SOURCE: Franklin Wireless Corporation

Franklin Wireless Corporation

February 14, 2011 16:15 ET

Franklin Wireless Announces Second Quarter Fiscal 2011 Financial Results

Net Income Increases 147%; Gross Profit Margin Rises to 39%

SAN DIEGO, CA--(Marketwire - February 14, 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 financial results for the second quarter of fiscal year 2011 ended December 31, 2010.

The company reported net sales of $15.6 million for the quarter, compared with $25.2 million in net sales for the corresponding period of 2009. Gross margin improved to 39.1% from 11.5% and despite the decrease in revenue, gross profit increased by 110% to $6.1 million compared to $2.9 million for the same quarter last year. In addition, net income increased to $2.0 million for the three month period ending December 31, 2010, compared with $821,546 for the same period in 2009, which represents a 147% increase year-over-year. The improved gross margin, gross profit and net income were driven primarily by an increase in the proportion of FTI supplied products (vs. third party suppliers), which consisted of the Company's U600 and U210 USB modems. 

"Despite operating in a very competitive environment during this past quarter, Franklin Wireless posted solid financial results including substantial increases in gross margin and net income," said OC Kim, president of Franklin Wireless. "During the quarter, we continued to ship a greater mix of FTI supplied products, which was the primary reason for the improved results and we feel this further validates our strategic investment in FTI which took place in fiscal 2010."

Diluted earnings per share improved to $0.17 for the quarter compared to $0.06 for same period last year. The increase was due to higher net income as well as the lower share count resulting from the recent repurchase of approximately 1.8 million shares from C-Motech. The Company expects to repurchase C-Motech's remaining 1.6 million shares by March 31, 2011, which will further reduce the number of shares outstanding.

The company's 10-Q filing for the three month period ending December 31, 2010 is on file with the SEC (www.sec.gov).

         
FRANKLIN WIRELESS CORP.        
CONDENSED CONSOLIDATED BALANCE SHEETS        
UNAUDITED        
(IN THOUSANDS)        
           
    December 31,   June 30,  
    2010   2010  
ASSETS            
               
  Cash and cash equivalents $ 15,810   $ 16,108  
  Accounts receivable   4,605     3,119  
  Inventories   320     198  
  Intangible assets, net   2,480     2,859  
  Deferred tax assets, net   1,668     1,672  
  Property and equipment, net   461     985  
  Advance payment to vendor   630     458  
  Other assets   653     496  
TOTAL ASSETS $ 26,627   $ 25,895  
               
LIABILITIES AND STOCKHOLDERS' EQUITY            
               
  Trade accounts payable $ 5,111   $ 6,418  
  Accrued liabilities   362     732  
  Other liabilities   3,640     3,076  
TOTAL LIABILITIES   9,113     10,226  
               
Stockholders' equity            
  Common stock   14     14  
  Additional paid-in capital   5,991     5,556  
  Retained earnings   12,140     8,982  
  Treasury stock   (1,873 )   -  
  Non-controlling interest   1,337     1,130  
  Other   (95 )   (13 )
Total stockholders' equity   17,514     15,669  
               
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 26,627   $ 25,895  
             
         
FRANKLIN WIRELESS CORP.        
STATEMENT OF OPERATIONS        
UNAUDITED        
(IN THOUSANDS, EXCEPT PER SHARE DATA)        
  THREE MONTHS ENDED  
  December 31  
  2010   2009  
             
Net sales $ 15,583   $ 25,177  
             
Cost of goods sold   9,483     22,280  
             
Gross profit   6,100     2,897  
             
Operating Expenses            
  Selling, general and administrative   2,497     1,458  
Total Operating Expenses   2,497     1,458  
             
Income from operations   3,603     1,439  
             
Other income (expense)            
  Interest income   11     11  
  Other income (expense), net   (106 )   22  
Total other income (expense)   (95 )   33  
             
Income before taxes   3,508     1,472  
             
Income tax provision/(benefit)   1,105     576  
             
Non-controlling interests in net loss of subsidiary   (372 )   (74 )
             
Net Income $ 2,031   $ 822  
             
Basic earnings per share $ 0.17   $ 0.06  
Diluted earnings per share $ 0.17   $ 0.06  
             
Weighted average common shares outstanding - basic   11,978     13,548  
Weighted average common shares outstanding - diluted   12,151     13,665  
             

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.

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