Franklin Wireless Net Income Rises on Cost Cuts Despite Sales Dip

TL;DR

**FKWL's cost-cutting is propping up profits, but declining sales are a red flag for future growth; stay cautious.**

AI Summary

FRANKLIN WIRELESS CORP. (FKWL) reported a net income attributable to the Parent Company of $640,478 for the three months ended September 30, 2025, an increase from $515,187 in the same period of 2024. Despite this, net sales decreased to $12,744,960 in Q3 2025 from $13,322,912 in Q3 2024, primarily driven by a decline in North America sales from $13,322,448 to $12,733,051. Gross profit, however, improved significantly to $2,909,770 in Q3 2025 from $2,071,502 in Q3 2024, largely due to a reduction in cost of goods sold from $11,251,410 to $9,835,190. Operating expenses also saw a slight decrease from $2,444,285 to $2,319,390. The company experienced a substantial loss from foreign currency transactions of $(290,870) in Q3 2025, a reversal from a gain of $451,947 in Q3 2024. Cash and cash equivalents decreased by $1,361,049 to $13,380,124 as of September 30, 2025, compared to $14,741,173 at June 30, 2025, primarily due to net cash used in operating activities of $(1,488,908).

Why It Matters

For investors, FKWL's ability to increase net income despite declining sales signals effective cost management and improved gross margins, which could be a positive long-term indicator. However, the reliance on North American sales and the significant foreign currency loss highlight potential vulnerabilities. Employees might see stability from improved profitability, but the sales decline could signal challenges in market penetration or demand. Customers may benefit from potentially more competitive pricing due to lower cost of goods sold. In the competitive wireless access product market, FKWL's improved gross profit margin could give it an edge, but the overall revenue contraction suggests it's losing ground to rivals or facing broader market headwinds.

Risk Assessment

Risk Level: medium — The risk level is medium due to declining net sales from $13,322,912 to $12,744,960, indicating potential market share loss or reduced demand. Additionally, a significant swing from a foreign currency gain of $451,947 in Q3 2024 to a loss of $(290,870) in Q3 2025 introduces volatility and currency risk, impacting overall profitability.

Analyst Insight

Investors should closely monitor FKWL's revenue trends in North America and its ability to sustain gross profit improvements. Consider holding existing positions but deferring new investments until there's clear evidence of revenue stabilization or growth, especially given the foreign currency volatility.

Financial Highlights

debt To Equity

0.39

revenue

$12,744,960

operating Margin

4.63%

total Assets

$53,284,485

total Debt

$14,926,406

net Income

$640,478

eps

N/A

gross Margin

22.83%

cash Position

$13,380,124

revenue Growth

-4.4%

Revenue Breakdown

Key Numbers

• $12,744,960 — Net sales for Q3 2025 (Decreased from $13,322,912 in Q3 2024)
• $640,478 — Net Income attributable to Parent Company for Q3 2025 (Increased from $515,187 in Q3 2024)
• $2,909,770 — Gross profit for Q3 2025 (Increased from $2,071,502 in Q3 2024)
• $(290,870) — Loss from foreign currency transactions for Q3 2025 (Reversed from a gain of $451,947 in Q3 2024)
• $13,380,124 — Cash and cash equivalents as of September 30, 2025 (Decreased from $14,741,173 as of June 30, 2025)
• $(1,488,908) — Net cash used in operating activities for Q3 2025 (Compared to $2,670,900 provided by operating activities in Q3 2024)
• 11,784,280 — Shares of common stock outstanding (As of November 14, 2025)
• $9,835,190 — Cost of goods sold for Q3 2025 (Decreased from $11,251,410 in Q3 2024)

Key Players & Entities

• FRANKLIN WIRELESS CORP. (company) — Registrant
• Sigbeat Inc. (company) — Majority-owned subsidiary
• Forge International Co., Ltd. (company) — Electronic Manufacturing Services (EMS) partner and 40% owner of Sigbeat
• Franklin Technology Inc. (company) — Majority-owned subsidiary
• The Nasdaq Stock Market LLC (regulator) — Exchange where Common Stock is registered
• Securities and Exchange Commission (regulator) — Regulatory body for 10-Q filing
• Nevada (person) — State of incorporation for Franklin Wireless Corp.
• San Diego, California (person) — Principal executive offices location

