AJB-MSB, on or about October 29, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Debra Martin, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv2091-AJB-MSB, on or about December 15, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

The Harwood and Martin actions have been consolidated into a single action in the U.S. District Court, Southern District of California (San Diego) titled “In re Franklin Wireless Corp. Derivative Litigation”, Case No.: 21cv1837-AJB (MSB). Discovery is ongoing at this time.

Pape

A legal action was filed in the Second Judicial District Court of Nevada in the County of Washoe against Franklin, as a nominal defendant, Barbara Pape, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case # CV22-00471, on or about March 21, 2022, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

The Company will vigorously defend such shareholder litigation and proceedings. No liability has been recorded for these litigations because the Company believes that any such liability is not probable and reasonably estimable at this time.

“Short-Swing” Profits Litigation

A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Nosirrah Management LLC v. Franklin Wireless et al., Case # 3:21-cv-01316-RSH-JLB, on or about July 22, 2021, claiming that our Chief Executive Officer, O.C. Kim, violated Section 16(b) of the Securities Exchange Act of 1934 for receiving “short-swing” profits from a sale and purchase of Franklin shares, in violation of that Act. On October 19, 2023, the jury) returned a verdict for $2,000,000 in favor of the Company against the Company’s Chief Executive Officer, O.C. Kim. Mr. Kim has filed a notice indicating he intends to appeal the verdict.

Loan Agreement with Subsidiary

On March 21, 2022, Franklin Wireless Corp. (the “Company”) entered into a Loan Agreement with Franklin Technologies, Inc. a Korean corporation (“FTI”), under which the Company agreed to loan US$10,000,000 to FTI. The Company owns a majority of the outstanding equity of FTI. FTI’s primary business is providing design and development services to the Company for our wireless products. As part of the loan transaction, FTI delivered a $10 million Promissory Note to the Company (the “Note”).

The purpose of the loan is to allow FTI to purchase a facility in South Korea to house its operations, and to provide it with additional working capital. The purchase of such a facility with the loan proceeds is subject to the Company’s reasonable approval. Upon acquisition of the facility, FTI is required to grant the Company a mortgage on it to secure payment of the Note.

The Note is for a term of five years, provides for annual payments of interest at 2% per annum, and is due and payable upon maturity. The Note and Loan Agreement include customary provisions for default and acceleration upon default, and a default interest rate of 7% per annum.

Employment Contracts

On October 1, 2020, we entered into Change of Control Agreements with OC Kim, our President, and Yun J. (David) Lee, our Chief Operating Officer. Each Change of Control Agreement provides for a lump sum payment to the officer in case of a change of control of the Company. The term includes the acquisition of Common Stock of the Company resulting in one person or company owning more than 50% of the outstanding shares, a significant change in the composition of the Board of Directors of the Company during any 12-month period, a reorganization, merger, consolidation or similar transaction resulting in the transfer of ownership of more than fifty percent (50%) of the Company's outstanding Common Stock, or a liquidation or dissolution of the Company or sale of substantially all of the Company's assets. These agreements were for an initial term of three years but have now been extended through October 2024.

The Change of Control Agreement with Mr. Kim calls for a payment of $5 million upon a change of control, and the agreement with Mr. Lee calls for a payment of $2 million upon a change of control.

On November 10, 2022, the Company and OC Kim, its President, entered into an amendment of the existing employment letter agreement dated September 7, 2021. The amendment provides for a severance payment of $3 million if Mr. Kim voluntarily terminates his employment by the Company or if he voluntarily terminates his employment due to a “change in circumstances,” generally defined as a material breach by the Company of its salary and benefit obligations or a significant reduction in Mr. Kim’s title or responsibilities. In the case of a termination of employment by the Company for cause (generally defined as conviction of a felony, or a misdemeanor where imprisonment is imposed, commission of any act of theft, fraud, dishonesty, or material falsification of any employment or Company records, or improper disclosure of the Company's confidential or proprietary information), the Company is to make a severance payment of $1,500,000. In either case, any unvested options become immediately vested.

In the amendment, Mr. Kim also agrees that, for a period of two years after termination, he will not disparage the Company or its officers, solicit any of its employees to terminate their employment, or disclose any of the Company’s proprietary information.

In addition, the amendment provides for the payment of an incentive bonus to Mr. Kim of $125,000 for each calendar quarter during the remaining four-year term of the employment letter, with the first such bonus due on December 31, 2022.

The Change in Control Agreement with Mr. Kim, dated October 1, 2020, has not been terminated and remains in effect at this time.

International Tariffs

We believe that our products are currently exempt from international tariffs upon import from our manufacturers to the United States. If this were to change at any point, a tariff of 10%-25% of the purchase price would be imposed. If such tariffs are imposed, they could have a materially adverse effect on sales and operating results.

Customer Indemnification

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

NOTE 7 - LONG-TERM INCENTIVE PLAN AWARDS

We apply the provisions of ASC 718, “Compensation - Stock Compensation,” to all of our stock-based compensation awards and use the Black-Scholes option pricing model to value stock options. The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted average assumptions: The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant for periods corresponding with the expected term of options award; the expected term represents awards granted are expected to be outstanding giving considerations vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the dividend yield is based upon the company’s dividend rate at the time fair value is measure and future expectations. Under this application, we record compensation expense for all awards granted.

In July of 2020, the Board of Directors adopted the 2020 Franklin Wireless Corp. Stock Option Plan (the “2020 Plan”), which covers 800,000 shares of Common Stock. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors, and independent contractors. These options will have such vesting or other provisions as may be established by the Board of Directors at the time of each grant.

The estimated forfeiture rate considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations about the future. We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. There were $51,589 and $180,745 compensation expenses recorded under this method for the three months ended September 30, 2023 and 2022, respectively.

