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Item 9A. Controls and Procedures

2020-09-17 compared with 2019-09-30 · 409 added, 371 removed, 899 unchanged (46% of the section changed)

CONTROLS AND PROCEDURES

E VALUATION OF DISCLOSURE 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

evaluated, under the supervision and with the participation of OC Kim, 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)

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Based upon that evaluation, our President and Acting Chief Financial Officer

have concluded that, as of June 30, 2019, our disclosure controls and procedures were effective in ensuring that information required

has concluded that, as of June 30, 2020, 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,

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OTHER INFORMATION

On September 9, 2020, we entered into Subscription

Agreements with two accredited investors (the “Investors”), pursuant to which we sold and issued to the Investors

an aggregate of 923,078 shares of Common Stock at a purchase price of $6.50 per share.

The $6,000,007 aggregate purchase price

for these Units was paid in cash to the Company.

DIRECTORS, EXECUTIVE

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Johnathan Chee

Benjamin Chung

Chief Operating Officer

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of the Company’s business, products, strategic relationships and future opportunities is of great value to the Company.

Gary Nelson has

been a director since September 2003.

Nelson has been a director since September 2003.

Nelson was an early investor in Franklin Telecommunications Corp.

in the 1980’s

and served as a director from 2001 up until the Company’s merger with Accetio Inc.

in September 2003, at which time the Company

was renamed Franklin Wireless Corp.

in the 1980’s and served as a director from 2001 up until the Company’s merger with Accetio Inc.

2003, at which time the Company was renamed Franklin Wireless Corp.

Following the merger, Mr.

Nelson became a director and ultimately Chairman of the Board of

Franklin Wireless Corp.

He was co-founder and President of Churchill Mortgage Corporation, an income property mortgage banking

firm based in Los Angeles, California, which was a loan correspondent for major life insurance companies and other financial institutions.

Nelson became a director and

ultimately Chairman of the Board of Franklin Wireless Corp.

He was co-founder and President of Churchill Mortgage

Corporation, an income property mortgage banking firm based in Los Angeles, California, which was a loan correspondent for

major life insurance companies and other financial institutions.

In addition, Mr.

Nelson was the Chief Operating Officer of Churchill Mortgage Capital, which was the loan origination arm of Churchill

Mortgage Corporation.

Nelson’s prior experience includes various marketing positions with Control Data Corporation and

design engineering positions with North American Aviation where he worked on the Apollo Project.

Nelson was the Chief Operating Officer of

Churchill Mortgage Capital, which was the loan origination arm of Churchill Mortgage Corporation.

Nelson’s prior

experience includes various marketing positions with Control Data Corporation and design engineering positions with North

American Aviation where he worked on the Apollo Project.

He holds a B.S.

Mechanical Engineering from Kansas State University and an MBA from the University of Southern California.

in Mechanical Engineering from Kansas State

University and an MBA from the University of Southern California.

We believe that Mr.

Nelson’s

qualifications to serve as a director of the Company include his many years of business, operational and management experience

including his previous position as President of Churchill Mortgage Corporation.

Nelson’s qualifications to

serve as a director of the Company include his many years of business, operational and management experience including his

previous position as President of Churchill Mortgage Corporation.

In addition, Mr.

Nelson has served as

a director of the Company for 14 years, and brings a valuable historical perspective on the development of the Company’s

business and its leadership.

Nelson has served as a director

of the Company for 14 years, and brings a valuable historical perspective on the development of the Company’s business

and its leadership.

Joon Won Jyoung has

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From 1992 to 1996, he served as President of Sneakers Classic Ltd.,

and from 1987 to 1991, he was Chairman of Empire State Bank in New York.

From 1972 to 1982, he was Chairman of Downtown

Mart, a distribution company in New York and Virginia.

and from 1987 to 1991, he was Chairman of Empire State Bank in New York from 1972 to 1982, he was Chairman of Downtown Mart,

a distribution company in New York and Virginia.

He holds a B.S.

in Mathematics from Seoul National University and an M.S.

in Statistics from the University of Connecticut.

in Statistics

from the University of Connecticut.

We believe Mr.

Jyoung’s qualifications to serve as a director of the Company

include his extensive management experience in a diverse range of industries as well as his broad experience in international business

Jyoung’s qualifications to serve as a director of the Company include

his extensive management experience in a diverse range of industries as well as his broad experience in international business

Johnathan Chee has

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of legal matters that may affect the Company.

Benjamin Chung has been

a director since November 2011.

He is a Certified Public Accountant and an experienced finance and accounting executive whose client

base includes several telecommunications companies.

He is currently a Partner in the accounting firm of Benjamin & Young, LLP.

Between September 2010 and July 2011 he served as International Controller for American Apparel, Inc., a publicly traded company.

He served as an Audit Senior Manager in the accounting firm of BDO USA, LLP from October 2007 to August 2010 and completed an 18

month international rotation at BDO Daejoo Korea where he was promoted to an Audit Partner.

Prior to BDO, he was the Director of

Internal Audit for Big 5 Sporting Goods Corporation, a publicly traded company, from January 2006 to October 2007.

in Business Administration from California State Polytechnic University, Pomona.

