The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes included elsewhere in this report. This report contains certain forward-looking statements relating to future events or our future financial performance. These statements are subject to risks and uncertainties which could cause actual results to differ materially from those discussed in this report. You are cautioned not to place undue reliance on this information, which speaks only as of the date of this report. We are not obligated to publicly update this information, whether as a result of new information, future events or otherwise, except to the extent we are required to do so in connection with our obligation to file reports with the SEC. For a discussion of the important risks to our business and future operating performance, see the discussion under the caption "Item 1A. Risk Factors" and under the caption "Factors That May Influence Future Results of Operations" in the Company's Form 10-K for the year ended June 30, 2022, filed on September 13, 2022. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.





BUSINESS OVERVIEW

We are a leading provider of integrated wireless solutions utilizing the latest in 4G LTE (fourth generation long-term evolution) and 5G (fifth generation) technologies including mobile hotspots, routers, CPEs (Customer Premise Equipment), and various trackers. Our integrated software subscription services provide users remote capabilities including mobile device management (MDM) and software defined wide area networking (SD-WAN).

We have majority ownership of 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.

Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our global customer base primarily extends from North America to 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, and (5) our ability to meet customers' demands.

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.





CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions.

We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2022, that are both important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective, and complex judgments. Typically, the circumstances that make these judgments difficult, subjective, and complex have to do with making estimates about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies during the six months ended December 31, 2022.









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RESULTS OF OPERATIONS

The following table sets forth, for the three and six months ended December 31, 2022 and 2021, our statements of comprehensive (loss) income (unaudited) including data expressed as a percentage of sales:





                                          Three Months Ended             Six Months Ended
                                             December 31,                  December 31,
                                         2022            2021           2022           2021

Net sales                                  100.0%         100.0%         100.0%         100.0%
Cost of goods sold                          89.5%          80.0%          85.1%          83.4%
Gross profit                                10.5%          20.0%          14.9%          16.6%
Operating expenses                          25.7%         117.1%          26.5%          81.9%
Loss from operations                       (15.2% )       (97.1% )       (11.6% )       (65.3% )
Other income, net                           15.6%           7.4%           2.9%           5.2%
Net income (loss) before income
taxes                                        0.4%         (89.7% )        (8.7% )       (60.1% )
Income tax provision (benefit)               1.3%         (26.2% )         0.1%         (17.2% )
Net loss                                    (0.9% )       (63.5% )        (8.8% )       (42.9% )
Less: non-controlling interest in
net income (loss) of subsidiary              3.3%           1.6%           0.0%           1.4%
Net loss attributable to Parent
Company stockholders                        (4.2% )       (65.1% )        (8.8% )       (44.3% )

THREE MONTHS ENDED DECEMBER 31, 2022 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2021

NET SALES - Net sales increased by $7,162,054, or 393.2%, to $8,983,643 for the three months ended December 31, 2022 from $1,821,589 for the corresponding period of 2021. For the three months ended December 31, 2022, net sales by geographic regions, consisting of North America and Asia, were $8,950,134 (99.6% of net sales) and $33,509 (0.4% of net sales), respectively. For the three months ended December 31, 2021, net sales by geographic regions, consisting of North America, the countries in the Caribbean and South America, and Asia, were $1,284,850 (70.5% of net sales), $2,375 (0.1% of net sales), and $534,364 (29.4%), respectively.

Net sales in North America increased by $7,665,284, or 596.6%, to $8,950,134 for the three months ended December 31, 2022 from $1,284,850 for the corresponding period of 2021. The increase in net sales in North America was primarily due to the demands for two newly launched wireless products from two major carrier customers, which did not purchase our products during the corresponding period of 2021. Net sales in the Caribbean and South America decreased by $2,375, or 100.0%, to $0 for the three months ended December 31, 2022 from $2,375 for the corresponding period of 2021. The decrease in net sales was primarily due to the general nature of sales in these regions, which often fluctuate significantly from period to period due to the timing of orders placed by a relatively small number of customers. Net sales in Asia decreased by $500,855, or 93.7%, to $33,509 for the three months ended December 31, 2022 from $534,364 for the corresponding period of 2021. The decrease in net sales was primarily due to the one-time revenue generated from the material sales by FTI for the corresponding prior period, which typically vary from period to period.

