What changed in this filing

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Item 9A. Controls and Procedures

2021-09-28 compared with 2020-09-17 · 1040 added, 905 removed, 403 unchanged (83% of the section changed)

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EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our management has

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)

as of the end of the period covered by this report.

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

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,

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.

Our management has evaluated,

under the supervision and with the participation of OC Kim, our President, and David Brown, our 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 the Acting Chief Financial Officer have concluded

that, as of June 30, 2021, 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 Exchange

Act or in other factors that materially affected or are reasonably likely to materially affect our internal controls and procedures

over financial reporting during the fourth quarter of the fiscal year ended June 30, 2020.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL

Our management is

responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f)

and 15d-15(f) under the Exchange Act).

Our internal control over financial reporting is designed 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.

Because of its inherent limitations, internal control over financial reporting may

not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the

risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or

procedures may deteriorate.

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 Exchange Act or in other

factors that materially affected or are reasonably likely to materially affect our internal controls and procedures over financial reporting

during the fourth quarter of the fiscal year ended June 30, 2021.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible

for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)

under the Exchange Act).

Our internal control over financial reporting is designed 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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of

changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

To evaluate the effectiveness

of internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management conducted

an assessment, using the criteria in Internal Control-Integrated Framework, (specifically the 2013 framework) issued

by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on its assessment, management concluded that

we maintained effective internal control over financial reporting as of June 30, 2020.

This annual report

does not include an attestation report from our independent registered public accounting firm regarding internal control over financial

Management's report was not subject to attestation by our registered public accounting firm pursuant to the rules adopted

under Section 404(c) of the Sarbanes-Oxley Act.

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

OFFICERS AND CORPORATE GOVERNANCE

Set forth below are

the names, ages, titles and present and past positions of our directors and executive officers as of June 30, 2020.

of internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management conducted an assessment,

using the criteria in Internal Control-Integrated Framework, (specifically the 2013 framework) issued by the Committee of

Sponsoring Organizations of the Treadway Commission (COSO).

Based on its assessment, management concluded that we maintained effective

internal control over financial reporting as of June 30, 2021.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below are the names,

ages, titles and present and past positions of our directors and executive officers as of June 30, 2021.

President, Secretary and a Director

Chairman of the Board and a Director

Joon Won Jyoung

Johnathan Chee

Chief Operating Officer

OC Kim has been

our President, Secretary and a director since September 2003 and served as our Acting Chief Financial Officer until March 2014

and reassumed the role in April 2018.

Acting Chief Financial Officer

OC Kim has been our President,

Secretary and a director since September 2003.

He also served as our Acting Chief Financial Officer from April 2018 until March 2021.

Prior to joining Franklin Wireless, Mr.

Kim was the CEO and President of Accetio Inc., a

company he founded in April 2001 that developed cell phones and modules for the telecommunications industry.

In September 2003,

Kim was the CEO and President of Accetio Inc., a company he founded in April 2001 that developed

cell phones and modules for the telecommunications industry.

In September 2003, Accetio Inc.

merged with Franklin Telecommunications Corp.

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Prior to this, Mr.

Chief Operating Officer of Axesstel Inc., a pioneering developer of CDMA Wireless Local Loop Products.

Before joining Axesstel,

he was the president of the U.S.

sales office for Kolon Data Communications Co., Ltd., one of Korea's most prominent technology

conglomerates.

Kim was the Chief Operating Officer of Axesstel Inc., a pioneering developer

of CDMA Wireless Local Loop Products.

Before joining Axesstel, he was the president of the U.S.

sales office for Kolon Data Communications

Co., Ltd., one of Korea's most prominent technology conglomerates.

While at Kolon Data Communications, Mr.

Kim helped introduce the first generation of CDMA phones to the Korean market

through his work with Qualcomm Personal Electronics (QPE), a joint venture between Qualcomm Incorporated and Sony Electronics Inc.

Kim helped introduce the first

generation of CDMA phones to the Korean market through his work with Qualcomm Personal Electronics (QPE), a joint venture between Qualcomm

Incorporated and Sony Electronics Inc.

Kim began his career at Lucky Goldstar (LG) Electronics.

He has more than 29 years of experience in sales, marketing, and operations

management in the telecommunications and information systems industries.

He has more than 29 years of experience

in sales, marketing, and operations management in the telecommunications and information systems industries.

He earned a B.A.

from Sogang University in Korea.

Kim’s qualifications to serve as a director of the Company include his extensive business, operational and management

experience in the wireless industry, including his current position as the Company’s President.

In addition, his knowledge

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

Nelson has been a director since September 2003.

University in Korea.

We believe Mr.

Kim’s qualifications to serve as a director of the Company include his extensive business, operational

and management experience in the wireless industry, including his current position as the Company’s President.

In addition, his

knowledge 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 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.

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.

in September 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.

in 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.

Joon Won Jyoung has

been a director since September 2009.

He has been an active investor since 1997 and made early investments in Sewon

Telecom, Telson Electronics and Pantech, three leading telecommunications companies based in Korea.

From 2001 to 2007, Mr.

Jyoung served as a director and Treasurer for Sewon Telecom.

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.

He holds a B.S.

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

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

Johnathan Chee has

been a director since September 2009.

He is an attorney and has owned the Law Offices of Johnathan Chee, in Niles,

Illinois, since August 2007.

Chee has represented clients in various business dealings and negotiations with Ameritech, SBC,

Sprint and several wireless carriers in Latin America.

Between 1998 and 2007, he served as an attorney with the C&S Law Group,

P.C., in Glenview, Illinois.

He holds a B.A.

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.

Johnathan Chee has been

a director since September 2009.

He is an attorney and has owned the Law Offices of Johnathan Chee, in Niles, Illinois, since August

Chee has represented clients in various business dealings and negotiations with Ameritech, SBC, Sprint and several wireless

carriers in Latin America.

Between 1998 and 2007, he served as an attorney with the C&S Law Group, P.C., in Glenview, Illinois.

from the University of Illinois-Chicago and a J.D.

from IIT Chicago-Kent College of

He is a member of the Illinois Bar Association.

from IIT Chicago-Kent College of Law.

He is a member of the Illinois Bar

We believe Mr.

