What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-09-13 compared with 2021-09-28 · 547 added, 498 removed, 945 unchanged (53% of the section changed)

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during the fourth quarter of the fiscal year ended June 30, 2022.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible

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internal control over financial reporting as of June 30, 2022.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

DISCLOSURE REGARDING FOREIGN

JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable

DIRECTORS, EXECUTIVE OFFICERS

AND CORPORATE GOVERNANCE

Set forth below are the names,

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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.

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

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Nelson was an early investor in Franklin Telecommunications Corp.

in the 1980’s and served

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

in 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

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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

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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.

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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

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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

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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.

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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 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

The Board of Directors has no other committees.

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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").

all compensation paid or accrued by us for the years ended June 30, 2022, and 2021 to our President, Chief Operating Officer, and Acting

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

Compensation Table

Name and Principal Position

Option Awards

All Other Compensation

Chief Operating Officer

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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 to purchase 200,000, 15,000, and 10,000 shares were granted to OC Kim, Yun J.

(David) Lee, and David Brown

during fiscal 2022, respectively.

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.

Outstanding Equity Awards at Fiscal Year-End

Options Awards

of Shares that

The option vests and is exercisable in full on the first anniversary of the date of the grant and has a

ten-year term.

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

nonexercisable

The option vests and is exercisable over three years as follows and has a five-year term:

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

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

33.3% 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

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

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

The option had an expiration date of

June 13, 2022.

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:

On June 13, 2022, the option was modified to extend the term to December 31, 2022.

The option vests and is exercisable over three years as follows and has a five-year term:

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

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Johnathan Chee

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.

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

year ended June 30, 2022 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 year ended June 30, 2022, there has been no approved bonus for the Directors.

On December 28, 2021, options to purchase 15,000 shares were granted to each of the directors.

The options granted to directors during fiscal 2022 vest over three years and are subject to early termination on the occurrence of certain events related to termination or resignation of the director.

There were no outstanding equity awards held by

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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.

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

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Our compensation policies

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

interests of our stockholders.

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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.

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.

The 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.

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

In January 2022, we implemented the CalSavers retirement program.

CalSavers is California’s new retirement savings program that

will offer millions of workers in California the opportunity to get on track for the future.

The program is a voluntary participation

All employees have the option to participate in this program if they chose to do so.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth

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

805 Third Ave., 15 th Floor,

New York, NY 10022

Kennedy Capital Management, Inc.

10829 Olive Blvd., St.

Louis, MO 63141

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

AIGH Investment Partners, L.L.C.

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All directors and executive officers as a group

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

Based solely on a Schedule 13G dated February 14, 2022, which indicates that Mr.

Packer may be deemed to beneficially own 674,738 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 July 09, 2021, which indicates that Kennedy Capital

Management, Inc.

may be deemed to beneficially own 661,185 shares.

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

Based solely on a Schedule 13G dated February 14, 2022, which indicates

that AIGH Capital Management, L.L.C.

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INDEPENDENCE.

PRINCIPAL ACCOUNTANT

FEES AND SERVICES

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed

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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 SCHEDULES

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, 2022, and 2021, which was performed by Paris, Kreit, and Chiu CPA LLP (formerly as “Benjamin & Ko”).

services described above were approved in advance by the Board of Directors or the Company's Audit Committee.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Index to financial statements

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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.

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.

Description of Securities (7)

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

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

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

and OC Kim (3)

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

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

and OC Kim (3)

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

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

and David Lee.

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.

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

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

and Top Intercube Co., Ltd .

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

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

and Partron Co., Ltd.

of Ethics (2)

Loan Agreement between Franklin Technology Incorporation and Franklin Wireless Corporation, dated March 31, 2022 (8)

Code of Ethics (2)

Consent of Paris, Kreit and Chiu CPA LLP

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

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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.

(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.

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

the quarter ended March 31, 2022, filed on May 10, 2022.

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FRANKLIN WIRELESS CORP.

