FKWL filing — read by section

FRANKLIN WIRELESS CORP. 10-Q 
 
 Table
of Contents 

 UNITED STATES 

 SECURITIES AND EXCHANGE COMMISSION 

 Washington, DC 20549 

 FORM 10-Q 

 x 
 
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
 
 For the quarterly period ended March 31, 2024 

 OR 

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

 For the transition period from 
to . 

 Commission file number: 001-14891 

 FRANKLIN WIRELESS CORP. 

 (Exact name of Registrant as specified in its charter)

 Nevada 

 (State or other jurisdiction of incorporation or
 organization)
 
 95-3733534 

 (I.R.S. Employer Identification Number)
 
 3940 Ruffin Road 

 Suite C 

 San Diego , California 

 (Address of principal executive offices)
 
 92123 

 (Zip code)
 
 ( 858 ) 623-0000 

 Registrant's telephone number, including area code

 Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No
 ☐ 

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

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

 Large accelerated filer ☐ 
 Accelerated filer ☐ 
 Non-accelerated filer ☒ 
 Smaller reporting company ☒ 
 Emerging Growth Company ☐ 

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

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

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

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

 Title of each class 
 Trading symbol(s) 
 Name of each exchange on which registered 

 Common Stock, par value $.001 per share 
 FKWL 
 The Nasdaq Stock Market LLC 

 The Registrant has 11,784,280 shares of common stock outstanding as
of May 15, 2024.

 FRANKLIN WIRELESS CORP. 

 FORM 10-Q 

 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024 

 INDEX 

 Page 

 PART I – Financial Information 

 Item 1: 
 Consolidated Financial Statements (unaudited) 
 
 Consolidated Balance Sheets as of March 31, 2024 (unaudited) and June 30, 2023 
 
 4 

 Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (unaudited) for the three and nine months ended March 31, 2024 and 2023 
 
 5 

 Consolidated Statements of Stockholders' Equity (unaudited) for the three and nine months ended March 31, 2024 and 2023 
 
 6-7 

 Consolidated Statements of Cash Flows (unaudited) for the nine months ended March 31, 2024 and 2023 
 
 8 

 Notes to Consolidated Financial Statements (unaudited) 
 
 9 

 Item 2: 
 Management’s Discussion and Analysis of Financial Condition and Results of Operations 
 
 25 

 Item 3: 
 Quantitative and Qualitative Disclosures About Market Risk 
 
 30 

 Item 4: 
 Controls and Procedures 
 
 30 

 PART II – Other Information 

 Item 1: 
 Legal Proceedings 
 
 31 

 Item 1A: 
 Risk Factors 
 
 31 

 Item 2: 
 Unregistered Sales of Equity Securities and Use of Proceeds 
 
 31 

 Item 3: 
 Defaults Upon Senior Securities 
 
 31 

 Item 4: 
 Mine Safety Disclosures 
 
 31 

 Item 5: 
 Other Information 
 
 31 

 Item 6: 
 Exhibits 
 
 31 

 Signatures 
 
 32 

 2 

 NOTE ON FORWARD LOOKING STATEMENTS 

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

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

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

 3 

 PART I – FINANCIAL INFORMATION 

 ITEM 1. Consolidated Financial Statements 

 FRANKLIN WIRELESS CORP. 

 Consolidated Balance Sheets 

 M arch
 31, 2024 
 
 (Unaudited) 
 June 30, 2023 

 ASSETS 
 
 Current assets: 
 
 Cash and cash equivalents 
 $ 7,004,494 
 $ 12,241,286 

 Short-term investments 
 24,732,707 
 26,728,313 

 Accounts receivable 
 10,262,320 
 8,949,802 

 Advance to vendors 
 57,043 
 53,875 

 Other receivables, prepaid expenses, and other current assets 
 128,504 
 51,125 

 Inventories, net 
 1,136,035 
 3,741,637 

 Prepaid income taxes 
 136,641 
 – 

 Loan to an employee 
 90,012 
 91,057 

 Total current assets 
 43,547,756 
 51,857,095 

 Property and equipment, net 
 126,046 
 101,088 

 Intangible assets, net 
 1,585,201 
 2,180,884 

 Deferred tax assets, non-current 
 2,809,830 
 2,235,515 

 Goodwill 
 273,285 
 273,285 

 Right of use assets 
 1,542,462 
 152,665 

 Other assets 
 134,239 
 126,546 

 TOTAL ASSETS 
 $ 50,018,819 
 $ 56,927,078 

 LIABILITIES AND STOCKHOLDERS' EQUITY 
 
 Current liabilities: 
 
 Accounts payable 
 $ 6,281,925 
 $ 12,950,497 

 Income tax payable 
 – 
 6,556 

 Contract liabilities and advance from customers 
 195,599 
 146,488 

 Accrued legal contingency expense 
 2,400,000 
 2,400,000 

 Accrued liabilities 
 1,335,915 
 849,605 

 Lease liabilities, current 
 233,501 
 159,104 

 Total current liabilities 
 10,446,940 
 16,512,250 

 Lease liabilities, non-current 
 1,326,489 
 – 

 Total liabilities 
 11,773,429 
 16,512,250 

 Commitments and contingencies (Note 6) 
 – 
 – 

 Stockholders’ equity: 
 
 Parent Company stockholders’ equity 
 
 Preferred stock, par value $ 0.001 per share, authorized 10,000,000 shares; none issued and outstanding 
 – 
 – 

 Common stock, par value $ 0.001 per share, authorized 50,000,000 shares; 11,784,280 shares issued and outstanding 
 14,263 
 14,263 

 Additional paid-in capital 
 14,647,056 
 14,438,196 

 Retained earnings 
 26,903,234 
 29,101,225 

 Treasury stock, 2,549,208 shares 
 ( 3,554,893 ) 
 ( 3,554,893 ) 

 Accumulated other comprehensive loss 
 ( 1,153,048 ) 
 ( 1,071,930 ) 

 Total Parent Company stockholders’ equity 
 36,856,612 
 38,926,861 

 Noncontrolling interests 
 1,388,778 
 1,487,967 

 Total stockholders’ equity 
 38,245,390 
 40,414,828 

 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 
 $ 50,018,819 
 $ 56,927,078 

 See accompanying notes to consolidated financial
statements.

 4 

 FRANKLIN WIRELESS CORP. 