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

include his experience as a business attorney that allow him to provide the Company’s Board of Directors with valuable knowledge

of legal matters that may affect the Company.

Chee’s qualifications to serve as a director of the Company include his experience as a business attorney

that allow him to provide the Company’s Board of Directors with valuable knowledge of legal 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.

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

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

been our Chief Operating Officer since September 2008.

Kristina Kim is a licensed

attorney with extensive knowledge of global import/export, international trade, and regulatory issues.

Kim also served as General

Counsel and Vice President with Samsung International Inc.

for over 14 years.

Kim holds a B.A.

in Biochemistry and Molecular Biology

from the University of California at Santa Barbara, and a Juris Doctorate from the University of San Diego.

(David) Lee has served

as our Chief Operating Officer since September 2008.

Lee has 23 years of upper level management experience in telecommunications,

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of Ace Electronics, and served as Chief Financial Officer and Director of Sales and Marketing for RMG Wireless.

Prior to that,

he served as Controller and Director of International Sales for Focus Wireless in Chicago.

COMPLIANCE WITH SECTION 16(A) OF EXCHANGE

Section 16(a) of the

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.

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

Prior to that, he served

as Controller and Director of International Sales for Focus Wireless in Chicago.

David Brown has served as

our Acting Chief Financial officer since March 2021.

With over 25 years of financial experience, David Brown has worked in several industries

including manufacturing, aerospace, biotech, and electronics.

A graduate in accounting from San Diego State University, David has advanced

knowledge of accounting, budgeting, and cash management.

He has developed and implemented internal policies and procedures throughout

several organizations and has managed all aspects of the finance departments along with outside auditors.

CODE OF ETHICS

The Board of Directors

has adopted a Code of Ethics, which is applicable to all of our employees, including our principal executive officer, principal

financial officer, principal accounting officer or controller, or persons performing similar functions.

of Ethics covers all areas of professional conduct, including honest and ethical conduct, conflicts of interest, compliance with

laws, disclosure obligation, and accountability for adherence to this Code.

The Board of Directors has

adopted a Code of Ethics, which is applicable to all of our employees, including our principal executive officer, principal financial

officer, principal accounting officer or controller, or persons performing similar functions.

The Code of Ethics covers all areas of professional

conduct, including honest and ethical conduct, conflicts of interest, compliance with laws, disclosure obligation, and accountability

for adherence to this Code.

CORPORATE GOVERNANCE

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.

During fiscal 2021, the Board

of Directors held five meetings.

Each director attended 100% of the meetings of the Board, except for Joon Won Jyoung, who attended none

of the meetings and resigned his position on the Board on January 26, 2021.

The Board of Directors has an Audit Committee made up of

Heidy Chow (committee chair), Gary Nelson, and Kristina Kim, and a Compensation Committee made up of Gary Nelson (committee chair) and

Johnathan Chee.

The Board of Directors has no other committees.

EXECUTIVE COMPENSATION

The following table

sets forth all compensation paid or accrued by us for the years ended June 30, 2020 and 2019 to our President, Chief Operating

Officer and Chief Financial Officer (The "Named Executive Officers").

The following table sets forth

all compensation paid or accrued by us for the years ended June 30, 2021, and 2020 to our President, Chief Operating Officer, and Chief

Financial Officer (The "Named Executive Officers").

Name and Principal Position

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All Other Compensation

OC Kim, President and

Acting Financial Officer

Chief Operating Officer

Acting Chief Financial Officer

Outstanding Equity Awards at Fiscal Year-End

The following table

presents the outstanding equity awards held by each of the Named Executive Officers as of June 30, 2020.

The only outstanding

equity awards are stock options.

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

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.

The following table presents

the outstanding equity awards held by each of the Named Executive Officer as of June 30, 2021.

The only outstanding equity awards

are stock options.

Options to purchase 100,000 shares were granted to Yun J.

(David) Lee during fiscal 2021.

The options 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 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:

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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

and an expiration date of June 11, 2014.

On June 10, 2014, the option was modified to extend the term an additional five years

to June 11, 2019.

The option originally had a five-year

term and an expiration date of June 11, 2014.

On June 10, 2014, the option was modified to extend the term an additional five years to

June 11, 2019.

On June 11, 2019, the option was again modified to extend the term an additional three years to June 15, 2022.

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

33.3% of the shares underlying the option vest on the first anniversary of the date of the grant.

33.3% of the shares underlying the option vest on the second anniversary of the date of the grant.

33.3% of the shares underlying the option vest on the third anniversary of the date of the grant.

Director Compensation

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for reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors.

Employee directors do not receive

any cash compensation for services as directors and have not received any equity compensation designated for such services.

of the Board of Directors who are not employees may receive stock option grants as consideration for their board service from time

to time, although there is no established policy for such stock option grants.

Fiscal 2020 Director

Employee directors do not receive any

cash compensation for service as directors and do not receive any equity compensation designated for such services.

Members of the Board

of Directors who are not employees may receive stock option grants as consideration for their board service from time to time, although

there is no established policy for such stock option grants.

Fiscal 2021 Director Compensation

Fee Earned or

Joon Won Jyoung

Johnathan Chee

Benjamin Chung

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

equity awards held by any of the non-officer directors as of June 30, 2020.

Kristina Kim (2)

Directors are compensated at a base rate of $10,000 and $15,000 annually for the years

ended December 31, 2020, and 2021, respectively, and prorated based upon board meeting attendance.

Bonuses may be awarded when the business

has performed exceptionally well as determined by the Board of Directors.

For the six months ended December 31, 2021, the Board of Directors

approved bonuses of $2,000 each to Gary Nelson, Jonathan Chee, and Heidy Chow.

For the six months ended June 30, 2021, there

has been no approved bonus for the Directors.

On January 27, 2021, the Board of Directors appointed

Kristina Kim to the Board of Directors to replace Mr.

Joon Won Jyoung, who resigned his position on the Board on January 26, 2021.

There were no outstanding equity awards held by

any of the non-officer directors as of June 30, 2021.

EMPLOYMENT CONTRACTS

On September 21, 2009,

we entered into Change of Control Agreements with OC Kim, our President, and Yun J.

On September 21, 2009, we

entered into Change of Control Agreements with OC Kim, our President, and Yun J.