We believe Mr.

Chung’s qualifications

to serve as a director of the Company include his experience as a certified public accountant and as controller for public

companies, which will allow him to provide the Company’s Board of Directors with valuable knowledge of financial and

accounting matters that may affect the Company.

Heidy Chow is a Certified

Public Accountant and an experienced finance and accounting executive whose client base includes several IT companies.

is an Assurance Partner of The Pun Group, LLP and has over fifteen (15) years of combined experience in auditing, consulting and

Chow’s career in public accounting was spent primarily with the National firms of RSM US and Ernst & Young,

and regional firms where she has specialized in corporate accounting and auditing services.

She supervises engagement teams in

areas of designing and planning audits in accordance with the AICPA Generally Accepted Auditing Standards and Public Company Accounting

Oversight Board (PCAOB) standards.

In addition, she often serves as Contract Chief Financial Officer for privately held small and

middle market companies.

She holds a B.S.

in Accounting from California State Polytechnic University, Pomona.

(David) Lee has

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Securities Exchange Act of 1934 requires officers and directors, and persons who own more than ten percent of our equity securities,

to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "Commission").

Officers, directors and greater than regulations to furnish us with copies of all forms they file pursuant to Section 16(a).

solely on our review of the copies of such forms it received and written representations from reporting persons required to file

reports under Section 16(a), to our knowledge all of the Section 16(a) filing requirements applicable to such persons with respect

to fiscal 2019 were complied with.

to file reports of ownership and changes in ownership with the Securities and Exchange Commission.

Officers, directors and greater

than regulations to furnish us with copies of all forms they file pursuant to Section 16(a).

Based solely on our review of the

copies of such forms it received and written representations from reporting persons required to file reports under Section 16(a),

to our knowledge all of the Section 16(a) filing requirements applicable to such persons with respect to fiscal 2019 were complied

CODE OF ETHICS

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CORPORATE GOVERNANCE

During fiscal 2019,

the Board of Directors held six meetings.

Each director attended 100% of the meetings of the Board, except for Joon Won Jyoung,

who attended none of the meetings.

The Board of Directors has an Audit Committee made up of Messrs.

Chung (committee chair) and

Nelson and a Compensation Committee made up of Messrs.

During fiscal 2020 the

Board of Directors held six meetings.

Each director attended 100% of the meetings of the Board, except for Joon Won Jyoung, who

attended none of the meetings.

The Board of Directors has an Audit Committee made up of Heidy Chow (committee chair) and Gary Nelson

and a Compensation Committee made up of Messrs.

Nelson (committee chair) and Chee.

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All Other Compensation

OC Kim, President

(David) Lee, Chief Operating Officer

Richard Walker, Chief Financial Officer (1)

(1) On April 6, 2018 Richard Walker resigned as Chief Financial

Officer of the Company.

Walker's resignation was not the result of any disagreement with respect to the Company's operations,

policies or practices.

OC Kim, President and

Acting Financial Officer

Chief Operating Officer

Outstanding Equity Awards at Fiscal Year-End

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No options were granted to the Named Executive Officers during the 2020 fiscal year.

The options previously granted to our Named Executive Officers vest over periods ranging from one to three years and are subject

to early termination on the occurrence of certain events related to termination of employment.

In addition, the full

vesting of options is accelerated if there is a change in control of the Company.

previously granted to our Named Executive Officers vest over periods ranging from one to three years and are subject to early termination

on the occurrence of certain events related to termination of employment.

In addition, the full vesting of options is accelerated

if there is a change in control of the Company.

Options Awards

of Shares that

________________________

The option vests and is exercisable in

full on the first anniversary of the date of the grant and has a ten-year term.

The option vests and is exercisable over

two years as follows:

50% of the shares underlying the option vest on the first anniversary

of the date of the grant.

25% of the shares underlying the option vest eighteen months following

the date of the grant.

25% of the shares underlying the option vest on the second anniversary

of the date of the grant.

The option vests and is exercisable in full on the first anniversary of the date of the grant and has a ten-year term.

The option vests and is exercisable over two years as follows:

50% of the shares underlying the option vest on the first anniversary of the date of the grant.

25% of the shares underlying the option vest eighteen months following the date of the grant.

25% of the shares underlying the option vest on the second anniversary of the date of the grant.

The option originally had a five-year term

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Benjamin Chung

_________________________

Directors are compensated a maximum of $10,000 annually, which is prorated based upon board meeting attendance.

This compensation plan became effective January 1, 2015.

Heidy Chow (2)

Directors are compensated a base rate of $10,000 annually, which is prorated based upon board meeting attendance.

Bonuses may be awarded when the business has performed exceptionally well as determined by the Board of Directors.

This year the Board of Directors approved bonuses of $2,500 each to Gary Nelson, Jonathan Chee, and Heidy Chow.

On December 30, 2019, the Board of Directors appointed Ms.

Heidy Chow to the Board of Directors to replace Mr.

Benjamin Chung.

Chow was also appointed to the Audit Committee of the Board of Directors

There were no outstanding

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COMPENSATION DISCUSSION AND ANALYSIS

PHILOSOPHY - We compensate our executive officers through a mix of base salary, incentive compensation and stock options.

