franklin_def14a-122211.htm
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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FRANKLIN WIRELESS CORP.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-1l (a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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2011
NOTICE OF ANNUAL MEETING
AND
PROXY STATEMENT
_____________________
December 22, 2011
at 2:00 p.m. Pacific Time
Country Inn & Suites
5975 Lusk Blvd.
San Diego, CA 92121
Franklin Wireless Corp.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 22, 2011
The 2011 Annual Meeting of Stockholders (the “Annual Meeting”) of Franklin Wireless Corp. (“Franklin” or the “Company”) will be held at Country Inn & Suites, 5975 Lusk Blvd., San Diego, California 92121 on Thursday, December 22, 2011, at 2:00 p.m. Pacific Time, to consider the following proposals:
1. To elect the five director nominees named in the Proxy Statement to hold office until the next annual meeting of stockholders;
2. To ratify an amendment of the Franklin Wireless Corp. 2009 Stock Option Plan increasing the number of shares covered by the Plan to 2,000,000 shares;
3. To ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year 2012; and
4. To act on such other matters as may properly come before the meeting or any adjournment thereof.
These proposals are fully set forth in the accompanying Proxy Statement, which you are urged to read thoroughly. For the reasons set forth in the Proxy Statement, your Board of Directors recommends a vote "FOR" each of the proposals. The Company intends to mail the Annual Report, Proxy Statement and Proxy card enclosed with this notice on or about November 11, 2011 to all stockholders entitled to vote at the Annual Meeting. Only stockholders of record at the close of business on October 14, 2011 will be entitled to attend and vote at the meeting. A list of all stockholders entitled to vote at the Annual Meeting will be available at the principal office of the Company during usual business hours, for examination by any stockholder for any purpose germane to the Annual Meeting for 10 days prior to the date thereof. Stockholders are cordially invited to attend the Annual Meeting. However, whether or not you plan to attend the meeting in person, your shares should be represented and voted. After reading the enclosed Proxy Statement, please sign, date, and return promptly the enclosed Proxy in the accompanying postpaid envelope we have provided for your convenience to ensure that your shares will be represented. If you do attend the meeting and wish to vote your shares personally, you may revoke your Proxy.
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By Order of the Board of Directors
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/s/ OC Kim
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OC Kim
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President
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WHETHER OR NOT YOU PLAN ON ATTENDING THE MEETING IN PERSON, PLEASE VOTE AS PROMPTLY AS POSSIBLE TO ENSURE THAT YOUR VOTE IS COUNTED.
Franklin Wireless Corp.
6205 Lusk Blvd.
San Diego, California 92121
(858) 623-0000
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PROXY STATEMENT
_______________________
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Franklin Wireless Corp. (“Franklin” or the “Company”) to be voted at the Annual Meeting of Stockholders (“Annual Meeting”) which will be held at Country Inn & Suites, 5975 Lusk Blvd., San Diego, California 92121 on Thursday, December 22, 2011, at 2:00 p.m. Pacific Time, and at any postponements or adjournments thereof. The proxy materials will be furnished to stockholders on or about November 11, 2011.
REVOCABILITY OF PROXY AND SOLICITATION
Any stockholder executing a proxy that is solicited hereby has the power to revoke it prior to the voting of the proxy. Revocation may be made by attending the Annual Meeting and voting the shares of stock in person, or by delivering to the Secretary of the Company at the principal office of the Company prior to the Annual Meeting a written notice of revocation or a later-dated, properly executed proxy. Solicitation of proxies may be made by directors, officers and other employees of the Company by personal interview, telephone, facsimile transmittal or electronic communications. No additional compensation will be paid for any such services. This solicitation of proxies is being made by the Company which will bear all costs associated with the mailing of this proxy statement and the solicitation of proxies.
RECORD DATE
Stockholders of record at the close of business on October 14, 2011, will be entitled to receive notice of, attend and vote at the meeting.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these materials?
The Company has delivered printed versions of these materials to you by mail, in connection with the Company’s solicitation of proxies for use at the Annual Meeting. These materials describe the proposals on which the Company would like you to vote and also give you information on these proposals so that you can make an informed decision.
What is included in these materials?
These materials include:
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this Proxy Statement for the Annual Meeting;
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the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended June 30, 2011; and
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the proxy card or vote instruction form for the Annual Meeting. |
What is the proxy card?
The proxy card enables you to appoint OC Kim, our President, as your representative at the Annual Meeting. By completing and returning a proxy card, you are authorizing this individual to vote your shares at the Annual Meeting in accordance with your instructions on the proxy card. This way, your shares will be voted whether or not you attend the Annual Meeting.
What is the purpose of the Annual Meeting?