INDEX TO CONSOLIDATED FINANCIAL

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022, and 2021

Index to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firms (PCAOB ID 6651 )

Consolidated Balance Sheets as of June 30, 2022, and June 30, 202 1

Consolidated Statements of Comprehensive Income for the Years ended June 30, 2021, and 2020

Consolidated Statements of Comprehensive (Loss) Income for the Years ended June 30, 2022, and 202 1

Consolidated Statements of Stockholders' Equity for the Years ended June 30, 2022, and 202 1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and Board of Directors of Franklin

Wireless Corp.

To the Shareholders and Board of Directors of Franklin Wireless Corp.

Opinion on the Consolidated Financial Statements

and Internal Control Over Financial Reporting

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.

and its subsidiary (the “Company”) as of June 30, 2022 and 2021, and the related

consolidated statements of comprehensive (loss) income, changes in stockholders’ equity, and cash flows for each of the two years

in the period ended June 30, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of June 30, 2022, based on criteria established

in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements

referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the

results of its operations and its cash flows for each of the two years in the period ended June 30, 2022 in conformity with accounting

principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects,

effective internal control over financial reporting as of June 30, 2022, based on criteria established in Internal Control – Integrated

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

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

The Company’s management is responsible

for these consolidated financial statements, 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 Management’s Annual Report on Internal

Control Over Financial Reporting.

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

and an opinion on the entity’s internal control over financial reporting 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.

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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.

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

statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting

was maintained in all material respects.

Our audits of the consolidated financial statements

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 responds 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 financial statements.

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

that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control

Over Financial Reporting

An entity’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 accounting principles generally accepted in the United States of America.

An entity’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 entity;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with

accounting principles generally accepted in the United States of America, and that receipts and expenditures of the entity are being made

only in accordance with authorizations of management and directors of the entity;

and (3) provide reasonable assurance regarding prevention

or timely detection of unauthorized acquisition, use, or disposition of the entity’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.

Critical Audit Matters

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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.

1 unchanged sentence

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.

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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.

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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.

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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 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.

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 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.

We believe that our audits provide

a reasonable basis for our opinion.

/s/ HASKELL & WHITE LLP

We have served as the Company’s auditor

Irvine, California

Description of the Matter

Legal Proceedings

As described in Note 8 to the consolidated financial

statements, management records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the

loss and when loss is probable.

Where the reasonable estimate of the probable loss is a range, management records as an accrual in its

financial statements the most likely estimate of the loss, or the low end of the range if there is no one best estimate.

Management either

discloses the amount of a possible loss or range of loss in excess of established accruals if estimable, or states that such an estimate

cannot be made.

Management discloses significant legal proceedings even where liability is not probable or the amount of the liability

is not estimable, or both, if management believes there is at least a reasonable possibility that a loss may be incurred.

How We Addressed the Matter in Our Audit

The principal considerations for our determination

that performing procedures relating to legal proceedings is a critical audit matter are the significant judgment by management when assessing

the likelihood of a loss being incurred and when estimating the loss or range of loss for each claim, which in turn led to significant

auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s assessment of the liabilities and

disclosures associated with legal proceedings.

Addressing the matter involved performing procedures and evaluating

audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing

the effectiveness of controls relating to management’s evaluation of the liability related to legal proceedings, including controls

over determining the likelihood of a loss and whether the amount of loss can be reasonably estimated, as well as financial statement disclosures.

These procedures also included, among others, obtaining and evaluating the letters of audit inquiry with internal and external legal counsel,

evaluating the reasonableness of management’s assessment regarding whether an unfavourable outcome is reasonably possible or probable

and reasonably estimable, and evaluating the sufficiency of the Company’s disclosures related to legal proceedings

We have served as the Company’s auditor

Kreit, and Chiu CPA LLP , (formerly as “Benjamin & Ko”).

