Core Insights - Franklin Access has successfully funded a joint venture named Sigbeat to develop 4G/5G modules and AI-powered solutions [1] - Sigbeat will focus on designing, marketing, and certifying advanced 4G/5G modules with on-device AI capabilities [2] - The joint venture aims to enhance security, image processing, and video streaming functionalities while reducing reliance on cloud computing [2][3] Company Overview - Franklin Access specializes in integrated connectivity solutions utilizing 4G LTE and 5G technologies [5] - The company provides mobile device management (MDM), network management solutions (NMS), and innovative wireless products [5] Joint Venture Details - Sigbeat will leverage technological expertise from its partners and Franklin Access's leadership in wireless solutions [3] - The modules will combine edge computing with multi-network capabilities to enhance customization and efficiency for various industries [3][4] - Sigbeat aims to deliver reliable and future-ready connectivity through scalable and customizable designs [4]

Core Viewpoint - Franklin Wireless achieved a significant legal victory in a shareholder litigation case, resulting in only nominal damages awarded to the company, allowing management to refocus on its business objectives [2][3][6]. Group 1: Legal Outcome - The U.S. District Court for the Southern District of California ruled that the actions of Franklin Wireless officers and directors led to only nominal damage to the company [2]. - Plaintiffs initially sought over $110 million in damages, but the jury awarded only $0.99 in nominal damages after less than a day of deliberation [6]. Group 2: Management Implications - The resolution of the litigation provides certainty and clarity for the company's officers and directors, enabling them to concentrate on delivering innovative connectivity solutions [3]. - Management can now focus on its mission without the distraction of ongoing legal issues [3]. Group 3: Company Profile - Franklin Wireless specializes in integrated solutions utilizing 4G LTE and 5G technologies, offering mobile device management and network management solutions [4].

Financial Performance - Net sales for the three months ended September 30, 2024, were $13,322,912, representing a 38.3% increase from $9,655,546 in the same period of 2023[11] - Gross profit for the quarter was $2,071,502, up from $1,513,160, indicating a gross margin improvement[11] - The company reported a net income of $648,656 for the quarter, compared to a net loss of $337,201 in the prior year[11] - Earnings per share attributable to Parent Company stockholders were $0.04, compared to a loss of $0.02 in the prior year[11] - The company reported a comprehensive income of $600,187 for the quarter, compared to a comprehensive loss of $331,165 in the same quarter of 2023[11] - The net income for the three months ended September 30, 2024, was $648,656, compared to a net loss of $(337,201) for the same period in 2023, indicating a turnaround in profitability[16] - Cash flow from operating activities showed a positive net cash of $2,670,900, a significant improvement from a cash outflow of $5,223,316 in the previous year[16] - The company recognized a gain from the forgiveness of accrued liabilities amounting to $247,592, contributing positively to the net income[11] Assets and Liabilities - Total current assets increased to $45,268,864 as of September 30, 2024, from $40,220,460 at June 30, 2024, reflecting a growth of 12.8%[7] - Cash and cash equivalents rose to $14,618,062, up from $12,266,556, marking a 19.2% increase[7] - Total liabilities increased to $14,392,297 from $10,343,831, representing a 39.5% rise[8] - The company’s retained earnings increased to $25,652,396 from $25,137,209, showing a growth of 2%[9] - Total stockholders' equity as of September 30, 2024, was $37,240,162, up from $36,375,998 at June 30, 2024[9] - Total accrued liabilities as of September 30, 2024, amounted to $1,765,370, an increase from $1,425,146 as of June 30, 2024[79] Research and Development - Research and development expenses for the quarter were $1,024,312, compared to $866,955 in the same period last year, reflecting a 18.1% increase[11] - Capitalized product development costs in progress were $14,000 as of September 30, 2024, compared to $0 as of June 30, 2024[48] - Research and development costs increased to $1,024,312 for the three months ended September 30, 2024, compared to $866,955 in 2023[50] Customer Concentration - A significant portion of revenue is derived from a small number of customers, with the two largest customers accounting for 93.6% of consolidated net sales for the three months ended September 30, 2024[69] - Sales to the two largest customers accounted for 93.6% of consolidated net sales for the three months ended September 30, 2024, compared to 90.6% for the same period in 2023[69] Inventory and Cost of Goods Sold - The company reported a significant decrease in accounts receivable, which was $(634,081) for the three months ended September 30, 2024, compared to $(978,093) in the same period of 2023[16] - Cost of goods sold included amortization expenses of approximately $245,233 for the three months ended September 30, 2024, compared to $239,624 for the same period in 2023[45] - The company recorded inventory reserves of $91,482 for obsolete or slow-moving inventory as of September 30, 2024[54] Operating Expenses - Total operating expenses increased to $2,444,285, up from $2,097,677, primarily driven by higher selling, general, and administrative expenses and research and development costs[11] - Shipping and handling costs increased to $78,113 for the three months ended September 30, 2024, compared to $52,450 for the same period in 2023[52] Tax and Legal Matters - The company recorded income tax provisions of $47,880 for the three months ended September 30, 2024, compared to benefits of $50,060 for the same period in 2023, reflecting a shift from tax benefits to tax expenses[64] - A settlement of $2.4 million was agreed upon in a shareholder lawsuit, which is reflected in liabilities under "accrued legal contingency expense"[94] Corporate Developments - The company entered into a loan agreement with its South Korean subsidiary for $10 million to support operations and facility acquisition[102] - The loan agreement includes a 2% annual interest rate and a five-year term, with a default interest rate of 7% per annum[103] - The company is forming a new corporation with MeiG Smart Technology Co., Ltd., contributing $3 million for a 60% ownership stake[109] - The company has accrued a bonus of $1,000,000 for the CEO for the quarter ended September 30, 2024, with a total bonus balance of $1,000,000[107] Compliance and Risk Management - The company has not identified any cybersecurity incidents that materially affected its business strategy or financial condition as of September 30, 2024[116] - The company anticipates no losses on cash deposits exceeding the FDIC insured limit of $250,000 per financial institution[71] - The company has recently adopted new accounting standards that will require additional disclosures in future financial statements[72][73]

