Financial Analysis

NOTE 6 - COMMITMENTS AND CONTINGENCIES Leases We adopted ASC 842 new lease accounting on July 1, 2019. We had an operating lease principally for both Franklin Wireless Corp. and Franklin Technologies Inc., in accordance with ASC 842. We determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. Operating leases are recorded in the balance sheet as right-of-use asset (ROU asset) and operating lease obligation. ROU assets represent the Companys right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assts and liabilities. Lease expense for operating lease is recognized on a straight-line basis over the lease term. We are also electing not to a …

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NOTE 7 - LONG-TERM INCENTIVE PLAN AWARDS We apply the provisions of ASC 718, Compensation - Stock Compensation, to all of our stock-based compensation awards and use the Black-Scholes option pricing model to value stock options. The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted average assumptions: The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant for periods corresponding with the expected term of options award; the expected term represents the period of time that options granted are expected to be outstanding, taking into account the vesting provisions and historical exercise patterns of participants; the expected volatility is based upon historical volatility; and the dividend yield is based upon the companys dividend rate at the time fair value is measure and future expectations. Under this application, we record compensation expense for all awards granted. In July of 2020, the Board of Directors adopted the 2020 Franklin Wireless Corp. Stock Option Plan (the 2020 Plan), which covers 1,000,000 shares of Common Stock. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors, and independent contractors. These options will have such vesting or other provisions as may be established by the Board of Directors or Plan Administrator at the time of each gra …

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NOTE 4 - INCOME TAXES Income tax benefit for the years ended June 30, 2026, and 2025 consists of the following: Schedule of income tax benefit Years Ended June 30, 2026 2025 United States (Domestic) Foreign (Non-U.S.) Consolidated United States (Domestic) Foreign (Non-U.S.) Consolidated Current income tax expense: Federal $ 43,891 $ $ 43,891 $ 33,736 $ $ 33,736 State 14,569 14,569 800 800 Foreign Total Current income tax expense 58,460 58,460 34,536 34,536 Deferred income tax (benefit) expense: Federal (443,300 ) (443,300 ) 189,057 189,057 State (78,795 ) (78,795 ) (123,770 ) (123,770 ) Foreign 324,903 324,903 (144,990 ) (144,990 ) Total deferred income tax expense (522,095 ) 324,903 (197,192 ) 65,287 (144,990 ) (79,703 ) (Benefit) provision for income taxes $ (463,635 ) $ 324,903 $ (138,732 ) $ 99,823 $ (144,990 ) $ (45,167 ) The income tax benefit reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows: Schedule of income tax benefit reconciliation Years Ended June 30, 2026 2025 United States (Domestic) Foreign (Non-U.S.) Consolidated ($) Consolidated (%) United States (Domestic) Foreign (Non-U.S.) Consolidated ($) Consolidated (%) Federal income tax at statutory rate of 21% applied to loss before income taxes and extraordinary items $ (231,615 ) $ (1,254,294 ) $ (1,485,909 ) 21.0 % $ (57,862 ) $ 18,887 $ (38,975 ) 21.0 % State tax, net of federal tax benefit (51,119 ) (51,119 ) …

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Recently Issued Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The ASU requires disaggregated information about a reporting entitys effective tax rate reconciliation as well as additional details regarding income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024, with early adoption permitted. We adopted the ASU effective July 1, 2025, and the required disclosures are included in Note 4 of our Form 10-K for the fiscal year ended June 30, 2026. The adoption enhanced disclosures regarding rate reconciliation and income taxes paid, but had no impact on our consolidated financial position, results of operations, or cash flows. In November 2024, the FASB issued ASU No. 2024-03, Expense Disaggregation Disclosures (Subtopic 220-40). The ASU requires disclosure of specified information about certain costs and expenses. This includes purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The ASU is effective on a prospective or retrospective basis for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. In January 2025, the FASB issued ASU 2025-01, which rev …

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NOTE 9 RELATED PARTY TRANSACTIONS On May 14, 2024, we 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 EMS partner, 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 three members, of whom two are to be appointed by the Company and one appointed by Forge. Sigbeat will engage in worldwide sales, marketing, customer support and operations for telecommunications modules under such brands or designations as the Board of Directors of Sigbeat determines. Pursuant to the Agreement, in July 2024, Sigbeat entered into a stock subscription agreement with Forge, for the purchase of 400,000 shares of Common Stock, representing 40% of the total outstanding Common Stock of Sigbeat. On December 23, 2024, and January 9, 2025, we contributed $ 600,000 and $ 2,400,000 for Common Stock, respectively, and, on January 16, 2025, Forge contributed $ 2,000,000 for Common Stock. On June 20, 2024, we entered into a Purchase and Supply Agreement with Forge. This Agreement outlines the terms under which we purchase certain products from Forge for resale to our customers. For the years ended June 30, 2026 and 2025, we purchased EMS from Forge in the amount of approximately $ 27.1 …

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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Companys consolidated financial statements. The consolidated financial statements and notes are representations of the Companys 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 statements. Principles of Consolidation As of June 30, 2026 and 2025, the consolidated financial statements include the accounts of Franklin Wireless Corp. and its subsidiaries, FTI and Sigbeat, with majority voting interests of 66.3 % and 60.0 %, respectively, (approximately 33.7 % and 40.0 % are owned by noncontrolling interests, respectively). In the preparation of consolidated financial statements, intercompany transactions and balances are eliminated and net (loss) earnings are reduced by the portion of the net (loss) earnings of the subsidiary or subsidiaries applicable to noncontrolling interests. Reclassifications Certain amounts on the prior periods consolidated financial statements were regrouped and reclassified to conform to current-year presentation, with no effect on total stockholders equity. Non-controlling Interest in Consolidated Subsidiary As of June 30, 2026, the Non-Controlling Interests (NCI) totaled $ 1,166,023 , representing a ($ 2,183,838 ) net decrease from the $ 3,349,861 bal …

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NOTE 8 STOCKHOLDERS EQUITY Common Stock We have been authorized to issue 50,000,000 shares of common stock, $ 0.001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution. For the year ended June 30, 2026, no shares of common stock were issued, and there were 11,784,280 shares issued and outstanding as of June 30, 2026, and 2025. Preferred Stock We have been authorized to issue 10,000,000 shares of preferred stock. $0.01 par value, but no preferred stock is issued and outstanding as of June 30, 2026 and 2025. Treasury Stock We had 2,549,208 shares of treasury stock, valued at $ 3,554,893 (based on the costs that we agreed to repurchase) as of June 30, 2026 and 2025. Cash Dividends On November 4, 2025, our Board of Directors declared a cash dividend of $ 0.04 per share on our common stock, totaling $ 471,371 . The dividend was payable to shareholders of record at the close of business on November 14, 2025. We recorded the dividend declaration as a reduction to Retained Earnings and a corresponding increase in Dividends Payable on November 4, 2025. On December 2, 2025, we completed the cash payment, which resulted …

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NOTE 10 SUBSEQUENT EVENTS The FASB issued ASC 855, Subsequent Events. ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. We have evaluated all events or transactions that occurred after June 30, 2026, up through the date the financial statements were available to be issued. Other than as described in NOTE 6 (COMMITMENTS AND CONTINGENCIES Litigation - FTI Litigation in Korea ), we did not have any material recognizable subsequent events required to be disclosed to the financial statements as of June 30, 2026. …

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