 Consolidated Statements of Comprehensive (Loss)
Income (unaudited) 

 Three Months Ended 
 Nine Months Ended 

 March 31, 
 March 31, 

 2024 
 2023 
 2024 
 2023 

 Net sales 
 $ 6,176,499 
 $ 11,851,971 
 $ 24,679,824 
 $ 28,944,554 

 Cost of goods sold 
 5,659,050 
 9,806,461 
 21,812,140 
 24,359,140 

 Gross profit 
 517,449 
 2,045,510 
 2,867,684 
 4,585,414 

 Operating expenses: 
 
 Selling, general and administrative 
 1,261,147 
 1,463,433 
 4,032,031 
 4,039,035 

 Research and development 
 811,470 
 1,052,672 
 2,531,279 
 2,999,207 

 Total operating expenses 
 2,072,617 
 2,516,105 
 6,563,310 
 7,038,242 

 Loss from operations 
 ( 1,555,168 ) 
 ( 470,595 ) 
 ( 3,695,626 ) 
 ( 2,452,828 ) 

 Other (loss) income, net: 
 
 Interest income 
 155,433 
 158,418 
 561,201 
 281,155 

 Income from governmental subsidy 
 ( 59 ) 
 7,197 
 16,507 
 41,510 

 Gain from the forgiveness of accounts payable and accrued liabilities 
 – 
 25,293 
 – 
 190,293 

 Loss from foreign currency transactions 
 ( 366,078 ) 
 ( 199,226 ) 
 ( 217,606 ) 
 ( 75,004 ) 

 Other (loss) income, net 
 142,788 
 111,888 
 460,363 
 152,971 

 Total other (loss) income, net 
 ( 67,916 ) 
 103,570 
 820,465 
 590,925 

 Loss before benefit for income taxes 
 ( 1,623,084 ) 
 ( 367,025 ) 
 ( 2,875,161 ) 
 ( 1,861,903 ) 

 Income tax benefit 
 ( 312,764 ) 
 ( 578,664 ) 
 ( 577,981 ) 
 ( 563,181 ) 

 Net (loss) income 
 ( 1,310,320 ) 
 211,639 
 ( 2,297,180 ) 
 ( 1,298,722 ) 

 Less: non-controlling interests in net loss of subsidiary at 33.7% 
 ( 134,640 ) 
 ( 35,990 ) 
 ( 99,189 ) 
 ( 41,036 ) 

 Net (loss) income attributable to Parent Company 
 $ ( 1,175,680 ) 
 $ 247,629 
 $ ( 2,197,991 ) 
 $ ( 1,257,686 ) 

 (Loss) income per share attributable to Parent Company stockholders – basic and diluted 
 $ ( 0.10 ) 
 $ 0.02 
 $ ( 0.19 ) 
 $ ( 0.11 ) 

 Weighted average common shares outstanding – basic and diluted 
 11,784,280 
 11,784,280 
 11,784,280 
 11,720,776 

 Comprehensive (loss) income 
 
 Net (loss) income 
 $ ( 1,310,320 ) 
 $ 211,639 
 $ ( 2,297,180 ) 
 $ ( 1,298,722 ) 

 Translation adjustments 
 ( 146,761 ) 
 ( 139,752 ) 
 ( 81,118 ) 
 ( 65,713 ) 

 Comprehensive (loss) income 
 ( 1,457,081 ) 
 71,887 
 ( 2,378,298 ) 
 ( 1,364,435 ) 

 Less: comprehensive loss attributable to non-controlling interest 
 ( 134,640 ) 
 ( 35,990 ) 
 ( 99,189 ) 
 ( 41,036 ) 

 Comprehensive (loss) income attributable to controlling interest 
 $ ( 1,322,441 ) 
 $ 107,877 
 $ ( 2,279,109 ) 
 $ ( 1,323,399 ) 

 See accompanying notes to consolidated financial
statements.

 5 

 FRANKLIN WIRELESS CORP. 

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY 

 For the Three and Nine Months Ended March 31,
2024 (unaudited) 

 Common Stock 
 Additional Paid-in 
 Retained 
 Treasury 
 Accumulated Other Comprehensive Income 
 Non-

 controlling
 
 Total Stockholders 

 Shares 
 Amount 
 Capital 
 Earnings 
 Stock 
 (Loss) 
 Interest 
 Equity 

 Balance - June 30, 2023 
 11,784,280 
 $ 14,263 
 $ 14,438,196 
 $ 29,101,225 
 $ ( 3,554,893 ) 
 $ ( 1,071,930 ) 
 $ 1,487,967 
 $ 40,414,828 

 Net loss attributable to Parent Company 
 – 
 – 
 – 
 ( 1,022,311 ) 
 – 
 – 
 – 
 ( 1,022,311 ) 

 Foreign exchange translation 
 – 
 – 
 – 
 – 
 – 
 65,643 
 – 
 65,643 

 Comprehensive income attributable to noncontrolling interest 
 – 
 – 
 – 
 – 
 – 
 – 
 35,451 
 35,451 

 Stock based compensation 
 – 
 – 
 138,780 
 – 
 – 
 – 
 – 
 138,780 

 Balance – December 31, 2023 
 (unaudited) 
 11,784,280 
 $ 14,263 
 $ 14,576,976 
 $ 28,078,914 
 $ ( 3,554,893 ) 
 $ ( 1,006,287 ) 
 $ 1,523,418 
 $ 39,632,391 

 Net loss attributable to Parent Company 
 – 
 – 
 – 
 ( 1,175,680 ) 
 – 
 – 
 – 
 ( 1,175,680 ) 

 Foreign exchange translation 
 – 
 – 
 – 
 – 
 – 
 ( 146,761 ) 
 – 
 ( 146,761 ) 

 Comprehensive loss attributable to noncontrolling interest 
 – 
 – 
 – 
 – 
 – 
 – 
 ( 134,640 ) 
 ( 134,640 ) 

 Stock based compensation 
 – 
 – 
 70,080 
 – 
 – 
 – 
 – 
 70,080 

 Balance – March 31, 2024
 (unaudited) 
 11,784,280 
 $ 14,263 
 $ 14,647,056 
 $ 26,903,234 
 $ ( 3,554,893 ) 
 $ ( 1,153,048 ) 
 $ 1,388,778 
 $ 38,245,390 

 See accompanying notes to consolidated
financial statements.

 6 

 FRANKLIN WIRELESS CORP. 

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY 

 For the Three and Nine Months Ended March 31,
2023 (unaudited) 

 Common Stock 
 
 Additional Paid-in 
 
 Retained 
 
 Treasury 
 
 Accumulated Other Comprehensive Income 
 
 Non-controlling 
 
 Total Stockholders 
 
 Shares 
 
 Amount 
 
 Capital 
 
 Earnings 
 
 Stock 
 
 (Loss) 
 
 Interest 
 
 Equity 
 
 Balance - June 30, 2022 
 
 11,684,280 
 
 $ 
 14,163 
 
 $ 
 13,593,426 
 
 $ 
 31,964,246 
 
 $ 
 ( 3,554,893 ) 
 
 $ 
 ( 984,152 ) 
 
 $ 
 1,569,605 
 
 $ 
 42,602,395 
 
 Net loss attributable to Parent Company 
 
 – 
 
 – 
 
 – 
 
 ( 1,505,315 
 ) 
 
 – 
 
 – 
 
 – 
 
 ( 1,505,315 
 ) 

 Foreign exchange translation 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 74,039 
 
 – 
 
 74,039 
 
 Issuance of stock related to stock option exercised 
 
 100,000 
 
 100 
 
 133,900 
 
 – 
 
 – 
 
 – 
 
 – 
 
 134,000 
 
 Compensation expense related to stock option granted 
 
 – 
 
 – 
 
 360,525 
 
 – 
 
 – 
 
 – 
 
 – 
 
 360,525 
 
 Comprehensive loss attributable to non-controlling interest 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 5,046 
 ) 
 
 ( 5,046 
 ) 

 Balance - December 31, 2022

 (unaudited) 
 
 11,784,280 
 
 $ 
 14,263 
 
 $ 
 14,087,851 
 
 $ 
 30,458,931 
 
 $ 
 ( 3,554,893 
 ) 
 
 $ 
 ( 910,113 
 ) 
 
 $ 
 1,564,559 
 
 $ 
 41,660,598 
 
 Net income attributable to Parent Company 
 
 – 
 
 – 
 
 – 
 
 247,629 
 
 – 
 
 – 
 
 – 
 
 247,629 
 
 Foreign exchange translation 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 139,752 
 ) 
 
 – 
 
 ( 139,752 
 ) 

 Compensation expense related to stock option granted 
 
 – 
 
 – 
 
 176,397 
 
 – 
 
 – 
 
 – 
 
 – 
 
 176,397 
 
 Comprehensive loss attributable to non-controlling interest 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 – 
 
 ( 35,990 ) 
 
 ( 35,990 
 ) 

 Balance - March 31, 2023

 (unaudited) 
 
 11,784,280 
 
 $ 
 14,263 
 
 $ 
 14,264,248 
 
 $ 
 30,706,560 
 
 $ 
 ( 3,554,893 
 ) 
 
 $ 
 ( 1,049,865 
 ) 
 
 $ 
 1,528,569 
 
 $ 
 41,908,882 
 
 See
accompanying notes to consolidated financial statements. 