A summary of the status of our stock options is presented below as of September 30, 2023:

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2023

647,001

4.24

2.88

130,200

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(16,000

)

4.77

–

Outstanding as of September 30, 2023

631,001

4.23

2.63

–

Exercisable as of September 30, 2023

478,642

4.49

2.44

–

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $3.20 as of September 30, 2023, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of September 30, 2023, in the amount of 631,001 shares was $3.34 per share. As of September 30, 2023, there was unrecognized compensation cost of $432,617 related to non-vested stock options granted.

A summary of the status of our stock options is presented below as of September 30, 2022:

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2022

766,001

3.85

3.37

183,270

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(10,000

)

5.40

–

Outstanding as of September 30, 2022

756,001

3.86

3.11

158,000

Exercisable as of September 30, 2022

399,089

3.90

2.36

158,000

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.92 as of September 30, 2022, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of September 30, 2022, in the amount of 756,001 shares was $3.17 per share. As of September 30, 2022, there was unrecognized compensation cost of $1,102,036 related to non-vested stock options granted.

NOTE 8 – RELATED PARTY TRANSACTIONS

For the three months ended September 30, 2023, and 2022, there have not been any transactions entered into or been a participant in which a related person had or will have a direct or indirect material interest.

NOTE 9 - SUBSEQUENT EVENTS

The FASB issued ASC 855, “Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company has evaluated all events or transactions that occurred after September 30, 2023, up through the date the financial statements were available to be issued. During these periods, the Company did not have any material recognizable subsequent events required to be disclosed to the financial statements as of November 14, 2023.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. This report contains certain forward-looking statements relating to future events or our future financial performance. These statements are subject to risks and uncertainties which could cause actual results to differ materially from those discussed in this report. You are cautioned not to place undue reliance on this information, which speaks only as of the date of 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” in the Company’s Form 10-K for the year ended June 30, 2023, filed on September 28, 2023. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

BUSINESS OVERVIEW

FACTORS THAT MAY INFLUENCE FUTURE RESULTS OF OPERATIONS

We believe that our revenue growth will be influenced largely by (1) the 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 (5) our ability to meet customers’ demands.

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 customers.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions.

We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2023, 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, 2023.

RESULTS OF OPERATIONS

The following table sets forth, for the three months ended September 30, 2023 and 2022, our statements of comprehensive income (loss) including data expressed as a percentage of sales:

	Three Months Ended
	September 30,
	2023			2022

Net sales		100.0%			100.0%
Cost of goods sold		84.3%			80.3%
Gross profit		15.7%			19.7%
Operating expenses		21.7%			27.3%
Loss from operations		(6.0%	)		(7.6%	)
Other (expense) income, net		2.0%			(11.3%	)
Net loss before income taxes		(4.0%	)		(18.9%	)
Income tax benefits		(0.5%	)		(1.3%	)
Net loss		(3.5%	)		(17.6%	)
Less: noncontrolling interest in net loss of subsidiary		(0.8%	)		(3.7%	)
Net loss attributable to Parent Company stockholders		(2.7%	)		(13.9%	)

THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2022

NET SALES - Net sales increased by $1,546,606, or 19.1%, to $9,655,546 for the three months ended September 30, 2023 from $8,108,940 for the corresponding period of 2022. 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. For the three months ended September 30, 2022, net sales by geographic regions, consisting of North America and Asia, were $8,107,451 (100.0% of net sales) and $1,489 (0.0% of net sales), respectively.

Net sales in North America increased by $1,548,095, or 19.1%, to $9,655,546 for the three months ended September 30, 2023 from $8,107,451 for the corresponding period of 2022. The increase in net sales in North America was primarily due to the demand for a new wireless product from one major carrier customer for this fiscal period, which was offset by the decreased demand from other customers. Net sales in Asia decreased by $1,489, or 100%, to $0 for the three months ended September 30, 2023 from $1,489 for the corresponding period of 2022. The decrease in net sales was primarily due to the decreased revenue generated from the material sales and product development service by FTI, which typically vary from period to period.

GROSS PROFIT - Gross profit decreased by $80,702, or 223.3%, to $1,513,160 for the three months ended September 30, 2023 from $1,593,862 for the corresponding period of 2022. The gross profit in terms of net sales percentage was 15.7% for the three months ended September 30, 2023 compared to 19.7% for the corresponding period of 2022. The decrease in gross profit was primarily due to the lower gross profit in terms of net sales percentage. The decrease in gross profit in terms of net sales percentage was primarily due to the increased amortization expenses associated with the completed capitalized product development costs that are included in the cost of goods sold as well as the decreased revenues generated from the device management services, which has a high margin.

OPERATING EXPENSES - Operating expenses decreased by $112,078, or 5.1%, to $2,097,677 for the three months ended September 30, 2023 from $2,209,755 for the corresponding period of 2022.

Selling, general, and administrative expenses decreased by $8,913 to $1,230,722 for the three months ended September 30, 2023, from $1,239,635 for the corresponding period of 2022. Research and development expense decreased by $103,165 to $866,955 for the three months ended September 30, 2023, from $970,120 for the corresponding period of 2022. The decrease in research and development expense was primarily due to the decreased other research and development costs, which typically vary from period to period, of approximately $62,000 as well as the decreased payroll expense for employees involved in research and development of approximately $41,000.

OTHER INCOME, NET - Other income, net increased by $1,111,316, or 121.6%, to $197,256 for the three months ended September 30, 2023 from $914,060 for the corresponding period of 2022. 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 $750,000 and the increased interest income earned and unrealized gain from the money market accounts and certificates of deposit of approximately $367,000.

