Risk Factors Dashboard

Item 1A. Risk Factors” and under the caption “Factors That May Influence Future Results of Operations” below. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

BUSINESS OVERVIEW

Doing business as “Franklin Access”, we are a leading global provider of integrated wireless solutions utilizing the latest 5G (fifth generation) and 4G LTE (fourth generation long-term evolution) technologies including mobile hotspots, fixed wireless routers, and mobile device management (MDM) solutions. During the six months ended June 30, 2026, we began implementing a strategic shift to reduce our reliance on mobile hotspot products and increase our focus on fixed wireless routers and telecommunications modules. This shift was accelerated following a significant decline in demand for certain legacy hotspot products. We are a leading enabler of the Digital Divide initiative, and our expertise extends to innovation in Internet of Things (IOT) and machine-to-machine (M2M) applications, driving forward seamless communication and connectivity for both individuals and enterprises. While we intend to integrate artificial intelligence (“AI”)-compatible hardware, we have not commercially implemented AI technology within our current products.

We hold a 66.3% ownership in Franklin Technology Inc. (“FTI”), a research and development company based in Seoul, South Korea. FTI primarily provides design and development services for our wireless products. We hold a 60% ownership interest in Sigbeat Inc., based in San Diego, California (“Sigbeat”), which will engage in worldwide sales, marketing, customer support and operations for telecommunications modules. Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our primary markets are in North America and Asia.

FACTORS THAT MAY INFLUENCE FUTURE RESULTS OF OPERATIONS

We believe that our revenue growth will be influenced largely by (1) the successful maintenance of our existing customers, (2) the rate of increase in demand for wireless data products, (3) customer acceptance of our new products, (4) new customer relationships and contracts, (5) our ability to meet customers’ demands, (6) our ability to maintain good relationships with our manufacturing partners and suppliers, and (7) the defect rates experienced by end users of our hardware and software products.

During the six months ended June 30, 2026, we experienced a significant reduction in expected future demand from one of our major customers related to a legacy hotspot product. This decrease in demand was caused by difficulties working with an intermediary company regarding late payments, as well as other matters. In response to this, we are accelerating our strategic focus toward commercial and industrial routers and telecommunications modules through our subsidiary. These product lines are in earlier stages of commercialization, and there can be no assurance regarding the timing or level of future revenues from these initiatives.

We have entered into and expect to continue to enter into new customer relationships and contracts for the supply of our products, and this may require significant demands on our resources, resulting in increased operating, selling, and marketing expenses associated with such new customers.

We continuously evaluate the performance of our hardware and software products to discover defects that can adversely affect our revenue, income, and the price of our stock. If defects occur that customers believe are either severe in nature or excessively frequent in occurrence, customers could stop buying our products and services and the value of our stock may decrease.

We are seeing that demand from end-users has been shifting in the post-pandemic economy as remote education and work from home trends are declining. Current demand for mobile device management (MDM) services has been declining. We are working to improve and further enhance our software service offerings to address this change in the market.

We are also experiencing industry-wide supply constraints and cost increases affecting certain components used in our products, including memory components and raw materials used in printed circuit boards. These conditions may affect component availability, lead times and pricing and have resulted in increased complexity in managing our production schedules and product costs. Our ability to deliver products to customers on a timely basis is critical, particularly for our Tier-1 carrier customers, who are highly sensitive to delivery timing and reliability. Any delays or disruptions in our supply chain could impair our ability to meet customer delivery schedules, and failure to meet such requirements could negatively impact customer relationships, order volumes, or future business opportunities.