 7 

 FRANKLIN WIRELESS CORP. 

 Consolidated Statements of Cash Flows (unaudited) 

 Nine Months Ended 
 March 31, 
 
 2024 
 2023 

 CASH FLOW FROM OPERATING ACTIVITIES: 
 
 Net loss 
 $ ( 2,297,180 ) 
 $ ( 1,298,722 ) 

 Adjustments to reconcile net income to net cash provided by operating activities: 
 
 Depreciation 
 28,059 
 41,341 

 Amortization of intangible assets 
 722,476 
 595,218 

 Stock based compensation 
 208,860 
 536,922 

 Forgiveness of debt 
 – 
 ( 190,293 ) 

 Amortization of right of use assets 
 ( 1,389,797 ) 
 220,807 

 Deferred tax (benefit) provision 
 ( 574,315 ) 
 ( 558,631 ) 

 Increase (decrease) in cash due to change in: 
 
 Accounts receivable 
 ( 1,312,518 ) 
 ( 5,895,731 ) 

 Advance to vendors 
 ( 3,168 ) 
 117,436 

 Other receivables, prepaid expenses, and other current assets 
 ( 77,379 ) 
 1,628 

 Prepaid income taxes 
 ( 136,641 ) 
 ( 10,363 ) 

 Inventories 
 2,605,602 
 ( 1,713,431 ) 

 Other assets 
 ( 7,693 ) 
 837 

 Accounts payable 
 ( 6,668,572 ) 
 1,214,246 

 Income tax payable 
 ( 6,556 ) 
 ( 5,532 ) 

 Contract liabilities and advance from customers 
 49,111 
 ( 62,965 ) 

 Lease liabilities 
 1,400,886 
 ( 230,466 ) 

 Accrued liabilities 
 486,310 
 283,500 

 Net cash used in operating activities 
 ( 6,972,515 ) 
 ( 6,954,199 ) 

 CASH FLOW FROM INVESTING ACTIVITIES: 
 
 Sales (purchases) of short-term investments 
 1,995,606 
 ( 71,927 ) 

 Purchases of property and equipment 
 ( 53,017 ) 
 ( 45,212 ) 

 Payments for capitalized product development costs 
 ( 121,708 ) 
 ( 1,601,998 ) 

 Purchases of intangible assets 
 ( 5,085 ) 
 ( 12,570 ) 

 Net cash provided by (used in) investing activities 
 1,815,796 
 ( 1,731,707 ) 

 CASH FLOW FROM FINANCING ACTIVITIES: 
 
 Loan to an employee 
 1,045 
 ( 90,045 ) 

 Cash received from exercise of stock options 
 – 
 134,000 

 Net cash provided by financing activities 
 1,045 
 43,955 

 Effect of foreign currency translation 
 ( 81,118 ) 
 ( 65,713 ) 

 Net decrease in cash and cash equivalents 
 ( 5,236,792 ) 
 ( 8,707,664 ) 

 Cash and cash equivalents, beginning of period 
 12,241,286 
 26,277,418 

 Cash and cash equivalents, end of period 
 $ 7,004,494 
 $ 17,569,754 

 Supplemental disclosure of cash flow information: 
 
 Cash paid during the periods for: 
 
 Income taxes 
 $ ( 136,641 ) 
 $ ( 800 ) 

 See accompanying notes to consolidated financial
statements.

 8 

 FRANKLIN WIRELESS CORP. 

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

 (Unaudited) 

 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES 

 Principles of Consolidation 

 The consolidated financial
statements include the accounts of the Company and its subsidiary, Franklin Technology Inc. (“FTI”), with a majority voting
interest of 66.3 % (approximately 33.7 % is owned by noncontrolling interests) as of March 31, 2024, and 2023. In the preparation of consolidated
financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion
of the net earnings of the subsidiary applicable to noncontrolling interests.

 As consolidated financial
statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the
retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated
retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses,
gains, and losses only from the date the subsidiary is initially consolidated, and the noncontrolling interest is reported in the consolidated
statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any
subsidiaries as of March 31, 2024, or June 30, 2023.

 Reclassifications 

 Certain amounts on the prior
period’s consolidated balance sheets were reclassified to conform to current-year presentation, with no effect on total stockholders’
equity.

 Noncontrolling Interest in a Consolidated Subsidiary 

 As of March 31, 2024, the
noncontrolling interest was $ 1,388,778 , which represents a $ 99,189 decrease from $ 1,487,967 as of June 30, 2023. The decrease in the noncontrolling
interest of $ 99,189 was from loss in the subsidiary of $ 294,700 incurred for the nine months ended March 31, 2024.

 Segment Reporting 

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

 Schedule of segment information by geographic areas 
 
 Three Months Ended 
 Nine Months Ended 

 March 31, 
 March 31, 

 Net sales: 
 2024 
 2023 
 2024 
 2023 

 North America 
 $ 6,174,327 
 $ 11,720,894 
 $ 24,583,324 
 $ 28,778,479 

 Asia 
 2,172 
 131,077 
 96,500 
 166,075 

 Totals 
 $ 6,176,499 
 $ 11,851,971 
 $ 24,679,824 
 $ 28,944,554 

 9 

 Schedule of long lived assets by geographic area 
 
 Long-lived assets, net (property and equipment and intangible assets): 
 March 31, 2024 
 June 30, 2023 

 North America 
 $ 1,492,015 
 $ 2,083,902 

 Asia 
 219,232 
 198,070 

 Totals 
 $ 1,711,247 
 $ 2,281,972 

 Fair Value of Financial Instruments 

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

 Allowance for Doubtful Accounts 

 On July 1, 2023, we adopted
ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the
incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”)
methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized
cost, including loan receivables and held to maturity debt securities. It also applies to Off-Balance Sheet (“OBS”) credit
exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments)
and net investments and leases recognized by a lessor in accordance with Topic 842 on leases. Upon adoption of ASC 326 and based upon
our review of our collection history as well as the current balances associated with all significant customers and associated invoices,
as of March 31, 2024, we did no t record any reserve for unfunded commitments and doubtful accounts.

 Cash Flows Reporting 

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

 Related Parties 

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

 Foreign Currency Translations 

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

 10 

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

 Leases 

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

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

 Revenue Recognition 

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

 Contracts with Customers 

 Revenue from sales of products
and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hotspot routers.
Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service.
Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate
and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable
consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provisions for the nine months
ended March 31, 2024 and 2023 were not material.