GROSS PROFIT - Gross profit increased by $582,062, or 159.9%, to $946,042 for the three months ended December 31, 2022 from $363,980 for the corresponding period of 2021. The gross profit in terms of net sales percentage was 10.5% for the three months ended December 31, 2022 compared to 20.0% for the corresponding period of 2021. The increase in gross profit was primarily due to the change in net sales as described above. The decrease in gross profit in terms of net sales percentage was primarily due to the revenues (approximately 58% of net sales) generated from one newly launched product during the three months ended December 31, 2022, which involved a substantially higher cost of goods sold (approximately 93%), which was partially offset by the revenues generated from other sales of the products with lower costs of goods sold.









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OPERATING EXPENSES - Operating expenses increased by $180,449, or 8.5%, to $2,312,382 for the three months ended December 31, 2022 from $2,131,933 for the corresponding period of 2021.

Selling, general, and administrative expenses increased by $311,173 to $1,335,967 for the three months ended December 31, 2022, from $1,024,794 for the corresponding period of 2021. The increase in selling, general, and administrative expenses was primarily due to the increased payroll expenses, compensation expenses related to stock options granted for employees, and commission expense for sales of approximately $183,000, $82,000, and $49,000, respectively. Research and development expense decreased by $130,724 to $976,415 for the three months ended December 31, 2022, from $1,107,139 for the corresponding period of 2021. The decrease in research and development expense was primarily due to the mix of the timing of research and development activities and the number of active projects, which typically vary from period to period.

OTHER INCOME, NET - Other income, net increased by $1,266,582, or 939.4%, to $1,401,415 for the three months ended December 31, 2022 from $134,833 for the corresponding period of 2021. The increase was primarily due to the gain from the favorable changes in foreign currency exchange rates in FTI and the forgiven liabilities of approximately $1.1 million and $165,000, respectively.

SIX MONTHS ENDED DECEMBER 31, 2022 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2021

NET SALES - Net sales increased by $11,926,934, or 230.9%, to $17,092,583 for the six months ended December 31, 2022 from $5,165,649 for the corresponding period of 2021. For the six months ended December 31, 2022, net sales by geographic regions, consisting of North America and Asia, were $17,057,585 (99.8% of net sales) and $34,998 (0.2% of net sales), respectively. For the six months ended December 31, 2021, net sales by geographic regions, consisting of North America, the countries in the Caribbean and South America, and Asia, were $4,456,048 (86.3% of net sales), $2,375 (0.0% of net sales), and $707,226 (13.7% of net sales), respectively.

Net sales in North America increased by $12,601,537, or 282.8%, to $17,057,585 for the six months ended December 31, 2022 from $4,456,048 for the corresponding period of 2021. The increase in net sales in North America was primarily due to the demands for two newly launched wireless products from two major carrier customers, which did not purchase our products during the corresponding period of 2021. Net sales in the Caribbean and South America decreased by $2,375, or 100.0%, to $0 for the six months ended December 31, 2022 from $2,375 for the corresponding period of 2021. The decrease in net sales was primarily due to the general nature of sales in these regions, which often fluctuate significantly from period to period due to the timing of orders placed by a relatively small number of customers. Net sales in Asia decreased by $672,228, or 95.1%, to $34,998 for the six months ended December 31, 2022 from $707,226 for the corresponding period of 2021. The decrease in net sales was primarily due to the one-time revenue generated from the material sales by FTI for the corresponding prior period, which typically vary from period to period.