Financial Performance - For the fiscal year ended June 30, 2024, total net sales were $30,796,690, a decrease of approximately 33% from $45,948,516 in fiscal 2023[10] - Net sales in North America were $30,699,727, down from $45,782,084, representing a decline of about 33%[10] - For the fiscal year ended June 30, 2024, net revenues from the two largest customers represented 68% and 23% of consolidated net sales, indicating a significant dependency on a small number of customers[33] - Net sales for the fiscal year ended June 30, 2024, totaled $30,796,690, a decrease of approximately 33% from $45,948,516 in 2023[10] - North America generated $30,699,727 in net sales, down from $45,782,084 in the previous year, reflecting a decline of about 33%[10] Asset Management - Long-lived assets decreased to $1,424,565 from $2,281,972, a reduction of approximately 37.5%[10] - Long-lived assets decreased from $2,281,972 in June 30, 2023, to $1,424,565 in June 30, 2024, representing a reduction of approximately 37.5%[10] Product Development and Innovation - The company is focused on developing 5G and 4G LTE wireless solutions, including mobile hotspots and fixed wireless routers[11] - New product developments include a 4G/5G M2M Gateway and on-device AI capabilities for enhanced IoT applications[13] - Future product development includes a 4G/5G M2M Gateway and on-device AI capabilities for enhanced IoT applications[13] Market and Competition - The wireless broadband data access market is highly competitive, requiring continuous investment in R&D and marketing[25] - The market for the company's products is rapidly evolving and highly competitive, posing challenges in maintaining market acceptance and customer relationships[29] Operational Risks - The company experiences long lead times for product deliveries, often exceeding 45 days, which may lead to customer loss to competitors with faster delivery times[35] - The company operates in a volatile hardware and software design industry, with risks including latent design flaws and manufacturing defects that could impact product performance[28] - The company relies on collaborative arrangements for product development and commercialization, which are critical for maintaining market presence[32] - The company relies on independent manufacturers in Asia for the majority of its product production[20] - The company relies on third-party manufacturers and sole source suppliers, exposing it to risks related to supply chain disruptions and component availability[39] Financial Strategy and Risks - The company may seek additional financing for product development, which could dilute existing stockholder ownership[22] - The company is exposed to potential tariffs of 10%-25% on the purchase price if international tariff exemptions change, which could adversely affect sales and operating results[36] - The company faces risks related to international operations, including credit management, regulatory changes, and potential adverse tax consequences[35] - International operations expose the company to political, economic, and currency exchange risks that could materially affect financial results[43] - The company may engage in acquisitions or divestitures, which could adversely impact financial condition and require significant charges to earnings if goodwill becomes impaired[44] Shareholder Considerations - The company's share price has been highly volatile and may continue to be influenced by various factors, including financial reporting and market conditions[46] - The share price has been highly volatile and may continue to be influenced by market manipulation and concentrated ownership[46] - The company does not intend to pay dividends, making stock price appreciation the primary return on investment for shareholders[46] - Fluctuations in quarterly operating results may lead to volatility in stock price, affecting investor confidence and market perception[47] Regulatory Environment - The company has obtained necessary regulatory approvals for current products but may face challenges in obtaining timely approvals for future products[37] - Regulatory approvals are mandatory for products, and delays in obtaining these approvals could hinder future product sales[37]