Recent regulatory developments involving restrictions on certain foreign-manufactured telecommunications and networking equipment may affect the approval, importation, or commercialization of certain future wireless products. We are evaluating the applicability of these developments to our product roadmap, including upcoming consumer and enterprise networking products. Based on currently available information, we believe our approved mobile hotspot products are not materially affected by these developments.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

We account for our revenue according to ASC 606, “Revenue from Contracts with Customers”, pursuant to which, revenue is recognized when the control of the promised goods or services is transferred to the customers, and the performance obligations under the contract have been satisfied, in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

We determine revenue recognition through the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

Contracts with Customers

Revenue from sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hotspot routers. The products and services covered by contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. While we continuously monitor product returns, we do not establish a formal provision for estimated warranties and returns because such costs are covered by our manufacturers. For the years ended June 30, 2026 and 2025, these expenditures were not material.

Disaggregation of Revenue

In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Contract Balances

We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. However, we recognize contract liability when a customer prepays for goods and/or services, or when we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services.

The balances of our trade receivables are as follows:

We did not have any un-invoiced receivables in the periods ended June 30, 2026 and 2025.

Our contract liabilities are as follows:

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. To identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 99.3% and 99.2% of net sales for the years ended June 30, 2026 and 2025, respectively.

Revenue recognized over a period of time is based on the percent completion of a project and accounted for under 0.7% and 0.8% of net sales for the years ended June 30, 2026 and 2025, respectively. The majority of our revenue recognized at a point in time is for the sale of hotspot router products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process.

As of June 30, 2026 and 2025, our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Capitalized Product Development Costs

Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding.

The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 2 to Notes to Consolidated Financial Statements) include certifications, licenses, payroll, employee benefits, and other headcount-related expenses associated with product development. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved. Once the products are available for general release to our customers, we cease capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the straight-line amortization. The amortization begins when the products are available for general release to our customers.

As of June 30, 2026, and June 30, 2025, capitalized product development costs in progress were $22,582 and $452,676, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. For the years ended June 30, 2026 and 2025, we incurred $462,136 and $520,202, respectively, in capitalized product development costs, and all costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive (loss) income.

Income Taxes

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

We evaluate the available positive and negative evidence supporting the realization of our gross deferred tax assets, including historical financial results, the scheduled reversal of deferred tax liabilities, and the amount and timing of forecasted future taxable income. Based on this evaluation, management determined that it is more likely than not that our U.S. federal and state deferred tax assets will be fully realized, and accordingly, no valuation allowance was recorded for U.S. deferred tax assets as of June 30, 2026, or 2025.

Conversely, during the fiscal year ended June 30, 2026, based on the weight of available evidence, including cumulative losses incurred by our foreign subsidiary, management determined that it was no longer more likely than not that the foreign deferred tax assets would be realized. Consequently, a 100% valuation allowance was recorded against all foreign deferred tax assets as of June 30, 2026, whereas no valuation allowance was recorded against foreign deferred tax assets as of June 30, 2025.

As of June 30, 2026, we had federal and state net operating loss carryforwards of approximately $1.1 million and $0.6 million, respectively. As of June 30, 2025, we had federal and state net operating loss carryforwards of approximately $2.7 million and $0.7 million, respectively. Under current U.S. federal tax law, federal net operating loss carryforwards generated in tax years ending after December 31, 2017, of approximately $1.1 million, carry forward indefinitely. We have no federal net operating loss carryforwards that pre-date the Tax Cuts and Jobs Act of 2017 (“TCJA”). State net operating loss carryforwards of approximately $0.6 million will begin to expire in 2043. The utilization of net operating loss carryforwards may be subject to annual limitations under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state tax provisions. The state net operating loss of approximately $0.7 million will begin to expire in 2043. The utilization of net operating loss carryforwards may be subject to limitations under provisions of the Internal Revenue Code Section 382 and similar state provisions.

