Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Sep. 28, 2018 | Dec. 31, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | FRANKLIN WIRELESS CORP | ||
Entity Central Index Key | 722,572 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 10,050,000 | ||
Entity Common Stock, Shares Outstanding | 10,570,203 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 11,975,944 | $ 14,285,001 |
Accounts receivable | 7,907,117 | 10,993,191 |
Other receivables, net | 125,144 | 79,021 |
Inventories, net | 1,615,332 | 3,379,065 |
Prepaid expenses and other current assets | 19,034 | 19,135 |
Prepaid income taxes | 28,240 | 28,240 |
Advance payments to vendors | 78,696 | 127,100 |
Total current assets | 21,749,507 | 28,910,753 |
Property and equipment, net | 124,072 | 219,942 |
Intangible assets, net | 996,708 | 1,109,475 |
Deferred tax assets, non-current | 1,853,429 | 1,661,906 |
Goodwill | 273,285 | 273,285 |
Other assets | 139,637 | 136,652 |
TOTAL ASSETS | 25,136,638 | 32,312,013 |
Current liabilities | ||
Accounts payable | 7,609,585 | 12,862,564 |
Income tax payable | 3,750 | 0 |
Advance payments from customers | 228,598 | 51,997 |
Accrued liabilities | 259,348 | 288,342 |
Total current liabilities | 8,101,281 | 13,202,903 |
Total liabilities | 8,101,281 | 13,202,903 |
Commitments and contingencies (Note 8) | ||
Parent Company stockholders' equity: | ||
Preferred stock, par value $0.001 per share, authorized 10,000,000 shares; No preferred stock issued and outstanding as of June 30, 2018 and 2017 | 0 | 0 |
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 10,570,203 and 10,520,203 shares issued and outstanding as of June 30, 2018 and 2017, respectively | 13,972 | 13,922 |
Additional paid-in capital | 7,442,272 | 7,375,322 |
Retained earnings | 13,753,565 | 15,846,022 |
Treasury stock, 3,472,286 shares as of June 30, 2018 and 2017 | (4,513,479) | (4,513,479) |
Accumulated other comprehensive loss | (581,983) | (613,805) |
Total Parent Company stockholders' equity | 16,114,347 | 18,107,982 |
Non-controlling interests | 921,010 | 1,001,128 |
Total Stockholders' Equity | 17,035,357 | 19,109,110 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 25,136,638 | $ 32,312,013 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Jun. 30, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock Authorized | 10,000,000 | 10,000,000 |
Preferred stock Issued | 0 | 0 |
Preferred stock Outstanding | 0 | 0 |
Common stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock Authorized | 50,000,000 | 50,000,000 |
Common stock Issued | 10,570,203 | 10,520,203 |
Common stock Outstanding | 10,570,203 | 10,520,203 |
Treasury stock shares | 3,472,286 | 3,472,286 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||
Net sales | $ 30,065,833 | $ 48,565,524 |
Cost of goods sold | 24,874,119 | 39,347,065 |
Gross profit | 5,191,714 | 9,218,459 |
Operating expenses: | ||
Selling, general, and administrative | 4,511,568 | 4,898,956 |
Research and development | 3,372,016 | 3,445,124 |
Total operating expenses | 7,883,584 | 8,344,080 |
Income (loss) from operations | (2,691,870) | 874,379 |
Other income, net: | ||
Interest income | 10,007 | 9,650 |
Income from governmental subsidy | 330,856 | 281,570 |
Other income, net | (8,541) | (19,845) |
Total other income, net | 332,322 | 271,375 |
Income (loss) before provision for income taxes | (2,359,548) | 1,145,754 |
Income tax provision (benefit) | (186,973) | 374,587 |
Net income (loss) | (2,172,575) | 771,167 |
Non-controlling interests in net loss of subsidiary 48.2% | 80,118 | 102,793 |
Net income (loss) attributable to Parent Company | $ (2,092,457) | $ 873,960 |
Basic earnings (loss) per share attributable to Parent Company stockholders | $ (0.20) | $ 0.08 |
Diluted earnings (loss) per share attributable to Parent Company stockholders | $ (0.20) | $ 0.08 |
Weighted average common shares outstanding - basic | 10,538,610 | 10,501,730 |
Weighted average common shares outstanding - diluted | 10,538,610 | 10,660,900 |
Comprehensive income (loss) | ||
Net income (loss) | $ (2,172,575) | $ 771,167 |
Translation adjustments | 31,822 | 34,322 |
Comprehensive income (loss) | (2,140,753) | 805,489 |
Comprehensive loss attributable to non-controlling interest | 80,118 | 102,793 |
Comprehensive income (loss) attributable to controlling interest | $ (2,060,635) | $ 908,282 |
Consolidated Statements of Com5
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) | Jun. 30, 2018 |
Income Statement [Abstract] | |
Non-controlling interests in net loss of subsidiary at 48.2% | 48.20% |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest | Total |
Beginning balance, shares at Jun. 30, 2016 | 10,442,203 | ||||||
Beginning balance, value at Jun. 30, 2016 | $ 13,844 | $ 7,295,580 | $ 14,972,062 | $ (4,513,479) | $ (648,127) | $ 1,103,921 | $ 18,223,801 |
Net income attributable to Parent Company | 873,960 | 873,960 | |||||
Foreign exchange translation | 34,322 | 34,322 | |||||
Comprehensive income attributable to non-controlling interest | (102,793) | (102,793) | |||||
Share-based compensation | (25,000) | (25,000) | |||||
Issuance of stock related to stock options exercised, shares issued | 78,000 | ||||||
Issuance of stock related to stock options exercised, value | $ 78 | 104,742 | 104,820 | ||||
Ending balance, shares at Jun. 30, 2017 | 10,520,203 | ||||||
Ending balance, value at Jun. 30, 2017 | $ 13,922 | 7,375,322 | 15,846,022 | (4,513,479) | (613,805) | 1,001,128 | 19,109,110 |
Net income attributable to Parent Company | (2,092,457) | (2,092,457) | |||||
Foreign exchange translation | 31,822 | 31,822 | |||||
Comprehensive income attributable to non-controlling interest | (80,118) | (80,118) | |||||
Issuance of stock related to stock options exercised, shares issued | 50,000 | ||||||
Issuance of stock related to stock options exercised, value | $ 50 | 66,950 | 67,000 | ||||
Ending balance, shares at Jun. 30, 2018 | 10,570,203 | ||||||
Ending balance, value at Jun. 30, 2018 | $ 13,972 | $ 7,442,272 | $ 13,753,565 | $ (4,513,479) | $ (581,983) | $ 921,010 | $ 17,035,357 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income (loss) | $ (2,172,575) | $ 771,167 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation | 119,773 | 143,257 |
Amortization of intangible assets | 488,049 | 471,235 |
Reserve for obsolete inventory | 150,000 | 52,493 |
Deferred tax | (191,523) | 356,830 |
Share-based compensation | 0 | (25,000) |
Forgiveness of accounts payable | (2,382) | 0 |
Increase (decrease) in cash due to change in: | ||
Accounts receivable | 3,039,951 | 1,311,077 |
Inventories | 1,613,733 | (1,146,304) |
Prepaid expenses and other current assets | 101 | (7,297) |
Prepaid income taxes | 0 | 2,626 |
Advance payments to vendors | 48,404 | (118,718) |
Other assets | (2,985) | (578) |
Accounts payable | (5,250,597) | (413,561) |
Income tax payable | 3,750 | 0 |
Advance payments from customers | 176,601 | 50,096 |
Accrued liabilities | (28,994) | 41,040 |
Net cash provided (used in) by operating activities | (2,008,694) | 1,488,363 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (23,903) | (45,435) |
Payments for capitalized development costs | (291,386) | (368,226) |
Purchases of intangible assets | (83,896) | (85,597) |
Net cash used in investing activities | (399,185) | (499,258) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Cash received from exercise of stock options | 67,000 | 104,820 |
Net cash provided by financing activities | 67,000 | 104,820 |