Core Insights - Franklin Access has committed to invest $3 million in a joint venture focused on developing and marketing 4G/5G mobile broadband modules, aiming to innovate in the module space with on-device AI capabilities [1][4]. Company Overview - Franklin Access specializes in integrated wireless solutions, utilizing 4G LTE and 5G technologies to provide mobile device management and network management solutions [3]. - The company is transitioning its branding from Franklin Wireless to Franklin Access, indicating a broader focus on integrated solutions [3]. Product Development - The new on-device AI modules are anticipated to launch soon, addressing the increasing demand for smarter wireless products [3]. - These modules will feature advanced functionalities in security, image processing, and video streaming, enhancing user experience across 4G and 5G networks [4][5]. - The modules will be certified with wireless operators before becoming available to the market [4]. Industry Trends - On-device AI technology offers benefits such as improved privacy, faster response times, reduced reliance on internet connectivity, and enhanced customization for users [2]. - Applications for on-device AI include voice assistants, video quality improvements, augmented reality, and security enhancements, indicating a growing trend towards localized processing [2].

Core Perspective - Franklin Wireless has rebranded itself as Franklin Access to better reflect its mission of providing global connectivity solutions [2][4] Company Overview - Franklin Access focuses on delivering integrated wireless solutions that emphasize reliability, speed, and accessibility for both home and business networks [4] - The company specializes in leveraging 4G LTE and 5G technologies to design connectivity solutions suitable for the digital age [6] Strategic Move - The rebranding is seen as a strategic move to enhance customer satisfaction through innovative network solutions and user-friendly products [2][4] - The transition to Franklin Access will not impact ownership, management, or operations, and the company will continue to be listed on NASDAQ under the symbol FKWL [2] Online Presence - The launch of FranklinAccess.com consolidates all Franklin Access brands into a single online platform, enhancing the company's digital presence [5] Commitment to Service - The company remains dedicated to exceptional service and aims to empower users with seamless network integration across multiple devices [4][6]

Franklin Access focuses on reliability, speed, and accessibility for modern home and business network demands. We empower users with seamless network integration on multiple devices at home, traveling, and even managing IoT systems. We will push the boundaries of network solutions with our customers as the core of everything we do. The rebranding to Franklin Access also brings a unified online presence with the launch of FranklinAccess.com, a website that consolidates all Franklin Access brands into one con ...