Our compensation policies are designed to be competitive with comparable employers and to align management’s incentives

with both near-term and long-term interests of our stockholders.

We use informal methods of benchmarking our executive

compensation, based on the experience of our directors or, in some cases, studies of industry standards.

Our compensation is

negotiated on a case by case basis, with attention being given to the amount of compensation necessary to make a competitive

offer and the relative compensation among our executive officers.

GENERAL PHILOSOPHY -

We compensate our executive officers through a mix of base salary, incentive compensation and stock options.

Our compensation policies

are designed to be competitive with comparable employers and to align management’s incentives with both near-term and long-term

interests of our stockholders.

We use informal methods of benchmarking our executive compensation, based on the experience of our

directors or, in some cases, studies of industry standards.

Our compensation is negotiated on a case by case basis, with attention

being given to the amount of compensation necessary to make a competitive offer and the relative compensation among our executive

BASE SALARIES

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statements for the subject year.

The fees set forth on the foregoing table relate to the audit as of and for the

years ended June 30, 2019 and 2018, which was performed by Haskell & White LLP.

All of the services described above were approved

in advance by the Board of Directors or the Company's Audit Committee.

The fees set forth on the foregoing table relate to the audit as of and for the years ended June

30, 2020 and 2019, which was performed by Haskell & White LLP.

All of the services described above were approved in advance

by the Board of Directors or the Company's Audit Committee.

EXHIBITS, FINANCIAL STATEMENT

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Articles of Incorporation of Franklin Wireless Corp.

Amended and Restated Bylaws of Franklin Wireless Corp.

Amended and Restated Bylaws of Franklin

Wireless Corp.

Description of Securities

Lease, dated August 12, 2011, between the Company and EJMC, Inc., a California corporation (4)

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Lease, dated September 9, 2015, between the Company and Hunsaker & Associates San Diego, Inc., a California corporation (5)

Common Stock Purchase Agreement, dated August 18, 2020, between Franklin Wireless Corp.

and Top Intercube Co., Ltd.

Common Stock Purchase Agreement, dated August 18, 2020, between Franklin Wireless Corp.

and Partron Co., Ltd.

Code of Ethics (2)

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the quarterly period ended March 31, 2008, filed on May 14, 2008.

(2) Incorporated by reference from Annual Report on Form 10-KSB

(2) Incorporated by reference from Annual Report on Form 10-K

for the year ended June 30, 2008, filed on September 26.

(3) Incorporated by reference from Annual Report on Form

10-K for the year ended June 30, 2009, filed on October 13, 2009.

(3) Incorporated by reference from Annual Report on Form 10-K

for the year ended June 30, 2009, filed on October 13, 2009.

(4) Incorporated by reference from Annual Report on Form

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Johnathan Chee

/s/ BENJAMIN CHUNG

/s/ HEIDY CHOW

September 17, 2020

Benjamin Chung

FRANKLIN WIRELESS CORP.

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(the “Company”) as of June 30, 2020 and 2019, and the related consolidated

statements of comprehensive income, stockholders’

equity, and cash flows for each of the years then ended, and the related

notes (collectively, the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2019 and 2018,

and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accounting

principles generally accepted in the United States of America.

statements of comprehensive income (loss), stockholders’

equity, and cash flows for each of the two years in the period ended

June 30, 2020, and the related notes (collectively, the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30,

2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended

June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Prepaid expenses and other current assets

Prepaid income taxes

Advance payments to vendors

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Deferred tax assets, non-current

Right of use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

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Income tax payable

Advance payments from customers

Accrued liabilities

Lease liabilities, current

Total current liabilities

Lease liabilities, non-current

Notes payable, payroll protection plan loan

Total liabilities

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Parent Company stockholders’

Preferred stock, par value $0.001 per share, authorized 10,000,000 shares;

preferred stock issued and outstanding as of June 30, 2019 and 2018

Preferred stock, par value

$0.001 per share, authorized 10,000,000 shares;

No preferred stock issued and outstanding as of June 30, 2020 and

Common stock, par value $0.001 per share, authorized 50,000,000 shares;

10,570,203 shares issued and outstanding as of June 30, 2019 and 2018, respectively

10,605,912 and 10,570,203 shares issued and outstanding as of June 30, 2020 and 2019, respectively

Additional paid-in capital

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TOTAL LIABILITIES AND STOCKHOLDERS’

See accompanying notes to consolidated

financial statements.