 Disaggregation of Revenue 

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

 11 

 Contract Balances 

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

 The balances of our trade
receivables are as follows:

 Schedule of trade receivables 
 
 March 31, 2024 
 June 30, 2023 

 Accounts Receivable 
 $ 10,262,320 
 $ 8,949,802 

 The balance of contract assets
was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended March 31, 2024, and June 30, 2023.

 Our contract liabilities are
as follows:

 Schedule of contract liabilities 
 
 March 31, 2024 
 June 30, 2023 

 Undelivered products 
 $ 195,599 
 $ 146,488 

 Performance Obligations 

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

 Our performance obligations
are primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 99.9 %
of net sales for the nine months ended March 31, 2024, and 2023. Revenue recognized over a period of time for non-recurring engineering
projects is based on the percent complete of a project and accounted for 0.1 % of net sales for the three and nine months ended March 31,
2024 and 2023. The majority of our revenue recognized at a point in time is for the sale of hotspot router products. Revenue from these
contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product,
which generally coincides with title transfer at completion of the shipping process.

 As of March 31, 2024 and 2023,
our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

 Cost of Goods Sold 

 All costs associated with
our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of
goods sold also includes amortization expenses of $ 227,028 and $ 706,340 associated with capitalized product development costs associated
with complete technology for the three and nine months ended March 31, 2024, respectively, and $ 229,884 and $ 564,143 for the three and
nine months ended March 31, 2023, respectively.

 12 

 Capitalized Product Development Costs 

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

 The costs of product development
that are capitalized once technological feasibility is determined (noted as technology in progress in the Intangible Assets table in Note
3 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
customers.

 As of March 31, 2024, and
June 30, 2023, capitalized product development costs in progress were $ 131,588 and $ 203,838 , respectively, and these amounts are included
in intangible assets in our consolidated balance sheets. For the three and nine months ended March 31, 2024, we incurred $ 52,975 and $ 121,708 ,
respectively, and for the three and nine months ended March 31, 2023, we incurred $ 555,018 and $ 1,601,998 respectively, in capitalized
product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological
feasibility is reached are expensed and included in our consolidated statements of comprehensive income.

 Research and Development Costs 

 Costs associated with research
and development are expensed as incurred. Research and development costs were $ 811,470 and $ 1,052,672 for the three months ended March
31, 2024 and 2023, respectively, and $ 2,531,279 and $ 2,999,207 for the nine months ended March 31, 2024 and 2023, respectively.

 Warranties 

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

 Shipping and Handling Costs 

 Costs associated with
product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and
administrative expenses on the consolidated statements of comprehensive income, were $ 28,441 
and $ 58,730 
for the three months ended March 31, 2024 and 2023, respectively, and $ 129,100 
and $ 188,836 
for the nine months ended March 31, 2024 and 2023, 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.

 13 

 Short Term Investments 

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

 Inventories 

 Our inventories consist of
finished goods and are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis. We assess
the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand
forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable and
can fluctuate significantly caused by factors beyond the control of the Company. We may write down our inventory value for potential obsolescence
and excess inventory. As of March 31, 2024, and June 30, 2023, we have recorded inventory reserves in the amount of $ 74,548 and $ 585,274 
for obsolete or slow-moving inventories, respectively.

 Property and Equipment 

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

 Schedule of useful lives of property and equipment 
 
 Machinery 
 6 years 

 Office equipment 
 5 years 

 Molds 
 3 years 

 Vehicles 
 5 years 

 Computers and software 
 5 years 

 Furniture and fixtures 
 7 years 

 Facilities improvements 
 5 years or life of the lease, whichever is shorter 

 Goodwill and Intangible Assets 

 Goodwill and certain intangible
assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business
Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets
acquired. Intangible assets are recorded at their fair value at the date of acquisition. 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 deemed necessary
as of March 31, 2024, or June 30, 2023.

 Long-lived Assets 

 In accordance with ASC 360,
“Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever
events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may
not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to
generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant
changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment
loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount.

 14 

 As of March 31, 2024, and
June 30, 2023, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

 Stock-based Compensation 

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

 Income Taxes 

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

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

 As of March 31, 2024, we
have no material unrecognized tax benefits. We recorded an income tax benefit of $ 312,764 
and $ 577,981 for
the three and nine months ended March 31, 2024, respectively, and an income tax benefit of $ 578,664 
and $ 563,181 
for the three and nine months ended March 31, 2023, respectively. We also recorded an increase in deferred tax asset, non-current,
of $ 308,123 
and $ 574,315 
for the three and nine months ended March 31, 2024, respectively, and an increase in deferred tax asset, non-current, of $ 573,314 
and $ 558,631 
for the three and nine months ended March 31, 2023, respectively.

 Earnings (loss) per Share Attributable to Common
Stockholders 

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

 Concentrations 

 We extend credit to our customers
and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and
provide an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods
presented.

 15 

 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 nine months ended March 31, 2024, sales to our two largest customers accounted
for 62 % and 28 % of our consolidated net sales, and 45 % and 54 % of our accounts receivable balance as of March 31, 2024. In the same period
of 2023, sales to our two largest customers accounted for 64 % and 27 % of our consolidated net sales, and 0 % and 85 % of our accounts receivable
balance as of March 31, 2023. 

 For the nine months ended
March 31, 2024, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If these manufacturing
companies were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed,
or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact the Company's
revenue.

 For the nine months ended
March 31, 2024, we purchased wireless data products from these manufacturers in the amount of $ 18,287,260 , or 99.5 % of total purchases
and had related accounts payable of $ 5,967,868 as of March 31, 2024. In the same period of 2023, we purchased wireless data products from
these manufacturers in the amount of $ 25,347,466 , or 99 % of total purchases and had related accounts payable of $ 9,001,053 as of March
31, 2023.

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

 Recently Issued Accounting Pronouncements 

 In November 2023, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable
Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable
segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported
measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the
CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance
and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented
in the financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being
included in our consolidated financial statements, once adopted.

 In December 2023, the FASB
issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting
entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective
basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have
not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included
in our consolidated financial statements, once adopted.

 NOTE 2 – BUSINESS OVERVIEW 

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

 16 

 We have majority ownership
of Franklin Technology Inc. (FTI), a research and development company based in Seoul, South Korea. FTI primarily provides design and development
services for our wireless products.