(David) Lee, our Chief Operating Officer.

Change of Control Agreement provides for a lump sum payment to the officer in case of a change of control of the Company.

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.

The Change of Control

Agreement with Mr.

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.

The Change of Control Agreement

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 Board of Directors

has approved extension of the Change of Control Agreements with Mr.

Lee calls for a payment of $2 million

upon a change of control.

The Board of Directors has

approved extension of the Change of Control Agreements with Mr.

Lee through September 30, 2023.

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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

- We want to provide our senior management with a level of cash compensation in the form of base salary that facilitates an appropriate

lifestyle given their professional status and accomplishments.

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.

BASE SALARIES - We

want to provide our senior management with a level of cash compensation in the form of base salary that facilitates an appropriate lifestyle

given their professional status and accomplishments.

INCENTIVE COMPENSATION

- Our practice is to award cash bonuses based upon performance objectives set by the Board of Directors.

We maintain a bonus plan

which provides our executive officers the ability to earn cash bonuses based on the achievement of performance targets.

The performance

targets are set by the Board of Directors, and our executive officers are eligible to receive bonuses on a quarterly basis.

actual amount of incentive compensation paid to our executive officers is in the sole discretion of the Board of Directors.

We maintain a bonus plan which

provides our executive officers the ability to earn cash bonuses based on the achievement of performance targets.

The performance targets

are set by the Board of Directors, and our executive officers are eligible to receive bonuses on a quarterly basis.

The actual amount

of incentive compensation paid to our executive officers is in the sole discretion of the Board of Directors.

SEVERANCE BENEFITS

- We are generally an at will employer and have no employment agreements with severance benefits;

however, we have entered into

Change of Control Agreements with our executive officers, and one other employee that provide them with lump sum payments

in the event of a change in control of the Company.

however, we have entered into Change

of Control Agreements with our executive officers, and one other employee that provide them with lump sum payments in the event

of a change in control of the Company.

RETIREMENT PLANS -

We do not maintain any retirement plans.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table

sets forth certain information regarding the beneficial ownership of our Common Stock as of September 17, 2020 by each director

and executive officer of the Company, each person known to us to be the beneficial owner of more than 5% of the outstanding Common

Stock, and all directors and executive officers of the Company as a group.

Except as otherwise indicated below, each person has

sole voting and investment power with respect to the shares owned, subject to applicable community property laws.

SECURITY OWNERSHIP

OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth

certain information regarding the beneficial ownership of our Common Stock as of September 28, 2021, by each director and executive officer

of the Company, each person known to us to be the beneficial owner of more than 5% of the outstanding Common Stock, and all directors

and executive officers of the Company as a group.

Except as otherwise indicated below, each person has sole voting and investment power

with respect to the shares owned, subject to applicable community property laws.

Shares Beneficially Owned

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9707 Waples Street, Suite 150, San Diego, CA 92121

805 Third Ave., 15 th Floor, New York, NY 10022

805 Third Ave., 15 th Floor,

New York, NY 10022

Kennedy Capital Management, Inc.

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Louis, MO 63141

AIGH Investment Partners, L.L.C.

6006 Berkley Avenue, Baltimore, MD21209

All directors and executive officers as a group

Based solely on a Schedule 13G dated February 14, 2020, which indicates that Mr.

Based solely on a Schedule 13G dated February 12, 2021, which indicates

Packer may be deemed to beneficially own 849,259 shares.

With respect to these shares, Mr.

Packer has shared voting power and shared dispositive power with Globis Capital Partners, L.P., Globis Capital Advisors, L.L.C., Globis Overseas Fund, Ltd., Globis Capital Management, L.P.

Packer has shared voting power and

shared dispositive power with Globis Capital Partners, L.P., Globis Capital Advisors, L.L.C., Globis Overseas Fund, Ltd., Globis Capital

Management, L.P.

and Globis Capital, L.L.C.

Based solely on a Schedule 13G

dated February 12, 2019, which indicates that Kennedy Capital Management, Inc.

Based solely on a Schedule 13G dated July 09, 2021, which indicates that Kennedy Capital

Management, Inc.

may be deemed to beneficially own 661,185 shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE.

PRINCIPAL ACCOUNTANT FEES AND

Based solely on a Schedule 13G dated January 12, 2021, which indicates

that AIGH Capital Management, L.L.C.

may be deemed to beneficially own 780,000 shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE.

PRINCIPAL ACCOUNTANT

FEES AND SERVICES

The aggregate fees billed

for the most recently completed fiscal period for the audit of our annual financial statements and services normally provided by

the independent registered public accounting firm for this fiscal period were as follows:

In the above table,

"audit fees"

are fees billed by our external auditor for services provided in auditing our company's annual financial

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

for the most recently completed fiscal period for the audit of our annual financial statements and services normally provided by the independent

registered public accounting firm for this fiscal period were as follows:

In the above table, "audit

are fees billed by our external auditor for services provided in auditing our company's annual financial 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, 2021, and 2020, which

was performed by Benjamin & Ko and Haskell & White LLP., respectively.

All of the services described above were approved in advance

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

EXHIBITS, FINANCIAL STATEMENT

EXHIBITS, FINANCIAL

STATEMENT SCHEDULES

Index to financial statements

The following

Exhibits are files as part of, or incorporated by reference into, this Report on Form 10-K:

Articles of Merger and Agreement and Plan of Reorganization, filed January 2, 2008 with the Nevada Secretary of State (1)

Articles of Incorporation of Franklin Wireless Corp.

Amended and Restated Bylaws of Franklin

Wireless Corp.

The following Exhibits

are files as part of, or incorporated by reference into, this Report on Form 10-K:

of Merger and Agreement and Plan of Reorganization, filed January 2, 2008 with the Nevada Secretary of State (1)

of Incorporation of Franklin Wireless Corp.

and Restated Bylaws of Franklin Wireless Corp.

Description of Securities (7)

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

Employment Agreement, dated September 21, 2009, between Franklin Wireless Corp.