We apply the provisions of ASC 740 related to accounting for uncertain tax positions, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Under this provision, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Tax benefits of an uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained based on technical merits.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Refer to NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table sets forth, for the years ended June 30, 2026, and 2025, our statements of operations including data expressed as a percentage of sales:

YEAR ENDED JUNE 30, 2026, COMPARED TO YEAR ENDED JUNE 30, 2025

NET SALES - Net sales decreased by $9,572,496, or 20.8%, to $36,514,405 for the year ended June 30, 2026 from $46,086,901 for the corresponding period of 2025. For the year ended June 30, 2026, net sales by geographic regions, consisting of North America and Asia, were $36,478,002 (99.9% of net sales) and $36,403 (0.1% of net sales), respectively. For the year ended June 30, 2025, net sales by geographic regions, consisting of North America and Asia, were $46,081,244 (100.0% of net sales) and $5,657 (0.0% of net sales), respectively.

Net sales in North America decreased by $9,603,242, or 20.8%, to $36,478,002 for the year ended June 30, 2026, from $46,081,244 for the corresponding period of 2025. The decrease in net sales in North America was primarily due to the discontinuation of a key product by a major carrier customer, which was expected to contribute a significant portion of revenue following its recent launch, as well as the timing of large deliveries in prior periods that resulted in reduced current-period demand as customers worked through existing inventory. As a result of the product discontinuation, we do not expect material future sales of this product to this customer. Net sales in Asia increased by $30,746, or 543.5%, to $36,403 for the year ended June 30, 2026, from $5,657 for the corresponding period of 2025. The increase in net sales was primarily due to the revenue generated by FTI, which typically varies from period to period. Net sales in Asia decreased by $91,306, or 94.2%, to $5,657 for the year ended June 30, 2025, from $96,963 for the corresponding period of 2024. The decrease in net sales was primarily due to the absence of revenue generated by FTI, which typically varies from period to period.

GROSS PROFIT- Gross profit decreased by $1,659,938, or 21.0%, to $6,255,131 for the year ended June 30, 2026, from $7,915,069 for the corresponding period of 2025. The gross profit in terms of net sales percentage was 17.1% for the year ended June 30, 2026, compared to 17.2% for the corresponding period of 2025. The decrease in gross profit and gross profit in terms of net sales percentage for the year ended June 30, 2026, was primarily attributable to the decrease in net sales, which was driven in part by the discontinuation of a key product by a major customer.

OPERATING EXPENSES - Operating expenses decreased by $1,845,997, or 17.1%, to $8,932,741 for the year ended June 30, 2026, from $10,778,738 for the corresponding period of 2025.

Selling, general, and administrative expenses decreased by $977,128, or 14.6%, to $5,698,950 for the year ended June 30, 2026, from $6,676,078 for the corresponding period of 2025. The primary contributor to the decrease was the non-recurrence of a $1,250,000 accrued incentive bonus to OC Kim, President, in the prior year. In addition, operating expenses incurred by Sigbeat during the year ended June 30, 2026 increased, which partially offset the decrease described above.

Research and development expenses decreased by $868,869, or 21.2%, to $3,233,791 for the year ended June 30, 2026, from $4,102,660 for the corresponding period of 2025. The decrease was primarily driven by reductions of approximately $610,000 in R&D payroll expenses and $260,000 in direct project-related R&D costs. These fluctuations stem from the timing of R&D activities and the number of active projects, which typically vary from period to period.

TOTAL OTHER INCOME (EXPENSE), NET – Total Other income (expense), net decreased by $7,058,467, or 263.6%, to ($4,380,394) for the year ended June 30, 2026, from $2,678,073 for the corresponding period of 2025. This change was primarily driven by the following factors:

o

Interest Income: Interest income was $487,151 for fiscal 2026, a decrease of $207,976, or 29.9%, from $695,127 for fiscal 2025, primarily due to lower prevailing interest rates during the period.

o

Gain from the Forgiveness of Accounts Payable and Accrued Liabilities: Gain from the forgiveness of accounts payable and accrued liabilities increased by $165,222, or 66.7%, to $412,814 for fiscal 2026 from $247,592 for fiscal 2025. For fiscal 2026, we recognized a write-off of an accrued market development funds (“MDF”) liability of approximately $400,000 following the product lifecycle discontinuation of the related line. By comparison, in the prior fiscal year, we reversed a remaining accrual balance of approximately $250,000 after confirming that the underlying obligation—originally associated with a $650,000 customer marketing and promotions support program—no longer existed. The variance between fiscal years was primarily driven by the difference in the timing and magnitude of these liability derecognitions.