At our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting on the cover page of this Proxy Statement, including (i) the election of five persons named herein as nominees for directors of the Company, to hold office subject to the provisions of the bylaws of the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified, and (ii) to ratify an amendment of the Franklin Wireless Corp. 2009 Stock Option Plan increasing the number of shares covered by the Plan to 2,000,000 shares, (iii) ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year 2012, and (iv) to act on such other matters as may properly come before the meeting or any adjournment thereof.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of the number of shares of common stock issued and outstanding on the record date will constitute a quorum permitting the meeting to conduct its business. As of the record date, there are 11,835,471 shares of Franklin common stock issued and outstanding. Thus, the presence, in person or by proxy, of holders of common stock representing at least 5,917,736 votes will be required to establish a quorum.
What is the difference between a stockholder of record and a beneficial owner of shares held in street name?
Most of our stockholders hold their shares in an account at a brokerage firm, bank or other nominee holder, rather than holding share certificates in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially in street name.
Stockholder of Record
If, on October 14, 2011, your shares were registered directly in your name with our transfer agent, Integrity Stock Transfer, you are considered a stockholder of record with respect to those shares, and the Notice of Annual Meeting and Proxy Statement was sent directly to you by the Company. As the stockholder of record, you have the right to direct the voting of your shares by returning the proxy card to us. Whether or not you plan to attend the Annual Meeting, please complete, date, sign and return a proxy card to ensure that your vote is counted.
Beneficial Owner of Shares Held in Street Name
If, on October 14, 2011, your shares were held in an account at a brokerage firm, bank, broker-dealer, or other nominee holder, then you are considered the beneficial owner of shares held in “street name,” and the Notice of Annual Meeting & Proxy Statement was forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. However, since you are not the stockholder of record, you may not vote these shares in person at the Annual Meeting unless you receive a valid proxy from the organization.
How do I vote?
Shareholders of Record. If you are a stockholder of record, you may vote by any of the following methods:
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By Mail. You may vote by completing, signing, dating and returning your proxy card in the pre-addressed, postage-paid envelope provided.
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In Person. You may attend and vote at the Annual Meeting. The Company will give you a ballot when you arrive.
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Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name, you may vote by any of the following methods:
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By Mail. You may vote by proxy by filling out the vote instruction form and returning it in the pre-addressed, postage-paid envelope provided.
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In Person. If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares.
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Abstentions and broker non-votes
While the inspectors of election will treat shares represented by Proxies that reflect abstentions or include "broker non-votes" as shares that are present and entitled to vote for purposes of determining the presence of a quorum, abstentions or "broker non-votes" do not constitute a vote "for" or "against" any matter and thus will be disregarded in any calculation of "votes cast." However, abstentions and "broker non-votes" will have the effect of a negative vote if an item requires the approval of a majority of a quorum or of a specified proportion of all issued and outstanding shares.
Brokers holding shares of record for customers generally are not entitled to vote on “non-routine” matters, unless they receive voting instructions from their customers. As used herein, “uninstructed shares” means shares held by a broker who has not received voting instructions from its customers on a proposal. A “broker non-vote” occurs when a nominee holding uninstructed shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that non-routine matter.
What happens if I do not give specific voting instructions?
Shareholders of Record. If you are a stockholder of record and you:
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indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board of Directors, or
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sign and return a proxy card without giving specific voting instructions,
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then the proxy holders will vote your shares in the manner recommended by the Board of Directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally not vote on non-routine matters, such as the election of directors.
What are the Board’s recommendations?
The Board’s recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote:
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for election of the five directors nominated by the Company to hold office subject to the provisions of the Bylaws of the Company, until the next annual meeting of stockholders and until their successors are duly elected and qualified;
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to approve the ratification of an amendment of the Franklin Wireless Corp. 2009 Stock Option Plan increasing the number of shares covered by the Plan to 2,000,000 shares ; and
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to approve the ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year 2012.
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With respect to any other matter that properly comes before the meeting, the proxy holder will vote as recommended by the Board of Directors or, if no recommendation is given, in his own discretion.
Dissenters’ Right of Appraisal
Holders of shares of our Common Stock do not have appraisal rights under Nevada law or under the governing documents of the Company in connection with this solicitation.
How are Proxy materials delivered to households?
Only one copy of the Company's 10-K for the fiscal year ending June 30, 2011 and this Proxy Statement will be delivered to an address where two or more stockholders reside with the same last name or who otherwise reasonably appear to be members of the same family based on the stockholders’ prior express or implied consent.
We will deliver promptly upon written or oral request a separate copy of the Company's 10-K for the fiscal year ending June 30, 2011, as amended, and this Proxy Statement upon such request. If you share an address with at least one other stockholder, currently receive one copy of our Annual Report and Proxy Statement at your residence, and would like to receive a separate copy of our Annual Report and Proxy Statement for future stockholder meetings of the Company, please specify such request in writing and send such written request to Franklin Wireless Corp., 6205 Lusk Blvd., San Diego, CA 92121 Attention: Corporate Secretary.
How much stock is owned by 5% stockholders, directors, and executive officers?