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

Agreement, dated September 21, 2009, between Franklin Wireless Corp.

and OC Kim (3)

Change of Control Agreement, dated September 21, 2009, between Franklin Wireless Corp.

of Control Agreement, dated September 21, 2009, between Franklin Wireless Corp.

and OC Kim (3)

Change of Control Agreement, dated September 21, 2009, between Franklin Wireless Corp.

of Control Agreement, dated September 21, 2009, between Franklin Wireless Corp.

and David Lee.

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.

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

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.

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

and Partron Co., Ltd.

Code of Ethics (2)

of Ethics (2)

Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

8 unchanged sentences

XBRL Presentation Linkbase Document

__________________________________

(1) Incorporated by reference from Report on Form 10-QSB for

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

(1) Incorporated by reference from Report on Form 10-QSB for the quarterly

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

(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.

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

for the year ended June 30, 2011, filed on September 28, 2011.

(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

10-K for the year ended June 30, 2011, filed on September 28, 2011.

(5) Incorporated by reference from Quarterly Report on Form

10-Q for the quarter ended September 30, 2015, filed on November 16, 2015.

(5) Incorporated by reference from Quarterly Report on Form 10-Q for

the quarter ended September 30, 2015, filed on November 16, 2015.

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

the year ended June 30, 2020, filed on September 17, 2020.

(7) Incorporated by reference from Report

on Form 10-K/A for the year ended June 30, 2020, filed on September 18, 2020.

1 unchanged sentence

Not applicable.

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.

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.

2 unchanged sentences

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities

and on the dates indicated.

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and

on the dates indicated.

Principal Executive Officer

2 unchanged sentences

Principal Financial Officer

/s/ David Brown

Acting Chief Financial Officer

3 unchanged sentences

September 28, 2021

/s/ JOON WON JYOUNG

September 17, 2020

Joon Won Jyoung

/s/ JOHNATHAN CHEE

3 unchanged sentences

September 28, 2021

/s/ KRISTINA KIM

September 28, 2021

FRANKLIN WIRELESS CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL

FOR THE YEARS ENDED JUNE 30, 2021, and 2020

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of June 30, 2021, and June 30, 2020

3 unchanged sentences

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of Franklin

Wireless Corp.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheet of Franklin Wireless Corp.

(the “Company”) as of June 30, 2021, and the related consolidated statements of income

and comprehensive income, shareholders’

equity, and cash flows for the year ended June 30, 2021, and the related notes (collectively

referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of June 30, 2021, and the results of its operations and its cash flows

for the year ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting

as of June 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring

Organizations of the Treadway Commission (COSO), and our report dated, September 28, 2021, expressed an unqualified opinion.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect

to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange

Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that is material to the consolidated financial statements and (2)

involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any

way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter

below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.

Description of the Matter

As described in Note 2 to the consolidated financial

statements, the Company’s contracts with customers sometimes contain multiple performance obligations, which are accounted for separately

if they are distinct.

In such cases, the transaction price is then allocated to the distinct performance obligations on a relative standalone

selling price basis, and revenue is recognized when control of the distinct performance obligation is transferred.

Auditing the Company’s revenue recognition

was complex, including the identification and determination of distinct performance obligations and the timing of revenue recognition.

For example, there were non-standard terms and conditions that required judgment to determine the distinct performance obligations and

the impact on the timing of revenue recognition.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design,

and tested the operating effectiveness of the Company’s process and controls to identify and determine the distinct performance

obligations and the timing of revenue recognition.

To test the identification and determination of

the distinct performance obligations and the timing of revenue recognition, our audit procedures included, among others, reading the executed

contract or purchase order to understand the contract, identifying the performance obligation(s), determining the distinct performance

obligations, and evaluating the timing of revenue recognition for a sample of individual sales transactions.

We evaluated the accuracy

of the Company’s contract summary documentation, specifically related to the identification and determination of distinct performance

obligations and the timing of revenue recognition.

We further evaluated appropriateness of revenue recognition through year-on-year analytics

and reasonableness assessment of gross margin analysis.

/s/ Benjamin & Ko

Santa Ana, CA

September 28, 2021

We have served as the Company’s auditor

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of

Franklin Wireless Corp.

Opinion on Internal Control over Financial

We have audited the internal control over financial

reporting of Franklin Wireless Corp.

(the “Company”) as of June 30, 2021, based on criteria established in Internal Control—Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained,

in all material respects, effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal

Control—Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards

of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of June 30, 2021 and the

related consolidated statements of income and comprehensive income, shareholders’

equity, and cash flows of the Company for the

year ended June 30, 2021, and our report dated September 28, 2021, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible

for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over

financial reporting, included in the accompanying Report on the audit of the Consolidated Financial Statements.

Our responsibility is

to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting

firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective

internal control over financial reporting was maintained in all material respects.

Our audit of internal control over financial reporting

included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,

and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included

performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis

for our opinion.

Definition and Limitations of Internal Control

over Financial Reporting

A company’s internal control over financial

reporting is a process designed 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.

A company’s internal control

over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions

are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and

that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition

of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

/s/ Benjamin & Ko

Santa Ana, CA

September 28, 2021

We have served as the Company’s auditor

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Franklin Wireless Corp.

Opinion on the Consolidated Financial

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheets of Franklin Wireless Corp.

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

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.

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

These consolidated financial statements

are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of audits, we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company’s internal control over financial reporting.

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of audits, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

that our audits provide a reasonable basis for our opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

/s/ HASKELL & WHITE LLP

31 unchanged sentences

Parent Company stockholders’

Preferred stock, par value

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

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

No preferred stock issued and outstanding as of June 30, 2021, and 2020

3 unchanged sentences

Retained earnings

Treasury stock, 3,472,286 shares as of June 30, 2020 and 2019

Treasury stock, 2,549,208 and 3,472,286 shares as of June 30, 2021, and 2020, respectively

Accumulated other comprehensive loss

3 unchanged sentences

TOTAL LIABILITIES AND STOCKHOLDERS’

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

Consolidated Statements of Comprehensive

Income (loss)

Consolidated Statements of

Comprehensive Income

Fiscal Years Ended June 30,

$ 184,115,345

Cost of goods sold

3 unchanged sentences

Total operating expenses

Income (loss) from operations

Income from operations

Other income, net:

1 unchanged sentence

Income from governmental subsidy

Other income, net

Gain from the forgiveness of payroll protection plan loan

Other income (expense), net

Total other income, net

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%

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

Income before provision for income taxes

Income tax provision

non-controlling interests in net income 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 )

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

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

Net income attributable to Parent Company

Basic earnings per share attributable to Parent Company stockholders

Diluted earnings per share attributable to Parent Company stockholders

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

Comprehensive income (loss)

Net income (loss)

$ (1,473,758 )

Comprehensive income

Translation adjustments

Comprehensive income (loss)

comprehensive income (loss) attributable to non-controlling interest

Comprehensive income (loss) attributable to controlling interest

$ (1,328,943 )

See accompanying notes to consolidated financial statements.