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

Consolidated Statements of Comprehensive

Income (loss)

Fiscal Years Ended June 30,

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Total operating expenses

Loss from operations

Income (loss) from operations

Other income, net:

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Total other income, net

Loss before provision (benefit) for income taxes

Income tax benefit

Non-controlling interests in net loss of subsidiary at 48.2%

Income (loss) before provision (benefit) for income taxes

Income tax provision (benefit)

Net income (loss)

non-controlling interests in net loss of subsidiary at 48.2%

Net loss attributable to Parent Company

$ (1,276,124 )

non-controlling interests in net income (loss) of subsidiary at 35.8%

Less non-controlling interests in net income of subsidiary at 33.7%

Net income (loss) attributable to Parent Company

$ (1,276,124 )

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Weighted average common shares outstanding - diluted

Comprehensive loss

$ (1,473,758 )

Comprehensive income (loss)

Net income (loss)

$ (1,473,758 )

Translation adjustments

Comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to controlling interest

$ (1,328,943 )

Comprehensive income (loss)

comprehensive income (loss) attributable to non-controlling interest

Comprehensive income (loss) attributable to controlling interest

$ (1,328,943 )

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$ (4,513,479 )

Net loss attributable

to Parent Company

Foreign exchange translation

Comprehensive income attributable

to non-controlling interest

of stock related to stock options exercised

Balance - June 30, 2018

attributable to Parent Company

exchange translation

Comprehensive

loss attributable to non-controlling interest

of shares of a subsidiary

- June 30, 2019

$ (4,513,479 )

Net loss attributable

to Parent Company

Foreign exchange translation

Comprehensive loss attributable

to non-controlling interest

Purchase of shares

of a subsidiary

attributable to Parent Company

exchange translation

of stock related to stock option exercised

Comprehensive

income attributable to non-controlling interest

of shares of a subsidiary

- June 30, 2020

$ (4,513,479 )

See accompanying notes to consolidated financial statements.

FRANKLIN WIRELESS CORP.

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Fiscal Years Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ (1,473,758 )

CASH FLOW FROM OPERATING ACTIVITIES:

Net income (loss)

$ (1,473,758 )

Adjustments to reconcile net loss to net cash provided by

(used in) operating activities:

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Amortization of intangible assets

Disposal of intangible assets

Reserve for obsolete inventory

Forgiveness of accounts payable

Deferred tax (benefit)

Amortization of right of use assets

Increase (decrease) in cash due to change in:

Accounts receivable

(11,855,351 )

(10,730,663 )

Prepaid expenses and other current assets

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Advance payments from customers

Lease liabilities

Accrued liabilities

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash provided by operating activities

CASH FLOW FROM INVESTING ACTIVITIES:

Purchases of short-term investments

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Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds of payroll protection plan loan

Cash received from exercise of stock options

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Effect of foreign currency translation

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

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Cash paid during the periods for:

Non-cash investing and financing activities:

Initial adoption of right to use assets

Initial adoption of lease liabilities

See accompanying notes to consolidated financial statements.

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NOTE 1 - BUSINESS OVERVIEW

We are a provider of

intelligent wireless solutions including mobile hotspots, routers and modems as well as innovative hardware and software products

that support machine-to-machine (M2M) applications and the Internet of Things (IoT).

Our M2M and IoT solutions include embedded

modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications.

products are designed to solve wireless connectivity challenges in a variety of vertical markets including video surveillance,

digital signage, home security, oil and gas exploration, kiosks, fleet management, smart grid, vehicle diagnostics, telematics

and many more.

We are a leading provider

of intelligent wireless solutions including mobile hotspots, routers, trackers, and other devices.

Our designs integrate innovative

hardware and software enabling machine-to-machine (M2M) applications and the Internet of Things (IoT).

Our M2M and IoT solutions

include embedded modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications

based on 5G/4G wireless technology.

We have a majority

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Our global customer

base extends primarily from the United States to countries in South America, the Caribbean, Europe, the Middle East and Africa

("EMEA") and Asia.

base extends primarily from the United States to countries in Europe, the Middle East and Africa ("EMEA") and Asia.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING

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statements include the accounts of the Company and its subsidiary with a majority voting interest of 66.3% (33.7% is owned by non-controlling

interests) as of June 30, 2019 and 51.8% (48.2% is owned by non-controlling interests) as of June 30, 2018.

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 non-controlling interests.

The increase in the majority

voting interest in percentage from 51.8% to 64.2% for the year ended June 30, 2019 was due to the purchase of an additional 246,663

shares of the subsidiary, at $0.95 per share, by the parent company from three shareholders of the subsidiary.

interests) and 64.2% (35.8% is owned by non-controlling interests) as of June 30, 2020 and as of June 30, 2019, respectively.

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 non-controlling interests.

in the majority voting interest in percentage from 64.2% to 66.3% was due to the purchase by the Company of 43,333 shares of the

subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders during the year ended June 30, 2020.

decreased the non-controlling interests’

ownership percentage from 35.8% to 33.7%.

As consolidated

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As of June 30, 2020,

the non-controlling interest was $489,046, which represents a $431,964 decrease from $921,010 as of June 30, 2018.

The decrease in

the non-controlling interest of $431,964 was comprised of two components:

(1) losses in the subsidiary of $511,622 incurred

for the year ended June 30, 2019 and (2) a reduction in the ownership percentage of the non-controlling interests due to the

repurchase by the Company of 246,663 shares of the subsidiary for $234,330 ($0.95 per share) from three non-controlling

shareholders.

the non-controlling interest was $782,015, which represents a $292,969 increase from $489,046 as of June 30, 2020.

The increase in the

non-controlling interest of $292,969 was comprised of two components:

(1) an increase of $367,969 from income in the subsidiary

of $1,059,114 incurred for the year ended June 30, 2020 and (2) a reduction in the ownership percentage of the non-controlling

interests due to the repurchase by the Company of 43,333 shares of the subsidiary for $75,000 from three non-controlling shareholders.