The following table sets forth the number of shares known to be beneficially owned by all persons who own at least 5% of Franklin 's outstanding common stock, the Company's directors, the executive officers, and the directors and executive officers as a group as of October 14, 2011, unless otherwise noted. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated.
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Shares Beneficially Owned*
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Name and Address
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Number
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Percent
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OC Kim
6205 Lusk Blvd., San Diego, CA 92121
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1,796,695 (1)
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14.33%
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Gary Nelson
6205 Lusk Blvd., San Diego, CA 92121
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391,825 (2)
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3.13%
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C-Motech Co. Ltd
1321-1Seocho-Dong, Seocho-Gu, Seoul, Korea
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1,566,672
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12.50%
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Joon Won Jyoung
6205 Lusk Blvd., San Diego, CA 92121
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540,169
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4.31%
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Johnathan Chee
6205 Lusk Blvd., San Diego, CA 92121
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7,324
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0.06%
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Yun J. (David) Lee
6205 Lusk Blvd., San Diego, CA 92121
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225,000 (3)
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1.79%
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Sherman Capital Group LLC
3820 W. Happy Valley Road, Suite 141-601
Glendale, AZ 85310
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300,000 (4)(5)
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2.39%
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Steven Sherman
3820 W. Happy Valley Road, Suite 141-601
Glendale, AZ 85310
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300,000 (4)(5)
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2.39%
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Karen Singer
212 Vaccaro Drive
Cresskill, New Jersey 07626
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291,317 (5)
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2.32%
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David S. Oros
621 E. Pratt Street
Baltimore, Maryland 21202
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343,505 (5)
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2.74%
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All directors and officers as a group (five persons)
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2,961,013
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23.62%
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(1) Includes options to purchase 297,500 shares of Common Stock.
(2) Includes options to purchase 47,500 shares of Common Stock.
(3) Consists solely of options to purchase 225,000 shares of Common Stock.
(4) Based solely on a Schedule 13D dated August 4, 2011, which indicates that Mr. Sherman has sole dispositive and voting power over the shares of the Company owned by Sherman Capital Group.
(5) Based solely on a Schedule 13D dated August 4, 2011, which indicates that Sherman Capital Group, Karen Singer and David S. Oros are acting as a “group” for purposes of Rule 13d-5(b)(1) of the Securities Exchange Act of 1934, as amended, and each may be deemed to beneficially own the shares owned by the others in the group. Since the three persons in the group own, in the aggregate, 934,822 shares, or 7.45% of the outstanding shares, they are each included in this table.
** Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or preferred shares exercisable or convertible within 60 days of October 14, 2011 are deemed outstanding for computing the percentage of the person holding such option or warrant. Percentages are based on a total of 12,536,471 shares: 11,835,471 shares of common stock outstanding on October 14, 2011 and 701,000 shares issuable upon the exercise of options exercisable on or within 60 days of October 14, 2011.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors oversees our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the President and other key executives, visits to the Company’s facilities, by reading the reports and other materials that we send them and by participating in Board and committee meetings. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Biographical information about our directors is provided in “Item 1 - Proposal for the Election of Five Directors.” Except as set forth in this Proxy Statement, none of our directors held directorships in other reporting companies and registered investment companies at any time during the past five years.
Our Board currently consists of four persons and all of them have been nominated by the Company to stand for election.
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Name
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Age
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Position
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OC Kim
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48
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President, Acting Chief Financial Officer, Secretary and a Director
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Gary Nelson
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70
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Chairman of the Board and a Director
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Joon Won Jyoung
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69
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Director
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Johnathan Chee
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49
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Director
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Benjamin Chung
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36
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Director
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Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years, none of our directors has:
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Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
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Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
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Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
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Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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Been the subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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There are no material proceedings to which any director of the Company is a party adverse to the Company or has a material interest adverse to the Company.
How often did the Board meet during fiscal 2011?
During fiscal 2011, the Board of Directors held four meetings. Each director in office at the time attended no fewer than 75% of the meetings of the Board. The Board also approved certain actions by unanimous written consent.
What committees has the Board established?
The Board of Directors has not established any committees
The Board of Directors is responsible for identifying individuals qualified to become directors. The Board of Directors seeks to identify director candidates based on input provided by a number of sources, including (1) the Board of Directors members, (2) our stockholders, and (3) third parties, such as service providers. In evaluating potential candidates for director, the Board of Directors considers the entirety of each candidate’s credentials.
Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of the Board of Directors. However, at a minimum, candidates for director must possess:
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high personal and professional ethics and integrity;
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the ability to exercise sound judgment;
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the ability to make independent analytical inquiries;
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a willingness and ability to devote adequate time and resources to diligently perform Board and committee duties; and
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the appropriate and relevant business experience and acumen.