Comprehensive income

comprehensive income attributable to non-controlling interest

Comprehensive income attributable to controlling interest

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

Consolidated Statements of Stockholders'

Other Comprehensive Income

Consolidated Statements of

Stockholders' Equity

Additional Paid-in

Accumulated Other Comprehensive Income

Non-controlling

- June 30, 2018

Total Stockholders

Balance - June 30, 2019

$ (4,513,479 )

attributable to Parent Company

exchange translation

Comprehensive

loss attributable to non-controlling interest

of shares of a subsidiary

- June 30, 2019

Net income attributable to Parent Company

Foreign exchange translation

Issuance of stock related to stock option exercised

Comprehensive income attributable to non-controlling interest

Purchase of shares of a subsidiary

Balance - June 30, 2020

$ (4,513,479 )

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

Net income attributable to Parent Company

Foreign exchange translation

Issuance of stock related to stock option exercised

Comprehensive income attributable to non-controlling interest

Sales of treasury stock

Stock based compensation

Balance - June 30, 2021

$ (3,554,893 )

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated

financial statements.

FRANKLIN WIRELESS CORP.

Consolidated Statements of Cash Flows

Consolidated Statements of

Fiscal Years Ended June 30,

CASH FLOW FROM OPERATING ACTIVITIES:

Net income (loss)

$ (1,473,758 )

Adjustments to reconcile net income (loss) to net cash

provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Amortization of intangible assets

Stock based compensation

Bad debt expense

Forgiveness of payroll protection plan loan

Disposal of intangible assets

Reserve for obsolete inventory

Deferred tax (benefit)

Amortization of right of use assets

Deferred tax (benefit)

Increase (decrease) in cash due to change in:

3 unchanged sentences

Prepaid expenses and other current assets

Prepaid income taxes

Advance payments to vendors

Accounts payable

(32,364,266 )

Income tax payable

Advance payments from customers

Lease liabilities

5 unchanged sentences

Purchases of property and equipment

Payments for capitalized development costs

Payments for capitalized product development costs

Purchases of intangible assets

2 unchanged sentences

Proceeds of payroll protection plan loan

Sales of common stock sold from treasury stock

Cash received from exercise of stock options

1 unchanged sentence

Effect of foreign currency translation

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of year

2 unchanged sentences

Cash paid during the periods for:

$ (4,124,485 )

Non-cash investing and financing activities:

1 unchanged sentence

Initial adoption of lease liabilities

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

NOTES TO CONSOLIDATED FINANCIAL

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTE 1 - BUSINESS OVERVIEW

1 unchanged sentence

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

ownership position in Franklin Technology Inc.

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 ownership

position in Franklin Technology Inc.

("FTI"), a research and development company located in Seoul, South Korea.

FTI primarily provides design and development services to us for our wireless products.

FTI primarily

provides design and development services to us 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 extends primarily from the United States to countries in Europe, the Middle East and Africa ("EMEA") and Asia.

Our global customer base

extends primarily from North America, the Caribbean and South America, 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) 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’

interests) as of June 30, 2021, and 2020.

For the year ended June 30, 2020, the increase 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.

The purchase decreased the non-controlling interests’

ownership percentage from 35.8% to 33.7%.

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 non-controlling interest

is reported in the consolidated statement of financial position within equity, separately from the parent’s equity.

are no shares of the Company held by any subsidiaries as of June 30, 2020 or June 30, 2019.

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.

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 non-controlling 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 June 30, 2021, or June 30, 2020.

Non-controlling Interest in a Consolidated

As of June 30, 2020,

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’

ownership percentage from 35.8% to 33.7%.

As of June 30, 2021, the non-controlling

interest was $1,479,162, which represents a $697,147 increase from $782,015 as of June 30, 2020.

The increase in the non-controlling

interest of $697,147 was from income in the subsidiary of $2,071,302 incurred for the year ended June 30, 2021.

Segment Reporting

3 unchanged sentences

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.

We generate revenues

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.

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.

We generate revenues from

three geographic areas, consisting of North America, the Caribbean and South America, 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

1 unchanged sentence

Fiscal Year Ended June 30,

United States

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

North America

$ 183,771,146

Caribbean and South America

$ 184,115,345

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

3 unchanged sentences

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 (see Note 3).

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

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 (see Note 3).

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.

2 unchanged sentences

Allowance for Doubtful Accounts

Based upon our review

of our collection history as well as the current balances associated with all significant customers and associated invoices, we

do not believe an allowance for doubtful accounts was necessary as of June 30, 2020 and June 30, 2019.

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.

Based upon our review of our

collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe

an allowance for doubtful accounts was necessary as of June 30, 2021, and June 30, 2020.

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,

we recognized revenue in accordance with Accounting Standards Codification ("ASC") 605, “Revenue Recognition,”

when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured, and delivery

of products has occurred or services have been rendered.

Accordingly, we recognized revenues from product sales upon

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

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.

Under our sales return policy,

customers may generally return products that are under warranty for repair or replacement.

On July 1, 2018, we adopted ASU 2014-09

using the modified retrospective method applied to those contracts that were not completed or substantially complete as of June

Results for the reporting period beginning after July 1, 2018 are presented under Topic 606, while prior period amounts

have not been adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

We recorded no change

in retained earnings as of July 1, 2018 as a result of the cumulative impact of adopting Topic 606.

Contracts with Customers

Revenue for sales

of products and services is derived from contracts with customers.

The products and services promised in contracts primarily consist

of hot spot routers.

Contracts with each customer generally state the terms of the sale, including the description, quantity and

price of each product or service.