LIQUIDITY AND CAPITAL RESOURCES

Our historical operating results, capital resources and financial position, in combination with current projections and estimates, were considered in management’s plan and intentions to fund our operations over a reasonable period of time, which we define as the twelve-month period ending June 30, 2026. For the purposes of liquidity disclosures, we assess the likelihood that we have sufficient available working capital and other principal sources of liquidity to fund our operating activities and obligations as they become due.

Our principal source of liquidity as of June 30, 2026, consisted of cash and cash equivalents as well as short-term investments of $31,954,396. We believe we have sufficient available capital to cover our existing operations and obligations through at least June 30, 2026. Our long-term future cash requirements will depend on numerous factors, including our revenue base, profit margins, product development activities, market acceptance of our products, future expansion plans and ability to control costs. If we are unable to achieve our current business plan or secure additional funding that may be required, we would need to curtail our operations or take other similar actions outside the ordinary course of business.

OPERATING ACTIVITIES – Net cash (used in) provided by operating activities for the years ended June 30, 2026 and 2025 were ($6,296,906) and $1,844,360, respectively.

The ($6,296,906) in net cash used in operating activities for the year ended June 30, 2026 was primarily driven by the changes, including increases in inventories and accounts receivable of $2,998,397 and $1,751,615, respectively, and a decrease in accounts payable of $1,102,139, as well as our net loss adjusted for depreciation, amortization, losses from litigation contingency and foreign currency transactions, and other non-cash charges.

The $1,844,360 in net cash provided by operating activities for the year ended June 30, 2025 was primarily due to the increase in accrued liabilities and accounts payable of $2,615,116 and $855,382, respectively, which was offset by our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges) and the increase in inventories and accounts receivable of $993,069 and $311,767.

INVESTING ACTIVITIES – Net cash provided by investing activities for the years ended June 30, 2026 and 2025 were $5,510,683 and $1,006,398, respectively.

The $5,510,683 in net cash provided by investing activities for the year ended June 30, 2026 was primarily due to the sales of short-term investments of $6,041,785, which was partially offset by the payments for purchase of capitalized product development and intangible assets of $502,239.

The $1,006,398 in net cash provided by investing activities for the year ended June 30, 2025 was primarily due to the contribution in noncontrolling interest by a partner of $2,000,000, which was offset by the payments for the purchase of capitalized product development and intangible assets of $533,563 and the purchase of short-term investments of $437,774.

FINANCING ACTIVITIES – Net cash used in provided by financing activities for the years ended June 30, 2026 and 2025 was ($471,371) and ($408,663), respectively.

The ($471,371) in net cash used in financial activities for the year ended June 30, 2026 was attributable to the payment of cash dividends.

The ($408,663) in net cash used in financing activities for the year ended June 30, 2025 was the repurchase of 200,000 vested stock options from OC Kim, our President, which had been previously granted under the 2020 employee stock option plan. The ($408,663) in net cash used in financing activities for the year ended June 30, 2025 was the repurchase of 200,000 vested stock options from OC Kim, our President, which had been previously granted under the 2020 employee stock option plan. The ($408,663) in net cash used in financing activities for the year ended June 30, 2025 was the repurchase of 200,000 vested stock options from OC Kim, our President, which had been previously granted under the 2020 employee stock option plan.

OFF-BALANCE SHEET ARRANGEMENTS

None.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The following table summarizes our contractual obligations and commitments as of June 30, 2026, and the effect such obligations could have on our liquidity and cash flow in future periods:

LEASES

Refer to