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The Board of Directors will consider nominees recommended by stockholders if such recommendations are made in writing to the Board in compliance with the Bylaws of the Company. The Board of Directors does not plan to change the manner in which it evaluates nominees for election as a director based on whether the nominee has been recommended by a stockholder or otherwise.
The Board of Directors does not have a formal policy relating to diversity among directors. In considering new nominees and whether to re-nominate existing members of the Board, the committee seeks to achieve a Board with strengths in its collective knowledge and a broad diversity of perspectives, skills and business and professional experience. Among other items, the committee looks for a range of experience in strategic planning, sales, finance, executive leadership, industry and similar attributes.
Stockholder Communications
Stockholders requesting communication with directors can do so by writing to Franklin Wireless Corp., c/o Corporate Secretary, 6205 Lusk Blvd., San Diego, CA 92121. At this time we do not screen communications received and would forward any requests directly to the named director. If no director was named in a general inquiry, the Secretary would contact either the Chairman of the Board of Directors. We do not provide the physical address, email address, or phone numbers of directors to outside parties without a Director’s permission.
Code of Ethics
We have adopted a Code of Ethics that applies to all of our directors, officers and employees, including our President and Acting Chief Financial Officer.
Director Compensation
Our Directors are reimbursed for reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors. None of our directors received any compensation for serving on our Board for the year ended June 30, 2011. There is no established policy for the payment of fees or other compensation to any of the members of our Board of Directors.
INFORMATION ABOUT THE EXECUTIVE OFFICERS
The executive officers are elected annually by our Board of Directors and hold office until their successors are elected and duly qualified. There are no family relationships between any of our directors or executive officers. The current executive officers of the Company are as follows:
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Age
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Position
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OC Kim
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48
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President, Acting Chief Financial Officer, and Secretary
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Yun J. (David) Lee
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49
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Chief Operating Officer
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The following includes the principal occupations for the past five years (and, in some instances, for prior years) of each of our executive officers:
OC Kim has been our President, Acting Chief Financial Officer, Secretary and a director since September 2003. Prior to joining Franklin Wireless, Mr. Kim was the CEO and President of Accetio Inc., a company he founded in April 2001 that developed cell phones and modules for the telecommunications industry. In September 2003, Accetio Inc. merged with Franklin Telecommunications Corp. and was renamed Franklin Wireless. Prior to this, Mr. Kim was the Chief Operating Officer of Axesstel Inc., a pioneering developer of CDMA Wireless Local Loop Products. Before joining Axesstel, he was the president of the U.S. sales office for Kolon Data Communications Co., Ltd., one of Korea's most prominent technology conglomerates. While at Kolon Data Communications, Mr. Kim helped introduce the first generation of CDMA phones to the Korean market through his work with Qualcomm Personal Electronics (QPE), a joint venture between Qualcomm Incorporated and Sony Electronics Inc. Mr. Kim began his career at Lucky Goldstar (LG) Electronics. He HeHHHHHhas more than 23 years of experience in sales, marketing, and operations management in the telecommunications and information systems industries. He earned a B.A. from Sogang University in Korea.
Yun J. (David) Lee has been the Chief Operating Officer since September 2008. Mr. Lee has 17 years of upper level management experience in telecommunications, including experience in the cellular telephone business in the U.S. and South America. Prior to joining the Company, he was President of Ace Electronics, and served as Chief Financial Officer and Director of Sales and Marketing for RMG Wireless. Prior to that, he served as Controller and Director of International Sales for Focus Wireless in Chicago.
Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years, none of our executive officers has:
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Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
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Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
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Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
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Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
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Been the subject to, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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There are no material proceedings to which any executive of the Company is a party adverse to the Company or has a material interest adverse to the Company.
The following table sets forth all compensation paid or accrued by us for the years ended June 30, 2011 and 2010 to our President and Acting Chief Financial Officer and our Chief Operating Officer (The "Named Executive Officers").
Summary Compensation Table
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Name and Principal Position
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Fiscal
Year
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Salary
($)
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Bonus
($)
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Option
Awards
($)(1)
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All Other
Compensation
($)
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Total
($)
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OC Kim, President and
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2010
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$
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160,000
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$
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100,000
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$
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88,200
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-
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$
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348,200
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Acting Chief Financial Officer
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2011
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$
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181,668
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$
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72,000
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$
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-
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|
|
|
-
|
|
|
$
|
253,668
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yun J. (David) Lee,
|
|
2010
|
|
$
|
125,000
|
|
|
$
|
80,000
|
|
|
$
|
44,100
|
|
|
|
-
|
|
|
$
|
249,100
|
|
|
Chief Operating Officer
|
|
2011
|
|
$
|
144,820
|
|
|
$
|
60,000
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
204,820
|
|
__________________
(1) Represents the dollar amount recognized for financial statement report purposes with respect to the fiscal year in accordance with ASC 718 “Compensation – Stock Compensation.” Please see "NOTE 12. LONG-TERM INCENTIVE PLAN AWARDS," to our financial statements included in this report for the relevant assumptions used to determine the valuation of our option awards.