Effect of foreign currency translation | 31,822 | 34,322 |
Net increase (decrease) in cash and cash equivalents | (2,309,057) | 1,128,247 |
Cash and cash equivalents, beginning of year | 14,285,001 | 13,156,754 |
Cash and cash equivalents, end of year | 11,975,944 | 14,285,001 |
Cash (paid) received, net during the years for: | ||
Income taxes | $ (800) | $ (14,271) |
1. BUSINESS OVERVIEW
1. BUSINESS OVERVIEW | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS OVERVIEW | NOTE 1 - BUSINESS OVERVIEW We are a provider of intelligent wireless solutions including mobile hotspots, routers and modems as well as innovative hardware and software products that support machine-to-machine (M2M) applications and the Internet of Things (IoT). Our M2M and IoT solutions include embedded modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications. These products are designed to solve wireless connectivity challenges in a variety of vertical markets including video surveillance, digital signage, home security, oil and gas exploration, kiosks, fleet management, smart grid, vehicle diagnostics, telematics and many more. We have a majority ownership position in Franklin Technology Inc. ("FTI"), a research and development company located in Seoul, South Korea. FTI primarily provides design and development services to us 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 extends primarily from the United States to countries in South America, the Caribbean, Europe, the Middle East and Africa ("EMEA") and Asia. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and FTI, a subsidiary with a majority voting interest of 51.8% (48.2% is owned by non-controlling interests) as of June 30, 2018 and 2017. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests. As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2018 or June 30, 2017. Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2018, the non-controlling interest was $921,010, which represents a $80,118 decrease from $1,001,128 as of June 30, 2017. The decrease of $80,118 in the non-controlling interest was due to the non-controlling interests in net loss of subsidiary for the year ended June 30, 2018. Segment Reporting Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. We have one reportable segment, consisting of the sale of wireless access products. We generate revenues from four geographic areas, consisting of the United States, the Caribbean and South America, EMEA and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements. The following table contains certain financial information by geographic area: Fiscal Year Ended June 30, Net sales: 2018 2017 United States $ 29,235,011 $ 47,373,463 Caribbean and South America 238,970 252,000 Europe, the Middle East and Africa ("EMEA") 335,845 796,795 Asia 256,007 143,266 Totals $ 30,065,833 $ 48,565,524 Long-lived assets, net (property and equipment and intangible assets): June 30, 2018 June 30, 2017 United States $ 1,073,640 $ 1,209,050 Asia 47,140 120,367 Totals $ 1,120,780 $ 1,329,417 Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit (see Note 3). Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of June 30, 2018 and June 30, 2017. Revenue Recognition We recognize revenue in accordance with ASC 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured, and delivery of products has occurred or services have been rendered. Accordingly, we recognize revenues from product sales upon shipment of the products to customers or when the products are received by the customers in accordance with the shipping or delivery terms. We provide a warranty for one year from the shipment or delivery date, which is covered by our vendors pursuant to purchase agreements. Any net warranty related expenditures made by us have not historically been material. Under our sales return policy, customers may generally return products that are under warranty for repair or replacement. Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services are included in our cost of goods sold. Cost of goods sold also includes amortization expense associated with capitalized product development costs associated with complete technology. 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 related licenses, certification costs, 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 greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers. As of June 30, 2018, and June 30, 2017, capitalized product development costs in progress were $100,000 and $360,248, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the year ended June 30, 2018, we incurred $291,386 in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income. Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $3,372,016 and $3,445,124 for the years ended June 30, 2018 and 2017, respectively. Advertising and Promotion Costs Costs associated with advertising and promotions are expensed as incurred. Advertising and promotion costs were $16,488 and $22,539 for the years ended June 30, 2018 and 2017, respectively. Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the statement of comprehensive income, were $814,926 and $1,452,456 for the years ended June 30, 2018 and 2017, respectively. Cash and Cash Equivalents For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Inventories Our inventories consist of finished goods and are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable, and can fluctuate significantly caused by factors beyond our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2018, and 2017, we have recorded inventory reserves in the amount of $295,502 and $143,410, respectively, for inventories that we have identified as obsolete or slow-moving. Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was recognized during the years ended June 30, 2018 and 2017. Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2018: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 3.0 years 18,397 – 18,397 Technology in progress Not Applicable - 100,000 – 100,000 Software 5 years 2.7 years 323,295 238,487 84,808 Patents 10 years 7.0 years 58,391 6,683 51,708 Certifications & licenses 3 years 1.9 years 3,250,061 2,508,266 741,795 Total as of June 30, 2018 $ 3,750,144 $ 2,753,436 $ 996,708 The definite lived intangible assets consisted of the following as of June 30, 2017: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 2,402 2,002 400 Complete technology 3 years 0.7 years 6,405 4,804 1,601 Complete technology 3 years 3.0 years 18,397 – 18,397 Supply and development agreement 8 years 0.3 years 1,121,000 1,085,969 35,031 Technology in progress Not Applicable - 360,148 – 360,148 Software 5 years 2.7 years 239,398 216,829 22,569 Patents 10 years 7.0 years 58,391 4,693 53,698 Certifications & licenses 3 years 1.9 years 2,698,526 2,080,895 617,631 Total as of June 30, 2017 $ 4,504,667 $ 3,395,192 $ 1,109,475 Amortization expense recognized during the years ended June 30, 2018 and 2017 was $488,049 and $471,235, respectively. The amortization expenses of the definite lived intangible assets for the next five years and thereafter are as follows: FY2019 FY2020 FY2021 FY2022 FY2023 Thereafter Total $ 437,845 $ 280,924 $ 97,706 $ 27,274 $ 26,929 $ 126,030 Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 30, 2018 that would indicate that the long-lived assets are impaired. Stock-based Compensation The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. Stock-based compensation is recognized on a straight-line basis over the award’s vesting period. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles within the Company. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. Earnings per Share Attributable to Common Stockholders Basic earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. Concentrations of Credit Risk We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods presented. Substantially all of our revenues are derived from sales of wireless data products. Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively. A significant portion of our revenue is derived from a small number of customers. For the year ended June 30, 2018, net sales to our three largest customers represented 54%, 21%, and 11% of our consolidated net sales, respectively, and 48%, 36%, and 9% of our accounts receivable balance as of June 30, 2018. For the year ended June 30, 2017, net sales to our two largest customers represented 69% and 23% of our consolidated net sales, respectively, and 68% and 13% of our accounts receivable balance as of June 30, 2017. No other customer accounted for more than ten percent of total net sales as of June 30, 2018 and 2017. For the year ended June 30, 2018, sales to Verizon, Sprint, and Anydata Corp. each comprised more than 10% of our net sales. For the year ended June 30, 2017, sales to Verizon and Sprint each comprised more than 10% of our net sales. For the year ended June 30, 2018, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If this manufacturing company were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact our revenue. For the year ended June 30, 2018, we purchased wireless data products from this supplier in the amount of $19,507,215, or 87% of total purchases, and had related accounts payable of $5,834,383 as of June 30, 2018. For the year ended June 30, 2017, we purchased wireless data products from this supplier in the amount of $37,628,062, or 94% of total purchases, and had related accounts payable of $10,783,241 as of June 30, 2017. We maintain our cash accounts with established commercial banks. Such cash deposits exceed the Federal Deposit Insurance Corporation insured limit of $250,000 for each financial institution. However, we do not anticipate any losses on excess deposits. Recently Issued Accounting Pronouncements In March 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which amends existing standards for leases to increase transparency and comparability among organizations by requiring recognition of lease assets and liabilities on the balance sheet and requiring disclosure of key information about such arrangements. ASU 2016-02 will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted. We are currently evaluating the impact of adopting the new standard on our consolidated financial statements and the timing and presentation of our adoption. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606)(ASU 2016-10), which amends and adds clarity to certain aspects of the guidance set forth in the upcoming revenue standard (ASU 2014-09) related to identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update No. 2016-11, Revenue Recognition (Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09. In May 2016 the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which provides narrow scope improvements and practical expedients related to ASU 2014-09. We evaluated the impact of adopting these new standards on our consolidated financial statements. There will be no material difference in the way in which revenue is recognized versus current revenue recognition guidance. New standards will be effective for us concurrently with ASU 2014-09, beginning in our first quarter of fiscal 2019. |
3. FAIR VALUE MEASUREMENTS
3. FAIR VALUE MEASUREMENTS | 12 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 3 - FAIR VALUE MEASUREMENTS Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. · Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 inputs are unobservable inputs for the asset or liability. The carrying values of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate their fair values due to the short period of time to maturity or repayment. |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: June 30, 2018 June 30, 2017 Machinery and facility $ 306,335 $ 303,986 Office equipment 385,913 380,473 Molds 984,720 968,606 1,676,968 1,653,065 Less accumulated depreciation (1,552,896 ) (1,433,123 ) Total $ 124,072 $ 219,942 Depreciation expense associated with property and equipment was $119,773 and $143,257 for the fiscal years ended June 30, 2018 and 2017, respectively, and is included in selling, general, and administrative expenses on the consolidated statements of the comprehensive income. |
5. ACCRUED LIABILITIES
5. ACCRUED LIABILITIES | 12 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | NOTE 5 - ACCRUED LIABILITIES Accrued liabilities consisted of the following as of: June 30, 2018 June 30, 2017 Accrued salaries, payroll deductions owed to government entities $ 38,855 $ 45,278 Accrued vacation 54,506 56,612 Accrued seed stocks 140,000 140,000 Taxes 1,332 3,305 Other accrued liabilities 24,655 43,147 Total $ 259,348 $ 288,342 |
6. INCOME TAXES
6. INCOME TAXES | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 - INCOME TAXES Income tax provision for the years ended June 30, 2018 and 2017 consists of the following: Year Ended June 30, 2018 2017 Current income tax expense (benefit): Federal $ 3,750 $ 16,760 State 800 800 4,550 17,560 Deferred income tax expense (benefit): Federal (27,460 ) 440,647 State – – Foreign (164,063 ) (83,620 ) (191,523 ) 357,027 Provision (benefit) for income taxes $ (186,973 ) $ 374,587 The provision for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows: Year Ended June 30, 2018 2017 Federal tax provision (benefit), at statutory rate of 34% $ (799,696 ) $ 389,495 State tax, net of federal tax benefit (54,642 ) (50,107 ) Nondeductible expenses 6,753 5,762 R&D credits (36,733 ) (39,394 ) Foreign rate difference (54,332 ) 17,063 Other 34,878 1,133 Rate reduction 661,629 – Change in valuation allowance 55,170 50,635 Provision (benefit) for income taxes $ (186,973 ) $ 374,587 Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows: June 30, 2018 June 30, 2017 Deferred tax asset: Net operating losses $ 1,417,549 $ 1,221,466 State tax 169 272 Intangibles 44,200 71,716 Tax credits 589,206 541,390 Inventory reserve 76,663 – Other, net 48,687 107,903 Total deferred tax assets 2,176,474 1,942,747 Deferred tax liabilities: Fixed asset (17,123 ) (30,089 ) Total deferred tax liabilities (17,123 ) (30,089 ) Less valuation allowance (305,922 ) (250,752 ) Net deferred tax asset $ 1,853,429 $ 1,661,906 Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted 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 have evaluated the available evidence supporting the realization of our gross deferred tax assets, including the amount and timing of forecasted future taxable income. Management determined it is more likely than not that the federal deferred tax assets will be fully realized, and no valuation allowance is necessary as of June 30, 2018. Management also determined that certain state deferred tax assets required a partial valuation allowance as of June 30, 2018. As of June 30, 2018, we have federal net operating loss carryforwards of approximately $4.3 million, which expire through 2038 and no state net operating loss carryforwards. 