WEALTH UNIVERSITY

[san_terre]

I have been dealing with FKWL for many, many years. Rumor has it someone is looking to pick them up.

Here's some interesting info:

Franklin Wireless Corp. (OTC:FKWL) designs, manufactures and sells USB broadband modems, such as the 3G and 4G products offered by telecoms. A reader passed this company along to me, and on many metrics it does indeed look cheap. One thing that concerned me is that the company has made at least one potential catalyst very expensive.

Readers of this site know that, for many small caps, a potential catalyst for unlocking value is a takeover by a larger firm, especially larger firms acquiring niche players such as FKWL. In FKWL's case, such a catalyst comes at a hefty price. From the company's most recent 10-Q:

Change of Control Agreements

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.

Payments of $8 million to three executives makes an acquisition less likely (keep in mind, this company has a market cap of less than $30 million), which effectively eliminates the potential for this catalyst.

http://www.istockanalyst.com/finance/story/4951572/franklin-wireless-an-expensive-catalyst-is-no-catalyst-at-all