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

 NOTE 3 – BASIS OF PRESENTATION 

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

 NOTE 4 – DEFINITE LIVED INTANGIBLE ASSETS, NET 

 The definite lived intangible
assets consisted of the following as of March 31, 2024:

 Schedule of definite lived intangible assets 
 
 Definite lived intangible assets: 
 Expected Life 
 Average 
 Remaining 
 life 
 
 Gross 
 Intangible 
 Assets 
 
 Less Accumulated 
 Amortization 
 
 Net Intangible 
 Assets 
 
 Complete technology 
 3 years 
 – 
 $ 18,397 
 $ 18,397 
 $ – 

 Technology in progress 
 Not Applicable 
 – 
 131,588 
 – 
 131,588 

 Software 
 5 years 
 1.1 years 
 423,853 
 358,727 
 65,126 

 Patents 
 10 years 
 6.6 years 
 64,969 
 25,746 
 39,223 

 Certifications & licenses 
 3 years 
 1.6 years 
 3,953,198 
 2,603,934 
 1,349,264 

 Total as of March 31, 2024 
 
 $ 4,592,005 
 $ 3,006,804 
 $ 1,585,201 

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

 Definite lived intangible assets: 
 Expected Life 
 Average 
 Remaining 
 life 
 
 Gross 
 Intangible 
 Assets 
 
 Less Accumulated 
 Amortization 
 
 Net Intangible 
 Assets 
 
 Complete technology 
 3 years 
 – 
 18,397 
 18,397 
 – 

 Technology in progress 
 Not Applicable 
 – 
 203,838 
 – 
 203,838 

 Software 
 5 years 
 1.6 years 
 423,762 
 347,228 
 76,534 

 Patents 
 10 years 
 7.0 years 
 59,975 
 21,108 
 38,867 

 Certifications & licenses 
 3 years 
 2.0 years 
 3,759,240 
 1,897,595 
 1,861,645 

 Total as of June 30, 2023 
 
 $ 4,465,212 
 2,284,328 
 2,180,884 

 Amortization expense recognized
for the three months ended March 31, 2024 and 2023 was $ 232,232 and $ 234,325 , respectively, and for the nine months ended March 31, 2024
and 2023 was $ 722,476 and $ 595,218 , respectively.

 17 

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

 Schedule of future amortization expense 
 
 FY2024 
 FY2025 
 FY2026 
 FY2027 
 FY2028 
 Thereafter 

 Total 
 $ 274,926 
 $ 776,357 
 $ 358,993 
 $ 19,295 
 $ 15,790 
 $ 8,252 

 NOTE 5 - ACCRUED LIABILITIES 

 Accrued liabilities consisted
of the following as of:

 Schedule of accrued liabilities 
 
 March 31, 2024 
 June 30, 2023 

 Accrued payroll deductions owed to government entities 
 $ 41,163 
 $ 52,923 

 Accrued salaries and bonuses 
 750,000 
 375,000 

 Accrued vacation 
 156,338 
 141,590 

 Accrued commission for service providers 
 22,500 
 32,500 

 Accrued commission to a customer 
 247,592 
 247,592 

 Accrued rent expenses 
 118,322 
 – 

 Total 
 $ 1,335,915 
 $ 849,605 

 NOTE 6 - COMMITMENTS AND CONTINGENCIES 

 Leases 

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

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

 We leased approximately 12,775
square feet of office space in San Diego, California, at a monthly rent of $25,754, pursuant to a lease that expired in December 2023.
On October 19, 2023, we signed a lease for office space consisting of approximately 11,400 square feet, located in San Diego, California,
at a monthly rent of $23,370, which commenced on January 1, 2024. In addition to monthly rent, the lease includes payment for certain
common area costs. The term of the lease for the office space is 65 months from the lease commencement date. Our facility is covered by
an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs. Rent expenses for
this office space were $ 83,367 and $ 77,263 for the three months ended March 31, 2024 and 2023, and $ 237,893 and $ 231,789 for the nine
months ended March 31, 2024 and 2023, respectively.

 18 

 On or about December 7 th ,
2023, we received an invoice from our prior landlord, Hunsaker & Associates, requesting payment of additional rent on our completed
and expired lease of office space located at 9707 Waples Street, San Diego, CA as of December 31, 2023. This invoice purports to represent
charges for variable cost increases during the prior 7 years of the lease. We are currently reviewing these charges and will be requesting
further validation of these charges, in accordance with our rights granted under the lease. For the three months ended December 31, 2023,
we recorded an additional rent expense reflecting this pending invoice of $ 142,978 and a credit of $ 24,656 for our deposit on the leasehold
property.

 Our Korea-based subsidiary,
FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting
of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases expired on August
31, 2023 and were extended by an additional twelve months to August 31, 2024. In addition to monthly rent, the leases provide for periodic
cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level
of insurance, and we believe them to be suitable for our use and adequate for our present needs. Rent expense related to these leases
was approximately $ 32,100 for the three months ended March 31, 2024 and 2023, and approximately $ 96,300 for the nine months ended March
31, 2024 and 2023. This facility is also covered by an appropriate level of insurance, and we believe it 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, 2023 and was extended by an additional twelve months to September 4, 2024. Rent expenses related to this lease were $ 2,109 and $ 2,106 
for the three months ended March 31, 2024 and 2023, and $ 6,134 and $ 6,057 for the nine months ended March 31, 2024 and 2023.

 We used a discount rate of
 4.0 % in determining our operating lease liabilities for the office space that expired on December 31, 2023, and used a discount rate of
 7.0 % for the office space that commenced on January 1, 2024, in San Diego, California, 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, and our leases of the
South Korean offices and corporate housing facility have been considered as short-term leases.

 Rent expenses for the nine
months ended March 31, 2024 and 2023 were $ 483,305 and $ 334,146 , respectively. In accordance with ASC 842, the components of the lease
expense and supplemental cash flow information related to leases for the nine months ended March 31, 2024, and 2023 are as follows:

 Schedule of components of lease expense 
 
 Nine Months Ended March 31, 

 2024 
 2023 

 Operating lease expense 
 $ 237,893 
 $ 231,789 

 Additional charges for the prior operating lease subject to dispute 
 142,978 
 – 

 Short term lease cost 
 102,434 
 102,357 

 Total lease expense 
 $ 483,305 
 $ 334,146 

 Future minimum payments under
operating leases are as follows: 

 Schedule of future minimum payments 
 
 Operating Lease 

 Fiscal 2024 
 $ 89,208 

 Fiscal 2025 
 336,972 

 Fiscal 2026 
 344,789 

 Fiscal 2027 
 352,841 

 Fiscal 2028 
 387,437 

 Fiscal 2029 
 363,310 

 Total lease payments 
 1,874,557 

 Less imputed interest 
 ( 314,567 ) 

 Total 
 $ 1,559,990 

 Remaining lease term-operating leases 
 5.2 years 

 Discount rate-operating lease 
 7 % 

 19 

 Warranty repairs 

 The following table sets forth the percentages
of return rates and warranty repairs for all products currently marketed, in the aggregate from the date each product was introduced.

 Schedule of percentages of return rates and warranty repairs 
 
 Current Devices 

 Device Type 
 Return Rate 
 Warranty Repairs 

 4G Wireless Devices 
 0.07 % 
 0.06 % 

 5G Wireless Devices 
 0.52 % 
 0.16 % 

 Litigation 

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

 Verizon Jetpack Recall
 
 On April 8, 2021, Verizon
issued a press release announcing that it was working with the U.S. Consumer Product Safety Commission (CPSC) to conduct a voluntary recall
of certain Verizon Ellipsis Jetpack mobile hotspot devices, indicating that the lithium-ion battery in the devices can overheat, posing
a fire and burn hazard. According to the CPSC release, the recall affects approximately 2.5 million devices. We imported the devices and
supplied 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
device. We also began internal testing to evaluate device performance. We did not receive any further incident information until the last
week of March 2021. On April 1, 2021 we issued a press release announcing that we had received reports from Verizon about potential issues
with the batteries in the devices. On April 9, 2021 we issued a press release announcing the voluntary recall by Verizon. 