Outstanding Equity Awards at Fiscal Year-End
The following table presents the outstanding equity awards held by each of the Named Executive Officers as of June 30, 2011. The only outstanding equity awards are stock options. No options were granted to the Named Executive Officers during the 2011 fiscal year. All options in the table are fully vested.
|
Name
|
|
Number of Securities Underlying Unexercised Options
(#)
|
|
|
Option Exercise Price
($)
|
|
|
Option Expiration
Date
|
|
Number of Shares
that have not Vested
(#)
|
|
|
Market Value of Shares
that have not Vested
($)
|
|
|
OC Kim
|
|
|
200,000
|
|
|
$
|
2.07
|
|
|
04/19/2020
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
97,500
|
|
|
$
|
0.495
|
|
|
06/11/2013
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yun J. (David) Lee
|
|
|
100,000
|
|
|
$
|
2.07
|
|
|
04/19/2020
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
100,000
|
|
|
$
|
0.45
|
|
|
06/11/2014
|
|
|
-
|
|
|
|
-
|
|
| |
|
|
25,000
|
|
|
$
|
0.45
|
|
|
06/11/2014
|
|
|
-
|
|
|
|
-
|
|
EMPLOYMENT CONTRACTS
On September 21, 2009 we entered into Change of Control Agreements with OC Kim, our President and Acting Chief Financial Officer, Yun J. (David) Lee, our Chief Operating Officer, and Yong Bae Won, our Vice President, Engineering. Each Change of Control Agreement provides for a lump sum payment to the officer in case of a change of control of the Company. The term includes the acquisition of Common Stock of the Company resulting in one person or company owning more than 50% of the outstanding shares, a significant change in the composition of the Board of Directors of the Company during any 12-month period, a reorganization, merger, consolidation or similar transaction resulting in the transfer of ownership of more than fifty percent (50%) of the Company's outstanding Common Stock, or a liquidation or dissolution of the Company or sale of substantially all of the Company's assets.
The Change of Control Agreement with Mr. Kim is for three years and calls for a payment of $5 million upon a change of control; the agreement with Mr. Lee is for two years and calls for a payment of $2 million upon a change of control; and the agreement with Mr. Won is for two years and calls for a payment of $1 million upon a change of control. On September 16, 2011, the Board of Directors approved extending the terms of the Change of Control Agreements for an additional three years. Following this approval, the Change of Control Agreement with Mr. Kim will expire on September 21, 2015 and the Change of Control Agreements with Messrs. Lee and Won will expire on September 21, 2014.
On September 21, 2009, we entered into a renewable three-year employment agreement with our President. The annual salary for Mr. Kim is currently $200,000.
COMPENSATION DISCUSSION AND ANALYSIS
GENERAL PHILOSOPHY - We compensate our executive officers through a mix of base salary, bonus and stock options. Our compensation policies are designed to be competitive with comparable employers and to align management’s incentives with both near term and long-term interests of our stockholders. We use informal methods of benchmarking our executive compensation, based on the experience of our directors or, in some cases, studies of industry standards. Our compensation is negotiated on a case by case basis, with attention being given to the amount of compensation necessary to make a competitive offer and the relative compensation among our executive officers.
BASE SALARIES - We want to provide our senior management with a level of cash compensation in the form of base salary that facilitates an appropriate lifestyle given their professional status and accomplishments.
INCENTIVE COMPENSATION - Our practice is to award cash bonuses based upon performance objectives set by the Board of Directors. We maintain a bonus plan which provides our executive officers and non-executive officers the ability to earn cash bonuses based on the achievement of performance targets. The performance targets are set annually by the Board of Directors, and bonuses are awarded to executive officers and non-executive officers on a quarterly basis. The actual amounts of cash bonuses to executive officers and non-executive officers are in the sole discretion of the Board of Directors. For fiscal 2011, the performance targets were based on achieving revenue and operating income targets.
SEVERANCE BENEFITS - We are generally an at will employer, and have no employment agreements with severance benefits; however, we have entered into Change of Control Agreements with our executive officers, and one other employee that provide them with lump sum payments in the event off a change in control of the Company.
RETIREMENT PLANS - We do not maintain any retirement plans.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10% of the issued and outstanding shares of Franklin common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended June 30, 2011 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.
ACTIONS TO BE TAKEN AT THE MEETING
ITEM 1
PROPOSAL FOR ELECTION OF FIVE DIRECTORS
At this year’s Annual Meeting, the Board of Directors proposes that the nominees listed below, all of whom are currently serving as directors, be elected to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. The Board has no reason to believe that any of the persons named below will be unable or unwilling to serve as a nominee or as director if elected.
Assuming a quorum is present, the five nominees receiving the highest number of affirmative votes of shares entitled to be voted for such persons will be elected as directors of the Company to hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified. Unless marked otherwise, proxies received will be voted "FOR" the election of the nominees named below. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will ensure the election of the nominees listed below, and, in such event, the specific nominees to be voted for will be determined by the proxy holders.