LIQUIDITY AND CAPITAL RESOURCES

Our historical operating results, capital resources and financial position, in combination with current projections and estimates, were considered in management's plan and intentions to fund our operations over a reasonable period of time, which we define as the twelve-month period ending from the date of the filing of this Form 10-Q. For purposes of liquidity disclosures, we assess the likelihood that we have sufficient available working capital and other principal sources of liquidity to fund our operating activities and obligations as they become due.

Our principal source of liquidity as of September 30, 2023 consisted of cash and cash equivalents, as well as short-term investments, of $33,646,864. 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.

OPERATING ACTIVITIES - Net cash used in operating activities for the three months ended September 30, 2023 and 2022 was $5,223,316 and $1,012,140, respectively.

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.

The $1,012,140 in net cash used in operating activities for the three months ended September 30, 2022 was primarily due to the increase in inventory of $855,392 as well as our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by an increase in accounts payable of $537,395.

INVESTING ACTIVITIES – Net cash used in investing activities for the three months ended September 30, 2023 was $98,759, and net cash provided by investing activities for the three months ended September 30, 2022 was $553,881.

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.

The $553,881 in net cash provided by financial activities for the three months ended September 30, 2022 was from the decreased short-term investments of $1,080,659, which was partially offset by the payments for capitalized products development and property and equipment of $493,250 and $26,674, respectively.

FINANCING ACTIVITIES - Net cash used in financing activities for the three months ended September 30, 2023, and 2022 was $1,023 and $0, 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.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Leases

We lease approximately 12,775 square feet of office space in San Diego, California, at a monthly rent of $25,754, pursuant to a lease expiring in December 2023. 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. Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases will expire on August 31, 2024. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that will expire on September 4, 2024.

Rent expenses for the three months ended September 30, 2023, and 2022 were $111,417 and $111,293, respectively.

Recently Issued Accounting Pronouncements

Refer to NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company,” the Company is not required to respond to this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Acting Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our President and our Acting Chief Financial Officer have concluded that, as of September 30, 2023, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 and as a result of adopting Topic 842) for the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have provided information about legal proceedings in which we are involved in Note 8 of the notes to consolidated financial statements for the three months ended September 30, 2023, contained within this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, filed with the SEC on September 28, 2023 (the “Annual Report”), includes a detailed discussion of our risk factors under the heading “PART I, ITEM 1A – RISK FACTORS.” You should carefully consider the risk factors discussed in our Annual Report, as well as other information in this quarterly report. Any of these risks could cause our business, financial condition, results of operations and future growth prospects to suffer. We are not aware of any material changes from the risk factors previously disclosed.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

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

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with Section 13 of 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Franklin Wireless Corp.

	By:	/s/ OC Kim
		OC Kim President (Principal Executive Officer)

	By:	/s/ Bill Bauer
		Bill Bauer
Dated: November 14, 2023		Acting Chief Financial Officer (Principal Financial Officer)

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, OC Kim, President of Franklin Wireless Corp., certify that:

	1)	I have reviewed this quarterly report on Form 10-Q of Franklin Wireless Corp.;

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

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

	4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

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

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

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

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

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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

/s/ OC KIM

OC Kim

President

(Principal Executive Officer)

November 14, 2023

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bill Bauer, Acting Chief Financial Officer of Franklin Wireless Corp., certify that:

	1)	I have reviewed this quarterly report on Form 10-Q of Franklin Wireless Corp.;

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

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

	4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

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

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

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

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

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

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

/s/ Bill Bauer

Bill Bauer

Principal Financial Officer

November 14, 2023

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Franklin Wireless Corp. (the "Company") on Form 10-Q for the three months ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, OC Kim, President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

/s/ OC KIM

OC Kim

President

(Principal Executive Officer)

November 14, 2023

A signed copy of this written statement required by section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Franklin Wireless Corp. (the "Company") on Form 10-Q for the three months ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bill Bauer, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

/s/ Bill Bauer

Bill Bauer

Principal Financial Officer

November 14, 2023

Cover - shares	3 Months Ended
Cover - shares	Sep. 30, 2023	Nov. 14, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2023
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--06-30
Entity File Number	001-14891
Entity Registrant Name	FRANKLIN WIRELESS CORP.
Entity Central Index Key	0000722572
Entity Tax Identification Number	95-3733534
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	9707 Waples Street
Entity Address, Address Line Two	Suite 150
Entity Address, City or Town	San Diego
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92121
City Area Code	(858)
Local Phone Number	623-0000
Title of 12(b) Security	Common Stock, par value $.001 per share
Trading Symbol	FKWL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		11,784,280

Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2023	Jun. 30, 2023
Current assets:
Cash and cash equivalents	$ 6,844,719	$ 12,241,286
Short-term investments	26,802,145	26,728,313
Accounts receivable	9,921,362	8,949,802
Other receivables	20,971	14,438
Inventories, net	2,262,358	3,741,637
Prepaid expenses and other current assets	58,811	36,687
Loan to an employee	92,080	91,057
Advance payments to vendors	88,970	53,875
Total current assets	46,091,416	51,857,095
Property and equipment, net	92,125	101,088
Intangible assets, net	1,958,466	2,180,884
Deferred tax assets, non-current	2,286,375	2,235,515
Goodwill	273,285	273,285
Right of use assets	76,730	152,665
Other assets	124,152	126,546
TOTAL ASSETS	50,902,549	56,927,078
Current liabilities:
Accounts payable	7,149,702	12,950,497
Income tax payable		6,556
Contract liabilities	227,454	146,488
Accrued legal contingency expense	2,400,000	2,400,000
Accrued liabilities	989,697	849,605
Lease liabilities, current	79,949	159,104
Total current liabilities	10,846,802	16,512,250
Total liabilities	10,846,802	16,512,250
Commitments and contingencies (Note 6)
Parent Company stockholders’ equity
Preferred stock, par value $0.001 per share, authorized 10,000,000 shares; none issued and outstanding as of September 30, and June 30, 2023	0	0
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,784,280 shares issued and outstanding as of September 30, and June 30, 2023, respectively	14,263	14,263
Additional paid-in capital	14,489,785	14,438,196
Retained earnings	28,843,529	29,101,225
Treasury stock, 2,549,208 shares as of September 30, and June 30, 2023	(3,554,893)	(3,554,893)
Accumulated other comprehensive loss	(1,145,399)	(1,071,930)
Total Parent Company stockholders’ equity	38,647,285	38,926,861
Noncontrolling interests	1,408,462	1,487,967
Total stockholders’ equity	40,055,747	40,414,828
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 50,902,549	$ 56,927,078

Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2023	Jun. 30, 2022
Statement of Financial Position [Abstract]
Preferred stock par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares, issued	11,784,280	11,784,280
Common stock, shares, outstanding	11,784,280	11,784,280
Treasury stock shares	2,549,208	2,549,208

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Net sales	$ 9,655,546	$ 8,108,940
Cost of goods sold	8,142,386	6,515,078
Gross profit	1,513,160	1,593,862
Operating expenses:
Selling, general and administrative	1,230,722	1,239,635
Research and development	866,955	970,120
Total operating expenses	2,097,677	2,209,755
Loss from operations	(584,517)	(615,893)
Other income (expense), net:
Interest income	254,015	60,062
Income from governmental subsidy	11,100	17,147
Loss from foreign currency transactions	(198,974)	(948,887)
Other income (expense), net	131,115	(42,382)
Total other income (expense), net	197,256	(914,060)
Loss before provision for income taxes	(387,261)	(1,529,953)
Income tax benefits	(50,060)	(103,383)
Net loss	(337,201)	(1,426,570)
Less: noncontrolling interests in net loss of subsidiary at 33.7%	(79,505)	(299,579)
Net loss attributable to Parent Company	(257,696)	(1,126,991)
Comprehensive loss:
Net loss	(337,201)	(1,426,570)
Translation adjustments	(73,469)	(314,218)
Comprehensive loss	(410,670)	(1,740,788)
Less: comprehensive loss attributable to noncontrolling interest	(79,505)	(299,579)
Comprehensive loss attributable to controlling interest	$ (331,165)	$ (1,441,209)

Consolidated Statements of Comprehensive Loss (Unaudited) (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Income Statement [Abstract]
Earnings Per Share, Basic	$ (0.02)	$ (0.10)
Earnings Per Share, Diluted	$ (0.02)	$ (0.10)
Weighted Average Number of Shares Outstanding, Basic	11,784,280	11,684,280
Weighted Average Number of Shares Outstanding, Diluted	11,784,280	11,684,280

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Treasury Stock, Common [Member]	AOCI Attributable to Parent [Member]	Noncontrolling Interest [Member]	Total
Balance - June 30, 2022 at Jun. 30, 2022	$ 14,163	$ 13,593,426	$ 31,964,246	$ (3,554,893)	$ (984,152)	$ 1,569,605	$ 42,602,395
Beginning balace, shares at Jun. 30, 2022	11,684,280
Net loss attributable to Parent Company			(1,126,991)				(1,126,991)
Foreign exchange translation					(314,218)		(314,208)
Comprehensive loss attributable to noncontrolling interest						(299,579)	(299,579)
Stock based compensation		180,745					180,745
Balance – September 30, 2022 (unaudited) at Sep. 30, 2022	$ 14,163	13,774,171	30,837,255	(3,554,893)	(1,298,370)	1,270,026	41,042,352
Ending balace, shares at Sep. 30, 2022	11,684,280
Balance - June 30, 2022 at Jun. 30, 2023	$ 14,263	14,438,196	29,101,225	(3,554,893)	(1,071,930)	1,487,967	40,414,828
Beginning balace, shares at Jun. 30, 2023	11,784,280
Net loss attributable to Parent Company			(257,696)				(257,696)
Foreign exchange translation					(73,469)		(73,469)
Comprehensive loss attributable to noncontrolling interest						(79,505)	(79,505)
Stock based compensation		51,589					51,589
Balance – September 30, 2022 (unaudited) at Sep. 30, 2023	$ 14,263	$ 14,489,785	$ 28,843,529	$ (3,554,893)	$ (1,145,399)	$ 1,408,462	$ 40,055,747
Ending balace, shares at Sep. 30, 2023	11,784,280

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss	$ (337,201)	$ (1,426,570)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	11,390	15,819
Amortization of intangible assets	244,918	179,894
Stock based compensation	51,589	180,745
Amortization of right of use assets	75,935	72,836
Deferred tax benefit	(50,860)	(104,183)
Change in assets and liabilities:
Accounts receivable	(978,093)	388,567
Inventories	1,479,279	(855,392)
Prepaid expenses and other current assets	(22,124)	8,707
Advance payments to vendors	(35,095)	28,776
Other assets	2,394	9,909
Accounts payable	(5,800,795)	537,395
Income tax payable	(6,556)	(4,932)
Advance payment from customers	21,434	0
Unearned revenue from customers	59,532	70,113
Lease liabilities	(79,155)	(76,057)
Accrued liabilities	140,092	(37,767)
Net cash used in operating activities	(5,223,316)	(1,012,140)
CASH FLOW FROM INVESTING ACTIVITIES:
(Purchases) sales of short-term investments	(73,832)	1,080,659
Purchases of property and equipment	(2,427)	(26,674)
Payments for capitalized product development costs	(22,500)	(493,250)
Purchases of intangible assets	0	(6,854)
Net cash (used in) provided by investing activities	(98,759)	553,881
CASH FLOW FROM FINANCING ACTIVITIES:
Loan to an employee	(1,023)	0
Net cash used in financing activities	(1,023)	0
Effect of foreign currency translation	(73,469)	(314,218)
Net decrease in cash and cash equivalents	(5,396,567)	(772,477)
Cash and cash equivalents, beginning of year	12,241,286	26,277,418
Cash and cash equivalents, end of year	6,844,719	25,504,941
Cash paid during the periods for:
Income taxes	$ (45,800)	$ (800)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