Revenue from sales of products

and services is derived from contracts with customers.

The products and services covered by contracts primarily consist of hot spot 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.

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.

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.

historical averages, that provision for the year ended June 30, 2020 was not material.

Disaggregation of

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

Using historical averages, that provision for the year ended

June 30, 2021, was 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

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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:

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:

June 30, 2021

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Accounts Receivable

The balance of contract

assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2020 and

June 30, 2019.

Our contract liabilities

are as follows:

The balance of contract assets

was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2021, and June 30, 2020.

Our contract liabilities are

June 30, 2021

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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.

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.

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 satisfied at a point in time.

Revenue from products transferred to customers at a single point in time accounted for 99% of

net sales for the year ended June 30, 2020.

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,

our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Revenue from products transferred to customers at a single point in time accounted for over 99% of net

sales for the year ended June 30, 2021.

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

and accounted for under 1% of net sales for the year ended June 30, 2021.

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, 2021, 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 expense associated with capitalized product development costs associated with complete

All costs associated with

our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold.

goods sold also includes amortization expenses of approximately $360,000 and $405,000 associated with capitalized product development

costs associated with complete technology for the years ended June 30, 2021, and 2020, 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 shall be 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 2 to Notes to Consolidated Financial Statements) 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.

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 June 30, 2020,

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.

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 shall be 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

2 to Notes to Consolidated Financial Statements) 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

of June 30, 2021, and June 30, 2020, capitalized product development costs in progress were $602,388 and $140,192, respectively, and

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

During the year ended June 30, 2021, we incurred

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 (loss).

$694,909 in capitalized product development costs and disposed a technology in progress in the amount of $140,192 as we identified it

has the great unlikelihood of economic success based on its performance test results, 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 $3,746,502 and $2,955,581 for the years

ended June 30, 2020 and 2019, respectively.

We provide a warranty

for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors.

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

Costs associated with research

and development are expensed as incurred.

Research and development costs were $4,567,863 and $3,746,502 for the years ended June 30, 2021,

and 2020, respectively.

We provide a warranty for

one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors.

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 statements of comprehensive income, were $723,617 and $642,930 for the years ended June 30, 2021, and 2020, 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.

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

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.

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 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

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 net realizable value, 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, 2021, and 2020, we have recorded inventory reserves in the amount of $0 and $399,437, respectively,

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

Property and Equipment

are recorded at cost.

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

Maintenance and repairs are

charged to expense as incurred.

Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Office equipment

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Goodwill and Intangible Assets

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.

Goodwill and certain intangible

assets were recorded in connection with the FTI acquisition in October 2009, and were 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

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, 2021, and 2020.

Intangible Assets

The definite lived

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

The definite lived intangible

assets consisted of the following as of June 30, 2021:

Definite lived intangible assets:

7 unchanged sentences

Total as of June 30, 2021

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:

7 unchanged sentences

Total as of June 30, 2020

Amortization expense

recognized during the years ended June 30, 2020 and 2019 was $482,792 and $422,183, respectively.

The amortization expenses of

the definite lived intangible assets for the next five years and thereafter are as follows:

Amortization expense recognized

during the years ended June 30, 2021, and 2020 was $435,571 and $482,792, respectively.

For the year ended June 30, 2021, we

disposed the fully amortized intangible assets in the amount of $3,228,261 and a technology in progress in the amount of $140,192 as we

identified it has the great unlikelihood of economic success based on its performance test results.

The amortization expenses of the definite

lived intangible assets for the next five years and thereafter are as follows:

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:

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.

We are not aware of

any events or changes in circumstances during the year ended June 30, 2020 that would indicate that the long-lived assets are impaired.

Stock-based Compensation

The Company’s

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.

Stock-based compensation is recognized on a straight-line basis over the award’s

vesting period.

The Company estimates the fair value of stock options using a Black-Scholes option pricing model.

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.

The measurement date of the fair value of the equity instrument issued is the earlier of the date on which

the counterparty’s performance is complete or the date on which it is probable that performance will occur.

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;

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.

We are not aware of any events

or changes in circumstances during the year ended June 31, 2021, that would indicate that the long-lived assets are impaired.

Stock-based Compensation

costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles

within the Company.

The Company uses 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.

The Company assesses

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,

the Company records 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.

The Company classifies

interest and penalties associated with such uncertain tax positions as a component of income tax expense.

Earnings per Share Attributable to Common

Basic earnings per

share is calculated by dividing the net income 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 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

The Company’s 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.

Stock-based compensation is recognized on a straight-line basis over the award’s vesting period.

Company estimates 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.

The measurement date

of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete

or the date on which it is probable that performance will occur.

Stock-based compensation costs are reflected in the accompanying consolidated

statements of comprehensive income based upon the underlying recipients' roles within the Company.

The Company uses 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.

The Company assesses 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, the Company records

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.

The Company classifies interest and penalties associated

with such uncertain tax positions as a component of income tax expense.

Earnings per Share Attributable to Common Stockholders

Basic earnings per share is

calculated by dividing the net income 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 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 of Credit Risk

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 year ended June 30, 2020, net sales to our two largest customers

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, 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.

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.

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 year ended June 30, 2021, net sales to our two largest customers represented

63% and 30% of our consolidated net sales, respectively, and 0% and 84% of our accounts receivable balance as of June 30, 2021.

year ended June 30, 2020, net sales to our two largest customers represented 46% and 36% of our consolidated net sales, respectively,

and 21% and 72% of our accounts receivable balance as of June 30, 2020.

No other customer accounted for more than ten percent of total

For the year ended June 30,

2021, we purchased the majority of our wireless data products from two manufacturing companies located in Asia.

If they 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, 2021, we purchased wireless data products from these suppliers in the amount of $138,516,044, or 99% of total purchases, and had related

accounts payable of $9,096,451 as of June 30, 2021.

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.

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

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.

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.

In February 2018, the FASB

issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220):

Reclassification

of Certain Tax Effects from Accumulated Other Comprehensive Income.

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

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.

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.

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 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.