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. A reconciliation of the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax assets, is as follows: Balance as of June 30, 2016 $ 168,523 Gross increase 52,622 Balance as of June 30, 2017 221,145 Gross increase 35,894 Relief of ASC 740 reserve/adjustment (14,852 ) Balance as of June 30, 2018 $ 242,187 We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months. ASC 740 requires us to accrue interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to be paid. Our policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. We have not recorded any interest or penalties as the liability associated with the unrecognized tax benefits is immaterial. We are subject to taxation in the U.S., and various state and foreign jurisdictions. We adopted to classify its net deferred tax assets as noncurrent on the balance sheet under ASU 2015-17. The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017. The Act includes a provision to reduce federal corporate income tax rate to a flat 21% effective for a taxable year beginning on or after January 1, 2018. ASC 740 provides that deferred tax assets and liabilities be measured at the enacted tax rate expected to apply when the related temporary differences are to be realized or settled, and the related tax impact is recognized through continuing operation in the period in which tax legislation is enacted. Accordingly, the Company remeasures its deferred tax assets and liabilities as of June 30, 2018 and provides income tax provision of $661,629 through continuing operation section of the income statement. The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record and provisional estimate in the financial statements. The Company has recognized the provisional tax impacts related to the Tax Act in its financial statements for the year ended June 30, 2018. The ultimate impact may differ from these provisional amounts, possibly materially, due to among other things, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act. The tax fiscal years from 2014 to 2017 remain open to examination by the major taxing authorities to which is the Company is subject. |
7. EARNINGS PER SHARE
7. EARNINGS PER SHARE | 12 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 7 - EARNINGS PER SHARE We report earnings per share in accordance with ASC 260, “Earnings Per Share.” Basic earnings (loss) per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options. For the year ended June 30, 2018, we were in a net loss position and have excluded 299,000 stock options from the calculation of diluted net loss per shares because theses securities are anti-dilutive. The weighted average number of shares outstanding used to compute earnings (loss) per share is as follows: Year Ended June 30, 2018 2017 Net income (loss) attributable to Parent Company $ (2,092,457 ) $ 873,960 Weighted-average shares of common stock outstanding: Basic 10,538,610 10,501,730 Dilutive effect of common stock equivalents arising from stock options – 159,170 Diluted Outstanding shares 10,538,610 10,660,900 Basic earnings (loss) per share $ (0.20 ) $ 0.08 Diluted earnings (loss) per share $ (0.20 ) $ 0.08 |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 - COMMITMENTS AND CONTINGENCIES Leases We have agreements to lease office space that expire in fiscal 2020. On September 10, 2015, we signed a lease for an office space consisting of approximately 12,775 square feet, located in San Diego, California, at a monthly rent of $23,115, which commenced on October 28, 2015. In addition to monthly rent, the lease includes payment for certain common area costs. The term of the lease for this office space is four years from the lease commencement date. FTI leases approximately 10,000 square feet of office space, located in Seoul, Korea, at a monthly rent of approximately $8,000. The lease associated with this office space expires on September 1, 2019. Beginning on June 12, 2015, FTI leased additional office space consisting of approximately 2,682 square feet, also located in Seoul, Korea, at a monthly rent of approximately $2,700, and the lease expires on September 1, 2019. We lease one corporate housing facility primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2018 and was extended to September 4, 2019. Rent expense for the years ended June 30, 2018 and 2017 was $414,252 and $414,834, respectively. Future minimum payments under operating leases are as follows: Payments Due by June 30, 2019 2020 Total Administrative office, San Diego, CA $ 277,377 $ 92,459 $ 369,836 Administrative office, Korea 21,400 – 21,400 Corporate housing facility 2,591 – 2,591 Total Obligations $ 301,368 $ 92,459 $ 393,827 Litigation We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Management does not expect any material adverse outcome. Change of Control Agreements On September 21, 2009, we entered into Change of Control Agreements with OC Kim, our President, and Yun J. (David) Lee, our Chief Operating Officer. 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 calls for a payment of $5 million upon a change of control, and the agreement with Mr. Lee calls for a payment of $2 million upon a change of control. The Board of Directors has approved extension of the Change of Control Agreements with Mr. Kim and Mr. Lee, through September 30, 2021. Chinese Tariffs Franklin products are currently on a list that is exempt from Chinese tariffs. If this were to change at any point, a tariff of 10%-25% of the purchase price would be imposed. If such tariffs are imposed, they could have a materially adverse effect on sales. Customer Indemnification Under purchase orders and contracts for the sale of our products we may provide indemnification to our customers for potential intellectual property infringement claims for which we may have no corresponding recourse against our third-party licensors. This potential liability, if realized, could materially adversely affect our business, operating results and financial condition. |
9. LONG-TERM INCENTIVE PLAN AWA
9. LONG-TERM INCENTIVE PLAN AWARDS | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
LONG-TERM INCENTIVE PLAN AWARDS | NOTE 9 - LONG-TERM INCENTIVE PLAN AWARDS We apply the provisions of ASC 718, “Compensation - Stock Compensation,” using a modified prospective application, and the Black-Scholes model. Under this application, we are required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. Compensation costs will be recognized over the period that an employee provides service in exchange for the award. We adopted the 2009 Stock Incentive Plan (“2009 Plan”) on June 11, 2009, which provided for the grant of incentive stock options and non-qualified stock options to our employees and directors. Options granted under the 2009 Plan generally have a term of ten years and generally vest and become exercisable at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant dates. Historically, some stock option grants have included shorter vesting periods ranging from one to two years. The estimated forfeiture rate considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations about the future. We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. There was no compensation expense recorded under this method for the year ended June 30, 2018. A summary of the status of our stock options is presented below: Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2016 812,003 1.25 3.35 869,740 Granted – – – – Exercised (78,000 ) (1.34 ) (2.82 ) (175,500 ) Cancelled – – – – Forfeited or Expired (335,003 ) (0.57 ) – (753,750 ) Outstanding as of June 30, 2017 399,000 $ 1.12 4.05 $ 451,820 Granted – – – – Exercised (50,000 ) (1.34 ) (3.95 ) (92,500 ) Cancelled – – – – Forfeited or Expired (50,000 ) (1.34 ) (3.96 ) (92,500 ) Outstanding as of June 30, 2018 299,000 $ 1.04 2.75 $ 241,220 Exercisable as of June 30, 2018 299,000 $ 1.04 2.75 $ 241,220 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $1.85 as of June 30, 2018, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of June 30, 2018 in the amount of 299,000 shares was $0.92 per share. As of June 30, 2018, there was no unrecognized compensation cost related to non-vested stock options granted. |
