10-Q: Franklin Wireless Reports Q3 2025 Results: Revenue Surges, Bolstered by North American Demand

Franklin Wireless Corp. reports a significant increase in net sales for Q3 2025, driven by strong demand in North America, while navigating legal proceedings and strategic joint ventures.

Summary

• Franklin Wireless Corp. reported its Q3 2025 results, showing a $1.83 million increase in net sales, reaching $8.01 million, compared to $6.18 million in Q3 2024.
• The increase in sales was primarily driven by higher demand from major carrier customers in North America, which accounted for nearly all of the company's net sales.
• Gross profit increased significantly to $1.35 million, representing 16.9% of net sales, compared to $0.52 million, or 8.4% of net sales, in the same period last year, attributed to higher margin products.
• Operating expenses rose by $1.25 million to $3.32 million, mainly due to an accrued incentive bonus of $1.25 million for the President.
• The company reported a net loss of $0.64 million, influenced by increased operating expenses, but this was offset by a $1 million gain from a legal settlement.
• For the nine months ended March 31, 2025, net sales increased by $14.48 million to $39.16 million, compared to $24.68 million in the same period of 2024.
• The company's liquidity remains strong, with $38.14 million in cash, cash equivalents, and short-term investments.
• Franklin Wireless is involved in ongoing legal proceedings, including the Verizon Jetpack recall and litigation in Korea involving its subsidiary, FTI.
• The company formed a joint venture, Sigbeat Inc., with Forge International Co., Ltd., to focus on telecommunications modules, with Franklin holding a 60% ownership interest.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the company reported a net loss, there was significant revenue growth and improved gross profit margins. Ongoing legal issues and increased operating expenses temper the positive aspects.

Positives

• Significant increase in net sales, driven by strong demand in North America.
• Improved gross profit margin, indicating better profitability on sales.
• Strong liquidity position with substantial cash and short-term investments.
• Formation of a joint venture, Sigbeat Inc., to expand into telecommunications modules.
• The company recognized a $1 million gain from a legal settlement.

Negatives

• Increased operating expenses, primarily due to an incentive bonus for the President.
• Ongoing legal proceedings, including the Verizon Jetpack recall and litigation in Korea, could result in financial liabilities.
• Net loss reported for the quarter, although influenced by non-recurring expenses and legal gains.
• Decrease in net sales in Asia for the nine months ended March 31, 2025.

Risks

• Ongoing legal proceedings, including the Verizon Jetpack recall and litigation in Korea, could result in financial liabilities.
• Dependence on a small number of customers for a significant portion of revenue.
• Reliance on two manufacturing companies in Asia for the majority of wireless data products.
• Potential impact of international tariffs on imported products.
• Cybersecurity threats and incidents could materially affect the business.
• Decline in demand for mobile device management (MDM) services.

Future Outlook

The company's future results will be influenced by maintaining existing customers, demand for wireless data products, customer acceptance of new products, new customer relationships, meeting customer demands, relationships with manufacturing partners, and defect rates of products.

Industry Context

Franklin Wireless operates in the competitive wireless solutions market, facing challenges from shifting demand in the post-pandemic economy and the need to adapt its offerings to meet evolving customer needs.

Comparison to Industry Standards

• It is difficult to compare Franklin Wireless directly to industry standards without specific competitor data.
• However, the company's focus on 5G and 4G LTE technologies aligns with current industry trends.
• The company's gross profit margin of 16.9% for Q3 2025 is relatively low compared to some other technology companies, but it represents a significant improvement from the previous year.
• The company's involvement in legal proceedings, particularly the Verizon Jetpack recall, is a unique situation that does not have a direct industry benchmark.

Legal Proceedings

• The company is involved in legal proceedings related to the Verizon Jetpack recall, shareholder litigation, and litigation in Korea involving its subsidiary, FTI.
• A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Stephen Harwood, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv01837-AJB-MSB, on or about October 29, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner.
• A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Debra Martin, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv2091-AJB-MSB, on or about December 15, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner.
• A legal action was filed in the Second Judicial District Court of Nevada in the County of Washoe against Franklin, as a nominal defendant, Barbara Pape, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case # CV22-00471, on or about March 21, 2022, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner.
• A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Nosirrah Management LLC v. Franklin Wireless et al., Case # 3:21-cv-01316-RSH-JLB, on or about July 22, 2021, claiming that our Chief Executive Officer, O.C. Kim, violated Section 16(b) of the Securities Exchange Act of 1934 for receiving short-swing profits from a sale and purchase of Franklin shares, in violation of that Act.
• In January of 2025 our South Korea-based subsidiary, FTI was sued by Partron Co., Ltd., a South Korean manufacturer of electronic parts for mobile and telecommunication devices (Partron).

Related Party Transactions

• The company entered into a Purchase and Supply Agreement with Forge, a related party, for the purchase of certain products for resale.
• The company formed a joint venture, Sigbeat Inc., with Forge International Co., Ltd., with Franklin holding a 60% ownership interest and Forge holding a 40% ownership interest.
• On May 8, 2025, the Company entered into an agreement with OC Kim, its Chief Executive Officer, by which the Company agreed to repurchase fully-vested options to purchase 200,000 shares of the Company's Common Stock for $746,066.67.

Stakeholder Impact

• Shareholders: The increased revenue and improved gross profit margin are positive signs, but ongoing legal issues and increased operating expenses create uncertainty.
• Employees: The accrued incentive bonus for the President may impact employee morale.
• Customers: The company's ability to meet customer demands and maintain product quality is crucial for customer satisfaction.
• Suppliers: Maintaining good relationships with manufacturing partners is essential for ensuring a stable supply chain.
• Creditors: The company's strong liquidity position provides assurance of its ability to meet its financial obligations.

Next Steps

• Continue to manage and resolve ongoing legal proceedings.
• Focus on maintaining and expanding customer relationships.
• Adapt product offerings to meet evolving market demands.
• Control operating expenses to improve profitability.
• Monitor and mitigate potential impacts of international tariffs.

Key Dates

Keywords

Franklin Wireless, Financial Results, Q3 2025, Net Sales, Gross Profit, Operating Expenses, Legal Proceedings, Joint Venture, Sigbeat, Forge International, Verizon Jetpack Recall, FTI Litigation, Wireless Solutions, North America, Liquidity