The carrying values of the

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

Property and equipment

consisted of the following as of:

Property and equipment consisted

of the following as of:

June 30, 2021

3 unchanged sentences

Less accumulated depreciation

Depreciation expense

associated with property and equipment was $92,736 and $92,961 for the fiscal years ended June 30, 2020 and 2019, respectively,

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

Depreciation expense associated

with property and equipment was $90,322 and $92,736 for the fiscal years ended June 30, 2021, and 2020, respectively, and is included

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

For the year ended June 30,

2021, we disposed the fully depreciated property ad equipment in the amount of $812,416.

NOTE 5 - ACCRUED LIABILITIES

Accrued liabilities

consisted of the following as of:

Accrued liabilities consisted

of the following as of:

June 30, 2021

5 unchanged sentences

Accrued commission for service providers

Accrued commission to a customer

Other accrued liabilities

NOTE 6 - INCOME TAXES

Income tax provision

for the years ended June 30, 2020 and 2019 consists of the following:

Income tax provision for

the years ended June 30, 2021, and 2020 consists of the following:

Year Ended June 30,

Current income tax expense::

Current income tax expense (benefit):

Deferred income tax expense (benefit):

Provision (benefit) for income taxes

The provision (benefit)

for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before

provision for income taxes as follows:

Provision for income taxes

The provisions for income

taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for

income taxes as follows:

Year Ended June 30,

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

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

State tax, net of federal tax benefit

2 unchanged sentences

Foreign rate difference

Rate reduction

Forgiveness of payroll protection plan loan

Change in valuation allowance

Provision (benefit) for income taxes

Deferred income taxes

reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting

purposes and the amounts used for income tax purposes.

Deferred income taxes reflect

the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the

amounts used for income tax purposes.

Significant components of our deferred tax assets are as follows:

11 unchanged sentences

Net deferred tax asset

Deferred income tax

assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities

that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which

the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax

assets to the amount expected to be realized.

We have evaluated the available evidence supporting the realization of our gross

deferred tax assets, including the amount and timing of forecasted future taxable income.

Management determined it is more likely

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

As of June 30, 2020,

we have federal net operating loss carryforwards of approximately $1.2 million and no state net operating loss carryforwards.

the Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017, the federal net operating loss

recognized on or after January 1, 2018 will carry forward indefinitely.

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 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

under provisions of the Internal Revenue Code Section 382 and similar state provisions.

We apply the provisions

of ASC 740 related to accounting for uncertain tax positions, which prescribes a recognition threshold and measurement process

for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return.

Under this provision,

the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not

to be sustained upon audit by the relevant taxing authority.

Tax benefits of an uncertain tax position will not be recognized if

it has less than a 50% likelihood of being sustained based on technical merits.

A reconciliation of

the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred

tax assets, is as follows:

Deferred income tax assets

and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result

in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are

expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected

to be realized.

We have evaluated the available evidence supporting the realization of our gross deferred tax assets, including the amount

and timing of forecasted future taxable income.

Management determined it is more likely than not that the federal deferred tax assets

will be fully realized, and no valuation allowance is necessary as of June 30, 2021 or 2020.

As of June 30, 2021, we have

federal net operating loss carryforwards of approximately $0.8 million and no state net operating loss carryforwards.

Under the Tax Cuts

and Jobs Act (the “Act”), which was signed into law on December 22, 2017, the federal net operating loss recognized on or

after January 1, 2018 will carry forward indefinitely.

The federal net operating loss of $0.8 million, which recognized 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 under provisions of the Internal

Revenue Code Section 382 and similar state provisions.

We apply the provisions of

ASC 740 related to accounting for u

ncertain tax positions, which prescribes a recognition threshold and measurement process for recording

in the financial statements uncertain tax positions taken or expected to be taken in a tax return.

Under this provision, the impact of

an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be

sustained upon audit by the relevant taxing authority.

Tax benefits of an uncertain tax position will not be recognized if it has less

than a 50% likelihood of being sustained based on technical merits.

A reconciliation of the

beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax

assets, is as follows:

Balance as of June 30, 2019

3 unchanged sentences

Balance as of June 30, 2021

We do not anticipate

any material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

ASC 740 requires us

to accrue interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to

Our policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.

We have not recorded any interest or penalties as the liability associated with the unrecognized tax benefits is immaterial.

are subject to taxation in the U.S., and various state and foreign jurisdictions.

The Tax Cuts and Jobs

Act (the “Act”) was signed into law on December 22, 2017.

The Act includes a provision to reduce federal corporate

income tax rate to a flat 21% effective for a taxable year beginning on or after January 1, 2018.

ASC 740 provides that deferred

tax assets and liabilities be measured at the enacted tax rate expected to apply when the related temporary differences are to

be realized or settled, and the related tax impact is recognized through continuing operation in the period in which tax legislation

Accordingly, the Company remeasures its deferred tax assets and liabilities as of June 30, 2018 and provides income

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

We do not anticipate any

material change in the total amount of unrecognized tax benefits to occur within the next twelve months.

ASC 740 requires us to accrue

interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to be paid.

is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.

We have not recorded any interest

or penalties as the liability associated with the unrecognized tax benefits is immaterial.

We are subject to taxation in the U.S., and

various state and foreign jurisdictions.

NOTE 7 - EARNINGS PER SHARE

We report earnings

per share in accordance with ASC 260, “Earnings Per Share.”

Basic earnings (loss) per share are computed using the

weighted average number of shares outstanding during the period.

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

number of shares outstanding used to compute loss per share is as follows:

We report earnings per share

in accordance with ASC 260, “Earnings Per Share.”

Basic earnings per share are computed using the 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 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.

For the years ended June 30, 2021, and 2020, we have calculated the

diluted effect of common stocks arising from 484,000 and 251,291 stock options, respectively.

The weighted average number

of shares outstanding used to compute earnings per share is as follows:

Year Ended June 30,

Net income (loss) attributable to Parent Company

$ (1,276,124 )

Net income attributable to Parent Company

Weighted-average shares of common stock outstanding:

1 unchanged sentence

Diluted Outstanding shares

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

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

Basic earnings per share attributable to Parent Company stockholders

Diluted earnings per share attributable to Parent Company stockholders

NOTE 8 - COMMITMENTS AND CONTINGENCIES

On September 9, 2015,

we signed a lease for new 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 new lease includes payment for certain common

The term of the lease for the new office space was four years from the lease commencement date and was then extended

On September 9, 2015, we signed

a lease for new office space consisting of approximately 12,775 square feet, located in San Diego, California, at a monthly rent of $25,754,

which commenced on October 28, 2015.