September 13, 2022

4 unchanged sentences

Cash and cash equivalents

Certificates of deposit account

Accounts receivable

Short-term investments-others

Accounts receivable, net

Other receivables, net

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Income tax payable

Unearned revenue

Accrued liabilities

2 unchanged sentences

Lease liabilities, non-current

Notes payable, payroll protection plan loan

Total liabilities

Commitments and contingencies (Note 8)

Stockholders’

Parent Company stockholders’

Stockholders’ equity:

Parent Company stockholders’ equity

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

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Retained earnings

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

Treasury stock, 2,549,208 shares as of June 30, 2022, and 2021

( 3,554,893 )

Accumulated other comprehensive loss

Total Parent Company stockholders’

Total Parent Company stockholders’ equity

Non-controlling interests

Total stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

Consolidated Statements of

Comprehensive Income

Consolidated Statements of Comprehensive (Loss)

Fiscal Years Ended June 30,

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Total operating expenses

Income from operations

(Loss) income from operations

( 4,974,892 )

Other income, net:

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Gain from the forgiveness of payroll protection plan loan

Gain from the forgiveness of debts

Other income (expense), net

Total other income, net

Income before provision for income taxes

Income tax provision

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

(Loss) income before (benefit) provision for income taxes

( 4,709,473 )

Income tax (benefit) provision

( 1,037,068 )

Net (loss) income

( 3,672,405 )

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

Net income attributable to Parent Company

Basic earnings per share attributable to Parent Company stockholders

Diluted earnings per share attributable to Parent Company stockholders

Net (loss) income attributable to Parent Company

$ ( 3,762,848 )

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

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

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - diluted

Comprehensive income

Comprehensive (loss) income

Net (loss) income

$ ( 3,672,405 )

Translation adjustments

Comprehensive income

Comprehensive (loss) income

( 4,184,055 )

comprehensive income attributable to non-controlling interest

Comprehensive income attributable to controlling interest

Comprehensive (loss) income attributable to controlling interest

$ ( 4,274,498 )

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

Consolidated Statements of

Stockholders' Equity

Consolidated Statements of Stockholders' Equity

Additional Paid-in

Accumulated Other Comprehensive Income

Non-controlling

Total Stockholders

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$ ( 4,513,479 )

$ ( 650,426 )

Net income attributable to Parent Company

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Comprehensive income attributable to non-controlling interest

Purchase of shares of a subsidiary

Sales of treasury stock

Stock based compensation

Balance - June 30, 2021

$ ( 3,554,893 )

Net income attributable to Parent Company

$ ( 472,502 )

Net loss attributable to Parent Company

( 3,762,848 )

Foreign exchange translation

1 unchanged sentence

Comprehensive income attributable to non-controlling interest

Sales of treasury stock

Stock based compensation

1 unchanged sentence

$ ( 3,554,893 )

$ ( 984,152 )

See accompanying notes to consolidated

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FRANKLIN WIRELESS CORP.

Consolidated Statements of

Consolidated Statements of Cash Flows

Fiscal Years Ended June 30,

CASH FLOW FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 3,672,405 )

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

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Forgiveness of payroll protection plan loan

Forgiveness of debts

Disposal of intangible assets

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( 3,222,344 )

(10,730,663 )

Prepaid expenses and other current assets

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( 1,537,287 )

( 32,364,266 )

Income tax payable

Lease liabilities

Unearned revenue

Accrued liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

( 7,407,355 )

CASH FLOW FROM INVESTING ACTIVITIES:

Purchases of short-term investments

Purchases of shares of a subsidiary

( 10,950,625 )

Purchases of property and equipment

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Net cash used in investing activities

( 11,675,028 )

CASH FLOW FROM FINANCING ACTIVITIES:

Proceeds of payroll protection plan loan

Sales of common stock sold from treasury stock

2 unchanged sentences

Effect of foreign currency translation

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

( 19,518,588 )

Cash and cash equivalents, beginning of year

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$ ( 200,350 )

Non-cash investing and financing activities:

Initial adoption of right to use assets

Initial adoption of lease liabilities

$ ( 4,124,485 )

See accompanying notes to consolidated financial

FRANKLIN WIRELESS CORP.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS OVERVIEW

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position in Franklin Technology Inc.