Noncontrolling Interest in a Consolidated Subsidiary

Segment Reporting

Segment information by geographic areas
	Three Months Ended September 30,
Net sales:	2023		2022
North America	$	9,655,546	$	8,107,451
Asia		–		1,489
Totals	$	9,655,546	$	8,108,940


Long-lived assets, net (property and equipment and intangible assets):	September 30, 2023		June 30, 2023
North America	$	1,860,218	$	2,083,902
Asia		190,373		198,070
Totals	$	2,050,591	$	2,281,972

Fair Value of Financial Instruments

Use of Estimates

Allowance for Doubtful Accounts

Cash Flows Reporting

Related Parties

Foreign Currency Translations

Leases

Revenue Recognition

Contracts with Customers

Disaggregation of Revenue

Contract Balances

The balances of our trade receivables are as follows:

Schedule of receivables
	September 30, 2023		June 30, 2023
Accounts Receivable	$	9,921,362	$	8,949,802

The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended September 30, 2023, and June 30, 2023.

Our contract liabilities are as follows:

Schedule of contract liabilities
	September 30, 2023		June 30, 2023
Undelivered products	$	227,455	$	146,488

Performance Obligations

As of September 30, 2023 and 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Cost of Goods Sold

Capitalized Product Development Costs

Research and Development Costs

Warranties

Shipping and Handling Costs

Cash and Cash Equivalents

Short Term Investments

We have invested excess funds in short-term liquid assets, such as certificates of deposit and government bonds, etc.

Inventories

Property and Equipment


Machinery		6 years
Office equipment		5 years
Molds		3 years
Vehicles		5 years
Computers and software		5 years
Furniture and fixtures		7 years
Facilities improvements		5 years or life of the lease, whichever is shorter

Long-lived Assets

As of September 30, 2023, and June 30, 2023, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Stock-based Compensation

Income Taxes

Earnings (loss) per Share Attributable to Common Stockholders

Concentrations

Recently Issued Accounting Pronouncements

NOTE 2 - BUSINESS OVERVIEW

3 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

NOTE 2 - BUSINESS OVERVIEW

NOTE 2 - BUSINESS OVERVIEW

BASIS OF PRESENTATION

3 Months Ended

Sep. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

NOTE 3 – BASIS OF PRESENTATION

INTANGIBLE ASSETS, NET

3 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NET

NOTE 4 – INTANGIBLE ASSETS, NET

The definite lived intangible assets consisted of the following as of September 30, 2023:


Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		131,588		–		131,588
Software	5 years	1.4 years		423,762		351,063		72,699
Patents	10 years	6.8 years		59,975		22,568		37,407
Certifications & licenses	3 years	1.8 years		3,853,990		2,137,218		1,716,772
Total as of September 30, 2023			$	4,487,712	$	2,529,246	$	1,958,466

The definite lived intangible assets consisted of the following as of June 30, 2023:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		203,838		–		203,838
Software	5 years	1.6 years		423,762		347,228		76,534
Patents	10 years	7.0 years		59,975		21,108		38,867
Certifications & licenses	3 years	2.0 years		3,759,240		1,897,595		1,861,645
Total as of June 30, 2023			$	4,465,212		2,284,328		2,180,884

Amortization expense recognized during the three months ended September 30, 2023 and 2022 was $244,918 and $179,894, respectively.

The amortization expenses of the definite lived intangible assets for the future are as follows:

Schedule of future amortization expense
	FY2024		FY2025		FY2026		FY2027		FY2028		Thereafter
Total	$	739,840	$	752,789	$	295,501	$	18,296	$	12,200	$	8,252

ACCRUED LIABILITIES

3 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

ACCRUED LIABILITIES

NOTE 5 - ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

Schedule of accrued liabilities
	September 30, 2023		June 30, 2023
Accrued payroll deductions owed to government entities	$	53,500	$	52,923
Accrued salaries and bonuses		500,000		375,000
Accrued vacation		157,355		141,590
Accrued commission for service providers		31,250		32,500
Accrued commission to a customer		247,592		247,592
Total	$	989,697	$	849,605

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Leases

We adopted ASC 842 new lease accounting on July 1, 2019. We had an operating lease principally for both Franklin Wireless Corp. and Franklin Technologies Inc., in accordance with ASC 842.

Short-term leases with initial terms of twelve months or less are not capitalized, and our leases of the South Korean offices and corporate housing facility have been considered as short-term lease.

Schedule of components of lease expense
	Three Months Ended September 30,
	2023		2022
Operating lease expense	$	77,263	$	77,263
Short term lease cost		34,154		34,030
Total lease expense	$	111,417	$	111,293

Remaining lease term-operating leases		0.3 year
Discount rate-operating lease			4%


	Operating Leases
Fiscal 2024	$	80,483
Total lease payments		80,483
Less imputed interest		(534	)
Total	$	79,949

Litigation

We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business.

Verizon Jetpack Recall

Future Impact on Financial Performance

Shareholder Litigation

Ali

Harwood / Martin

Pape

“Short-Swing” Profits Litigation

Loan Agreement with Subsidiary

Employment Contracts

The Change of Control Agreement with Mr. Kim calls for a payment of $5 million upon a change of control, and the agreement with Mr. Lee calls for a payment of $2 million upon a change of control.

The Change in Control Agreement with Mr. Kim, dated October 1, 2020, has not been terminated and remains in effect at this time.