10. SUBSEQUENT EVENTS
10. SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 10 - SUBSEQUENT EVENTS Management considered subsequent events in the preparation of the Company's financial statements through the date this Form 10-K was filed. |
2. SUMMARY OF SIGNIFICANT ACC18
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and FTI, a subsidiary with a majority voting interest of 51.8% (48.2% is owned by non-controlling interests) as of June 30, 2018 and 2017. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests. As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2018 or June 30, 2017. |
Non-controlling Interest in a Consolidated Subsidiary | Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2018, the non-controlling interest was $921,010, which represents a $80,118 decrease from $1,001,128 as of June 30, 2017. The decrease of $80,118 in the non-controlling interest was due to the non-controlling interests in net loss of subsidiary for the year ended June 30, 2018. |
Segment Reporting | Segment Reporting Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. We have one reportable segment, consisting of the sale of wireless access products. We generate revenues from four geographic areas, consisting of the United States, the Caribbean and South America, EMEA and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements. The following table contains certain financial information by geographic area: Fiscal Year Ended June 30, Net sales: 2018 2017 United States $ 29,235,011 $ 47,373,463 Caribbean and South America 238,970 252,000 Europe, the Middle East and Africa ("EMEA") 335,845 796,795 Asia 256,007 143,266 Totals $ 30,065,833 $ 48,565,524 Long-lived assets, net (property and equipment and intangible assets): June 30, 2018 June 30, 2017 United States $ 1,073,640 $ 1,209,050 Asia 47,140 120,367 Totals $ 1,120,780 $ 1,329,417 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit (see Note 3). |
Use of Estimates | Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of June 30, 2018 and June 30, 2017. |
Revenue Recognition | Revenue Recognition We recognize revenue in accordance with ASC 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured, and delivery of products has occurred or services have been rendered. Accordingly, we recognize revenues from product sales upon shipment of the products to customers or when the products are received by the customers in accordance with the shipping or delivery terms. We provide a warranty for one year from the shipment or delivery date, which is covered by our vendors pursuant to purchase agreements. Any net warranty related expenditures made by us have not historically been material. Under our sales return policy, customers may generally return products that are under warranty for repair or replacement. |
Cost of Goods Sold | Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services are included in our cost of goods sold. Cost of goods sold also includes amortization expense associated with capitalized product development costs associated with complete technology. |
Capitalized Product Development Costs | 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 related licenses, certification costs, 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 greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers. As of June 30, 2018, and June 30, 2017, capitalized product development costs in progress were $100,000 and $360,248, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the year ended June 30, 2018, we incurred $291,386 in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income. |
Research and Development Costs | Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $3,372,016 and $3,445,124 for the years ended June 30, 2018 and 2017, respectively. |
Advertising and Promotion Costs | Advertising and Promotion Costs Costs associated with advertising and promotions are expensed as incurred. Advertising and promotion costs were $16,488 and $22,539 for the years ended June 30, 2018 and 2017, respectively. |
Warranties | Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. |
Shipping and Handling Costs | Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the statement of comprehensive income, were $814,926 and $1,452,456 for the years ended June 30, 2018 and 2017, respectively. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. |
Inventories | Inventories Our inventories consist of finished goods and are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable, and can fluctuate significantly caused by factors beyond our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2018, and 2017, we have recorded inventory reserves in the amount of $295,502 and $143,410, respectively, for inventories that we have identified as obsolete or slow-moving. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was recognized during the years ended June 30, 2018 and 2017. |
Intangible Assets | Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2018: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 3.0 years 18,397 – 18,397 Technology in progress Not Applicable - 100,000 – 100,000 Software 5 years 2.7 years 323,295 238,487 84,808 Patents 10 years 7.0 years 58,391 6,683 51,708 Certifications & licenses 3 years 1.9 years 3,250,061 2,508,266 741,795 Total as of June 30, 2018 $ 3,750,144 $ 2,753,436 $ 996,708 The definite lived intangible assets consisted of the following as of June 30, 2017: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 2,402 2,002 400 Complete technology 3 years 0.7 years 6,405 4,804 1,601 Complete technology 3 years 3.0 years 18,397 – 18,397 Supply and development agreement 8 years 0.3 years 1,121,000 1,085,969 35,031 Technology in progress Not Applicable - 360,148 – 360,148 Software 5 years 2.7 years 239,398 216,829 22,569 Patents 10 years 7.0 years 58,391 4,693 53,698 Certifications & licenses 3 years 1.9 years 2,698,526 2,080,895 617,631 Total as of June 30, 2017 $ 4,504,667 $ 3,395,192 $ 1,109,475 Amortization expense recognized during the years ended June 30, 2018 and 2017 was $488,049 and $471,235, respectively. The amortization expenses of the definite lived intangible assets for the next five years and thereafter are as follows: FY2019 FY2020 FY2021 FY2022 FY2023 Thereafter Total $ 437,845 $ 280,924 $ 97,706 $ 27,274 $ 26,929 $ 126,030 |
Long-lived Assets | Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 30, 2018 that would indicate that the long-lived assets are impaired. |
Stock-based Compensation | Stock-based Compensation The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. Stock-based compensation is recognized on a straight-line basis over the award’s vesting period. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles within the Company. |
Income Taxes | Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. |