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

FTI primarily

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The consolidated financial

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

interests) as of June 30, 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%.

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.

statements include the accounts of the Company and its subsidiary with a majority voting interest of approximately 66.3 % (approximately

33.7 % is owned by non-controlling interests) as of June 30, 2022, and 2021.

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

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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

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Accounting Standards

Codification (“ASC”) 280, “Segment Reporting,”

requires public companies to report financial and descriptive

information about their reportable operating segments.

We identify our operating segments based on how our chief operating decision maker

internally evaluates separate financial information, business activities and management responsibility.

We have one reportable segment,

consisting of the sale of wireless access products.

Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information

about their reportable operating segments.

We identify our operating segments based on how our chief operating decision maker internally

evaluates separate financial information, business activities and management responsibility.

We have one reportable segment, consisting

of the sale of wireless access products.

We generate revenues from

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financial information by geographic area:

Segment information by geographic areas

Fiscal Year Ended June 30,

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$ 184,115,345

Long lived assets by geographic area

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

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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.

collection history as well as the current balances associated with all significant customers and associated invoices, we do no t believe

an allowance for doubtful accounts was necessary as of June 30, 2022, and 2021.

Revenue Recognition

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receivables are as follows:

Schedule of receivables

June 30, 2022

1 unchanged sentence

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, 2021, and June 30, 2020.

Our contract liabilities are

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, 2022 and June 30,

An amount of $837,000 is

included in the Accounts Receivable balance as of June 30, 2022, which is the direct result of an agreement between our vendor and our

customer where we acted as facilitator.

There is a corresponding balance of $837,000 in our Accounts Payable balance as of June 30, 2022.

We expect to settle our liability with the vendor once the amount is received from the customer.

Schedule of contract liabilities

June 30, 2022

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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.

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.

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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.

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

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and accounted for under 1% of net sales for the year ended June 30, 2022.

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.

Most of our revenue that is 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, 2022, our contracts

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Accounting Standards Codification

(“ASC”) Topic 350, “Intangibles - Goodwill and Other”

includes software that is part of a product or process to

(“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.

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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

$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

As of June 30, 2022, and June

30, 2021, capitalized product development costs in progress were $ 187,343 and $ 602,388 , respectively, and these amounts are included in

intangible assets in our consolidated balance sheets.

During the year ended June 30, 2022, we incurred $ 658,544 in capitalized product

development costs, and all costs incurred before technological feasibility is reached are expensed and included in our consolidated statements

of comprehensive income.

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we believe we do not have any net warranty exposure and do not accrue any warranty expenses.

Historically, the Company has not experienced

Historically, the Company has no t experienced

any material net warranty expenditures.

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We have invested excess funds

in short term liquid assets of certificates of deposit.

in short term liquid assets, such as certificates of deposit or money market funds.

Our inventories consist of

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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

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

Useful lives of property and equipment

Office equipment

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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

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

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.

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assets consisted of the following as of June 30, 2022:

Intangible Assets

Definite lived intangible assets:

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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:

during the years ended June 30, 2022, and 2021 was $ 579,012

and $ 435,571 , respectively.

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:

Schedule of Expected Amortization Expense

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

“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.

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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;

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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

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.

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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.

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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.

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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.

(Loss) Earnings per Share Attributable to Common

Basic (loss) earnings per

share is calculated by dividing the net (loss) income by the weighted-average number of common shares that were outstanding for the period,

without consideration for potential common shares.

Diluted (loss) earnings per share is calculated by dividing the net (loss) 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.

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For the year ended June 30, 2022, 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

70 % and 13 % of our consolidated net sales, respectively, and 0 % of our accounts receivable balance as of June 30, 2022.

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.

No other customer accounted for more than ten percent of total net sales.

For the year ended June 30,

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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.

30, 2022, we purchased wireless data products from these suppliers in the amount of $ 22,319,313 , or 98.3 % of total purchases, and had

related accounts payable of $ 7,409,273 as of June 30, 2022.