International Tariffs

Customer Indemnification

LONG-TERM INCENTIVE PLAN AWARDS

3 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

LONG-TERM INCENTIVE PLAN AWARDS

NOTE 7 - LONG-TERM INCENTIVE PLAN AWARDS

A summary of the status of our stock options is presented below as of September 30, 2023:

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2023

647,001

4.24

2.88

130,200

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(16,000

)

4.77

–

Outstanding as of September 30, 2023

631,001

4.23

2.63

–

Exercisable as of September 30, 2023

478,642

4.49

2.44

–

A summary of the status of our stock options is presented below as of September 30, 2022:

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2022

766,001

3.85

3.37

183,270

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(10,000

)

5.40

–

Outstanding as of September 30, 2022

756,001

3.86

3.11

158,000

Exercisable as of September 30, 2022

399,089

3.90

2.36

158,000

RELATED PARTY TRANSACTIONS

3 Months Ended

Sep. 30, 2023

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

SUBSEQUENT EVENTS

3 Months Ended

Sep. 30, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 9 - SUBSEQUENT EVENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

Noncontrolling Interest in a Consolidated Subsidiary

Noncontrolling Interest in a Consolidated Subsidiary

Segment Reporting

Segment Reporting

Segment information by geographic areas
	Three Months Ended September 30,
Net sales:	2023		2022
North America	$	9,655,546	$	8,107,451
Asia		–		1,489
Totals	$	9,655,546	$	8,108,940


Long-lived assets, net (property and equipment and intangible assets):	September 30, 2023		June 30, 2023
North America	$	1,860,218	$	2,083,902
Asia		190,373		198,070
Totals	$	2,050,591	$	2,281,972

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Use of Estimates

Use of Estimates

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

Cash Flows Reporting

Cash Flows Reporting

Related Parties

Related Parties

Foreign Currency Translations

Foreign Currency Translations

Leases

Leases

Revenue Recognition

Revenue Recognition

Contracts with Customers

Disaggregation of Revenue

Contract Balances

The balances of our trade receivables are as follows:

Schedule of receivables
	September 30, 2023		June 30, 2023
Accounts Receivable	$	9,921,362	$	8,949,802

The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended September 30, 2023, and June 30, 2023.

Our contract liabilities are as follows:

Schedule of contract liabilities
	September 30, 2023		June 30, 2023
Undelivered products	$	227,455	$	146,488

Performance Obligations

As of September 30, 2023 and 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Cost of Goods Sold

Cost of Goods Sold

Capitalized Product Development Costs

Capitalized Product Development Costs

Research and Development Costs

Research and Development Costs

Warranties

Warranties

Shipping and Handling Costs

Shipping and Handling Costs

Cash and Cash Equivalents

Cash and Cash Equivalents

Short Term Investments

Short Term Investments

We have invested excess funds in short-term liquid assets, such as certificates of deposit and government bonds, etc.

Inventories

Inventories

Property and Equipment

Property and Equipment


Machinery		6 years
Office equipment		5 years
Molds		3 years
Vehicles		5 years
Computers and software		5 years
Furniture and fixtures		7 years
Facilities improvements		5 years or life of the lease, whichever is shorter

Long-lived Assets

Long-lived Assets

As of September 30, 2023, and June 30, 2023, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Stock-based Compensation

Stock-based Compensation

Income Taxes

Income Taxes

Earnings (loss) per Share Attributable to Common Stockholders

Earnings (loss) per Share Attributable to Common Stockholders

Concentrations

Concentrations

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Sep. 30, 2023

Accounting Policies [Abstract]

Segment information by geographic areas

Segment information by geographic areas
	Three Months Ended September 30,
Net sales:	2023		2022
North America	$	9,655,546	$	8,107,451
Asia		–		1,489
Totals	$	9,655,546	$	8,108,940

Schedule of long lived assets by geographic area


Long-lived assets, net (property and equipment and intangible assets):	September 30, 2023		June 30, 2023
North America	$	1,860,218	$	2,083,902
Asia		190,373		198,070
Totals	$	2,050,591	$	2,281,972

Schedule of receivables

Schedule of receivables
	September 30, 2023		June 30, 2023
Accounts Receivable	$	9,921,362	$	8,949,802

Schedule of contract liabilities

Schedule of contract liabilities
	September 30, 2023		June 30, 2023
Undelivered products	$	227,455	$	146,488

Schedule of useful lives of property and equipment


Machinery		6 years
Office equipment		5 years
Molds		3 years
Vehicles		5 years
Computers and software		5 years
Furniture and fixtures		7 years
Facilities improvements		5 years or life of the lease, whichever is shorter

INTANGIBLE ASSETS, NET (Tables)

3 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of definite lived intangible assets


Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		131,588		–		131,588
Software	5 years	1.4 years		423,762		351,063		72,699
Patents	10 years	6.8 years		59,975		22,568		37,407
Certifications & licenses	3 years	1.8 years		3,853,990		2,137,218		1,716,772
Total as of September 30, 2023			$	4,487,712	$	2,529,246	$	1,958,466

The definite lived intangible assets consisted of the following as of June 30, 2023:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Less Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	–		18,397		18,397		–
Technology in progress	Not Applicable	–		203,838		–		203,838
Software	5 years	1.6 years		423,762		347,228		76,534
Patents	10 years	7.0 years		59,975		21,108		38,867
Certifications & licenses	3 years	2.0 years		3,759,240		1,897,595		1,861,645
Total as of June 30, 2023			$	4,465,212		2,284,328		2,180,884

Schedule of future amortization expense

Schedule of future amortization expense
	FY2024		FY2025		FY2026		FY2027		FY2028		Thereafter
Total	$	739,840	$	752,789	$	295,501	$	18,296	$	12,200	$	8,252

ACCRUED LIABILITIES (Tables)

3 Months Ended

Sep. 30, 2023

Payables and Accruals [Abstract]