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

 Future Impact on Financial
Performance 

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

 20 

 Shareholder Litigation 

 Ali 

 A shareholder action, Ali
vs. Franklin Wireless Corp. et al. Case #3:21-cv-00687-AJB-MSB, was filed in the U.S. District Court, Southern District of California
(San Diego) on April 16, 2021, alleging, among other things, that we had prior knowledge that the Verizon recall was likely and that we
did not disclose that information to investors in a timely manner. The Class and Defendants have executed a Stipulation and Agreement
of Settlement under which the Class releases all claims against Defendants in exchange for a payment by Defendants of $ 2.4 million (the
“Settlement Amount”), which is reflected in liabilities under “accrued legal contingency expense” with a corresponding
charge to “loss from a legal contingency”. The Class has submitted a motion for preliminary approval of the settlement, which
the Court denied on January 24 th , 2024. On April 22, 2024, after resubmission of the application, the court granted preliminary
approval of the settlement. On May 6 th , 2024, per the terms of the settlement agreement, we sent by wire transfer $ 2,400,000 
to an account specified by the Ali class action claim administrator, Epiq (the appointed Settlement Administrator by the Court).

 Harwood / Martin 

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

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

 The Harwood and Martin actions
have been consolidated into a single action in the U.S. District Court, Southern District of California (San Diego) titled “In re
Franklin Wireless Corp. Derivative Litigation”, Case No.: 21cv1837-AJB (MSB). Discovery has been completed and we are awaiting rulings
on pretrial motions at the reporting date.

 Pape 

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

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

 “Short-Swing”
Profits Litigation 

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

 21 

 Loan Agreement with Subsidiary 

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

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

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

 Employment Contracts 

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

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

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

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

 In addition, the amendment
provides for the payment of an incentive bonus to Mr. Kim of $125,000 for each calendar quarter during the remaining four-year term of
the employment letter, with the first such bonus due on December 31, 2022. For the three and nine months ended March 31, 2024 and 2023,
$ 125,000 and $ 375,000 bonus had been accrued respectively with $ 750,000 and $ 375,000 accrual bonus balances as of March 31, 2024 and June
30, 2023, respectively.

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

 22 

 International Tariffs 

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

 Customer Indemnification 

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

 NOTE 7 - LONG-TERM INCENTIVE PLAN AWARDS 

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

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

 The estimated forfeiture rate
considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations
about the future. We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates.
There were $ 208,860 and $ 536,922 compensation expenses recorded under this method for the nine months ended March 31, 2024 and 2023, respectively.

 A summary of the status of
our stock options is presented below as of March 31, 2024:

 Schedule of stock option activity 
 
 Weighted- 
 
 Average 
 
 Weighted- 
 Remaining 
 
 Average 
 Contractual 
 Aggregate 

 Exercise 
 Life 
 Intrinsic 

 Options 
 Shares 
 Price 
 (In Years) 
 Value 

 Outstanding as of June 30, 2023 
 647,001 
 $ 4.24 
 2.88 
 $ 130,200 

 Granted 
 – 
 – 
 – 
 – 

 Exercised 
 – 
 – 
 – 
 – 

 Cancelled 
 – 
 – 
 – 
 – 

 Forfeited or expired 
 ( 20,000 ) 
 4.90 
 – 
 – 

 Outstanding as of March 31, 2024 
 627,001 
 $ 4.22 
 2.14 
 $ – 

 Exercisable as of March 31, 2024 
 539,921 
 $ 4.37 
 2.03 
 $ – 

 23 

 The aggregate intrinsic
value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.99
per share as of March 31,2024, 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 March 31, 2024, in the amount of 627,001 shares
was $ 3.33 per share. As of March 31, 2024, there was unrecognized compensation cost of $ 259,182 related to non-vested stock options granted.

 A summary of the status of
our stock options is presented below as of March 31, 2023:

 Weighted- 
 
 Average 
 
 Weighted- 
 Remaining 
 
 Average 
 Contractual 
 Aggregate 

 Exercise 
 Life 
 Intrinsic 

 Options 
 Shares 
 Price 
 (In Years) 
 Value 

 Outstanding as of June 30, 2022 
 766,001 
 $ 3.85 
 3.37 
 $ 183,270 

 Granted 
 – 
 – 
 – 
 – 

 Exercised 
 ( 100,000 ) 
 1.34 
 – 
 – 

 Cancelled 
 – 
 – 
 – 
 – 

 Forfeited or expired 
 ( 17,000 ) 
 5.40 
 – 
 – 

 Outstanding as of March 31, 2023 
 649,001 
 $ 4.24 
 3.12 
 $ 595,200 

 Exercisable as of March 31, 2023 
 405,277 
 $ 4.63 
 2.85 
 $ 248,724 

 The aggregate intrinsic value
in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $4.98 as of
March 31, 2023, which would have been received by the option holders had all option holders exercised their options as of that date. The
weighted-average grant-date fair value of stock options outstanding as of March 31, 2023, in the amount of 649,001 shares was $ 3.35 per
share. As of March 31, 2023, there was unrecognized compensation cost of $ 724,837 related to non-vested stock options granted.

 NOTE 8 – RELATED PARTY TRANSACTIONS 

 For the three and nine months
ended March 31, 2024, and 2023, there have not been any transactions entered into or been a participant in which a related person had
or will have a direct or indirect material interest.

 NOTE 9 - SUBSEQUENT EVENTS 

 The FASB issued ASC 855,
“Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. The Company has evaluated all events or transactions
that occurred after March 31, 2024, up through the date the financial statements were available to be issued. During these periods, the
Company did not have any material recognizable subsequent events required to be disclosed to the financial statements as of March 31,
2024.

 24 

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

 The following discussion and
analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related
notes included elsewhere in this report. This report contains certain forward-looking statements relating to future events or our future
financial performance. These statements are subject to risks and uncertainties which could cause actual results to differ materially from
those discussed in this report. You are cautioned not to place undue reliance on this information, which speaks only as of the date of
this report. We are not obligated to publicly update this information, whether as a result of new information, future events
or otherwise, except to the extent we are required to do so in connection with our obligation to file reports with the SEC. For a discussion
of the important risks to our business and future operating performance, see the discussion under the caption “Item 1A. Risk Factors”
and under the caption “Factors That May Influence Future Results of Operations” in the Company’s Form 10-K for the year
ended June 30, 2023, filed on September 28, 2023. In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur.

 BUSINESS OVERVIEW 

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

 We have majority ownership
of Franklin Technology Inc. (FTI), a research and development company based in Seoul, South Korea. FTI primarily provides design and development
services for our wireless products. 

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

 The Company is constantly
evaluating opportunities to increase shareholder value, both based on internal initiatives and in response to suggestions from shareholders
and others.

 FACTORS THAT MAY INFLUENCE FUTURE RESULTS OF
OPERATIONS 

 We believe that our revenue
growth will be influenced largely by (1) the successful maintenance of our existing customers, (2) the rate of increase in demand for
wireless data products, (3) customer acceptance of our new products, (4) new customer relationships and contracts, and (5) our ability
to meet customers’ demands.

 We have entered into and expect
to continue to enter into new customer relationships and contracts for the supply of our products, and this may require significant demands
on our resources, resulting in increased operating, selling, and marketing expenses associated with such new customers.

 There is always a risk of
disputes and disagreements with our business partners and suppliers, and the costs associated with enforcing our rights in those matters
could negatively impact operating capital and reserves.

 25 

 CRITICAL ACCOUNTING POLICIES 

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

 We have several critical accounting
policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2023, that are both important to the
portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex
judgments. Typically, the circumstances that make these judgments difficult, subjective, and complex have to do with making estimates
about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies for the
three and nine months ended March 31, 2024.