This decreased the non-controlling interests’

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We generate revenues

from four geographic areas, consisting of the United States, the Caribbean and South America, EMEA and Asia.

The following enterprise-wide

disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements.

The following

table contains certain financial information by geographic area:

from three geographic areas, consisting of the United States, EMEA and Asia.

The following enterprise-wide disclosure is prepared

on a basis consistent with the preparation of the consolidated financial statements.

The following table contains certain

financial information by geographic area:

Fiscal Year Ended June 30,

United States

Caribbean and South America

Europe, the Middle East and Africa (“EMEA”)

Europe, the Middle East and Africa ("EMEA")

Long-lived assets, net (property and equipment and intangible assets):

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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.

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.

Through June 30, 2018,

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shipment of the products to the customers or when the products are received by the customers in accordance with shipping or delivery

We provided a warranty for one year from the shipment or delivery date, which was covered by our vendors pursuant to purchase

We provide a warranty for one year from the shipment or delivery date, which is covered by our vendors pursuant to purchase

Any net warranty related expenditures made by us have historically not been material.

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June 30, 2019

Advance payments from customers

Undelivered products

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net sales for the year ended June 30, 2020.

Revenue for non-recurring engineering projects is based on the percent complete of

a project and accounted for 1.0% of net sales for the year ended June 30, 2019.

The majority of our revenue recognized at a point

in time is for the sale of hot-spot 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.

Revenue for non-recurring engineering projects is based on the percentage completion

of a project and accounted for 1% of net sales for the year ended June 30, 2020.

Most of our revenue recognized at a point in time

is for the sale of hot-spot router products.

Revenue from these contracts is recognized when the customer can 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 June 30, 2020,

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As of June 30, 2020,

2019, and June 30, 2018, capitalized product development costs in progress were $465,352 and $100,000, respectively, and these

amounts are included in intangible assets in our consolidated balance sheets.

and June 30, 2019, capitalized product development costs in progress were $140,193 and $465,352, respectively, and these amounts

are included in intangible assets in our consolidated balance sheets.

During the year ended June 30, 2020, we incurred $343,360

in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses.

costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive

All costs incurred

before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income (loss).

Research and Development Costs

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ended June 30, 2020 and 2019, respectively.

Advertising and Promotion Costs

Costs associated with

advertising and promotions are expensed as incurred.

Advertising and promotion costs were $6,105 and $16,488 for the

years ended June 30, 2019 and 2018, respectively.

We provide a warranty

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Shipping and handling costs, which are included in selling, general

and administrative expenses on the statement of comprehensive income, were $1,140,229 and $814,926 for the years ended June 30,

and administrative expenses on the statements of comprehensive income, were $642,930 and $1,140,229 for the years ended June 30,

2020 and 2019, 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 and short-term government bonds mutual funds that are readily convertible to cash and have a $1.00 net asset value.

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 of certificates of deposit.

We have invested excess

funds in short term liquid assets of certificates of deposit.

Our inventories consist

of finished goods and are stated at the lower of cost or market, cost being determined on a first-in, first-out basis.

the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal

demand forecasts using management’s best estimates given information currently available.

Our customer demand is highly unpredictable

and can fluctuate significantly caused by factors beyond our control.

We may write down our inventory value for potential obsolescence

and excess inventory.

As of June 30, 2019, and 2018, we have recorded inventory reserves in the amount of $553,281 and $295,502,

respectively, for inventories that we have identified as obsolete or slow-moving.

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 our control.

We may write down our inventory value

for potential obsolescence and excess inventory.

As of June 30, 2020, and 2019, we have recorded inventory reserves in the

amount of $399,437 and $553,281, respectively, for inventories that we have identified as obsolete or slow-moving.

Property and Equipment

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Goodwill and Intangible Assets

Goodwill and certain

intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with

ASC 805, “Business Combinations.”

Goodwill represents the excess of the purchase price over the fair value of the tangible

and intangible net assets acquired.

Intangible assets are recorded at their fair value at the date of acquisition.

other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.”

Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized

in earnings when identified.

No impairment was recognized during the years ended June 30, 2019 and 2018.

certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in

accordance with ASC 805, “Business Combinations.”

Goodwill represents the excess of the purchase price over the

fair value of the tangible and intangible net assets acquired.

Intangible assets are recorded at their fair value at the date

of acquisition.

Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other

Intangible Assets.”

Goodwill and other intangible assets are tested for impairment at least annually and any related

impairment losses are recognized in earnings when identified.

No impairment was recognized during the years ended June 30,

2020 and 2019.

Intangible Assets

The definite lived intangible

assets consisted of the following as of June 30, 2019:

The definite lived

intangible assets consisted of the following as of June 30, 2020:

Definite lived intangible assets:

Expected Life

Less Accumulated

Net Intangible

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Expected Life

Less Accumulated

Net Intangible

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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.

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.

We are not aware of

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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.

