Franklin Wireless(FKWL) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended December 31, 2024, reached $17,827,098, a significant increase of 100.5$8,847,779 in the same period of 2023[16] - Gross profit for the six months ended December 31, 2024, was $5,313,564, up from$2,350,235 in 2023, reflecting a growth of 126.5%[16] - The company reported a net income attributable to Parent Company of $228,740 for the three months ended December 31, 2024, compared to a net loss of$764,615 in the same period of 2023[16] - For the six months ended December 31, 2024, the net income was $565,211 compared to a net loss of$986,860 for the same period in 2023[23] - Earnings per share attributable to Parent Company stockholders for the three months ended December 31, 2024, was $0.02, compared to a loss of$0.06 in the same period of 2023[16] - Net sales increased by $8,979,319, or 101.5$17,827,098 for the three months ended December 31, 2024, compared to $8,847,779 for the same period in 2023[156] - Gross profit increased by$2,404,987, or 287.3%, to $3,242,062 for the three months ended December 31, 2024, with a gross profit margin of 18.2$12,646,685, or 68.3%, to $31,150,010 from$18,503,325 in 2023[162] - Gross profit for the six months ended December 31, 2024, increased by $2,963,329, or 126.1$5,313,564, with a gross profit margin of 17.1% compared to 12.7% in 2023[164] Assets and Liabilities - Total current assets increased to $48,586,348 as of December 31, 2024, compared to$40,220,460 on June 30, 2024, representing a rise of 20.5%[14] - Total liabilities increased to $17,474,880 as of December 31, 2024, compared to$10,343,831 on June 30, 2024, marking a rise of 68.5%[14] - Cash and cash equivalents rose to $20,262,886 as of December 31, 2024, compared to$12,266,556 on June 30, 2024, indicating a growth of 65.5%[14] - Total stockholders' equity increased to $36,975,488 as of December 31, 2024, from$36,375,998 on June 30, 2024, reflecting a growth of 1.6%[14] - The company reported accounts receivable of $1,912,369 as of December 31, 2024, compared to$1,155,060 as of June 30, 2024, indicating a significant increase in receivables[51] - Total accrued liabilities as of December 31, 2024, amounted to $2,002,924, an increase from$1,425,146 as of June 30, 2024[89] Cash Flow - Operating cash flow for the six months ended December 31, 2024, was $5,412,542, a significant improvement from a cash outflow of$6,193,534 in the prior year[23] - For the six months ended December 31, 2024, net cash provided by operating activities was $5,412,542, primarily due to an increase in accounts payable and accrued liabilities of$6,501,820 and $838,564, respectively[173] - For the six months ended December 31, 2023, net cash used in operating activities was$6,193,534, mainly due to an increase in accounts receivable of $4,495,638 and a decrease in accounts payable of$3,869,191[174] - Net cash provided by investing activities for the six months ended December 31, 2024, was $2,631,817, primarily from sales of short-term investments totaling$2,685,688[175] - Net cash used in investing activities for the six months ended December 31, 2023, was $869,481, mainly due to the purchase of short-term investments of$779,571[177] - Net cash used in financing activities for the six months ended December 31, 2024, was $0, compared to$2,046 in 2023, which was related to increased loan interest to an employee[178] Expenses - Research and development expenses for the six months ended December 31, 2024, totaled $1,951,550, an increase of 13.5$1,719,809 in 2023[16] - Operating expenses increased by $53,815, or 2.2$2,446,831 for the three months ended December 31, 2024[159] - Operating expenses for the six months ended December 31, 2024, increased by $400,423, or 8.9$4,891,116 from $4,490,693 in 2023[166] - The company reported stock-based compensation of$170,583 for the six months ended December 31, 2024, compared to $138,780 in the prior year[23] - Shipping and handling costs for the three months ended December 31, 2024, were$94,742, up from $51,498 in the same period of 2023, representing an increase of approximately 83.7$208,917 for the three months ended December 31, 2024, compared to $239,688 for the same period in 2023, showing a decrease of approximately 12.8$217,591 for the three months ended December 31, 2024, compared to $245,326 for the same period in 2023[87] Subsidiaries and Investments - The company formed a new subsidiary, Sigbeat, with a 60$5,000,000 in capital for its establishment[27] - The company holds a 66.3% ownership in Franklin Technology Inc., which provides design and development services for wireless products[85] - The company holds a 66.3% ownership in Franklin Technology Inc. and a 60% ownership in Sigbeat Inc., expanding its market presence in North America and Asia[147] Legal and Compliance - The company is involved in litigation related to a recall affecting approximately 2.5 million devices, with no current estimate of the financial impact[104] - A legal action against the company resulted in a settlement payment of $2.4 million related to shareholder litigation[110] - The company has no material unrecognized tax benefits as of December 31, 2024[74] - The company recorded a decrease in deferred tax asset of$166,927 for the three months ended December 31, 2024, compared to an increase of $215,332 for the same period in 2023[74] - The company has not reported any changes in internal controls over financial reporting that materially affect its operations during the six months ended December 31, 2024[188] Lease and Rent - The company leased approximately 12,775 square feet of office space in San Diego, California, at a monthly rent of$25,754, which will increase to $27,789 for a new lease of 11,400 square feet starting January 1, 2024[93] - Rent expense for the San Diego office space was$83,367 for the three months ended December 31, 2024, compared to $77,263 for the same period in 2023, reflecting an increase of 13.6$112,352, a decrease from $254,402 in the same period of 2023[183] - Rent expenses for the six months ended December 31, 2024, were$225,109, down from $365,829 in 2023[183] - Rent expenses for the Korea-based subsidiary's leases were approximately$26,475 for the three months ended December 31, 2024, down from approximately $32,100 in 2023, a decrease of 17.5$225,109, a decrease of 38.5% from $365,829 in 2023[99] Market and Strategy - The company is a leading global provider of integrated wireless solutions, focusing on 5G and 4G LTE technologies[84] - The company is focusing on enhancing its software service offerings to adapt to the declining demand for mobile device management services in the post-pandemic economy[151] - The company plans to replace one model this year and another next year that are reaching end of life with new models, which may impact future growth prospects[192] Miscellaneous - The return rate for 5G wireless devices is 0.57%, with warranty repairs at 0.10%[102] - The company is currently exempt from international tariffs on products manufactured in Vietnam, but potential future tariffs could significantly impact costs and profits[127] - As of December 31, 2024, no material cybersecurity incidents were identified that could affect the Company's business strategy or financial condition[132]