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,

We maintain our cash accounts

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Recently Issued Accounting Pronouncements

In June 2016, the FASB

issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses, which changes the methodology to be

used to measure credit losses for certain financial instruments and financial assets, including trade receivables.

methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred

over the life of the financial asset.

The Company adopted the standard on July 1, 2020.

The new standard did not have a material

impact on its consolidated financial statements.

In February 2018, the FASB

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

Reclassification

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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.

The adoption of this update does not have a material impact the Company’s consolidated financial statements.

In December 2019, the

FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which among other things, eliminates

certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating

income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of

The Company adopted the standard on July 1, 2021.

The new standard did not have a material impact on its consolidated

financial statements.

NOTE 3 - FAIR VALUE MEASUREMENTS

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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 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.

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of the following as of:

Schedule of property and equipment

June 30, 2022

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with property and equipment was $ 87,743 and $ 90,322 for the fiscal years ended June 30, 2022, and 2021, 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.

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

For the years ended June

30, 2022 and 2021, we disposed of fully depreciated property and equipment in the amounts of $ 4,175 and $ 812,416 , respectively.

NOTE 5 - ACCRUED LIABILITIES

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of the following as of:

Schedule of accrued liabilities

June 30, 2022

1 unchanged sentence

Accrued payroll deductions owed to government entities

Accrued salaries and bonuses

Accrued vacation

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NOTE 6 - INCOME TAXES

Income tax provision for

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

Income tax (benefit) provision

for the years ended June 30, 2022, and 2021 consists of the following:

Schedule of Income tax provision from continuing operations

Year Ended June 30,

Current income tax expense (benefit):

Deferred income tax expense (benefit):

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:

Current income tax (benefit) expense:

$ ( 127,998 )

Total Current income tax expense (benefit)

Deferred income tax (benefit) expense:

Total deferred income tax expense (benefit)

(Benefit) provision for income taxes

$ ( 1,037,068 )

The (benefit) provision 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:

Schedule of effective income tax rate

Year Ended June 30,

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

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

$ ( 982,130 )

State tax, net of federal tax benefit

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Change in valuation allowance

Provision (benefit) for income taxes

(Benefit) provision for income taxes

$ ( 1,037,068 )

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.

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:

Schedule of deferred tax assets

June 30, 2022

2 unchanged sentences

Net operating losses

Lease accounting

Lease accounting, net

Inventory reserve

2 unchanged sentences

Deferred state taxes

Property and equipment, net

Total deferred tax liabilities

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As of June 30, 2022, 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.

federal and state net operating loss carryforwards of approximately $ 3.3 million and $ 40,000 , respectively.

Under the Tax Cuts and Jobs

Act, which was signed into law on December 22, 2017, the federal net operating loss of approximately $ 2.5 million, which was recognized

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

The federal net operating loss of approximately $ 0.8 million, which was

recognized on or before December 31, 2017, will expire through 2035 .

The state net operating loss of approximately $ 40,000 will begin

to expire through 2042.

The utilization of net operating loss carryforwards may be subject to limitations under provisions of the Internal

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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

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.

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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:

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:

Schedule of unrecognized tax benefits

Balance as of June 30, 2020

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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 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.

NOTE 7 – (LOSS) EARNINGS PER SHARE

We report (loss) earnings

per share in accordance with ASC 260, “Earnings Per Share.” Basic (loss) earnings per share are computed using the weighted

average number of shares outstanding during the period.

Diluted (loss) 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 year ended June 30, 2022, we were

in a net loss position and have excluded 766,001 stock options from the calculation of diluted net loss per share because these securities

are anti-dilutive.

For the year ended June 30, 2021, we have calculated the diluted effect of common stocks arising from 484,000 stock

The weighted average number

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

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

Schedule of earnings per share

Year Ended June 30,

Net income attributable to Parent Company

Net (loss) income attributable to Parent Company

$ ( 3,762,848 )

Weighted-average shares of common stock outstanding:

1 unchanged sentence

Diluted Outstanding shares

Basic earnings per share attributable to Parent Company stockholders

Diluted earnings per share attributable to Parent Company stockholders

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

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

NOTE 8 - COMMITMENTS AND CONTINGENCIES

In February 2016, the Financial

Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.