Earnings per Share Attributable to Common Stockholders | Earnings per Share Attributable to Common Stockholders Basic earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. |
Concentrations of Credit Risk | Concentrations of Credit Risk We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods presented. Substantially all of our revenues are derived from sales of wireless data products. Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively. A significant portion of our revenue is derived from a small number of customers. For the year ended June 30, 2018, net sales to our three largest customers represented 54%, 21%, and 11% of our consolidated net sales, respectively, and 48%, 36%, and 9% of our accounts receivable balance as of June 30, 2018. For the year ended June 30, 2017, net sales to our two largest customers represented 69% and 23% of our consolidated net sales, respectively, and 68% and 13% of our accounts receivable balance as of June 30, 2017. No other customer accounted for more than ten percent of total net sales as of June 30, 2018 and 2017. For the year ended June 30, 2018, sales to Verizon, Sprint, and Anydata Corp. each comprised more than 10% of our net sales. For the year ended June 30, 2017, sales to Verizon and Sprint each comprised more than 10% of our net sales. For the year ended June 30, 2018, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If this manufacturing company were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact our revenue. For the year ended June 30, 2018, we purchased wireless data products from this supplier in the amount of $19,507,215, or 87% of total purchases, and had related accounts payable of $5,834,383 as of June 30, 2018. For the year ended June 30, 2017, we purchased wireless data products from this supplier in the amount of $37,628,062, or 94% of total purchases, and had related accounts payable of $10,783,241 as of June 30, 2017. We maintain our cash accounts with established commercial banks. Such cash deposits exceed the Federal Deposit Insurance Corporation insured limit of $250,000 for each financial institution. However, we do not anticipate any losses on excess deposits. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In March 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which amends existing standards for leases to increase transparency and comparability among organizations by requiring recognition of lease assets and liabilities on the balance sheet and requiring disclosure of key information about such arrangements. ASU 2016-02 will be effective for us beginning in our first quarter of fiscal 2020, and early adoption is permitted. We are currently evaluating the impact of adopting the new standard on our consolidated financial statements and the timing and presentation of our adoption. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606)(ASU 2016-10), which amends and adds clarity to certain aspects of the guidance set forth in the upcoming revenue standard (ASU 2014-09) related to identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update No. 2016-11, Revenue Recognition (Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09. In May 2016 the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which provides narrow scope improvements and practical expedients related to ASU 2014-09. We evaluated the impact of adopting these new standards on our consolidated financial statements. There will be no material difference in the way in which revenue is recognized versus current revenue recognition guidance. New standards will be effective for us concurrently with ASU 2014-09, beginning in our first quarter of fiscal 2019. |
2. SUMMARY OF SIGNIFICANT ACC19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Segment information by geographic areas | Fiscal Year Ended June 30, Net sales: 2018 2017 United States $ 29,235,011 $ 47,373,463 Caribbean and South America 238,970 252,000 Europe, the Middle East and Africa ("EMEA") 335,845 796,795 Asia 256,007 143,266 Totals $ 30,065,833 $ 48,565,524 Long-lived assets, net (property and equipment and intangible assets): June 30, 2018 June 30, 2017 United States $ 1,073,640 $ 1,209,050 Asia 47,140 120,367 Totals $ 1,120,780 $ 1,329,417 |
Useful lives of property and equipment | Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Intangible Assets | The definite lived intangible assets consisted of the following as of June 30, 2018: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 3.0 years 18,397 – 18,397 Technology in progress Not Applicable - 100,000 – 100,000 Software 5 years 2.7 years 323,295 238,487 84,808 Patents 10 years 7.0 years 58,391 6,683 51,708 Certifications & licenses 3 years 1.9 years 3,250,061 2,508,266 741,795 Total as of June 30, 2018 $ 3,750,144 $ 2,753,436 $ 996,708 The definite lived intangible assets consisted of the following as of June 30, 2017: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 2,402 2,002 400 Complete technology 3 years 0.7 years 6,405 4,804 1,601 Complete technology 3 years 3.0 years 18,397 – 18,397 Supply and development agreement 8 years 0.3 years 1,121,000 1,085,969 35,031 Technology in progress Not Applicable - 360,148 – 360,148 Software 5 years 2.7 years 239,398 216,829 22,569 Patents 10 years 7.0 years 58,391 4,693 53,698 Certifications & licenses 3 years 1.9 years 2,698,526 2,080,895 617,631 Total as of June 30, 2017 $ 4,504,667 $ 3,395,192 $ 1,109,475 |
Schedule of Expected Amortization Expense | FY2019 FY2020 FY2021 FY2022 FY2023 Thereafter Total $ 437,845 $ 280,924 $ 97,706 $ 27,274 $ 26,929 $ 126,030 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | June 30, 2018 June 30, 2017 Machinery and facility $ 306,335 $ 303,986 Office equipment 385,913 380,473 Molds 984,720 968,606 1,676,968 1,653,065 Less accumulated depreciation (1,552,896 ) (1,433,123 ) Total $ 124,072 $ 219,942 |
5. ACCRUED LIABILITIES (Tables)
5. ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | June 30, 2018 June 30, 2017 Accrued salaries, payroll deductions owed to government entities $ 38,855 $ 45,278 Accrued vacation 54,506 56,612 Accrued seed stocks 140,000 140,000 Taxes 1,332 3,305 Other accrued liabilities 24,655 43,147 Total $ 259,348 $ 288,342 |
6. INCOME TAXES (Tables)
6. INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income tax provision from continuing operations | Year Ended June 30, 2018 2017 Current income tax expense (benefit): Federal $ 3,750 $ 16,760 State 800 800 4,550 17,560 Deferred income tax expense (benefit): Federal (27,460 ) 440,647 State – – Foreign (164,063 ) (83,620 ) (191,523 ) 357,027 Provision (benefit) for income taxes $ (186,973 ) $ 374,587 |
Schedule of effective income tax rate | Year Ended June 30, 2018 2017 Federal tax provision (benefit), at statutory rate of 34% $ (799,696 ) $ 389,495 State tax, net of federal tax benefit (54,642 ) (50,107 ) Nondeductible expenses 6,753 5,762 R&D credits (36,733 ) (39,394 ) Foreign rate difference (54,332 ) 17,063 Other 34,878 1,133 Rate reduction 661,629 – Change in valuation allowance 55,170 50,635 Provision (benefit) for income taxes $ (186,973 ) $ 374,587 |
Schedule of deferred tax assets | June 30, 2018 June 30, 2017 Deferred tax asset: Net operating losses $ 1,417,549 $ 1,221,466 State tax 169 272 Intangibles 44,200 71,716 Tax credits 589,206 541,390 Inventory reserve 76,663 – Other, net 48,687 107,903 Total deferred tax assets 2,176,474 1,942,747 Deferred tax liabilities: Fixed asset (17,123 ) (30,089 ) Total deferred tax liabilities (17,123 ) (30,089 ) Less valuation allowance (305,922 ) (250,752 ) Net deferred tax asset $ 1,853,429 $ 1,661,906 |
