Franklin Wireless Announces Financial Results for Fiscal 2011

SAN DIEGO, CA--(Marketwire - Sep 28, 2011) - Franklin Wireless Corp. (OTCBB: FKWL), the market leader in dual-mode WiMAX and CDMA modems for 3G and 4G wireless broadband data communications, today announced full-year financial results for the fiscal year ended June 30, 2011.

Net sales for fiscal 2011 were $46.5 million, compared with $101.9 million for fiscal 2010. Gross profit margin for fiscal 2011 improved to 32%, compared with 14% for fiscal 2010.

Net income for fiscal 2011 was $4.5 million, or $0.36 per diluted share, compared with $4.8 million, or $0.35 per diluted share for fiscal 2010. Despite the lower net sales, earnings per share increased year-over-year due to the higher gross profit margin as well as the reduced share count that resulted from the C-Motech stock repurchase and the cancellation of 250,000 shares as the Company previously announced. The fiscal 2011 net income included non-cash expenses of $868,000 and $800,000 for amortization of intangible assets and share-based compensation expense respectively. As of June 30, 2011, the Company had working capital of approximately $14.6 million and stockholders' equity of approximately $18.9 million, compared with working capital of approximately $10.4 million and stockholders' equity of approximately $15.7 million at the end of fiscal 2010.

The decline in net sales year-over-year was due to several factors including increased competition in the dual-mode (3G and 4G) USB modem market, as well as competition from other similar products introduced during fiscal 2011, which negatively affected price and volume. Fiscal 2011 net sales were also affected by delays in launching new products due to longer than expected schedules associated with design, testing and certification efforts. In addition, net sales for fiscal 2010 were significantly higher than net sales for fiscal 2011 because Franklin Wireless benefited from being the only supplier of dual-mode (WiMAX and CDMA) USB modems in North America, which was a position the Company maintained nearly throughout the entire fiscal year of 2010. Also during fiscal 2010, Franklin's largest customer was in the process of rolling out a significant portion of its 4G (WiMAX) network, which had a favorable effect on net sales during this period.

"While we obviously experienced a significant decrease in revenues during fiscal 2011, particularly in the second half of the fiscal year, we are encouraged by the recent progress made regarding new product introductions and our potential to sign new carrier customers" said OC Kim, president of Franklin Wireless. "Our new products, some of which have been previously announced, have received strong interest from both our current carrier partners and new ones, and we feel we are in a good position heading into fiscal 2012. However, we expect continued weakness in revenues during the first and second quarters of fiscal 2012 as we transition to new 4G technologies including LTE, but anticipate that revenues will begin to ramp up during the second half of the fiscal year, driven by our planned new product roll-outs."

Key milestones achieved during fiscal 2011:

• The Company completed the repurchase of 1,803,684 Franklin Wireless shares from C-Motech, which significantly reduced the number of outstanding common stock shares.
• Successful product launch of the new U600 3G/4G USB modem with a US Tier-1 carrier. The U600 represents Franklin's third generation such device and has several new and improved features compared to prior models.
• Introduction of the M600 Series of embedded modules including dual-mode (3G/4G) and single-mode (CDMA or WiMAX) versions. These modules are designed to be integrated into laptops, tablets and M2M (machine-to-machine) devices and other products that require wireless connectivity. Recently, the Company shipped the first production quantities of the M600.
• As reported in April, 2011, the Company announced the cancellation of 250,000 Franklin Wireless shares, which further reduced the number of outstanding shares.
• Market release and shipment to customers of the new U310 single-mode (WiMAX) USB modem.

The company's 10-K filing for the twelve month period ending June 30, 2011 is on file with the SEC (www.sec.gov).

FRANKLIN WIRELESS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
		June 30,			June 30,
		2011			2010
ASSETS
	Cash and cash equivalents	$	11,358		$	16,108
	Accounts receivable		6,916			3,119
	Inventories		935			198
	Intangible assets, net		2,275			2,859
	Deferred tax assets, net		1,679			1,672
	Property and equipment, net		440			985
	Advance payment to vendor		41			458
	Other assets		527			496
TOTAL ASSETS		$	24,171		$	25,895
LIABILITIES AND STOCKHOLDERS' EQUITY
	Trade accounts payable	$	2,782		$	6,418
	Accrued liabilities		319			732
	Other liabilities		2,098			3,076
TOTAL LIABILITIES			5,199			10,226
Stockholders' equity
	Common stock		14			14
	Additional paid-in capital		6,420			5,556
	Retained earnings		13,527			8,982
	Treasury stock		(1,873	)		-
	Non-controlling interest		901			1,130
	Other		(17	)		(13	)
Total stockholders' equity			18,972			15,669
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	24,171		$	25,895

FRANKLIN WIRELESS CORP.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
		TWELVE MONTHS ENDED
		June 30,
		2011			2010
Net sales		$	46,514		$	101,898
Cost of goods sold			31,456			87,873
Gross profit			15,058			14,025
Operating Expenses
	Selling, general and administrative		9,405			6,359
Total Operating Expenses			9,405			6,359
Income from operations			5,653			7,666
Other income (expense)
	Interest income		46			79
	Other income (expense), net		1,998			(164	)
Total other income (expense)			2,044			(85	)
Income before taxes			7,697			7,581
Income tax provision/(benefit)			3,354			2,954
Non-controlling interests in net loss of subsidiary			202			151
Net Income		$	4,545		$	4,778
Basic earnings per share		$	0.37		$	0.35
Diluted earnings per share		$	0.36		$	0.35
Weighted average common shares outstanding - basic			12,280			13,584
Weighted average common shares outstanding - diluted			12,464			13,741

About Franklin Wireless

Franklin Wireless Corp. (OTCBB: FKWL) is engaged in the design, manufacture and sale of high speed wireless data products including third generation ("3G") and fourth generation ("4G") modems, routers and modules. Our current products are focused on widely deployed cellular technologies including CDMA EVDO Rev A, HSPA, WiMAX and LTE. We were the world's first supplier of both CDMA EVDO Rev A and dual-mode (CDMA EVDO Rev A/WiMAX) Universal Serial Bus (USB) modems. Franklin's other products include Wi-Fi "hotspot" routers (which operate over WiMAX or CDMA networks) and wireless modules that are generally sold to original equipment manufacturers (OEMs). Our company's primary customers are wireless carriers who seek innovative, reliable and cost effective technology solutions for their subscribers. Our customer base extends from the United States to South America and the Caribbean.

Franklin Wireless is headquartered in San Diego, California and has a majority ownership position in Franklin Technology Inc. (FTI), a research and development facility located in Seoul, South Korea. FTI provides design, development and manufacturing services to Franklin for its wireless data products. For additional information, please visit www.franklinwireless.com.

Safe Harbor Statement:

Certain statements in this press release constitute "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements, expressed or implied by such forward-looking statements.