FAQ

Risk Factors

• Foreign Currency Transaction Volatility [medium — financial]: The company experienced a substantial loss of $290,870 from foreign currency transactions in Q3 2025, a significant reversal from a gain of $451,947 in Q3 2024. This volatility can negatively impact profitability.
• Inventory Management [medium — operational]: Inventories decreased from $2,358,335 as of June 30, 2025, to $995,364 as of September 30, 2025. While this contributed to improved gross profit by reducing cost of goods sold, a significant drop may indicate potential supply chain issues or a shift in sales strategy.
• Cash Flow from Operations [high — financial]: Net cash used in operating activities was $(1,488,908) in Q3 2025, a sharp decline from $2,670,900 provided by operating activities in Q3 2024. This negative cash flow is a primary driver for the decrease in cash and cash equivalents.
• Declining Net Sales [medium — market]: Net sales decreased to $12,744,960 in Q3 2025 from $13,322,912 in Q3 2024. This 4.4% reduction, primarily in North America, signals potential market challenges or reduced demand.
• Accounts Receivable Fluctuation [low — financial]: Accounts receivable, net, increased significantly from $1,330,504 as of June 30, 2025, to $6,782,714 as of September 30, 2025. This could indicate longer collection periods or an increase in sales on credit terms.

Industry Context

Franklin Wireless Corp. operates in the telecommunications modules sector. The industry is characterized by rapid technological advancements, global competition, and evolving regulatory landscapes. Companies in this space often rely on partnerships and joint ventures to expand market reach and product development, as evidenced by Franklin's Sigbeat joint venture.

Regulatory Implications

While this 10-Q does not detail specific regulatory changes, companies in the wireless and telecommunications sector are subject to regulations concerning spectrum usage, data privacy, and product certifications. Compliance with these evolving standards is crucial for market access and operational continuity.

What Investors Should Do

1. Monitor operating cash flow trends.
2. Analyze the drivers of improved gross margin.
3. Investigate the reversal of foreign currency gains to losses.
4. Assess the increase in accounts receivable.

Key Dates

• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing decreased net sales but improved gross profit and net income, alongside negative operating cash flow.
• 2025-06-30: End of Q2 2025 — Prior period balance sheet date, used for comparison of cash and cash equivalents and other balance sheet items.
• 2024-09-30: End of Q3 2024 — Prior year comparable period for the income statement, showing higher net sales and positive operating cash flow but lower gross profit.
• 2024-05-14: Agreement for Formation of a Joint Venture Corporation (Sigbeat) — Established a joint venture with an EMS partner, impacting consolidation and non-controlling interests.

Glossary

Non-controlling interests

The portion of equity in a subsidiary that is not attributable to the parent company. It represents the ownership stake of external shareholders in a consolidated subsidiary. (Affects the reported net income and total equity of the parent company, as seen with Sigbeat and FTI.)

Accumulated other comprehensive loss

A component of equity that includes unrealized gains and losses that have not yet been realized and recognized in net income. This can include foreign currency translation adjustments. (Reflects the impact of foreign currency fluctuations on the company's equity, which was $(1,204,421) as of September 30, 2025.)

Cost of goods sold

The direct costs attributable to the production or purchase of the goods sold by a company during a period. (A significant reduction in COGS from $11,251,410 to $9,835,190 in Q3 2025 was a key driver of improved gross profit.)

Retained earnings

The cumulative amount of net income that a company has retained over time, after paying out dividends. (Increased from $24,894,108 as of June 30, 2025, to $25,534,586 as of September 30, 2025, reflecting the net income generated.)

Right of use assets, net

Assets recognized under lease accounting standards, representing the right to use an underlying asset for the lease term. (These assets decreased from $1,382,294 to $1,288,492, reflecting ongoing lease payments.)

Year-Over-Year Comparison

Compared to the prior year's third quarter, Franklin Wireless Corp. saw a decrease in net sales from $13,322,912 to $12,744,960. However, gross profit significantly improved from $2,071,502 to $2,909,770 due to a reduction in the cost of goods sold. While net income attributable to the parent company increased from $515,187 to $640,478, a major concern is the reversal from positive operating cash flow in the prior year to negative operating cash flow of $(1,488,908) in the current quarter.

Key Financial Figures

• $1,405,537 — As of September 30, 2024, the NCI was $1,405,537, which represents a $176,593 increase f
• $176,593 — NCI was $1,405,537, which represents a $176,593 increase from $1,228,944 as of June 30,
• $1,228,944 — ich represents a $176,593 increase from $1,228,944 as of June 30, 2024. The increase of $1
• $133,469 — ease of $176,593 in the NCI consists of $133,469 from income in the subsidiary of $396,5
• $396,552 — 33,469 from income in the subsidiary of $396,552 and $43,124 from foreign exchange trans
• $43,124 — ncome in the subsidiary of $396,552 and $43,124 from foreign exchange translation incur