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

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represented 46% and 36% of our consolidated net sales, respectively, and 21% and 72% of our accounts receivable balance as of June

For the year ended June 30, 2018, net sales to our three largest customers represented 54%, 21%, and 11% of our consolidated

net sales, respectively, and 48%, 36%, and 9% of our accounts receivable balance as of June 30, 2018.

No other customer accounted

for more than ten percent of total net sales for the years ended June 30, 2019 and 2018.

For the year ended June 30, 2019, sales

to Verizon and Sprint each comprised more the 10% of our net sales.

For the year ended June 30, 2018, sales to Verizon, Sprint,

and Anydata Corp.

each comprised more the 10% of our net sales.

For the year ended June 30, 2019, net sales to our two largest customers represented 57% and 24% of our consolidated

net sales, respectively, and 56% and 26% of our accounts receivable balance as of June 30, 2019, no other customer accounted for

more than ten percent of total net sales.

For the year ended

June 30, 2020, we purchased the majority of our wireless data products from two manufacturing companies located in Asia.

manufacturing company were to experience delays, capacity constraints or quality control problems, product shipments to our customers

could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively

impact our revenue.

For the year ended June 30, 2019, we purchased wireless data products from these suppliers in the amount of

$28,858,171, or 97% of total purchases, and had related accounts payable of $4,401,501 as of June 30, 2019.

For the year ended

June 30, 2018, we purchased wireless data products from this supplier in the amount of $19,507,215, or 87% of total purchases,

and had related accounts payable of $5,834,383 as of June 30, 2018.

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.

were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed,

or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact our revenue.

For the year ended June 30, 2020, we purchased wireless data products from these suppliers in the amount of $67,179,379, or 94%

of total purchases, and had related accounts payable of $41,181,840, as of June 30, 2020.

For the year ended June 30, 2019, we

purchased wireless data products from two suppliers in the amount of $28,858,171, or 97% of total purchases, and had related accounts

payable of $4,401,501, as of June 30, 2019.

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 Adopted Accounting Pronouncements

2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

2016-02, Leases (ASC

Topic 842) (ASU 2016-02), which amends existing standards for leases to increase transparency and comparability among organizations

by requiring recognition of lease assets and liabilities on the balance sheet and requiring disclosure of key information about

such arrangements.

We adopted the standard as of July 1, 2019 using the modified retrospective approach.

The adoption of the new

standard resulted in the recording of operating lease right-of-use (“ROU”) assets and operating lease liabilities of

$1,501,203 as of July 1, 2019.

As of the adoption date, we have no finance leases.

As permitted under ASC 842, we elected several

practical expedients that permit us to not reassess (1) whether existing contracts are or contain a lease, (2) the classification

of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs.

The application

of the practical expedients did not have a significant impact on the measurement of the operating lease liability.

did not affect our consolidated net income or cash flows.

See “Note 8”

for further details.

Recently Issued Accounting Pronouncements

In March 2016, the

FASB issued Accounting Standards Update No.

2016-02, Leases (Topic 842) (ASU 2016-02), which amends existing standards for leases

to increase transparency and comparability among organizations by requiring recognition of lease assets and liabilities on the

balance sheet and requiring disclosure of key information about such arrangements.

ASU 2016-02 will be effective for us beginning

in our first quarter of fiscal 2020, and early adoption is permitted.

We are currently evaluating the impact of adopting the new

standard on our consolidated financial statements and the timing and presentation of our adoption.

However, we do not expect that

the adoption of this update will materially impact the Company’s consolidated financial statements.

February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the TCJA on items within AOCI to retained

We do not expect that the adoption of this update will impact the Company’s consolidated financial statements.

Under the amendments in

ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated

other comprehensive income to retained earnings.

We do not expect that the adoption of this update will impact the Company’s

consolidated financial statements.

NOTE 3 - FAIR VALUE MEASUREMENTS

value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized

or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually).

Assets and liabilities

recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs

used to measure their fair value.

Hierarchical levels, which are directly related to the amount of subjectivity, associated with

the inputs to the valuation of these assets or liabilities are as follows:

- Level 1 inputs are quoted

prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

- Level 2 inputs are observable

inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar

assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data

for substantially the full term of the assets or liabilities.

- L evel 3 inputs are unobservable

inputs for the asset or liability.

Fair value accounting

is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at

fair value in the consolidated financial statements on a recurring basis (at least annually).

Assets and liabilities recorded at

fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure

their fair value.

Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to

the valuation of these assets or liabilities are as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities

that the Company can access at the measurement date.

Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets

and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable

or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 inputs are unobservable inputs for the asset or liability.

The carrying values

of the Company’s financial instruments, including cash and cash equivalents, short-term investments, accounts receivable,

and accounts payable, approximate their fair values due to the short period of time to maturity or repayment.

We invest our excess

cash into financial instruments which management believes are readily convertible into cash, such as money market funds and certificates

and accounts payable and debt, are calculated based on their approximate their fair values due to the short period of time to maturity

or repayment.

We invest our excess cash into financial instruments which management believes are readily convertible into cash,

such as money market funds and certificates of deposit.

