FRANKLIN WIRELESS CORP. Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, 2006 2005 Net sales $ 969,528 $ 79,890 Cost of goods sold 675,850 17,500 Gross profit 293,678 62,390 Operating expenses: Selling, general, and administrative 199,264 103,734 Research and development - 36,300 Total operating expenses 199,264 140,034 Income (Loss) from operations 94,414 (77,644) Other income (expense): Interest income 5,284 30 Other income 25 17 Other expenses - (349) Total other income (expense), net 5,309 (302) Net income (loss) before income taxes 99,723 (77,946) Provision for income taxes 800 - Net income (loss) $ 98,923 $ (77,946) Basic earnings (loss) per share $ 0.0001 $ (0.0001) Diluted earnings (loss) per share $ 0.0001 $ (0.0001) Weighted average common shares outstanding - basic 796,958,771 793,040,050 Weighted average common shares outstanding - diluted 796,958,771 793,040,050 See accompanying notes to unaudited consolidated financial statements. FRANKLIN WIRELESS CORP. Consolidated Balance Sheets ---------------------------- (Unaudited) September 30, June 30, 2006 2006 ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 1,161,618 $ 568,387 Inventory 197,250 - Accounts receivable 244,352 1,750 ------------- ------------- Total current assets 1,603,220 570,137 Property and equipment, net 12,439 12,715 Intangible assets, net 138,974 104,195 Other assets 4,452 4,452 ------------- ------------- TOTAL ASSETS $ 1,759,085 $ 691,499 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 573,531 $ 585 Accrued liabilities 186,685 190,968 Other current liability 400,000 - Notes payable to stockholders, current portion 540,000 540,000 ------------- ------------- Total current liabilities 1,700,216 731,553 ------------- ------------- Stockholders equity Common stock, no par value, authorized 900,000,000 shares and Preferred stock, no par value, authorized 10,000,000 shares; Common stock issued and outstanding - 882,040,050 as of September 30, 2006 and June 30, 2006, and no Preferred stock issued and outstanding - - Additional paid-in capital 4,629,393 4,629,393 Stock subscription receivable (17,395) (17,395) Accumulated deficit (4,553,129) (4,652,052) ------------- ------------- Total stockholders equity (deficit) 58,869 (40,054) ------------- ------------- Total liabilities and stockholders equity $ 1,759,085 $ 691,499 ============= ============= See accompanying notes to unaudited consolidated financial statements. FRANKLIN WIRELESS CORP. Consolidated Statements of Cash Flows (Unaudited) ---------------------------- Three Months Ended September 30, ---------------------------- 2006 2005 ------------- ------------- CASH FLOWS FROM OPERATIONS ACTIVITIES: Net Income (loss) $ 98,923 $ (77,946) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 1,436 1,550 Amortization of intangible assets 19,001 11,250 Increase (decrease) in cash due to change in: Accounts receivable (242,602) (800) Inventory (197,250) Intangible assets (53,780) - Accounts payable 572,946 80,001 Accrued liabilities (4,283) 10,250 ------------- ------------- Net cash provided by operating activities 194,391 24,305 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,160) - ------------- ------------- Net cash used in investing activities (1,160) - ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment received for future stock issuance 400,000 - ------------- ------------- Net cash provided by financing activities 400,000 - ------------- ------------- Net increase in cash and cash equivalents 593,231 24,305 Cash and cash equivalents, beginning of period 568,387 39,542 ------------- ------------- Cash and cash equivalents, end of period $ 1,161,618 $ 63,847 ============= ============= Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ - $ - Income taxes $ - $ - See accompanying notes to unaudited consolidated financial statements.
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