Filing Documents

• franklin_i10q-093025.htm (10-Q) — 695KB
• franklin_ex3101.htm (EX-31.1) — 10KB
• franklin_ex3102.htm (EX-31.2) — 10KB
• franklin_ex3201.htm (EX-32.1) — 4KB
• franklin_ex3202.htm (EX-32.2) — 4KB
• 0001683168-25-008378.txt ( ) — 4991KB
• fkwl-20250930.xsd (EX-101.SCH) — 32KB
• fkwl-20250930_cal.xml (EX-101.CAL) — 52KB
• fkwl-20250930_def.xml (EX-101.DEF) — 152KB
• fkwl-20250930_lab.xml (EX-101.LAB) — 341KB
• fkwl-20250930_pre.xml (EX-101.PRE) — 292KB
• franklin_i10q-093025_htm.xml (XML) — 721KB

– Financial Information

PART I – Financial Information Item 1: Consolidated Financial Statements (unaudited) 4 Consolidated Balance Sheets as of September 30, 2025 (unaudited) and June 30, 2025 4 Consolidated Statements of Comprehensive Income (unaudited) for the three months ended September 30, 2025 and 2024 5 Consolidated Statements of Stockholders' Equity (unaudited) for the three months ended September 30, 2025 and 2024 6-7 Consolidated Statements of Cash Flows (unaudited) for the three months ended September 30, 2025 and 2024 8

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 9 Item 2:

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Item 3:

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 34 Item 4:

Controls and Procedures

Controls and Procedures 34

– Other Information

PART II – Other Information Item 1:

Legal Proceedings

Legal Proceedings 35 Item 1A:

Risk Factors

Risk Factors 35 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds 35 Item 3: Defaults Upon Senior Securities 35 Item 4: Mine Safety Disclosures 35 Item 5: Other Information 35 Item 6: Exhibits 35

Signatures

Signatures 36 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 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, 2025. 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

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS FRANKLIN WIRELESS CORP. Consolidated Balance Sheets September 30, 2025 (Unaudited) June 30, 2025 ASSETS Current assets: Cash and cash equivalents $ 13,380,124 $ 14,741,173 Short-term investments 25,334,511 25,887,028 Accounts receivable, net 6,782,714 1,330,504 Other receivable due from officer 662,596 662,596 Inventories, net 995,364 2,358,335 Other current assets 126,484 143,666 Advance payments to vendors 110,737 56,988 Total current assets 47,392,530 45,180,290 Property and equipment, net 60,545 72,882 Intangible assets, net 865,648 1,014,112 Deferred tax assets, non-current 3,273,622 3,273,622 Goodwill 273,285 273,285 Right of use assets, net 1,288,492 1,382,294 Other assets 130,363 133,545 TOTAL ASSETS $ 53,284,485 $ 51,330,030 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,620,211 $ 8,119,055 Contract liabilities and advance from customers 115,920 125,300 Income tax payable 30,870 – Accrued liabilities, bonus payable to an officer 2,750,000 2,625,000 Accrued liabilities, others 1,114,897 1,172,044 Lease liabilities, current 371,550 375,343 Total current liabilities 14,003,448 12,416,742 Lease liabilities, non-current 922,958 1,018,985 Total liabilities 14,926,406 13,435,727 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 14,337,826 14,337,826 Retained earnings 25,534,586 24,894,108 Treasury stock, 2,549,208 shares ( 3,554,893 ) ( 3,554,893 ) Accumulated other comprehensive loss ( 1,204,421 ) ( 1,146,862 ) Total Parent Company stoc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company's consolidated financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial Principles of Consolidation As of September 30, 2025, the consolidated financial statements include the accounts of the Company and its subsidiaries, Franklin Technology Inc. ("FTI") and Sigbeat Inc. ("Sigbeat"), with majority voting interests of approximately 66.3 % and 60.0 %, respectively, (approximately 33.7 % and 40.0 % are owned by noncontrolling interests, respectively). As of September 30, 2024, the consolidated financial statements include the accounts of the Company and its subsidiary, FTI, with a majority voting interest of 66.3 % (approximately 33.7 % is owned by noncontrolling interests). In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings (loss) are reduced by the portion of the net earnings (loss) of the subsidiary or subsidiaries applicable to noncontrolling interests. On May 14, 2024, the Company entered into an Agreement for Formation of a Joint Venture Corporation (the "Agreement"). Under the terms of the Agreement, the parties formed a Nevada corporation, Sigbeat, to be owned 60 % by Franklin and 40% by its Electronic Manufacturing Services ("EMS") partner, Forge International Co., Ltd. ("Forge"). The parties contributed a total of $ 5,000,000 in capital, in accordance with their respective ownership interest percentages. Under the terms of the Agreement, Sigbeat has a Board of Directors consisting of thre

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