Schedule of unrecognized tax benefits | Balance as of June 30, 2016 $ 168,523 Gross increase 52,622 Balance as of June 30, 2017 221,145 Gross increase 35,894 Relief of ASC 740 reserve/adjustment (14,852 ) Balance as of June 30, 2018 $ 242,187 |
7. EARNINGS PER SHARE (Tables)
7. EARNINGS PER SHARE (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | Year Ended June 30, 2018 2017 Net income (loss) attributable to Parent Company $ (2,092,457 ) $ 873,960 Weighted-average shares of common stock outstanding: Basic 10,538,610 10,501,730 Dilutive effect of common stock equivalents arising from stock options – 159,170 Diluted Outstanding shares 10,538,610 10,660,900 Basic earnings (loss) per share $ (0.20 ) $ 0.08 Diluted earnings (loss) per share $ (0.20 ) $ 0.08 |
8. COMMITMENTS AND CONTINGENC24
8. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Payments Due by June 30, 2019 2020 Total Administrative office, San Diego, CA $ 277,377 $ 92,459 $ 369,836 Administrative office, Korea 21,400 – 21,400 Corporate housing facility 2,591 – 2,591 Total Obligations $ 301,368 $ 92,459 $ 393,827 |
9. LONG-TERM INCENTIVE PLAN A25
9. LONG-TERM INCENTIVE PLAN AWARDS (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Stock Option Activity | Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2016 812,003 1.25 3.35 869,740 Granted – – – – Exercised (78,000 ) (1.34 ) (2.82 ) (175,500 ) Cancelled – – – – Forfeited or Expired (335,003 ) (0.57 ) – (753,750 ) Outstanding as of June 30, 2017 399,000 $ 1.12 4.05 $ 451,820 Granted – – – – Exercised (50,000 ) (1.34 ) (3.95 ) (92,500 ) Cancelled – – – – Forfeited or Expired (50,000 ) (1.34 ) (3.96 ) (92,500 ) Outstanding as of June 30, 2018 299,000 $ 1.04 2.75 $ 241,220 Exercisable as of June 30, 2018 299,000 $ 1.04 2.75 $ 241,220 |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Details - Segments) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Net sales | $ 30,065,833 | $ 48,565,524 |
Long-lived assets, net (property and equipment and intangible assets) | 1,120,780 | 1,329,417 |
United States [Member] | ||
Net sales | 29,235,011 | 47,373,463 |
Long-lived assets, net (property and equipment and intangible assets) | 1,073,640 | 1,209,050 |
Caribbean and South America [Member] | ||
Net sales | 238,970 | 252,000 |
EMEA [Member] | ||
Net sales | 335,845 | 796,795 |
Asia [Member] | ||
Net sales | 256,007 | 143,266 |
Long-lived assets, net (property and equipment and intangible assets) | $ 47,140 | $ 120,367 |
2. Summary of Significant Acc27
2. Summary of Significant Accounting Policies (Details - Useful lives) | 12 Months Ended |
Jun. 30, 2018 | |
Machinery [Member] | |
Estimated useful lives | 6 years |
Office Equipment [Member] | |
Estimated useful lives | 5 years |
Molds [Member] | |
Estimated useful lives | 3 years |
Vehicles[Member] | |
Estimated useful lives | 5 years |
Computers and software [Member] | |
Estimated useful lives | 5 years |
Furniture and fixtures [Member] | |
Estimated useful lives | 7 years |
Facilities [Member] | |
Estimated useful lives | 5 years or life of the lease, whichever is shorter |
2. Summary of Significant Acc28
2. Summary of Significant Accounting Policies (Details - Intangibles) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Intangible Assets, Gross | $ 3,750,144 | $ 4,504,667 |
Accumulated Amortization | 2,753,436 | 3,395,192 |
Intangible Assets, Net | $ 996,708 | $ 1,109,475 |
Complete Technology 1 [Member] | ||
Expected Life | 3 years | 3 years |
Remaining Life | 3 years | 6 months |
Intangible Assets, Gross | $ 18,397 | $ 2,402 |
Accumulated Amortization | 0 | 2,002 |
Intangible Assets, Net | 18,397 | $ 400 |
Technology in progress [Member] | ||
Intangible Assets, Gross | 100,000 | |
Accumulated Amortization | 0 | |
Intangible Assets, Net | $ 100,000 | |
Software [Member] | ||
Expected Life | 5 years | 5 years |
Remaining Life | 2 years 8 months 12 days | 2 years 8 months 12 days |
Intangible Assets, Gross | $ 323,295 | $ 239,398 |
Accumulated Amortization | 238,487 | 216,829 |
Intangible Assets, Net | $ 84,808 | $ 22,569 |
Patents [Member] | ||
Expected Life | 10 years | 10 years |
Remaining Life | 7 years | 7 years |
Intangible Assets, Gross | $ 58,391 | $ 58,391 |
Accumulated Amortization | 6,683 | 4,693 |
Intangible Assets, Net | $ 51,708 | $ 53,698 |
Certifications And Licenses [Member] | ||
Expected Life | 3 years | 3 years |
Remaining Life | 1 year 10 months 25 days | 1 year 10 months 25 days |
Intangible Assets, Gross | $ 3,250,061 | $ 2,698,526 |
Accumulated Amortization | 2,508,266 | 2,080,895 |
Intangible Assets, Net | $ 741,795 | $ 617,631 |
Complete Technology 2 [Member] | ||
Expected Life | 3 years | |
Remaining Life | 8 months 12 days | |
Intangible Assets, Gross | $ 6,405 | |
Accumulated Amortization | 4,804 | |
Intangible Assets, Net | $ 1,601 | |
Complete Technology 3 [Member] | ||
Expected Life | 3 years | |
Remaining Life | 3 years | |
Intangible Assets, Gross | $ 18,397 | |
Accumulated Amortization | 0 | |
Intangible Assets, Net | $ 18,397 | |
Supply And Development Agreement [Member] | ||
Expected Life | 8 years | |
Remaining Life | 3 months 19 days | |
Intangible Assets, Gross | $ 1,121,000 | |
Accumulated Amortization | 1,085,969 | |
Intangible Assets, Net | 35,031 | |
Technology In Progress [Member] | ||
Intangible Assets, Gross | 360,148 | |
Accumulated Amortization | 0 | |
Intangible Assets, Net | $ 360,148 |
2. Summary of Significant Acc29
2. Summary of Significant Accounting Policies (Details - Amortization) | Jun. 30, 2018USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
FYE 2,019 | $ 437,845 |
FYE 2,020 | 280,924 |
FYE 2,021 | 97,706 |
FYE 2,022 | 27,274 |
FYE 2,023 | 26,929 |
Thereafter | $ 126,030 |
2. Summary of Significant Acc30
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Noncontrolling interest percentage | 51.80% | 48.20% |
Noncontrolling interest | $ 921,010 | $ 1,001,128 |
Decrease in noncontrolling interest | (80,118) | |
Allowance for doubtful accounts | 0 | 0 |
Capitalized product development costs | 100,000 | 360,248 |
Product development costs incurred | 291,386 | 368,226 |
Research and development costs | 3,372,016 | 3,445,124 |
Advertising costs | 16,488 | 22,539 |
Warranty expense | 0 | 0 |
Shipping and handling expense | 814,926 | 1,452,456 |
Inventory reserve | 295,502 | 143,410 |
Goodwill impairment | 0 | 0 |
Amortization expense | 488,049 | 471,235 |
Products purchased | 24,874,119 | 39,347,065 |
Accounts payable | $ 7,609,585 | $ 12,862,564 |
Sales [Member] | Customer 1 [Member] | ||
Concentration of credit risk | 54.00% | 69.00% |
Sales [Member] | Customer 2 [Member] | ||
Concentration of credit risk | 21.00% | 23.00% |
Sales [Member] | Customer 3 [Member] | ||
Concentration of credit risk | 11.00% | |
Sales [Member] | Verizon, Sprint, Anydata [Member] | ||
Concentration of credit risk | More than 10% | |
Sales [Member] | Verizon and Sprint [Member] | ||
Concentration of credit risk | More than 10% | |
Accounts Receivable [Member] | Customer 1 [Member] | ||
Concentration of credit risk | 48.00% | 68.00% |
Accounts Receivable [Member] | Customer 2 [Member] | ||
Concentration of credit risk | 36.00% | 13.00% |
Accounts Receivable [Member] | Customer 3 [Member] | ||
Concentration of credit risk | 9.00% | |
Purchases [Member] | Supplier Concentration Risk [Member] | ||