Information With Respect to Director Nominees
Listed below are the nominees for election to our Board with information showing the principal occupation or employment of the nominees for director, the principal business of the corporation or other organization in which such occupation or employment is carried on, and such nominees’ business experience during the past five years. Such information has been furnished to the Company by the director nominees. Each nominee is currently a director of the Company
| Name |
Age |
|
OC Kim
|
48
|
|
Gary Nelson
|
70
|
|
Joon Won Jyoung
|
69
|
|
Johnathan Chee
|
49
|
|
Benjamin Chung
|
36
|
OC Kim has been our President, Acting Chief Financial Officer, Secretary and a director since September 2003. Prior to joining Franklin Wireless, Mr. Kim was the CEO and President of Accetio Inc., a company he founded in April 2001 that developed cell phones and modules for the telecommunications industry. In September 2003, Accetio Inc. merged with Franklin Telecommunications Corp. and was renamed Franklin Wireless. Prior to this, Mr. Kim was the Chief Operating Officer of Axesstel Inc., a pioneering developer of CDMA Wireless Local Loop Products. Before joining Axesstel, he was the president of the U.S. sales office for Kolon Data Communications Co., Ltd., one of Korea's most prominent technology conglomerates. While at Kolon Data Communications, Mr. Kim helped introduce the first generation of CDMA phones to the Korean market through his work with Qualcomm Personal Electronics (QPE), a joint venture between Qualcomm Incorporated and Sony Electronics Inc. Mr. Kim began his career at Lucky Goldstar (LG) Electronics. He HeHHHHHhas more than 23 years of experience in sales, marketing, and operations management in the telecommunications and information systems industries. He earned a B.A. from Sogang University in Korea.
We believe Mr. Kim’s qualifications to serve as a director of the Company include his extensive business, operational and management experience in the wireless industry, including his current position as the Company’s President. In addition, his knowledge of the Company’s business, products, strategic relationships and future opportunities is of great value to the Company.
Gary Nelson has been a director since September 2003. Mr. Nelson was an early investor in Franklin Telecommunications Corp. in the 1980’s and served as a director from 2001 up until the company’s merger with Accetio Inc. in September 2003, at which time the company was renamed Franklin Wireless. Following the merger, Mr. Nelson became a director and ultimately Chairman of the Board of Franklin Wireless. He is co-founder and current President of Churchill Mortgage Corporation, an income property mortgage banking firm based in Los Angeles, California, which is a loan correspondent for major life insurance companies and other financial institutions. The Churchill portfolio consists of approximately $2 billion in loans. In addition, Mr. Nelson is the Chief Operating Office of Churchill Mortgage Capital, which is the loan origination arm of Churchill Mortgage Corporation. Mr. Nelson’s prior experience includes various marketing positions with Control Data Corporation and design engineering positions with North American Aviation where he worked on the Apollo Project. He holds a B.S. in Mechanical Engineering from Kansas State University and an MBA from the University of Southern California.
We believe that Mr. Nelson’s qualifications to serve as a director of the Company include his many years of business, operational and management experience including his current position as President of Churchill Mortgage Corporation. In addition, Mr. Nelson has served as a director of the Company for eight years, and brings a valuable historical perspective on the development of the Company’s business and its leadership.
Joon Won Jyoung has been a director since September 2009. He has been an active investor since 1997 and made early investments in Sewon Telecom, Telson Electronics and Pantech, three leading telecommunications companies based in Korea. From 2001 to 2007, Mr. Jyoung served as a director and Treasurer for Sewon Telecom. From 1992 to 1996, he served as President of Sneakers Classic Ltd., and from 1987 to 1991, he was Chairman of Empire State Bank in New York. From 1972 to 1982, he was Chairman of Downtown Mart, a distribution company in New York and Virginia. He holds a B.S. in Mathematics from Seoul National University and an M.S. in Statistics from the University of Connecticut.
We believe Mr. Jyoung’s qualifications to serve as a director of the Company include his extensive management experience in a diverse range of industries, including telecommunications, as well as his broad experience in international business matters. Mr. Jyoung’s background and experience allow him to provide the Company’s Board of Directors with valuable knowledge and insight.
Johnathan Chee has been a director since September 2009. He is an attorney and has owned the Law Offices of Johnathan Chee, in Niles, Illinois, since August 2007. Mr. Chee has represented clients in various business dealings and negotiations with Ameritech, SBC, Sprint and several wireless carriers in Latin America. Between 1998 and 2007, he served as an attorney with the C&S Law Group, P.C., in Glenview, Illinois. He holds a B.A. from the University of Illinois-Chicago and a J.D. from IIT Chicago-Kent College of Law. He is a member of the Illinois Bar Association.
