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]
Franklin Wireless(FKWL) - 2025 Q1 - Quarterly Report