2016-02 (Topic 842).

842 amended several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as

a right-of-use asset and corresponding liability, measured at the present value of the lease payments.

In July 2018, the FASB issued supplemental

adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU

2018-11 “Leases (Topic 842):

Targeted Improvements.” The new guidance aims to increase transparency and comparability among

organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key

information about leasing arrangements.

A modified retrospective application is required with an option to not restate comparative periods

in the period of adoption.

The Company, effective July

1, 2019 has adopted the provisions of the new standard.

The Company decided to use the practical expedients available upon adoption of

Topic 842 to aid the transition from current accounting to provisions of Topic 842.

The package of expedients will effectively allow the

Company to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard

as the business evolves.

The Company has an operating

lease principally for both Franklin Wireless Corp.

and Franklin Technologies Inc.

Management evaluates each lease independently to determine

the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

The Company adopted Topic 842 using a modified retrospective approach

for its existing lease at July 1, 2019.

The adoption of Topic 842 impacted the Company’s balance sheet by the recognition of the

operating lease right-of-use assets and the liability for operating leases.

The lease liability is based on the present value of the remaining

lease payments, discounted using a market based incremental borrowing rate as the effective date of July 1, 2019 using current estimates

as to lease term including estimated renewals for each operating lease.

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.

a lease for new office space consisting of approximately 12,775 square feet, located in San Diego, California, which commenced on October

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 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 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.

The term 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 $25,754, by an additional fifty

months to December 31, 2023.

Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use

and adequate for our present needs.

Our Korea-based subsidiary,

FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting

of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea.

These leases expired on August

31, 2022 but extended by an additional twelve months to August 31, 2023.

In addition to monthly rent, the leases provide for periodic

cost of living increases in the base rent and payment for certain common area costs.

These facilities are covered by an appropriate level

of insurance, and we believe them to be suitable for our use and adequate for our present needs.

We lease one corporate housing facility,

located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2022,

and extended by an additional twelve months to September 4, 2023.

Rent expense for the years

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

ended June 30, 2022, and 2021 was $ 446,057 and $ 446,614 ,

respectively.

Future minimum payments under operating leases are as follows:

Schedule of Future Minimum Rental Payments for Operating Leases

Payments due by June 30,

Administrative office, San Diego, CA

Administrative office, Korea

Total Obligations

As of June 30, 2022, 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.

discount rates of 4.0 % in determining our operating lease liabilities for the office spaces in San Diego, California.

This rate represented

our incremental borrowing rates at that time.

Short-term leases with initial terms of twelve months or less are not capitalized, and our

lease of the South Korean offices has been considered as short-term lease.

Our San Diego office lease was extension of previous lease

and did not contain any further extension provisions.

Future minimum payments under

operating leases are as follows:

Maturities of lease liabilities

Operating Leases

Total lease payments

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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

On April 8, 2021, Verizon

issued a press release announcing that it is working with the U.S.

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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

first advised us of one alleged Jetpack device failure at the end of February 2021.

We immediately began meeting with Verizon and requested

access to the device.

We also began internal testing to evaluate device performance.

We did not receive any further incident information until the last

week of March 2021.

On April 1 we issued a press release announcing that we had received reports from Verizon about potential issues with

the batteries in the devices.

We did not receive any further incident information

until the last week of March 2021.

On April 1, 2021 we issued a press release announcing that we had received reports from Verizon about

potential issues with the batteries in the devices.

On April 9, 2021 we issued a press release announcing the voluntary recall by Verizon.

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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.

could cause the devices to fail in the way described in Verizon’s recall notice.

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.

We are striving to avoid any litigation arising from the recall and

have not been served with any legal action relating to the products covered by the recall.