 RESULTS OF OPERATIONS 

 The following table sets forth,
for the three and nine months ended March 31, 2024 and 2023, our statements of comprehensive (loss) income (unaudited) including data
expressed as a percentage of sales:

 Three Months Ended 
 Nine Months Ended 

 March 31, 
 March 31, 

 2024 
 2023 
 2024 
 2023 

 Net sales 
 100.0% 
 100.0% 
 100.0% 
 100.0% 

 Cost of goods sold 
 91.6% 
 82.7% 
 88.4% 
 84.2% 

 Gross profit 
 8.4% 
 17.3% 
 11.6% 
 15.8% 

 Operating expenses 
 33.6% 
 21.3% 
 26.6% 
 24.3% 

 Loss from operations 
 (25.2% ) 
 (4.0% ) 
 (15.0% ) 
 (8.5% ) 

 Other (loss) income, net 
 (1.1% ) 
 0.9% 
 3.3% 
 2.0% 

 Net loss before income taxes 
 (26.3% ) 
 (3.1% ) 
 (11.7% ) 
 (6.5% ) 

 Income tax (benefit) provision 
 (5.1% ) 
 (4.9% ) 
 (2.4% ) 
 (2.0% ) 

 Net (loss) income 
 (21.2% ) 
 1.8% 
 (9.3% ) 
 (4.5% ) 

 Less: non-controlling interest in net loss of subsidiary 
 (2.2% ) 
 (0.3% ) 
 (0.4% ) 
 (0.1% ) 

 Net (loss) income attributable to Parent Company stockholders 
 (19.0% ) 
 2.1% 
 (8.9% ) 
 (4.4% ) 

 THREE MONTHS ENDED MARCH 31, 2024 COMPARED
TO THREE MONTHS ENDED MARCH 31, 2023 

 NET SALES - Net sales
decreased by $5,675,472, or 47.9%, to $6,176,499 for the three months ended March 31, 2024 from $11,851,971 for the corresponding period
of 2023. For the three months ended March 31, 2024, net sales by geographic regions, consisting of North America and Asia, were $6,174,327
(100.0% of net sales) and $2,172 (0.0%), respectively. For the three months ended March 31, 2023, net sales by geographic regions, consisting
of North America and Asia, were $11,720,894 (98.9% of net sales) and $131,077 (1.1%), respectively.

 26 

 Net sales in North America
decreased by $5,546,567, or 47.3%, to $6,174,327 for the three months ended March 31, 2024 from $11,720,894 for the corresponding period
of 2023. The decrease in net sales in North America was primarily due to the lack of sales to one major carrier (which was the largest
customer, approximately 52% of the total sales for the three months ended March 31, 2023), which was offset by the increased sales of
approximately $1.7M to another major carrier customer. Net sales in Asia decreased by $128,905, or 98.3%, to $2,172 for the three months
ended March 31, 2024 from $131,077 for the corresponding period of 2023. The decrease in net sales was primarily due to the lack of the
demand for one newly launched wireless product from a customer (approximately $160,000) from FTI.

 GROSS PROFIT - Gross
profit decreased by $1,528,061, or 74.7%, to $517,449 for the three months ended March 31, 2024 from $2,045,510 for the corresponding
period of 2023. The gross profit in terms of net sales percentage was 8.4% for the three months ended March 31, 2024 compared to 17.3%
for the corresponding period of 2023. The decrease in gross profit in terms of net sales percentage for the three months ended March 31,
2024, was primarily due to that a significant portion of the total sales, approximately 96%, was derived from a major carrier customer
with a competitive selling price and production costs (approximately gross profit in terms of net sales in percentage of 10%), and the
amortization expenses associated with the completed capitalized product development costs that are included in the cost of goods sold.

 OPERATING EXPENSES 
- Operating expenses decreased by $443,488, or 17.6%, to $2,072,617 for the three months ended March 31, 2024 from $2,516,105 for the
corresponding period of 2023.

 Selling, general, and administrative
expenses decreased by $202,286 to $1,261,147 for the three months ended March 31, 2024, from $1,463,433 for the corresponding period of
2023. The decrease in operating expenses was primarily due to the decreased compensation expenses related to stock options granted to
employees. Research and development expense decreased by $241,202 to $811,470 for the three months ended March 31, 2024, from $1,052,672
for the corresponding period of 2023. The decrease in research and development expense was primarily due to the decreased research and
development costs and the related payroll expense of approximately $125,000 and $116,000, respectively, which is the mixed result of the
timing of research and development activities and the number of active projects and typically vary from period to period.

 OTHER INCOME (LOSS), NET 
- Other income (loss), net decreased by $171,486, or 165.6%, to $67,916 for the three months ended March 31, 2024 from $103,570 for the
corresponding period of 2023. The decrease was primarily due to the decreased gain from the forgiven liability of approximately $190,000
and the increased loss from the unfavorable changes in foreign currency exchange rates of approximately $167,000, which was partially
offset by the increased unrealized gain from an investment account of approximately $196,000.

 NINE MONTHS ENDED MARCH 31, 2024 COMPARED TO
NINE MONTHS ENDED MARCH 31, 2023 

 NET SALES - Net sales
decreased by $4,264,730, or 14.7%, to $24,679,824 for the nine months ended March 31, 2024 from $28,944,554 for the corresponding period
of 2023. For the nine months ended March 31, 2024, net sales by geographic regions, consisting of North America and Asia, were $24,583,324
(99.6% of net sales) and $96,500 (0.4% of net sales), respectively. For the nine months ended March 31, 2023, net sales by geographic
regions, consisting of North America and Asia, were $28,778,479 (99.4% of net sales) and $166,075 (0.6% of net sales), respectively.

 Net sales in North America
decreased by $4,195,155, or 14.6%, to $24,583,324 for the nine months ended March 31, 2024 from $28,778,479 for the corresponding period
of 2023. The decrease in net sales in North America was primarily due to the decreased demands from our two largest major carrier customers
by approximately $4M for our wireless products compared to the corresponding period of 2023. Net sales in Asia decreased by $69,575, or
41.9%, to $96,500 for the nine months ended March 31, 2024 from $166,075 for the corresponding period of 2023. The decrease in net sales
in Asia was primarily due to the decreased demand by approximately $98,000 for one newly launched wireless product from a customer by
FTI compared to the corresponding period of 2023.

 27 

 GROSS PROFIT - Gross
profit decreased by $1,717,730, or 37.5%, to $2,867,684 for the nine months ended March 31, 2024 from $4,585,414 for the corresponding
period of 2023. The gross profit in terms of net sales percentage was 11.6% for the nine months ended March 31, 2024 compared to 15.8%
for the corresponding period of 2023. The decrease in gross profit was primarily due to the change in net sales as described above. The
decrease in gross profit in terms of net sales percentage for the nine months ended March 31, 2024, was primarily due to the mixed results
of competitive selling prices and the increase in production costs as well as the increased amortization expenses associated with the
completed capitalized product development costs that are included in the cost of goods sold compared to the corresponding period of 2023.

 OPERATING EXPENSES 
- Operating expenses decreased by $474,932, or 6.7%, to $6,563,310 for the nine months ended March 31, 2024 from $7,038,242 for the corresponding
period of 2023. 