NOTE 4 - PROPERTY AND EQUIPMENT

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June 30, 2019

Machinery and facility

Machinery and Commercial Equipment

Office equipment

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and is included in selling, general, and administrative expenses on the consolidated statements of comprehensive income.

the disposal of molds in the amount of $234,321 with no remaining net value, the associated accumulated depreciation was decreased

by the same amount for the year ended June 30, 2019.

NOTE 5 - ACCRUED LIABILITIES

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June 30, 2019

Accrued salaries, payroll deductions owed to government entities

Accrued payroll deductions owed to government entities

Accrued salaries and bonuses

Accrued vacation

Accrued undelivered inventory

Accrued commission for service providers

Other accrued liabilities

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Year Ended June 30,

Current income tax expense (benefit):

Current income tax expense::

Deferred income tax expense (benefit):

Benefit for income taxes

Provision (benefit) for income taxes

The provision (benefit)

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Year Ended June 30,

Federal tax benefit, at statutory rate of 21% for the year ended June 30, 2019 and 34% for the year ended June 30, 2018

Federal income tax (benefit), at statutory rate of 21% applied to earnings before income taxes and extraordinary items

State tax, net of federal tax benefit

Nondeductible expenses

Global intangible low-taxed income

Foreign rate difference

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Change in valuation allowance

Benefit for income taxes

Provision (benefit) for income taxes

Deferred income taxes

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Net operating losses

Lease accounting

Inventory reserve

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Deferred tax liabilities:

Deferred state taxes

Total deferred tax liabilities

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than not that the federal deferred tax assets will be fully realized, and no valuation allowance is necessary as of June 30, 2020.

Management also determined that certain state deferred tax assets required a partial valuation allowance as of June 30, 2019.

As of June 30, 2020,

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The federal net operating loss of $1.2 million, which recognized

on or before December 31, 2017, will expire through 2035, and the federal net operating loss of $3.1 million recognized on or after

January 1, 2018 will carry forward indefinitely.

on or before December 31, 2017, will expire through 2035, and the federal net operating loss recognized on or after January 1,

2018, which will carry forward indefinitely, is 0.

The utilization of net operating loss carryforwards may be subject to limitations

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Gross increase

Relief of ASC 740 reserve/adjustment

Balance as of June 30, 2019

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tax provision of $661,629 through continuing operation section of the income statement.

The SEC staff issued

Staff Accounting Bulletin No.

118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax

In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which

the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects

of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record and provisional estimate in the

financial statements.

The Company has recognized the provisional tax impacts related to the Tax Act in its financial statements

for the year ended June 30, 2018.

NOTE 7 - EARNINGS PER SHARE

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weighted average number of shares outstanding during the period.

Diluted earnings per share represent basic earnings per share

adjusted to include the potentially dilutive effect of outstanding stock options.

For the year ended June 30, 2019, we were in

a net loss position and have excluded 299,000 stock options from the calculation of diluted net loss per share because these securities

are anti-dilutive.

Diluted earnings (loss) per share represent basic earnings (loss)

per share adjusted to include the potentially dilutive effect of outstanding stock options by using the treasury stock method that

the proceeds we receive from an in-the-money option exercise are used towards repurchasing common shares in the market.

year ended June 30, 2020, we have calculated the diluted effect of common stock arising from 251,291 stock options.

ended June 30, 2019, we were in a net loss position and have excluded 299,000 stock options from the calculation of diluted net

loss per share because these securities are anti-dilutive.

The weighted average

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Year Ended June 30,

Net loss attributable to Parent Company

$ (1,276,124 )

Net income (loss) attributable to Parent Company

$ (1,276,124 )

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Diluted Outstanding shares

Basic loss per share

Diluted loss per share

Basic earnings (loss) per share attributable to Parent Company stockholders

Diluted earnings (loss) per share attributable to Parent Company stockholders

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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it to be suitable for our use and adequate for our present needs.

FTI leases approximately 10,000 square feet of office space,

located in Seoul, Korea, at a monthly rent of approximately $8,000 that expires on August 31, 2021.

Beginning on June 12, 2015,

FTI leased additional office space consisting of approximately 2,682 square feet, also located in Seoul, Korea, at a monthly rent

of approximately $2,700 that expires on August 31, 2021.

We lease one corporate housing facility primarily for our employees who

travel, under a non-cancelable operating lease that expires on September 4, 2020.

Our Korea-based subsidiary, FTI leases approximately 10,000 square

feet of office space, located in Seoul, Korea, at a monthly rent of approximately $8,000 that expires on August 31, 2021.

on June 12, 2015, FTI leased additional office space consisting of approximately 2,682 square feet, also located in Seoul, Korea,

at a monthly rent of approximately $2,700 that expires on August 31, 2021.

We lease one corporate housing facility primarily for

our employees who travel, under a non-cancelable operating lease that expires on September 4, 2020.

Rent expense for

the years ended June 30, 2020 and 2019 was $435,283 and $415,443, respectively.

Future minimum payments under operating leases

are as follows:

Future minimum

payments under operating leases are as follows:

Payments Due by June 30,

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Administrative office, Korea

Corporate housing facility

Total Obligations

We are from time to time involved in certain legal proceedings

and claims arising in the ordinary course of business.

Management does not expect any material adverse outcome.