Schedule of accrued liabilities

Schedule of accrued liabilities
	September 30, 2023		June 30, 2023
Accrued payroll deductions owed to government entities	$	53,500	$	52,923
Accrued salaries and bonuses		500,000		375,000
Accrued vacation		157,355		141,590
Accrued commission for service providers		31,250		32,500
Accrued commission to a customer		247,592		247,592
Total	$	989,697	$	849,605

COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Schedule of components of lease expense

Schedule of components of lease expense
	Three Months Ended September 30,
	2023		2022
Operating lease expense	$	77,263	$	77,263
Short term lease cost		34,154		34,030
Total lease expense	$	111,417	$	111,293

Remaining lease term-operating leases		0.3 year
Discount rate-operating lease			4%

Schedule of future minimum rental payments for operating leases


	Operating Leases
Fiscal 2024	$	80,483
Total lease payments		80,483
Less imputed interest		(534	)
Total	$	79,949

LONG-TERM INCENTIVE PLAN AWARDS (Tables)

3 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of stock option activity

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2023

647,001

4.24

2.88

130,200

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(16,000

)

4.77

–

Outstanding as of September 30, 2023

631,001

4.23

2.63

–

Exercisable as of September 30, 2023

478,642

4.49

2.44

–

A summary of the status of our stock options is presented below as of September 30, 2022:

Weighted-

Average

Weighted-

Remaining

Average

Contractual

Aggregate

Exercise

Life

Intrinsic

Options

Price

(In Years)

Value

Outstanding as of June 30, 2022

766,001

3.85

3.37

183,270

Granted

–

Exercised

–

Cancelled

–

Forfeited or expired

(10,000

)

5.40

–

Outstanding as of September 30, 2022

756,001

3.86

3.11

158,000

Exercisable as of September 30, 2022

399,089

3.90

2.36

158,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Net sales	$ 9,655,546	$ 8,108,940
North America [Member]
Net sales	9,655,546	8,107,451
Asia [Member]
Net sales	$ 0	$ 1,489

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments Long-Lived Assets) - USD ($)	Sep. 30, 2023	Jun. 30, 2022
Long-lived assets, net (property and equipment and intangible assets)	$ 2,050,591	$ 2,281,972
North America [Member]
Long-lived assets, net (property and equipment and intangible assets)	1,860,218	2,083,902
Asia [Member]
Long-lived assets, net (property and equipment and intangible assets)	$ 190,373	$ 198,070

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Receivables) - USD ($)	Sep. 30, 2023	Jun. 30, 2023	Jun. 30, 2022
Accounting Policies [Abstract]
Accounts Receivable	$ 9,921,362	$ 8,949,802	$ 8,949,802

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Contract liabilities) - USD ($)	Sep. 30, 2023	Jun. 30, 2022
Accounting Policies [Abstract]
Undelivered products	$ 227,455	$ 146,488

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Useful lives)	3 Months Ended
	Sep. 30, 2023
Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	6
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5
Tools, Dies and Molds [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	7
Facility Closing [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	5 years or life of the lease, whichever is shorter

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Product Information [Line Items]
Noncontrolling interest	$ 1,408,462		$ 1,487,967
Increase (decrease) in noncontrolling interest	79,505
Gain (Loss) on disposition of stock in subsidiary	236,217
Accounts Receivable, Allowance for Credit Loss	0
Product development costs	239,624	$ 166,000
Capitalized product development costs	131,588			$ 203,838
Product development costs incurred	22,500	493,250
Research and development expense	866,955	970,120
Shipping and handling expense	1,230,722	1,239,635
Inventory reserve	585,274
Income tax benefits	50,060	103,383
Increase (decrease) in deferred tax asset	50,860	104,183
Cost of revenue	8,142,386	6,515,078
Accounts payable, current	7,149,702		$ 12,950,497
Wireless Data Products [Member]
Product Information [Line Items]
Cost of revenue	6,361,553	7,067,055
Accounts payable, current	6,917,202	7,990,867
Shipping and Handling [Member]
Product Information [Line Items]
Shipping and handling expense	$ 51,073	$ 40,553
Revenue Benchmark [Member] \| Customer Concentration Risk [Member] \| Customer 1 [Member]
Product Information [Line Items]
Concentration of credit risk	91.00%	92.00%
Accounts Receivable [Member] \| Customer Concentration Risk [Member] \| Customer 1 [Member]
Product Information [Line Items]
Concentration of credit risk	98.00%	0.00%
Cost of Goods and Service, Product and Service Benchmark [Member] \| Supplier Concentration Risk [Member] \| Wireless Data Products [Member]
Product Information [Line Items]
Concentration of credit risk	99.80%	99.00%
Transferred at Point in Time [Member] \| Revenue Benchmark [Member] \| Product Concentration Risk [Member]
Product Information [Line Items]
Concentration of credit risk	99.90%	99.90%
Transferred at Point in Time [Member] \| Revenue Benchmark [Member] \| Engineering Projects [Member]
Product Information [Line Items]
Concentration of credit risk	0.10%	0.10%
Franklin Technology [Member]
Product Information [Line Items]
Noncontrolling interest percentage	66.30%
Noncontrolling Interests [Member]
Product Information [Line Items]
Noncontrolling interest percentage				33.70%