 Selling, general, and administrative
expenses decreased by $7,004 to $4,032,031 for the nine months ended March 31, 2024, from $4,039,035 for the corresponding period of 2023.
The decrease in selling, general, and administrative expenses was primarily due to the decreased compensation expenses related to stock
options granted to employees of approximately $320,000, which was offset by the increased operating lease expense and legal fees of approximately
$150,000 and 135,000, respectively. Research and development expense decreased by $467,928 to $2,531,279 for the nine months ended March
31, 2024, from $2,999,207 for the corresponding period of 2023. The decrease in research and development expense was primarily due to
the decreased research and development costs and the related payroll expense of approximately $280,000 and $188,000, respectively, which
is the mixed result of the timing of research and development activities and the number of active projects and typically vary from period
to period.

 OTHER INCOME, NET -
Other income, net increased by $229,540, or 38.8%, to $820,465 for the nine months ended March 31, 2024 from $590,925 for the corresponding
period of 2023. The increase was primarily due to the increased interest income of approximately $280,000 and the increased unrealized
gain from an investment account of approximately $261,000, which was offset by the decreased gain from the forgiven liability of approximately
$190,000 and the loss from the unfavorable changes in foreign currency exchange rates of approximately $143,000.

 LIQUIDITY AND CAPITAL RESOURCES 

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

 Our principal source of liquidity as of March
31, 2024 consisted of cash and cash equivalents as well as short-term investments of $31,737,201. We believe we have sufficient
available capital to cover our existing operations and obligations through at least one year from the date of the filing of this Form
10-Q. Our long-term future cash requirements will depend on numerous factors, including our revenue base, profit margins, product development
activities, market acceptance of our products, future expansion plans and ability to control costs. If we are unable to achieve
our current business plan or secure additional funding that may be required, we would need to curtail our operations or take other similar
actions outside the ordinary course of business in order to continue to operate as a going concern.

 OPERATING ACTIVITIES 
- Net cash used in operating activities for the nine months ended March 31, 2024 and 2023 was $6,972,515 and $6,954,199, respectively.

 The $6,972,515 in net cash
used in operating activities for the nine months ended March 31, 2024 was primarily due to the decrease in accounts payable of $6,668,572
as well as our operating results (net loss of $2,297,180 adjusted for depreciation, amortization, and other non-cash charges), which was
partially offset by a decrease in inventories of $2,605,602. The $6,954,199 in net cash used in operating activities for the nine months
ended March 31, 2023 was primarily due to the increase in accounts receivable of $5,895,731 and inventories of $1,713,431 as well as our
operating results (net loss of $1,298,722 adjusted for depreciation, amortization, and other non-cash charges), which was partially offset
by an increase in accounts payable of $1,214,246.

 28 

 INVESTING ACTIVITIES 
- Net cash provided by investing activities for the nine months ended March 31, 2024 was $1,815,796, and net cash used in investing activities
for the nine months ended March 31, 2023 was $1,731,707.

 The $1,815,796 in net cash
provided by investing activities for nine months ended March 31, 2024 was primarily due to the sales of short-term investments of $1,995,606,
which was partially offset by payments for purchase of capitalized product development of $121,708 and purchase of property and equipment
of $53,017. The $1,731,707 in net cash used in investing activities for nine months ended March 31, 2023 was primarily due to the payments
for purchase of capitalized product development of $1,601,998 and purchase of short-term investments of $71,927. 

 FINANCING ACTIVITIES 
- Net cash provided by financing activities for the nine months ended March 31, 2024 and 2023 was $1,045 and $43,955, respectively.

 The $1,045 in net cash provided
by financing activities for the nine months ended March 31, 2024 was due to the increase in loan to an employee of $1,045. The $43,955
in net cash provided by financing activities for the nine months ended March 31, 2023 was from cash received from exercise of stock options
of $134,000, which was partially offset by the increase in loan to an employee of $90,045.

 CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS 

 Leases 

 We leased approximately 12,775
square feet of office space in San Diego, California, at a monthly rent of $25,754, pursuant to a lease that expired in December 2023.
On October 19, 2023, we signed a lease for office space consisting of approximately 11,400 square feet, located in San Diego, California,
at a monthly rent of $23,370, which commenced on January 1, 2024. In addition to monthly rent, the lease includes payment for certain
common area costs. The term of the lease for the office space is 65 months from the lease commencement date. 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.

 On or about December 7, 2023,
we received an invoice from our prior landlord, Hunsaker & Associates, requesting payment of additional rent on our completed and
expired lease of office space located at 9707 Waples Street, San Diego, CA as of December 31, 2023. This invoice purports to represent
charges for variable cost increases during the prior 7 years of the lease. We are currently reviewing these charges and will be requesting
further validation of these charges, in accordance with our rights granted under the lease. For the three months ended December 31, 2023,
we recorded an additional rent expense reflecting this pending invoice of $142,978 and a credit of $24,656 for our deposit on the leasehold
property.

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

 Rent expense for the three
months ended March 31, 2024 and 2023 was $117,486 and $111,469, respectively. Rent expense for the nine months ended March 31, 2024 and
2023 was $483,305 and $334,146, respectively.

 Recently Issued Accounting Pronouncements 

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

 29 

 OFF-BALANCE SHEET ARRANGEMENTS 

 None.

 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 

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

 ITEM 4. CONTROLS AND PROCEDURES 

 Evaluation of Disclosure Controls and Procedures 

 Our management has evaluated,
under the supervision and with the participation of our President and Acting Chief Financial Officer, the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period
covered by this report. Based upon that evaluation, our President and our Acting Chief Financial Officer have concluded that, as of March
31, 2024, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports
that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time
periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to our management, including our principal executive
and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure.

 Changes in Internal Control Over Financial
Reporting 

 There have been no changes
in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934
and as a result of adopting Topic 842) during the nine months ended March 31, 2024 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.

 30 

 PART II – OTHER INFORMATION 

 ITEM 1. LEGAL PROCEEDINGS 

 We have provided information
about legal proceedings in which we are involved in Note 8 of the notes to consolidated financial statements for the three and nine months
ended March 31, 2024, contained within this Quarterly Report on Form 10-Q.

 ITEM 1 A .
RISK FACTORS 

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

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

 None.

 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 

 None.

 ITEM 4. MINE SAFETY DISCLOSURES 

 None.

 ITEM 5. OTHER INFORMATION 

 During the quarter ended March 31, 2024, no director
or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in
Item 408(a) of Regulation S-K.

 ITEM 6. EXHIBITS 

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

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

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

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

 101. INS Inline XBRL
Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document

 101. CAL Inline XBRL
Taxonomy Extension Calculation Linkbase Document

 101. DEF Inline XBRL
Taxonomy Extension Definition Linkbase Document

 101. LAB Inline XBRL
Taxonomy Extension Label Linkbase Document

 101. PRE Inline XBRL
Taxonomy Extension Presentation Linkbase Document

 104 Cover Page Interactive Data File (formatted in XBRL,
and included in exhibit 101)

 31 

 SIGNATURES 

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

 Franklin Wireless Corp. 

 By: 
 /s/ OC Kim 

 OC Kim

 President

 (Principal Executive Officer)
 
 By: 
 /s/ Bill Bauer 

 Bill Bauer 

 Acting Chief Financial Officer

 (Principal Financial Officer)
 
 Dated: May 15, 2024

 32
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
FRANKLIN WIRELESS CORP 10-Q