We are not currently able to estimate the financial

impact of the recall on our future operations.

At this time, we do not have information that identifies the cause of the alleged incidents.

We also do not have any specific legal claims or theories of causation for device failure incidents that would help us estimate the cost

of potential future litigation.

No liability has been recorded for this litigation because the Company believes that any such liability

is not probable and reasonably estimable at this time.

Shareholder Litigation

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.

A shareholder action, Ali

Franklin Wireless Corp.

Case #3:21-cv-00687-AJB-MSB, was filed in the U.S.

District Court, Southern District of California

(San Diego) on April 16, 2021, alleging, among other things, that we had prior knowledge that the recall was likely and that we did not

disclose that information to investors in a timely manner.

We believe these allegations are not supported by the facts and we will vigorously

defend against such claims.

Discovery is ongoing at this time.

Harwood / Martin

A legal action was filed in

District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Stephen Norwood Derivatively

on Behalf of Nominal Defendant Franklin Wireless Corp.

OC Kim, Et al., Case #21cv01837-JAH-DEB, on or about October 29, 2021, claiming

among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors

in a timely manner.

We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

A legal action was filed in

District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Debra Martin, derivatively

on behalf of nominal defendant Franklin Wireless Corp.

OC Kim, Et al., Case #21cv2091-CAB-KSC, on or about December 15, 2021, claiming

among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors

in a timely manner.

We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

The Harwood and Martin actions

have recently been consolidated into a single action in the U.S.

District Court, Southern District of California (San Diego) titled “In

re Franklin Wireless Corp.

Derivative Litigation”, Case No.:

21cv1837-AJB (MSB).

Discovery is ongoing at this time.

A legal action was filed in

the Second Judicial District Court of Nevada in the County of Washoe against Franklin, as a nominal defendant, Barbara Pape, derivatively

on behalf of nominal defendant Franklin Wireless Corp.

OC Kim, Et al., Case # CV22-00471, on or about March 21, 2022, claiming among

other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely

We believe these allegations are not supported by the facts and we will vigorously defend against such claims.

The Company will vigorously

defend such shareholder litigation and proceedings.

No liability has been recorded for these litigations because the Company believes

that any such liability is not probable and reasonably estimable at this time.

“Short-Swing”

Profits Litigation

A legal action was filed in the U.S.

District Court, Southern District

of California (San Diego) against Franklin, as a nominal defendant, Nosirrah Management LLC v.

Franklin Wireless et al.

Case # 3:21-cv-01316-CAB-JLB,

on or about July 22, 2021, claiming that our Chief Executive Officer, OC Kim, violated Section 16(b) of the Securities Exchange Act of

1934 for receiving “short-swing” profits from a sale and purchase of Franklin shares, in violation of that Act.

the allegations are not supported by the facts and we intend to vigorously defend against these claims.

No liability has been recorded

for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time.

We entered into a Professional

Services Agreement with Anydata Corp.

(“Anydata”) for the product ACT233F Smart Link OBD device on May 5, 2017, for a minimum

purchase commitment of 250,000 units.

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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;

As of March 31, 2022, there is a reasonable possibility we may incur a

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.

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.

As of the date of this report, litigation

is continuing, and the action is not yet resolved.

In March 2020, the World Health

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We apply the provisions of

ASC 718, “Compensation - Stock Compensation,”

to all of our stock-based compensation awards, and use the Black-Scholes option

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.

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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.

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

2020, respectively.

The estimated forfeiture rate

considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations

about the future.

We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates.

There were $ 545,841 and $ 380,758 compensation expenses recorded under this method for the years ended June 30, 2022, and 2021, respectively.

A summary of the status of

our stock options is presented below:

Schedule of Stock Option Activity

Outstanding as of June 30, 2020

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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

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

of $3.1727 as of June 30, 2022, which would have been received by the option holders had all option holders exercised their options as

of that date.

The weighted-average grant-date fair value of stock options outstanding as of June 30, 2022, in the amount of 766,001 shares

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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