Franklin Wireless(FKWL) - 2026 Q2 - Quarterly Report

Financial Performance - Total net sales for the three months ended December 31, 2025, were $11,928,864, a decrease of 33% compared to $17,827,098 for the same period in 2024[18] - Gross profit for the six months ended December 31, 2025, was $4,943,830, down from $5,313,564 in 2024, reflecting a decline of approximately 7%[18] - Operating expenses for the three months ended December 31, 2025, were $1,985,343, a decrease of 19% from $2,446,831 in 2024[18] - The company reported a net income of $466,665 for the three months ended December 31, 2025, compared to a net loss of $83,445 in the same period of 2024[18] - Earnings per share attributable to Parent Company stockholders for the three months ended December 31, 2025, were $0.05, up from $0.02 in 2024[18] - For the six months ended December 31, 2025, net income was $1,017,201, a significant increase from $565,211 in the same period of 2024, representing an 80% growth[26] - The company reported a comprehensive income of $377,491 for the three months ended December 31, 2025, compared to a comprehensive loss of $347,873 in the same period of 2024[18] Assets and Liabilities - Total current assets increased to $47,165,586 as of December 31, 2025, compared to $45,180,290 as of June 30, 2025, representing a growth of approximately 4%[15] - Total liabilities rose to $14,764,268 as of December 31, 2025, compared to $13,435,727 as of June 30, 2025, indicating an increase of about 10%[15] - Retained earnings increased to $25,596,837 as of December 31, 2025, from $24,894,108 as of June 30, 2025, reflecting a growth of approximately 3%[15] - The company’s total stockholders' equity as of December 31, 2025, was $38,264,199, an increase from $37,894,303 as of June 30, 2025[15] Cash Flow and Operating Activities - The company reported a net cash used in operating activities of $(5,574,688) for the six months ended December 31, 2025, compared to net cash provided of $5,412,542 in 2024[26] - Cash and cash equivalents at the end of the period were $9,362,857, down from $20,262,886 at the end of December 2024, indicating a decrease of approximately 53.8%[26] Research and Development - Research and development expenses for the six months ended December 31, 2025, were $1,726,570, compared to $1,951,550 in 2024, showing a reduction of approximately 11.5%[38] - Research and development costs were $776,818 for the three months ended December 31, 2025, compared to $927,238 for the same period in 2024, and $1,726,570 for the six months ended December 31, 2025, compared to $1,951,550 in 2024[64] Inventory and Accounts Receivable - Accounts receivable, net, increased to $10,356,344 as of December 31, 2025, from $1,330,504 as of June 30, 2025[55] - The inventory reserve for obsolete or slow-moving items was $55,194 as of December 31, 2025, compared to $40,274 as of June 30, 2025[69] - Contract liabilities for undelivered products decreased slightly to $121,354 as of December 31, 2025, from $125,300 as of June 30, 2025[56] Joint Ventures and Partnerships - The company has a joint venture, Sigbeat, with a 60% ownership, aimed at global sales and marketing for telecommunications modules, with a total capital contribution of $5,000,000[30] - The company formed a joint venture corporation, Sigbeat, with a total capital contribution of $5,000,000, where it owns 60% and its EMS partner, Forge, owns 40%[120] - In July 2024, Sigbeat entered into a stock subscription agreement with Forge to purchase 400,000 shares of Common Stock, representing 40% of the total outstanding Common Stock of Sigbeat[121] Legal and Compliance - The company is involved in litigation with Partron Co., Ltd., with a claim amounting to $8,895,120, including interest, scheduled for a court hearing on March 31, 2026[107] - The company is evaluating the impact of recently issued accounting standards updates, including ASU 2025-11, which improves interim disclosure requirements[85] Stock and Dividends - The company has 11,784,280 shares of common stock issued and outstanding as of December 31, 2025, with no shares issued during the six months ended December 31, 2025[139] - A cash dividend of $0.04 per share was declared on November 4, 2025, totaling $471,371, and was paid on December 2, 2025[142] - As of December 31, 2025, the company had 2,549,208 shares of treasury stock valued at $3,554,893[141] Expenses and Liabilities - The company incurred amortization expenses of $165,664 and $355,306 associated with capitalized product development costs for the three and six months ended December 31, 2025, respectively[60] - The company has accrued liabilities totaling $3,224,150 as of December 31, 2025, down from $3,797,044 as of June 30, 2025[93] Cybersecurity and Risk Management - The company has not identified any cybersecurity incidents that materially affected its business strategy or financial condition as of December 31, 2025[130] - The company is currently exempt from international tariffs on products manufactured in Vietnam, but potential tariffs could significantly increase import costs and affect profitability[124][125]