We believe Mr. Chee’s qualifications to serve as a director of the Company include his experience as a business attorney that allow him to provide the Company’s Board of Directors with valuable knowledge of legal matters that may affect the Company.
Benjamin Chung has been a director since November 2011. He is a Certified Public Accountant and an experienced finance and accounting executive whose client base includes several telecommunications companies. He is currently a Partner in the accounting firm of Simon & Edward, LLP. Between September 2010 and July 2011 he served as International Controller for American Apparel, Inc., a publicly traded company. He served as an Audit Senior Manager in the accounting firm of BDO USA, LLP from October 2007 to August 2010 and completed an 18 month international rotation at BDO Daejoo Korea where he was promoted to an Audit Partner. Prior to BDO, he was the Director of Internal Audit for Big 5 Sporting Goods Corporation, a publicly traded company, from January 2006 to October 2007. He holds a B.S. in Business Administration from California State Polytechnic University, Pomona.
We believe Mr. Chung’s qualifications to serve as a director of the Company include his experience as a certified public accountant and as controller for public companies, which will allow him to provide the Company’s Board of Directors with valuable knowledge of financial and accounting matters that may affect the Company.
Required Vote
The election of the directors of the Company requires the affirmative vote of a plurality of the votes cast by stockholders, who are entitled to vote, present in person or represented by Proxy at the Annual Meeting, which will be the nominees receiving the largest number of votes, which may or may not constitute less than a majority.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 1:
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE NOMINEES DESCRIBED ABOVE.
ACTIONS TO BE TAKEN AT THE MEETING (Continued)
PROPOSAL NO. 2:
RATIFICATION OF AMENDMENT TO THE COMPANY’S 2009 STOCK OPTION PLAN
At the Annual Meeting, the Company's stockholders are being asked to ratify an amendment to the Franklin Wireless Corp. 2009 Stock Option Plan (the "Plan") that increased the number of shares of Common Stock available under the Plan by 700,000 shares, from 1,300,000 shares to 2,000,000 shares.
The Board determined that it was advisable to amend the Company’s 2009 Stock Option Plan (the “Plan”) to increase the maximum number of authorized but unissued shares of Common Stock for the grant of awards under the Plan from 1,300,000 shares to 2,000,000 shares, and this action was approved by a written consent of holders of a majority of the outstanding Common Stock .The securities underlying the options under the Plan are shares of Common Stock. The Board of Directors is seeking ratification of this action by vote of the shareholders at the Annual Meeting. The purpose of the Plan is to align the interests of officers, other key employees, consultants and non-employee directors of the Company with those of the stockholders of the Company, to afford an incentive to such officers, employees, consultants and directors to continue as such, to increase their efforts on behalf of the Company and to promote the success of the Company’s business. The availability of additional shares will enhance the Company’s ability to achieve these goals. The basis of participation in the Plan is upon discretionary grants of the Board.
The exercise price of the options under the Plan may be no less than the fair market value of our shares of common stock on the date of grant, unless, with respect to nonqualified stock options that are not intended as incentive stock options within the meaning of section 422 of the Internal Revenue Code of 1986, as amended from time to time, otherwise determined by the Board of Directors. However, incentive stock options granted to ten percent or more stockholders must be priced at no less than 110% of the fair market value our shares of common stock on the date of grant and their term may not exceed five years. All options granted under the Plan are for a term of no longer than ten years unless otherwise determined by the Board of Directors. The Board also determines the exercise schedule of each option grant.
Equity Compensation Plan Information
The following table sets forth the aggregate information of our equity compensation plans in effect as of June 30, 2011:
| |
|
Number of
securities to be
issued upon exercise
of outstanding options and rights
|
|
|
Weighted-average
exercise price of
outstanding options and rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities reflected
in first column)
|
|
|
Equity compensation plans approved by security holders
|
|
|
930,836
|
|
|
$
|
1.40
|
|
|
|
984,000
|
|
|
Equity compensation plans not approved by security holders
|
|
|
-0-
|
|
|
$
|
N/A
|
|
|
|
N/A
|
|
Required Vote
Ratification of the amendment requires the receipt of the affirmative vote of a majority of the shares of the Company's common stock present in person or by proxy and voting at the Annual Meeting.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 2:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE AMENDMENT OF THE 2009 STOCK OPTION PLAN.
ACTIONS TO BE TAKEN AT THE MEETING (Continued)
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors has appointed BDO USA, LLP as the independent registered public accounting firm for the Company to audit the consolidated financial statements of the Company for fiscal year 2012. Although ratification by stockholders is not required by law, the Board of Directors has determined that it is desirable to request ratification of this selection by the stockholders. Notwithstanding its selection, the Board of Directors, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Board of Directors believes that such a change would be in the best interests of the Company and its stockholders. If the stockholders do not ratify the appointment of BDO USA, LLP, the Audit Committee may reconsider its selection.