Concentration of credit risk | 87.00% | 94.00% |
Products purchased | $ 19,507,215 | $ 37,628,062 |
Accounts payable | $ 5,834,383 | $ 10,783,241 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Property and equipment, gross | $ 1,676,968 | $ 1,653,065 |
Less accumulated depreciation | (1,552,896) | (1,433,123) |
Total | 124,072 | 219,942 |
Machinery and Facility [Member] | ||
Property and equipment, gross | 306,335 | 303,986 |
Office Equipment [Member] | ||
Property and equipment, gross | 385,913 | 380,473 |
Molds [Member] | ||
Property and equipment, gross | $ 984,720 | $ 968,606 |
4. Property and Equipment (De32
4. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 119,773 | $ 143,257 |
5. Accrued Liabilities (Details
5. Accrued Liabilities (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Payables and Accruals [Abstract] | ||
Accrued salaries, payroll deductions owed to government entities | $ 38,855 | $ 45,278 |
Accrued vacation | 54,506 | 56,612 |
Accrued seed stocks | 140,000 | 140,000 |
Taxes | 1,332 | 3,305 |
Other accrued liabilities | 24,655 | 43,147 |
Total | $ 259,348 | $ 288,342 |
6. Income Taxes (Details - Prov
6. Income Taxes (Details - Provision for Income Taxes) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Current income tax expense (benefit): | ||
Federal | $ 3,750 | $ 16,760 |
State | 800 | 800 |
Total Current income tax expense (benefit) | 4,550 | 17,560 |
Deferred income tax expense (benefit): | ||
Federal | (27,460) | 440,647 |
State | 0 | 0 |
Foreign | (164,063) | (83,620) |
Total deferred income tax expense (benefit) | (191,523) | 357,027 |
Provision (benefit) for income taxes | $ (186,973) | $ 374,587 |
6. Income Taxes (Details - Reco
6. Income Taxes (Details - Reconciliation of Tax Rate) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation | ||
Federal tax provision (benefit), at statutory rate of 34% | $ (799,696) | $ 389,495 |
State tax, net of federal tax benefit | (54,642) | (50,107) |
Nondeductible expenses | 6,753 | 5,762 |
R&D Credits | (36,733) | (39,394) |
Foreign rate difference | (54,332) | 17,063 |
Other | 34,878 | 1,133 |
Rate reduction | 661,629 | 0 |
Change in valuation allowance | 55,170 | 50,635 |
Provision (benefit) for income taxes | $ (186,973) | $ 374,587 |
6. Income Taxes (Details - Defe
6. Income Taxes (Details - Deferred Income Taxes) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Deferred tax asset: | ||
Net operating losses | $ 1,417,549 | $ 1,221,466 |
State tax | 169 | 272 |
Intangibles | 44,200 | 71,716 |
Tax credits | 589,206 | 541,390 |
Inventory reserve | 76,663 | 0 |
Other, net | 48,687 | 107,903 |
Total deferred tax assets | 2,176,474 | 1,942,747 |
Deferred tax liabilities: | ||
Fixed asset | (17,123) | (30,089) |
Total deferred tax liabilities | (17,123) | (30,089) |
Less valuation allowance | (305,922) | (250,752) |
Net deferred tax asset | $ 1,853,429 | $ 1,661,906 |
6. Income Taxes (Details - Unre
6. Income Taxes (Details - Unrecognized tax benefits) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Reconciliation of unrecognized tax benefits | ||
Beginning Balance | $ 221,145 | $ 168,523 |
Gross increase or (decrease) | 35,894 | 52,622 |
Relief of ASC 740 reserve/adjustment | (14,852) | |
Ending Balance | $ 242,187 | $ 221,145 |
6. Income Taxes (Details Narrat
6. Income Taxes (Details Narrative) - Federal [Member] | 12 Months Ended |
Jun. 30, 2018USD ($) | |
Operating loss carryforward | $ 4,300,000 |
Carryforward expiration dates | Dec. 31, 2038 |
Effective income tax | 21.00% |
Deferred tax assets and liabilities | $ 661,629 |
7. Earnings Per Share (Details)
7. Earnings Per Share (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Earnings Per Share [Abstract] | ||
Net income attributable to parent company | $ (2,092,457) | $ 873,960 |
Weighted-average shares of common stock outstanding: | ||
Basic | 10,538,610 | 10,501,730 |
Dilutive effect of common stock equivalents arising from stock options | 0 | 159,170 |
Diluted Outstanding shares | 10,538,610 | 10,660,900 |
Basic earnings (loss) per share | $ (0.20) | $ 0.08 |
Diluted earnings (loss) per share | $ (0.20) | $ 0.08 |
7. Earnings (Loss) Per Share (D
7. Earnings (Loss) Per Share (Details Narrative) | 12 Months Ended |
Jun. 30, 2018shares | |
Earnings Per Share [Abstract] | |
Anti-dilutive shares excluded from EPS | 299,000 |
8. Commitments and Contingenc41
8. Commitments and Contingencies (Details) | Jun. 30, 2018USD ($) |
Payments Due by June 30, | |
2,019 | $ 301,368 |
2,020 | 92,459 |
Total | 393,827 |
Administrative office, San Diego, CA [Member] | |
Payments Due by June 30, | |
2,019 | 277,377 |
2,020 | 92,459 |
Total | 369,836 |
Administrative office, Korea [Member] | |
Payments Due by June 30, | |
2,019 | 21,400 |
2,020 | 0 |
Total | 21,400 |
Corporate housing facility [Member] | |
Payments Due by June 30, | |
2,019 | 2,591 |
2,020 | 0 |
Total | $ 2,591 |
8. Commitments and Contingenc42
8. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent Expense | $ 414,252 | $ 414,834 |
9. Long-Term Incentive Plan A43
9. Long-Term Incentive Plan Awards (Details - Option Activity) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Weighted-Average Exercise Price | |||
Weighted Average Exercise Price Granted | $ 0.92 | ||
Options [Member] | |||
Shares | |||
Number of Options Outstanding, Beginning | 399,000 | 812,003 | |
Number of Options Granted | 0 | 0 | |
Number of Options Exercised | (50,000) | (78,000) | |
Number of Options Cancelled | 0 | 0 | |
Number of Options Forfeited or Expired | (50,000) | (335,003) | |
Number of Options Outstanding, Ending | 299,000 | 399,000 | 812,003 |
Number of Options Exercisable | 299,000 | ||
Weighted-Average Exercise Price | |||
Weighted Average Exercise Price Outstanding, Beginning | $ 1.12 | $ 1.25 | |
Weighted Average Exercise Price Granted | |||
Weighted Average Exercise Price Exercised | (1.34) | (1.34) | |
Weighted Average Exercise Price Canceled | |||
Weighted Average Exercise Price Forfeited or Expired | (1.34) | (0.57) | |
Weighted Average Exercise Price Outstanding, Ending | 1.04 | $ 1.12 | $ 1.25 |
Weighted Average Exercise Price Exercisable | $ 1.04 | ||
Weighted-Average Remaining Contractual Life (In Years) | |||
Weighted Average Remaining Contractual Life (in years) Outstanding | 2 years 9 months | 4 years 18 days | 3 years 4 months 6 days |
Weighted Average Remaining Contractual Life (in years) Exercised | 3 years 11 months 12 days | 2 years 9 months 25 days | |
Weighted Average Remaining Contractual Life (in years) Forfeited or Expired | 3 years 11 months 15 days | ||
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 9 months | ||
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | $ 451,820 | $ 869,740 | |
Aggregate Intrinsic Value Granted | |||
Aggregate Intrinsic Value Exercised | $ (92,500) | $ (175,500) | |
Aggregate Intrinsic Value Cancelled | |||
Aggregate Intrinsic Value Forfeited or Expired | $ (92,500) | $ (753,750) | |
Aggregate Intrinsic Value Outstanding, Ending | $ 241,220 | $ 451,820 | $ 869,740 |
Aggregate Intrinsic Value Exercisable | $ 241,220 |
9. Long-Term Incentive Plan A44
9. Long-Term Incentive Plan Awards (Details Narrative) | 12 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share based compensation expense | $ 0 |
Weighted average grant-date fair value of stock options | shares | 299,000 |
Weighted average grant-date fair value of stock options, per share price | $ / shares | $ 0.92 |
Unrecognized compensation cost related to non-vested options | $ 0 |