Financial Performance - Net sales for the three months ended March 31, 2024, were $6,176,499, a decrease of 47.9% compared to $11,851,971 for the same period in 2023[17] - Gross profit for the three months ended March 31, 2024, was $517,449, down 74.7% from $2,045,510 in the prior year[17] - The company reported a net loss of $1,310,320 for the three months ended March 31, 2024, compared to a net income of $211,639 for the same period in 2023[17] - Comprehensive loss for the three months ended March 31, 2024, was $1,457,081, compared to comprehensive income of $71,887 for the same period in 2023[17] - For the nine months ended March 31, 2024, the net loss was $2,297,180 compared to a net loss of $1,298,722 for the same period in 2023, representing an increase in loss of approximately 77%[25] - Net sales for North America decreased to $24,583,324 for the nine months ended March 31, 2024, down 14% from $28,778,479 in the same period of 2023[32] - Net sales decreased by $5,675,472, or 47.9%, to $6,176,499 for the three months ended March 31, 2024, compared to $11,851,971 for the same period in 2023[142] - Gross profit decreased by $1,528,061, or 74.7%, to $517,449 for the three months ended March 31, 2024, with a gross profit margin of 8.4% compared to 17.3% in 2023[144] - Net loss before income taxes for the three months ended March 31, 2024, was $(26.3%) compared to $(3.1%) for the same period in 2023[141] - Net sales for the nine months ended March 31, 2024, decreased by $4,264,730, or 14.7%, to $24,679,824 from $28,944,554 for the same period in 2023[148] - Gross profit for the nine months ended March 31, 2024, decreased by $1,717,730, or 37.5%, to $2,867,684, with a gross profit margin of 11.6% compared to 15.8% in 2023[150] Assets and Liabilities - Total current assets decreased to $43,547,756 as of March 31, 2024, from $51,857,095 as of June 30, 2023, representing a decline of 16.0%[14] - Total liabilities decreased to $11,773,429 as of March 31, 2024, from $16,512,250 as of June 30, 2023, a reduction of 28.5%[14] - The company’s retained earnings decreased to $26,903,234 as of March 31, 2024, down from $29,101,225 as of June 30, 2023, reflecting a decline of 7.5%[14] - The company’s total stockholders' equity decreased to $38,245,390 as of March 31, 2024, from $40,414,828 as of June 30, 2023, a decrease of 5.4%[14] - The total long-lived assets decreased from $2,281,972 as of June 30, 2023, to $1,711,247 as of March 31, 2024, indicating a decline of approximately 25%[33] - Cash and cash equivalents at the end of the period were $7,004,494, a decrease of 60% from $17,569,754 at the end of the same period in 2023[25] Expenses - Research and development expenses for the three months ended March 31, 2024, were $811,470, a decrease of 22.9% compared to $1,052,672 in the same period of 2023[17] - 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 same period in 2023[145] - Research and development costs for the three months ended March 31, 2024, were $811,470, down from $1,052,672 for the same period in 2023, representing a decrease of approximately 22.9%[56] - The company incurred a depreciation expense of $28,059 for the nine months ended March 31, 2024, compared to $41,341 in the same period of 2023[25] - The company recorded an income tax benefit of $312,764 for the three months ended March 31, 2024, compared to $578,664 for the same period in 2023, reflecting a decrease of approximately 45.9%[70] - Shipping and handling costs for the three months ended March 31, 2024, were $28,441, down from $58,730 in the same period of 2023, indicating a reduction of about 51.6%[58] Cash Flow - The company reported a net cash used in operating activities of $6,972,515 for the nine months ended March 31, 2024, compared to $6,954,199 in the same period of 2023[25] - Net cash provided by investing activities for the nine months ended March 31, 2024, was $1,815,796, mainly from sales of short-term investments totaling $1,995,606[159] - The net cash provided by financing activities for the nine months ended March 31, 2024, was $1,045, attributed to an increase in loan to an employee[161] - For the nine months ended March 31, 2024, the net cash used in operating activities was $6,972,515, primarily due to a decrease in accounts payable of $6,668,572 and a net loss of $2,297,180[157] Inventory and Receivables - As of March 31, 2024, accounts receivable increased to $10,262,320 from $8,949,802 as of June 30, 2023, reflecting a growth of approximately 14.7%[46] - The balance of inventory reserves for obsolete or slow-moving inventories was $74,548 as of March 31, 2024, significantly lower than $585,274 as of June 30, 2023, showing a decrease of approximately 87.3%[61] - Contract liabilities for undelivered products rose to $195,599 as of March 31, 2024, compared to $146,488 as of June 30, 2023, indicating an increase of about 33.5%[47] Leases and Commitments - The company signed a new lease for office space in San Diego, California, at a monthly rent of $23,370, which commenced on January 1, 2024[91] - Future minimum payments under operating leases total $1,874,557, with a remaining lease term of 5.2 years[96] - The total lease expenses for the nine months ended March 31, 2024, were $483,305, an increase from $334,146 in the same period of 2023[96] - The company recorded an additional rent expense of $142,978 for pending charges from a prior landlord for variable cost increases over the last seven years[163] Stock and Equity - The company recorded stock-based compensation of $208,860 for the nine months ended March 31, 2024, down from $536,922 in the same period of 2023[25] - As of March 31, 2024, there were 627,001 stock options outstanding with a weighted average exercise price of $4.22[126] - The aggregate intrinsic value of stock options as of March 31, 2024, was based on a closing stock price of $2.99 per share[127] Legal and Regulatory - A settlement of $2.4 million has been agreed upon in the shareholder litigation, which is reflected in liabilities under "accrued legal contingency expense"[105] - The company believes its products are currently exempt from international tariffs, but potential tariffs of 10%-25% could adversely affect sales and operating results if imposed[121] Miscellaneous - The company has not entered into any related party transactions for the three and nine months ended March 31, 2024, and 2023[129] - No material recognizable subsequent events were identified that required disclosure in the financial statements as of March 31, 2024[130] - The company has not been able to recreate any device failures related to the Verizon recall and believes the Jetpack devices are performing within normal parameters[102]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-14891 3940 Ruffin Road Suite C San Diego, California (Address of principal executive offices) 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 regist ...

RESULTS OF OPERATIONS The following table sets forth, for the three months ended September 30, 2023 and 2022, our statements of comprehensive income (loss) including data expressed as a percentage of sales: | --- | --- | --- | |-----------------------------------------------------------------------|---------------------------------|------------------| | | Three Months September \n2023 | Ended 30, \n2022 | | | | | | Net sales | 100.0% | 100.0% | | Cost of goods sold | 84.3% | 80.3% | | Gross profit | 15.7% | ...