In addition to monthly rent, the new lease includes payment for certain common area costs.

of the lease for the new office space was four years from the lease commencement date and was then extended at a monthly rent of $25,752,

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.

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, 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:

feet of office space, located in Seoul, Korea, at a monthly rent of approximately $8,000 and the additional office space consisting of

approximately 2,682 square feet, also located in Seoul, Korea, at a monthly rent of approximately $2,700 that expired on August 31, 2021,

and extended by an additional twelve months to August 31, 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, 2021, and extended by an additional

twelve months to September 4, 2022.

Rent expense for the years

ended June 30, 2021, and 2020 was $446,614 and $435,683, respectively.

Future minimum payments under operating leases are as follows:

Payments due by June 30,

2 unchanged sentences

Total Obligations

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.

As of June 30, 2021, 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

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:

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 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.

Verizon Jetpack Recall

On April 8 th , Verizon

issued a press release announcing that it is 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 import the devices and

supply them 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

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 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 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.

We are continuing to investigate

the alleged device failures.

At the time of the recall announcement, only two of the devices involved in the 15 alleged incidents had

been physically inspected by Verizon.

We have not yet had the opportunity to inspect any of these devices, but we have retained an expert

to assist in the process.

We are actively discussing

ways to resolve the consequences of the recall, including the costs to Verizon of conducting the recall, impacts on our manufacturing

partners and our future business relationship with Verizon.

Our suppliers and component manufactures, as well as relevant insurance carriers

have been notified and are also participating.

Future Impact on Financial

We need to resolve the recall

to ensure future sales to Verizon.

Discussions are ongoing but no agreement for future products have been reached at this time.

striving to avoid litigation arising from the recall and have not received court filings from any of the parties involved at this time.

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 allow us to estimate the ultimate cost of potential future litigation.

Although the recall notice identified 2.5 million devices,

we are unable to predict the number of units that may be returned or the costs and damages that may be alleged in the future.

Shareholder Litigation

We have been made aware of

legal actions alleging, among other things, that we had prior knowledge that the recall was likely and did not disclose that information

to investors in a timely manner.

We believe these allegations are not supported by the facts and we intend to vigorously defend against

these claims.

Swing Profits Litigation

A legal action was filed against

Franklin, as a nominal defendant, on or about July 22, 2021, claiming that OC Kim violated rule 16b of the Securities Act for taking swing

profits from a sale and purchase of shares in violation of the Act.

We believe the allegations are not supported by the facts and we intend

to vigorously defend against these claims.

Anydata, Inc.

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.

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.

(“Anydata”) for the product ACT233F 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, Quanta.

We believe 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 million.

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, and for the quarter ended December 31, 2020, the prepaid

expense of $149,580 has been recorded as a cost of goods sold.

As of June 30, 2021, there is a reasonable possibility we may incur a loss;

however, the amount is not estimable at this time.

On January 25 th , 2021, we commenced legal action against Anydata and its

principal officers in San Diego Superior Court, case number 37-2021-00003468-CU-BC-CTL.

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, we are deemed to be an essential business.

Nonetheless, out of concern for

our workers and pursuant to the government order, we reduced the scope of our 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 we expect this situation may increase demand for its

products, the related impact cannot be reasonably estimated at this time.

Change of Control Agreements

On September 21, 2009,

we entered into Change of Control Agreements with OC Kim, our President, and Yun J.

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.

Change of Control Agreement provides for a lump sum payment to the officer in case of a change of control of the Company.

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.

The Change of Control

Agreement with Mr.

Each Change of Control

Agreement provides for a lump sum payment to the officer in case we experience a change of control.

The term includes the acquisition

of our Common Stock 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 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 our outstanding Common Stock, or a liquidation or dissolution or sale of substantially

all of our assets.

The Change of Control Agreement

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 Board of Directors

has approved extension of the Change of Control Agreements with Mr.

Lee, through September 30, 2021.

Lee calls for a payment of $2 million

upon a change of control.

International Tariffs

We believe that our

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

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.

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 9 - LONG-TERM INCENTIVE PLAN AWARDS

We apply the provisions

of ASC 718, “Compensation - Stock Compensation,”

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

to value stock options.

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.

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.

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

Stock Incentive Plan (“2009 Plan”) on June 11, 2009, which provided for the grant of incentive stock options and non-qualified

stock options to our employees and directors.

Options granted under the 2009 Plan generally have a term of ten years and generally

vest and become exercisable at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant

Historically, some stock option grants have included shorter vesting periods ranging from one to two years.

In 2009, we adopted the Stock

Incentive Plan (“2009 Plan”), which provided for the grant of incentive stock options and non-qualified stock options to our

employees and directors.

Options granted under the 2009 Plan generally have a term of ten years and generally vest and become exercisable

at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant dates.

Historically, some stock option

grants have included shorter vesting periods ranging from one to two years.

In July of 2020, the Board

of Directors adopted the 2020 Franklin Wireless Corp.

Stock Option Plan, which covers 800,000 shares of Common Stock.

The Plan provide

for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors, and independent

These options will have such vesting or other provisions as may be established by the Board of Directors at the time of each

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 was no compensation expense recorded under this method for the year ended June 30, 2030.

A summary of the status

of our stock options is presented below:

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 $380,758 and $0 compensation expenses recorded under this method for the years ended June 30, 2021, and

2020, respectively.

A summary of the status of

our stock options is presented below:

Outstanding as of June 30, 2019

4 unchanged sentences

Exercisable as of June 30, 2021

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,

there was no unrecognized compensation cost related to non-vested stock options granted.

NOTE 10 - SUBSEQUENT EVENTS

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.

The aggregate

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

of $9.17 as of June 30, 2021, which would have been received by the option holders had all option holders exercised their options as of

The weighted-average grant-date fair value of stock options outstanding as of June 30, 2021, in the amount of 484,000 shares

was $3.02 per share.

As of June 30, 2021, there

was unrecognized compensation cost of $808,225 related to non-vested stock options granted.

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