The vote of a majority of the shares of Common Stock present or represented at the meeting is required for approval. Broker non-votes will be voted in favor of approval. BDO USA, LLP acted as the Company’s independent registered public accounting firm during the past fiscal year and, unless the Board of Directors appoints new independent accountants, BDO USA, LLP will continue to act in such capacity during the current fiscal year. It is anticipated that a representative of BDO USA, LLP will attend the Annual Meeting of Stockholders, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions.
The aggregate fees billed for the two most recently completed fiscal periods for the audit of our annual financial statements and other services for this fiscal period were as follows:
|
|
|
FY 2011
|
|
|
FY 2010
|
|
|
Audit Fees
|
|
$
|
69,025
|
|
|
$
|
73,000
|
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
3,000
|
|
|
Tax Fees
|
|
|
22,242
|
|
|
|
5,000
|
|
|
Total Fees
|
|
$
|
91,267
|
|
|
$
|
81,000
|
|
In the above table, "audit fees" are fees billed by our external auditor for services provided in auditing our company's annual financial statements for the subject year. “Audit-Related Fees” and “Tax Fees” are amounts billed by other accounting firms. The audit fees set forth on the foregoing relate to the audit as of and for the years ended June 30, 2011 and 2010, which were performed by BDO USA, LLP.
Pre-Approval Policies and Procedures
The Board of Directors pre-approves all audit and non-audit services performed by the Company’s auditor and the fees to be paid in connection with such services in order to assure that the provision of such services does not impair the auditor’s independence. All of the services described above were approved in advance by the Board of Directors.
RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 3:
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS AUDITORS FOR THE 2012 FISCAL YEAR.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented at the Annual Meeting. If any other matters properly come before the meeting, the persons named in the enclosed Proxy and will vote the shares represented thereby in accordance with their judgment on such matters.
Annual Reports on Form 10-K
Additional copies of Franklin's Annual Report on Form 10-K for the fiscal year ended June 30, 2011 may be obtained without charge by writing to the Corporate Secretary, Franklin Wireless Corp., 6205 Lusk Blvd., San Diego, CA 92121.
Stockholders Proposals for the 2012 Annual Meeting
Any stockholder who wishes to present proposals for inclusion in the Company’s proxy materials for the 2012 Annual Meeting of Stockholders may do so by following the procedures prescribed in Rule 14a-8 under the Securities Exchange Act of 1934, as amended. To be eligible, the stockholder proposals must be received by our Corporate Secretary at our principal executive office on or before July 14, 2012. Such proposal must also meet the other requirements of the rules of the SEC relating to shareholders’ proposals.
Proxy Solicitation Costs
The proxies being solicited hereby are being solicited by the Company. The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of the Notice, the Proxy Statement, the Proxy card and establishment of the Internet site hosting the proxy material. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. Officers and regular employees of the Company may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock.
| |
By Order of the Board of Directors,
|
|
| |
|
|
| |
|
|
| |
/s/ OC Kim
|
|
| |
OC Kim
|
|
| |
President
|
|
FRANKLIN WIRELESS CORP.
2011 PROXY CARD
The undersigned hereby appoints OC Kim as attorney and proxy for the undersigned, with full power of substitution, for and in the name, place and stead of the undersigned, to represent and vote, as designated below, all shares of stock of Franklin Wireless Corp., a Nevada corporation, held of record by the undersigned on October 14, 2011, at the Annual Meeting of the Shareholders to be held on December 22, 2011, or at any adjournment or postponement of such meeting, in accordance with and as described in the Notice of Annual Meeting of Shareholders and Proxy Statement. If no direction is given, this proxy will be voted FOR Proposals 1, 2 and 3 and in the discretion of the proxy as to such other matters as may properly come before the meeting.
x Please mark the votes as in this example.
The Board of Directors recommends a vote for Proposals 1, 2 and 3.
1. Election of Directors
Nominees: OC Kim, Gary Nelson, Joon Won Jyoung, Johnathan Chee, and Benjamin Chung.
FOR o WITHHELD o FOR ALL NOMINEES EXCEPT AS STATED BELOW o
To withhold authority as to any nominee(s), write the nominee(s) name(s) on the line below:
___________________________________________________________________________________________
2. To ratify an amendment to the Company's 2009 Stock Option Plan (the “Plan”) to increase the number of shares of Common Stock available under the Plan by 700,000 shares, from 1,300,000 shares to 2,000,000 shares.
FOR o AGAINST o ABSTAIN o
3. To ratify the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the 2012 fiscal year.
FOR o AGAINST o ABSTAIN o
The undersigned hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such stock and hereby ratifies all that the proxies, their substitutes, or any of them, may lawfully do by virtue hereof.
Please sign exactly as your name appears on the address label affixed hereto. If acting as attorney, executor, trustee or in other representative capacity, sign name and title.
Date:____________________
Signature:_______________
Signature if held jointly:________________________