DEFINITE LIVED INTANGIBLE ASSETS (Details - Intangible assets activity) - USD ($)	Sep. 30, 2023	Jun. 30, 2023	Jun. 30, 2022
Indefinite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	$ 4,487,712		$ 4,465,212
Less Accumulated Amortization	2,529,246		2,284,328
Net Intangible Assets	$ 1,958,466	$ 2,180,884	$ 2,180,884
Complete Technology [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life	3 years		3 years
Gross Intangible Assets	$ 18,397		$ 18,397
Less Accumulated Amortization	18,397		18,397
Net Intangible Assets	0		0
Technology In Progess [Member]
Indefinite-Lived Intangible Assets [Line Items]
Gross Intangible Assets	131,588		203,838
Less Accumulated Amortization	0		0
Net Intangible Assets	$ 131,588		$ 203,838
Computer Software, Intangible Asset [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life	5 years		5 years
Gross Intangible Assets	$ 423,762		$ 423,762
Less Accumulated Amortization	351,063		347,228
Net Intangible Assets	$ 72,699		$ 76,534
Average Remaining Life	1 year 4 months 24 days		1 year 7 months 6 days
Patent [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life	10 years		10 years
Gross Intangible Assets	$ 59,975		$ 59,975
Less Accumulated Amortization	22,568		21,108
Net Intangible Assets	$ 37,407		$ 38,867
Average Remaining Life	6 years 9 months 18 days		7 years
Certification And Licenses [Member]
Indefinite-Lived Intangible Assets [Line Items]
Expected Life	3 years		3 years
Gross Intangible Assets	$ 3,853,990		$ 3,759,240
Less Accumulated Amortization	2,137,218		1,897,595
Net Intangible Assets	$ 1,716,772		$ 1,861,645
Average Remaining Life	1 year 9 months 18 days		2 years

DEFINITE LIVED INTANGIBLE ASSETS (Details - Amortization Expenses)	Sep. 30, 2023 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
FYE 2024	$ 739,840
FYE 2025	752,789
FYE 2026	295,501
FYE 2027	18,296
FYE 2028	12,200
Thereafter	$ 8,252

INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	3 Months Ended
INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	Sep. 30, 2023	Sep. 30, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization of Intangible Assets	$ 244,918	$ 179,894

ACCRUED LIABILITIES (Details) - USD ($)	Sep. 30, 2023	Jun. 30, 2023	Jun. 30, 2022
Payables and Accruals [Abstract]
Accrued payroll deductions owed to government entities	$ 53,500		$ 52,923
Accrued salaries and bonuses	500,000		375,000
Accrued vacation	157,355		141,590
Accrued commission for service providers	31,250		32,500
Accrued commission to a customer	247,592		247,592
Total	$ 989,697	$ 849,605	$ 849,605

COMMITMENTS AND CONTINGENCIES (Details - Lease expenses) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Operating lease expense	$ 77,263	$ 77,263
Short term lease cost	34,154	34,030
Total lease expense	$ 111,417	$ 111,293
Remaining lease term-operating leases	3 months 18 days
Discount rate-operating lease	4.00%

COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liabilities)	Sep. 30, 2023 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Fiscal 2024	$ 80,483
Total lease payments	80,483
Less imputed interest	(534)
Total	$ 79,949

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)		3 Months Ended
	Sep. 09, 2015	Sep. 30, 2023	Sep. 30, 2022	Mar. 21, 2022
Loss Contingencies [Line Items]
Monthly rent	$ 23,115
Rent expense		$ 111,417	$ 111,293
Loan				$ 10,000,000
Ali [Member]
Loss Contingencies [Line Items]
Settlement amount		$ 2,400,000
California [Member]
Loss Contingencies [Line Items]
Lessee, Operating Lease, Discount Rate		4.00%
South Korea [Member]
Loss Contingencies [Line Items]
Lessee, Operating Lease, Discount Rate		2.80%
Administrative Office San Diego C A [Member]
Loss Contingencies [Line Items]
Rent expense		$ 77,263	77,263
Administrative Office Korea [Member]
Loss Contingencies [Line Items]
Rent expense		32,100	32,100
Seoul Korea [Member]
Loss Contingencies [Line Items]
Rent expense		$ 2,054	$ 1,930

LONG-TERM INCENTIVE PLAN AWARDS (Details - Option Activity) - Equity Option [Member] - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2022	Jun. 30, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of Options Outstanding, Beginning	647,001	766,001
Weighted Average Exercise Price Outstanding, Beginning	$ 4.24	$ 3.85
Weighted Average Remaining Contractual Life (in years) Exercisable	2 years 7 months 17 days	3 years 1 month 9 days	2 years 10 months 17 days	3 years 4 months 13 days
Aggregate Intrinsic Value Outstanding, Beginning	$ 130,200	$ 183,270
Number of Options Granted	0	0
Weighted Average Exercise Price Granted	$ 0	$ 0
Number of Options Exercised	0	0
Weighted Average Exercise Price Exercised	$ 0	$ 0
Number of Options Cancelled	0	0
Weighted Average Exercise Price Canceled	$ 0	$ 0
Number of Options Forfeited or expired	(16,000)	(10,000)
Weighted Average Exercise Price Forfeited or expired	$ 4.77	$ 5.40
Number of Options Outstanding, Ending	631,001	756,001	766,001
Weighted Average Exercise Price Outstanding, Ending	$ 4.23	$ 3.86	$ 3.85
Aggregate Intrinsic Value Outstanding, Ending	$ 0	$ 158,000	$ 183,270
Number of Options Exercisable	478,642	399,089
Weighted Average Exercise Price Exercisable	$ 4.49	$ 3.90
Weighted Average Remaining Contractual Life (in years) Exercisable	2 years 5 months 8 days	2 years 4 months 9 days
Aggregate Intrinsic Value Exercisable	$ 0	$ 158,000

LONG-TERM INCENTIVE PLAN AWARDS (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Jul. 31, 2020
Share-Based Payment Arrangement [Abstract]
Common stock shares			800,000
Share based compensation expense	$ 51,589	$ 180,745
Weighted average grant-date fair value of stock options	631,001	756,001
Weighted average grant-date fair value of stock options, per share price	$ 3.34	$ 3.17
Unrecognized compensation cost related to non-vested options	$ 432,617	$ 1,102,036

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