GROSS PROFIT - Gross profit decreased by $1,682,960, or 196.4%, to $2,539,904 for the six months ended December 31, 2022 from $856,944 for the corresponding period of 2021. The gross profit in terms of net sales percentage was 14.9% for the six months ended December 31, 2022 compared to 16.6% for the corresponding period of 2021. The decrease in gross profit was primarily due to the change in net sales as described above. The decrease in gross profit and gross profit in terms of net sales percentage was the mixed results of competitive selling prices and the increase in production costs of the two newly launched products, and the revenues generated from material sales by FTI, which involved lower margins, and the revenues generated from existing products sales with higher margins for the six months ended December 31, 2022.

OPERATING EXPENSES - Operating expenses increased by $290,487, or 6.9%, to $4,522,137 for the six months ended December 31, 2022 from $4,231,650 for the corresponding period of 2021.

Selling, general, and administrative expenses increased by $472,993 to $2,575,602 for the six months ended December 31, 2022, from $2,102,609 for the corresponding period of 2021. The increase in selling, general, and administrative expenses was primarily due to the increased payroll expenses, compensation expenses related to stock options granted for employees, and commission expense for sales of approximately $220,000, $168,000, and $75,000, respectively. Research and development expense decreased by $182,506 to $1,946,535 for the six months ended December 31, 2022, from $2,129,041 for the corresponding period of 2021. The decrease in research and development expense was primarily due to the mix of the timing of research and development activities and the number of active projects, which typically vary from period to period.









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OTHER INCOME, NET - Other income, net increased by $219,998, or 82.3%, to $487,355 for the six months ended December 31, 2022 from $267,357 for the corresponding period of 2021. The increase was primarily due to the gain from the forgiven liabilities and the increased interest income of approximately $165,000 and $119,000, respectively, which was partially offset by the decreased product development funding received by FTI from a government entity of approximately $60,000.

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 from the date of the filing of this Form 10-Q. For 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 December 31, 2022 consisted of cash and cash equivalents as well as short-term investments of $34,534,707. We believe we have sufficient available capital to cover our existing operations and obligations through at least one year from the date of the filing of this Form 10-Q. 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 in order to continue to operate as a going concern.

OPERATING ACTIVITIES - Net cash used in operating activities for the six months ended December 31, 2022 and 2021 was $7,187,190 and $8,435,836, respectively.

The $7,187,190 in net cash used in operating activities for the six months ended December 31, 2022 was primarily due to the increase in accounts receivable and inventories of $6,773,361 and $3,191,635, respectively, as well as our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by an increase in accounts payable of $3,771,831. The $8,435,836 in net cash used by operating activities for the six months ended December 31, 2021 was primarily due to the decrease in accounts payable of $6,189,648 and increase in inventories of $947,842 as well as our operating results (net loss adjusted for depreciation, amortization, and other non-cash charges), which was partially offset by a decrease in accounts receivable of $1,345,644.

INVESTING ACTIVITIES - Net cash used in investing activities for the six months ended December 31, 2022 and 2021 was $1,393,764 and $479,169, respectively.

The $1,393,764 in net cash used in investing activities for the six months ended December 31, 2022 was primarily due to the payments for capitalized product development of $1,046,980 and purchase of short-term investment of $293,545. The $479,169 in net cash used in investing activities for the six months ended December 31, 2021 was primarily due to the payments for capitalized product development of $453,689.

FINANCING ACTIVITIES - Net cash provided by financing activities for the six months ended December 31, 2022 and 2021 was $134,000 and $21,595, respectively.

The $134,000 and $21,595 in net cash provided by financing activities for the six months ended December 31, 2022 and 2021 were from cash received from exercise of stock options.









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CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS





Leases

We lease approximately 12,775 square feet of office space in San Diego, California, at a monthly rent of $25,754, pursuant to a lease expiring in December 2023. In addition to monthly rent, the lease includes payment for certain common area costs. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs. Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases will expire on August 31, 2023. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that will expire on September 4, 2023.

Rent expense for the three months ended December 31, 2022 and 2021 was $111,384 and $112,119, respectively. Rent expense for the six months ended December 31, 2022 and 2021 was $222,677 and $223,705, respectively.

Recently Issued Accounting Pronouncements

Refer to NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

None.

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