We entered into

a Professional Services Agreement with Anydata Corp.

(“Anydata”) for the productACT233F Smart Link OBD device on

May 5, 2017, for a minimum purchase commitment of 250,000 units, which is associated with Anydata’s irrevocable

purchase orders received from its customer.

As of June 30, 2020,

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.

Future minimum payments under operating leases are as follows:

Operating Leases

Total lease payments

Less imputed interest

We are from time to

time involved in certain legal proceedings and claims arising in the ordinary course of business.

Management does not expect any

material adverse outcome.

We entered into a Professional

Services Agreement with Anydata Corp.

(“Anydata”) for the productACT233F Smart Link OBD device on May 5, 2017, for

a minimum purchase commitment of 250,000 units.

We have delivered approximately 25,000 units and 7,000 units during our second

and fourth quarters of fiscal 2018, respectively, and an additional 18,000 units during our first quarter of fiscal 2019.

Sales to Anydata were approximately $1.8 million for the year ended June 30, 2019.

We have received information that Anydata

may not be able to fulfill the entire purchase commitment for which parts have already been ordered with our main vendor,

Management believes that the Company will be able to supply some of the products to another customer and has received

personal guarantees from the ownership group of Anydata.

As of June 30, 2019, the remaining purchase commitment unfulfilled

by Anydata to the Company was approximately $3.1 million.

The total preliminary product purchase commitment with Quanta was

approximately $1.9 million.

This amount is subject to further changes depending on the ability of Quanta to repurpose some of

the component parts to its other customers.

We have not recorded a receivable from Anydata, nor a liability owed to Quanta.

Management believes, at this time, a loss contingency is reasonably possible but not estimable as to how much ultimately

would be paid to Quanta.

For the year ended June 30, 2019, we paid $100,000 for the right to call on inventory and has

recorded this amount as a prepaid.

Additionally, we have agreed pricing adjustments with Quanta for other products to ensure

demand is met and have recorded an additional $22,000 as a prepaid related to pricing adjustments.

As of June 30, 2019, there

is a reasonable possibility we may incur a loss, however, the amount is not estimable at this time.

to Anydata were approximately $1.8 million for the year ended June 30, 2019.

We have received information that Anydata may not

be able to fulfill the entire purchase commitment for which parts have already been ordered with our main vendor, Quanta.

believes that the Company will be able to supply some of the products to another customer and has received personal guarantees

from the ownership group of Anydata.

As of June 30, 2019, the remaining unfulfilled purchase commitment was approximately $3.1

The total product purchase commitment with Quanta was approximately $2.9 million.

We have not recorded a receivable from

Anydata, nor a liability owed to Quanta.

Management believes that, at this time, a loss contingency is reasonably possible but

not estimable as to how much ultimately would be paid to Quanta.

As of June 30, 2020, we paid $100,000 for the right to call on

inventory and recorded an additional $49,580 as a prepaid expense related to pricing adjustments, which has been agreed with Quanta

for other products to ensure demand is met.

As of June 30, 2020, there is a reasonable possibility we may incur a loss, however,

the amount is not estimable at this time.

In March 2020, the

World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout

the United States.

On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential

businesses until further notice.

As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business.

Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations

and, where possible, certain workers began telecommuting from their homes.

The continued spread of COVID-19 may result in a period

of business disruption, including delays or disruptions in our supply chain.

The spread of COVID-19, or another infectious disease,

could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the

supply of our products.

While the Company expects this situation may increase demand for its products, the related impact cannot

be reasonably estimated at this time.

Change of Control Agreements

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Lee, through September 30, 2021.

Chinese Tariffs

International Tariffs

We believe that our

products are currently exempt from Chinese tariffs.

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

products are currently exempt from international tariffs upon import from our manufacturers to the United States.

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

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using a modified prospective application, and the Black-Scholes model

Under this application, we are required to record compensation expense for all awards granted after the date of adoption and for

the unvested portion of previously granted awards that remain outstanding at the date of adoption.

Compensation costs will be recognized

over the period that an employee provides service in exchange for the award.

to value stock options.

Under this application, we record compensation expense for all awards granted.

Compensation costs will

be recognized over the period that an employee provides service in exchange for the award, i.e.

the vesting period.

We adopted the 2009

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Exercisable as of June 30, 2020

The aggregate

intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock

price of 2.45 as of June 30, 2019, 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 June 30, 2019 in the amount

of 299,000 shares was $0.92 per share.

The aggregate intrinsic

value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of

$5.52 as of June 30, 2020, 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 June 30, 2020 in the amount of 251,291

shares was $0.93 per share.

As of June 30, 2020,

1 unchanged sentence

NOTE 10 - SUBSEQUENT EVENTS

Management considered

subsequent events in the preparation of the Company's financial statements through the date this Form 10-K was filed.

considered subsequent events in the preparation of the Company's financial statements through the date this Form 10-K was filed.

On September 9, 2020, we entered into Subscription Agreements with two accredited investors (the “Investors”), pursuant

to which we sold and issued to the Investors an aggregate of 923,078 shares of Common Stock at a purchase price of $6.50 per share.

The $6,000,007 aggregate purchase price for these Units was paid in cash to the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures