Cover
Cover - USD ($) | 12 Months Ended | ||
Jun. 30, 2022 | Sep. 13, 2022 | Dec. 31, 2021 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Jun. 30, 2022 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2022 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity File Number | 001-14891 | ||
Entity Registrant Name | FRANKLIN WIRELESS CORP. | ||
Entity Central Index Key | 0000722572 | ||
Entity Tax Identification Number | 95-3733534 | ||
Entity Incorporation, State or Country Code | NV | ||
Entity Address, Address Line One | 9707 Waples Street | ||
Entity Address, Address Line Two | Suite 150 | ||
Entity Address, City or Town | San Diego | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 92121 | ||
City Area Code | 858 | ||
Local Phone Number | 623-0000 | ||
Title of 12(g) Security | Common Stock, par value $.001 per share | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 36,716,000 | ||
Entity Common Stock, Shares Outstanding | 11,684,280 | ||
ICFR Auditor Attestation Flag | true | ||
Auditor Firm ID | 6651 | ||
Auditor Name | Paris, Kreit, and Chiu CPA LLP | ||
Auditor Location | New York, NY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 26,277,418 | $ 45,796,006 |
Short-term investments-others | 16,336,659 | 5,386,034 |
Accounts receivable, net | 1,322,619 | 2,542,429 |
Other receivables, net | 40,132 | 50,040 |
Inventories, net | 4,197,863 | 975,519 |
Prepaid expenses and other current assets | 40,939 | 44,984 |
Advance payments to vendors | 174,796 | 40,630 |
Total current assets | 48,390,426 | 54,835,642 |
Property and equipment, net | 105,952 | 151,610 |
Intangible assets, net | 1,350,056 | 1,246,750 |
Deferred tax assets, non-current | 1,347,436 | 387,548 |
Goodwill | 273,285 | 273,285 |
Right of use assets | 448,621 | 753,263 |
Other assets | 126,095 | 140,539 |
TOTAL ASSETS | 52,041,871 | 57,788,637 |
Current liabilities: | ||
Accounts payable | 8,143,305 | 9,718,989 |
Income tax payable | 6,702 | 333,503 |
Unearned revenue | 231,624 | 0 |
Accrued liabilities | 589,907 | 785,525 |
Lease liabilities, current | 308,834 | 317,519 |
Total current liabilities | 9,280,372 | 11,155,536 |
Lease liabilities, non-current | 159,104 | 467,937 |
Total liabilities | 9,439,476 | 11,623,473 |
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, 2022, and 2021 | 0 | 0 |
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,684,280 and 11,590,281 shares issued and outstanding as of June 30, 2022, and 2021, respectively | 14,163 | 14,069 |
Additional paid-in capital | 13,593,426 | 12,972,234 |
Retained earnings | 31,964,246 | 35,727,094 |
Treasury stock, 2,549,208 shares as of June 30, 2022, and 2021 | (3,554,893) | (3,554,893) |
Accumulated other comprehensive loss | (984,152) | (472,502) |
Total Parent Company stockholders’ equity | 41,032,790 | 44,686,002 |
Non-controlling interests | 1,569,605 | 1,479,162 |
Total stockholders’ equity | 42,602,395 | 46,165,164 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 52,041,871 | $ 57,788,637 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2022 | Jun. 30, 2021 |
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 | 11,684,280 | 11,590,281 |
Common stock Outstanding | 11,684,280 | 11,590,281 |
Treasury stock shares | 2,549,208 | 2,549,208 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) Income - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Income Statement [Abstract] | ||
Net sales | $ 23,997,762 | $ 184,115,345 |
Cost of goods sold | 20,181,179 | 151,651,324 |
Gross profit | 3,816,583 | 32,464,021 |
Operating expenses: | ||
Selling, general and administrative | 4,509,344 | 5,077,848 |
Research and development | 4,282,131 | 4,567,863 |
Total operating expenses | 8,791,475 | 9,645,711 |
(Loss) income from operations | (4,974,892) | 22,818,310 |
Other income, net: | ||
Interest income | 71,375 | 8,789 |
Income from governmental subsidy | 91,567 | 147,166 |
Gain from the forgiveness of payroll protection plan loan | 0 | 487,300 |
Gain from the forgiveness of debts | 38,397 | 0 |
Other income (expense), net | 64,080 | (26,088) |
Total other income, net | 265,419 | 617,167 |
(Loss) income before (benefit) provision for income taxes | (4,709,473) | 23,435,477 |
Income tax (benefit) provision | (1,037,068) | 5,039,295 |
Net (loss) income | (3,672,405) | 18,396,182 |
Less non-controlling interests in net income of subsidiary at 33.7% | 90,443 | 697,147 |
Net (loss) income attributable to Parent Company | $ (3,762,848) | $ 17,699,035 |
Basic (loss) earnings per share attributable to Parent Company stockholders | $ (0.32) | $ 1.56 |
Diluted (loss) earnings per share attributable to Parent Company stockholders | $ (0.32) | $ 1.53 |
Weighted average common shares outstanding - basic | 11,613,812 | 11,350,946 |
Weighted average common shares outstanding - diluted | 11,613,812 | 11,592,901 |
Comprehensive (loss) income | ||
Translation adjustments | $ (511,650) | $ 177,924 |
Comprehensive (loss) income | (4,184,055) | 18,574,106 |
Less: comprehensive income attributable to non-controlling interest | 90,443 | 697,147 |
Comprehensive (loss) income attributable to controlling interest | $ (4,274,498) | $ 17,876,959 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | AOCI Attributable to Parent [Member] | Noncontrolling Interest [Member] | Total |
Balance - June 30, 2021 at Jun. 30, 2020 | $ 14,007 | $ 7,475,365 | $ 18,028,059 | $ (4,513,479) | $ (650,426) | $ 782,015 | $ 21,135,541 |
Beginning balace, shares at Jun. 30, 2020 | 10,605,912 | ||||||
Net loss attributable to Parent Company | 17,699,035 | 17,699,035 | |||||
Foreign exchange translation | 177,924 | 177,924 | |||||
Issuance of stock related to stock option exercised | $ 62 | 74,689 | 74,751 | ||||
Issuance of stock related to stock options exercised, shares | 61,291 | ||||||
Comprehensive income attributable to non-controlling interest | 697,147 | 697,147 | |||||
Sales of treasury stock | 5,041,422 | 958,586 | 6,000,008 | ||||
Sales of treasury stock, shares | 923,078 | ||||||
Stock based compensation | 380,758 | 380,758 | |||||
Balance - June 30, 2022 at Jun. 30, 2021 | $ 14,069 | 12,972,234 | 35,727,094 | (3,554,893) | (472,502) | 1,479,162 | 46,165,164 |
Ending balance, shares at Jun. 30, 2021 | 11,590,281 | ||||||
Net loss attributable to Parent Company | (3,762,848) | (3,762,848) | |||||
Foreign exchange translation | (511,650) | (511,650) | |||||
Issuance of stock related to stock option exercised | $ 94 | 75,351 | 75,445 | ||||
Issuance of stock related to stock options exercised, shares | 93,999 | ||||||
Comprehensive income attributable to non-controlling interest | 90,443 | 90,443 | |||||
Stock based compensation | 545,841 | 545,841 | |||||
Balance - June 30, 2022 at Jun. 30, 2022 | $ 14,163 | $ 13,593,426 | $ 31,964,246 | $ (3,554,893) | $ (984,152) | $ 1,569,605 | $ 42,602,395 |
Ending balance, shares at Jun. 30, 2022 | 11,684,280 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ||
Net (loss) income | $ (3,672,405) | $ 18,396,182 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 87,743 | 90,322 |
Amortization of intangible assets | 579,012 | 435,571 |
Stock based compensation | 545,841 | 380,758 |
Bad debt expense | 23,780 | 338,185 |
Forgiveness of payroll protection plan loan | 0 | (487,300) |
Forgiveness of debts | (38,397) | 0 |
Disposal of intangible assets | 0 | 140,192 |
Amortization of right of use assets | 304,642 | 386,407 |
Deferred tax (benefit) | (959,888) | 550,640 |
Increase (decrease) in cash due to change in: | ||
Accounts receivable | 1,205,938 | 13,103,973 |
Inventories | (3,222,344) | 10,807,884 |
Prepaid expenses and other current assets | 4,045 | (23,396) |
Advance payments to vendors | (134,166) | (12,792) |
Other assets | 14,444 | 142,830 |
Accounts payable | (1,537,287) | (32,364,266) |
Income tax payable | (326,801) | 298,790 |
Lease liabilities | (317,518) | (399,285) |
Unearned revenue | 231,624 | 0 |
Accrued liabilities | (195,618) | 319,504 |
Net cash (used in) provided by operating activities | (7,407,355) | 12,104,199 |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of short-term investments | (10,950,625) | (4,116) |
Purchases of property and equipment | (42,085) | (21,043) |
Payments for capitalized product development costs | (658,544) | (694,909) |
Purchases of intangible assets | (23,774) | (2,452) |
Net cash used in investing activities | (11,675,028) | (722,520) |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Sales of common stock sold from treasury stock | 0 | 6,000,008 |
Cash received from exercise of stock options | 75,445 | 74,751 |
Net cash provided by financing activities | 75,445 | 6,074,759 |
Effect of foreign currency translation | (511,650) | 177,924 |
Net (decrease) increase in cash and cash equivalents | (19,518,588) | 17,634,362 |
Cash and cash equivalents, beginning of year | 45,796,006 | 28,161,644 |
Cash and cash equivalents, end of year | 26,277,418 | 45,796,006 |
Cash paid during the periods for: | ||
Income taxes | $ (200,350) | $ (4,124,485) |
BUSINESS OVERVIEW
BUSINESS OVERVIEW | 12 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
BUSINESS OVERVIEW | NOTE 1 - BUSINESS OVERVIEW We are a leading provider of intelligent wireless solutions including mobile hotspots, routers, trackers, and other devices. Our designs integrate innovative hardware and software enabling 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 based on 5G/4G wireless technology. 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 North America, the Caribbean and South America, and Asia. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2022 | |
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 its subsidiary with a majority voting interest of approximately 66.3 33.7 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, 2022, or June 30, 2021. Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2022, the non-controlling interest was $ 1,569,605 90,443 1,479,162 90,443 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 three geographic areas, consisting of North America, the Caribbean and South America, 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: Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2022 2021 North America $ 23,305,366 $ 183,771,146 Caribbean and South America 2,375 17,500 Asia 690,021 326,699 Totals $ 23,997,762 $ 184,115,345 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2022 June 30, 2021 United States $ 1,374,747 $ 1,349,320 Asia 81,261 49,040 Totals $ 1,456,008 $ 1,398,360 Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, short-term investments, 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 no Revenue Recognition Contracts with Customers Revenue from sales of products and services is derived from contracts with customers. The products and services covered by contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended June 30, 2022, was not material. Disaggregation of Revenue In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors. Contract Balances We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. We, however, recognize a contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services. The balances of our trade receivables are as follows: Schedule of receivables June 30, 2022 June 30, 2021 Accounts Receivable $ 1,322,619 $ 2,542,429 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2022 and June 30, 2021. An amount of $837,000 is included in the Accounts Receivable balance as of June 30, 2022, which is the direct result of an agreement between our vendor and our customer where we acted as facilitator. There is a corresponding balance of $837,000 in our Accounts Payable balance as of June 30, 2022. We expect to settle our liability with the vendor once the amount is received from the customer. Schedule of contract liabilities June 30, 2022 June 30, 2021 Undelivered products $ 371,624 $ 140,000 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. To identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2022. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2022. Most of our revenue that is recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. 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 expenses of approximately $ 500,000 360,000 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, 2022, and June 30, 2021, capitalized product development costs in progress were $ 187,343 602,388 658,544 Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 4,282,131 4,567,863 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 no 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 statements of comprehensive income, were $ 246,290 723,617 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. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value. Short Term Investments We have invested excess funds in short term liquid assets, such as certificates of deposit or money market funds. Inventories Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, 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, 2022, and 2021, we have recorded inventory reserves in the amount of $ 557,155 0 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: Useful lives of property and equipment Machinery 6 Office equipment 5 Molds 3 Vehicles 5 Computers and software 5 Furniture and fixtures 7 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 were 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 Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2022: Intangible Assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 0.5 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 3.0 399,811 268,495 131,316 Patents 10 3.9 21,105 12,951 8,154 Certifications & licenses 3 1.6 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 Amortization expense recognized during the years ended June 30, 2022, and 2021 was $ 579,012 435,571 3,228,261 140,192 Schedule of Expected Amortization Expense FY2023 FY2024 FY2025 FY2026 FY2027 Thereafter Total $ 557,856 $ 381,973 $ 181,342 $ 14,042 $ 10,000 $ 17,500 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, 2022, 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. (Loss) Earnings per Share Attributable to Common Stockholders Basic (loss) earnings per share is calculated by dividing the net (loss) income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted (loss) earnings per share is calculated by dividing the net (loss) 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, 2022, net sales to our two largest customers represented 70 13 0 63 30 0 84 For the year ended June 30, 2022, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If they 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, 2022, we purchased wireless data products from these suppliers in the amount of $ 22,319,313 98.3 7,409,273 138,516,044 99 9,096,451 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 June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses, which changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset. The Company adopted the standard on July 1, 2020. The new standard did not have a material impact on its consolidated financial statements. In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated other comprehensive income to retained earnings. The adoption of this update does not have a material impact the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which among other things, eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted the standard on July 1, 2021. The new standard did not have a material impact on its consolidated financial statements. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Jun. 30, 2022 | |
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, short-term investments, accounts receivable, and accounts payable and debt, are calculated based on their approximate their fair values due to the short period of time to maturity or repayment. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds and certificates of deposit. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: Schedule of property and equipment June 30, 2022 June 30, 2021 Machinery and Commercial Equipment $ 67,848 $ 67,044 Office equipment 312,785 291,191 Molds 575,552 575,552 Vehicle 15,513 – 971,698 933,787 Less accumulated depreciation (865,746 ) (782,177 ) Total $ 105,952 $ 151,610 Depreciation expense associated with property and equipment was $ 87,743 90,322 4,175 812,416 |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Jun. 30, 2022 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | NOTE 5 - ACCRUED LIABILITIES Accrued liabilities consisted of the following as of: Schedule of accrued liabilities June 30, 2022 June 30, 2021 Accrued payroll deductions owed to government entities $ 55,387 $ 66,307 Accrued vacation 65,602 73,900 Accrued undelivered inventory 140,000 140,000 Accrued commission for service providers 40,000 52,500 Accrued commission to a customer 288,306 451,898 Other accrued liabilities 612 920 Total $ 589,907 $ 785,525 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 - INCOME TAXES Income tax (benefit) provision for the years ended June 30, 2022, and 2021 consists of the following: Schedule of Income tax provision from continuing operations Year Ended June 30, 2022 2021 Current income tax (benefit) expense: Federal $ (127,998 ) $ 4,217,883 State 975 (525 ) Foreign 49,843 256,636 Total Current income tax expense (benefit) (77,180 ) 4,473,994 Deferred income tax (benefit) expense: Federal (876,513 ) 142,242 State (83,375 ) 155,410 Foreign – 267,649 Total deferred income tax expense (benefit) (959,888 ) 565,301 (Benefit) provision for income taxes $ (1,037,068 ) $ 5,039,295 The (benefit) 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: Schedule of effective income tax rate Year Ended June 30, 2022 2021 Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items $ (982,130 ) $ 4,929,611 State tax, net of federal tax benefit (82,840 ) 125,237 Nondeductible expenses 870 22,688 R&D credits (46,643 ) (56,950 ) Global intangible low-taxed income 152,930 95,419 Foreign rate difference (16,279 ) 39,146 Others (62,976 ) (13,523 ) Forgiveness of payroll protection plan loan – (102,333 ) Change in valuation allowance – – (Benefit) provision for income taxes $ (1,037,068 ) $ 5,039,295 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: Schedule of deferred tax assets June 30, 2022 June 30, 2021 Deferred tax asset: Net operating losses $ 737,258 $ 170,649 State tax – – Lease accounting, net 4,299 7,035 Intangibles 156,334 84,831 Tax credits 202,958 133,451 Inventory reserve 155,133 30,591 Other, net 145,679 12,693 Total deferred tax assets 1,401,661 439,250 Deferred tax liabilities: Deferred state taxes (46,565 ) (29,056 ) State tax (205 ) (110 ) Property and equipment, net (7,865 ) (22,536 ) Total deferred tax liabilities (54,225 ) (51,702 ) Less valuation allowance – – Net deferred tax asset $ 1,347,436 $ 387,548 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, 2022 or 2021. As of June 30, 2022, we have federal and state net operating loss carryforwards of approximately $ 3.3 40,000 2.5 0.8 2035 40,000 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: Schedule of unrecognized tax benefits Balance as of June 30, 2020 $ 296,832 Gross increase 38,427 Balance as of June 30, 2021 335,259 Gross increase 29,789 Balance as of June 30, 2022 $ 365,048 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. |
(LOSS) EARNINGS PER SHARE
(LOSS) EARNINGS PER SHARE | 12 Months Ended |
Jun. 30, 2022 | |
Earnings Per Share [Abstract] | |
(LOSS) EARNINGS PER SHARE | NOTE 7 – (LOSS) EARNINGS PER SHARE We report (loss) earnings per share in accordance with ASC 260, “Earnings Per Share.” Basic (loss) earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted (loss) earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options by using the treasury stock method that the proceeds we receive from an in-the-money option exercise are used towards repurchasing common shares in the market. For the year ended June 30, 2022, we were in a net loss position and have excluded 766,001 484,000 The weighted average number of shares outstanding used to compute (loss) earnings per share is as follows: Schedule of earnings per share Year Ended June 30, 2022 2021 Net (loss) income attributable to Parent Company $ (3,762,848 ) $ 17,699,035 Weighted-average shares of common stock outstanding: Basic 11,613,812 11,350,946 Dilutive effect of common stock equivalents arising from stock options – 241,955 Diluted Outstanding shares 11,613,812 11,592,901 Basic (loss) earnings per share attributable to Parent Company stockholders $ (0.32 ) $ 1.56 Diluted (loss) earnings per share attributable to Parent Company stockholders $ (0.32 ) $ 1.53 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 - COMMITMENTS AND CONTINGENCIES Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842). Topic 842 amended several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the period of adoption. The Company, effective July 1, 2019 has adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from current accounting to provisions of Topic 842. The package of expedients will effectively allow the Company to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard as the business evolves. The Company has an operating lease principally for both Franklin Wireless Corp. and Franklin Technologies Inc. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances. The Company adopted Topic 842 using a modified retrospective approach for its existing lease at July 1, 2019. The adoption of Topic 842 impacted the Company’s balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases. The lease liability is based on the present value of the remaining lease payments, discounted using a market based incremental borrowing rate as the effective date of July 1, 2019 using current estimates as to lease term including estimated renewals for each operating lease. On September 9, 2015, we signed a lease for new office space consisting of approximately 12,775 square feet, located in San Diego, California, which commenced on October 28, 2015. In addition to monthly rent, the new lease includes payment for certain common area costs. The term of the lease for the new office space was four years from the lease commencement date and was then extended at a monthly rent of $25,754, by an additional fifty months to December 31, 2023. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs. Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases expired on August 31, 2022 but extended by an additional twelve months to August 31, 2023. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2022, and extended by an additional twelve months to September 4, 2023. Rent expense for the years ended June 30, 2022, and 2021 was $ 446,057 446,614 Schedule of Future Minimum Rental Payments for Operating Leases Payments due by June 30, 2023 2024 Total Administrative office, San Diego, CA $ 321,930 $ 160,965 $ 482,895 Total Obligations $ 321,930 $ 160,965 $ 482,895 As of June 30, 2022, we used discount rates of 4.0 Future minimum payments under operating leases are as follows: Maturities of lease liabilities Operating Leases Fiscal 2023 $ 321,930 Fiscal 2024 160,965 Total lease payments 482,895 Less imputed interest (14,957 ) Total $ 467,938 Litigation We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Verizon Jetpack Recall On April 8, 2021, Verizon issued a press release announcing that it is working with the U.S. Consumer Product Safety Commission (CPSC) to conduct a voluntary recall of certain Verizon Ellipsis Jetpack mobile hotspot devices, indicating that the lithium-ion battery in the devices can overheat, posing a fire and burn hazard. According to the CPSC release, the recall affects approximately 2.5 million devices. We import the devices and supply them to Verizon. Verizon first advised us of one alleged Jetpack device failure at the end of February 2021. We immediately began meeting with Verizon and requested access to the device. We also began internal testing to evaluate device performance. We did not receive any further incident information until the last week of March 2021. On April 1, 2021 we issued a press release announcing that we had received reports from Verizon about potential issues with the batteries in the devices. On April 9, 2021 we issued a press release announcing the voluntary recall by Verizon. As of the date of this report, we have been unable to recreate any device failures of the type identified by Verizon. All internal testing conducted to date has confirmed that the Jetpack devices are performing within normal parameters. We are not currently aware of any aspect of the Jetpack design that could cause the devices to fail in the way described in Verizon’s recall notice. Future Impact on Financial Performance We are striving to avoid any litigation arising from the recall and have not been served with any legal action relating to the products covered by the recall. We are not currently able to estimate the financial impact of the recall on our future operations. At this time, we do not have information that identifies the cause of the alleged incidents. We also do not have any specific legal claims or theories of causation for device failure incidents that would help us estimate the cost of potential future litigation. No liability has been recorded for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time. Shareholder Litigation Ali A shareholder action, Ali vs. Franklin Wireless Corp. et al. Case #3:21-cv-00687-AJB-MSB, was filed in the U.S. District Court, Southern District of California (San Diego) on April 16, 2021, alleging, among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. Discovery is ongoing at this time. Harwood / Martin A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Stephen Norwood Derivatively on Behalf of Nominal Defendant Franklin Wireless Corp. v. OC Kim, Et al., Case #21cv01837-JAH-DEB, on or about October 29, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Debra Martin, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. OC Kim, Et al., Case #21cv2091-CAB-KSC, on or about December 15, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. The Harwood and Martin actions have recently been consolidated into a single action in the U.S. District Court, Southern District of California (San Diego) titled “In re Franklin Wireless Corp. Derivative Litigation”, Case No.: 21cv1837-AJB (MSB). Discovery is ongoing at this time. Pape A legal action was filed in the Second Judicial District Court of Nevada in the County of Washoe against Franklin, as a nominal defendant, Barbara Pape, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. OC Kim, Et al., Case # CV22-00471, on or about March 21, 2022, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. The Company will vigorously defend such shareholder litigation and proceedings. No liability has been recorded for these litigations because the Company believes that any such liability is not probable and reasonably estimable at this time. “Short-Swing” Profits Litigation A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Nosirrah Management LLC v. Franklin Wireless et al. Case # 3:21-cv-01316-CAB-JLB, on or about July 22, 2021, claiming that our Chief Executive Officer, OC Kim, violated Section 16(b) of the Securities Exchange Act of 1934 for receiving “short-swing” profits from a sale and purchase of Franklin shares, in violation of that Act. We believe the allegations are not supported by the facts and we intend to vigorously defend against these claims. No liability has been recorded for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time. Franklin v. Anydata, Inc. We entered into a Professional Services Agreement with Anydata Corp. (“Anydata”) for the product ACT233F Smart Link OBD device on May 5, 2017, for a minimum purchase commitment of 250,000 units. We have delivered approximately 25,000 units and 7,000 units during our second and fourth quarters of fiscal 2018, respectively, and an additional 18,000 units during our first quarter of fiscal 2019. Sales to Anydata were approximately $1.8 million for the year ended June 30, 2019. We have received information that Anydata may not be able to fulfill the entire purchase commitment for which parts have already been ordered with our main vendor, Quanta. We believe that the Company will be able to supply some of the products to another customer and has received personal guarantees from the ownership group of Anydata. As of June 30, 2019, the remaining unfulfilled purchase commitment was approximately $ 3.1 2.9 100,000 49,580 149,580 th COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, we are deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, we reduced the scope of our operations and, where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While we expect this situation may increase demand for its products, the related impact cannot be reasonably estimated at this time. Change of Control Agreements On October 1, 2020, 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 we experience a change of control. The term includes the acquisition of our Common Stock 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 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 our outstanding Common Stock, or a liquidation or dissolution or sale of substantially all of our 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. International Tariffs We believe that our products are currently exempt from international tariffs upon import from our manufacturers to the United States. 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 and operating results. 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. |
LONG-TERM INCENTIVE PLAN AWARDS
LONG-TERM INCENTIVE PLAN AWARDS | 12 Months Ended |
Jun. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
LONG-TERM INCENTIVE PLAN AWARDS | NOTE 9 - LONG-TERM INCENTIVE PLAN AWARDS We apply the provisions of ASC 718, “Compensation - Stock Compensation,” to all of our stock-based compensation awards, and use the Black-Scholes option pricing model to value stock options. Under this application, we record compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award, i.e. the vesting period. In 2009, we adopted the Stock Incentive Plan (“2009 Plan”), 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. In July of 2020, the Board of Directors adopted the 2020 Franklin Wireless Corp. Stock Option Plan, which covers 800,000 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 were $ 545,841 380,758 A summary of the status of our stock options is presented below: 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, 2020 251,291 $ 1.05 1.95 $ 1,124,525 Granted 299,000 5.40 – – Exercised (61,291 ) 1.22 – – Forfeited or expired (5,000 ) 5.40 – – Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (93,999 ) 0.80 – – Forfeited or expired (12,000 ) 5.40 – – Outstanding as of June 30, 2022 766,001 $ 3.85 3.37 $ 183,270 Exercisable as of June 30, 2022 345,366 $ 3.84 2.42 $ 183,270 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $3.1727 as of June 30, 2022, 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, 2022, in the amount of 766,001 3.17 As of June 30, 2022, there was unrecognized compensation cost of $ 1,311,085 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of approximately 66.3 33.7 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, 2022, or June 30, 2021. |
Non-controlling Interest in a Consolidated Subsidiary | Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2022, the non-controlling interest was $ 1,569,605 90,443 1,479,162 90,443 |
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 three geographic areas, consisting of North America, the Caribbean and South America, 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: Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2022 2021 North America $ 23,305,366 $ 183,771,146 Caribbean and South America 2,375 17,500 Asia 690,021 326,699 Totals $ 23,997,762 $ 184,115,345 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2022 June 30, 2021 United States $ 1,374,747 $ 1,349,320 Asia 81,261 49,040 Totals $ 1,456,008 $ 1,398,360 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, short-term investments, 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 | 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 no |
Revenue Recognition | Revenue Recognition Contracts with Customers Revenue from sales of products and services is derived from contracts with customers. The products and services covered by contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended June 30, 2022, was not material. Disaggregation of Revenue In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors. Contract Balances We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. We, however, recognize a contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services. The balances of our trade receivables are as follows: Schedule of receivables June 30, 2022 June 30, 2021 Accounts Receivable $ 1,322,619 $ 2,542,429 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2022 and June 30, 2021. An amount of $837,000 is included in the Accounts Receivable balance as of June 30, 2022, which is the direct result of an agreement between our vendor and our customer where we acted as facilitator. There is a corresponding balance of $837,000 in our Accounts Payable balance as of June 30, 2022. We expect to settle our liability with the vendor once the amount is received from the customer. Schedule of contract liabilities June 30, 2022 June 30, 2021 Undelivered products $ 371,624 $ 140,000 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. To identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2022. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2022. Most of our revenue that is recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. |
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 expenses of approximately $ 500,000 360,000 |
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, 2022, and June 30, 2021, capitalized product development costs in progress were $ 187,343 602,388 658,544 |
Research and Development Costs | Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 4,282,131 4,567,863 |
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 no |
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 statements of comprehensive income, were $ 246,290 723,617 |
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. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value. |
Short Term Investments | Short Term Investments We have invested excess funds in short term liquid assets, such as certificates of deposit or money market funds. |
Inventories | Inventories Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, 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, 2022, and 2021, we have recorded inventory reserves in the amount of $ 557,155 0 |
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: Useful lives of property and equipment Machinery 6 Office equipment 5 Molds 3 Vehicles 5 Computers and software 5 Furniture and fixtures 7 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 were 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 |
Intangible Assets | Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2022: Intangible Assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 0.5 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 3.0 399,811 268,495 131,316 Patents 10 3.9 21,105 12,951 8,154 Certifications & licenses 3 1.6 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 Amortization expense recognized during the years ended June 30, 2022, and 2021 was $ 579,012 435,571 3,228,261 140,192 Schedule of Expected Amortization Expense FY2023 FY2024 FY2025 FY2026 FY2027 Thereafter Total $ 557,856 $ 381,973 $ 181,342 $ 14,042 $ 10,000 $ 17,500 |
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, 2022, 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. |
(Loss) Earnings per Share Attributable to Common Stockholders | (Loss) Earnings per Share Attributable to Common Stockholders Basic (loss) earnings per share is calculated by dividing the net (loss) income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted (loss) earnings per share is calculated by dividing the net (loss) 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, 2022, net sales to our two largest customers represented 70 13 0 63 30 0 84 For the year ended June 30, 2022, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If they 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, 2022, we purchased wireless data products from these suppliers in the amount of $ 22,319,313 98.3 7,409,273 138,516,044 99 9,096,451 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 June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses, which changes the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset. The Company adopted the standard on July 1, 2020. The new standard did not have a material impact on its consolidated financial statements. In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated other comprehensive income to retained earnings. The adoption of this update does not have a material impact the Company’s consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which among other things, eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The Company adopted the standard on July 1, 2021. The new standard did not have a material impact on its consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Accounting Policies [Abstract] | |
Segment information by geographic areas | Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2022 2021 North America $ 23,305,366 $ 183,771,146 Caribbean and South America 2,375 17,500 Asia 690,021 326,699 Totals $ 23,997,762 $ 184,115,345 |
Long lived assets by geographic area | Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2022 June 30, 2021 United States $ 1,374,747 $ 1,349,320 Asia 81,261 49,040 Totals $ 1,456,008 $ 1,398,360 |
Schedule of receivables | Schedule of receivables June 30, 2022 June 30, 2021 Accounts Receivable $ 1,322,619 $ 2,542,429 |
Schedule of contract liabilities | Schedule of contract liabilities June 30, 2022 June 30, 2021 Undelivered products $ 371,624 $ 140,000 |
Useful lives of property and equipment | Useful lives of property and equipment Machinery 6 Office equipment 5 Molds 3 Vehicles 5 Computers and software 5 Furniture and fixtures 7 Facilities improvements 5 years or life of the lease, whichever is shorter |
Intangible Assets | Intangible Assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 0.5 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 3.0 399,811 268,495 131,316 Patents 10 3.9 21,105 12,951 8,154 Certifications & licenses 3 1.6 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 |
Schedule of Expected Amortization Expense | Schedule of Expected Amortization Expense FY2023 FY2024 FY2025 FY2026 FY2027 Thereafter Total $ 557,856 $ 381,973 $ 181,342 $ 14,042 $ 10,000 $ 17,500 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Schedule of property and equipment June 30, 2022 June 30, 2021 Machinery and Commercial Equipment $ 67,848 $ 67,044 Office equipment 312,785 291,191 Molds 575,552 575,552 Vehicle 15,513 – 971,698 933,787 Less accumulated depreciation (865,746 ) (782,177 ) Total $ 105,952 $ 151,610 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Schedule of accrued liabilities June 30, 2022 June 30, 2021 Accrued payroll deductions owed to government entities $ 55,387 $ 66,307 Accrued vacation 65,602 73,900 Accrued undelivered inventory 140,000 140,000 Accrued commission for service providers 40,000 52,500 Accrued commission to a customer 288,306 451,898 Other accrued liabilities 612 920 Total $ 589,907 $ 785,525 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income tax provision from continuing operations | Schedule of Income tax provision from continuing operations Year Ended June 30, 2022 2021 Current income tax (benefit) expense: Federal $ (127,998 ) $ 4,217,883 State 975 (525 ) Foreign 49,843 256,636 Total Current income tax expense (benefit) (77,180 ) 4,473,994 Deferred income tax (benefit) expense: Federal (876,513 ) 142,242 State (83,375 ) 155,410 Foreign – 267,649 Total deferred income tax expense (benefit) (959,888 ) 565,301 (Benefit) provision for income taxes $ (1,037,068 ) $ 5,039,295 |
Schedule of effective income tax rate | Schedule of effective income tax rate Year Ended June 30, 2022 2021 Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items $ (982,130 ) $ 4,929,611 State tax, net of federal tax benefit (82,840 ) 125,237 Nondeductible expenses 870 22,688 R&D credits (46,643 ) (56,950 ) Global intangible low-taxed income 152,930 95,419 Foreign rate difference (16,279 ) 39,146 Others (62,976 ) (13,523 ) Forgiveness of payroll protection plan loan – (102,333 ) Change in valuation allowance – – (Benefit) provision for income taxes $ (1,037,068 ) $ 5,039,295 |
Schedule of deferred tax assets | Schedule of deferred tax assets June 30, 2022 June 30, 2021 Deferred tax asset: Net operating losses $ 737,258 $ 170,649 State tax – – Lease accounting, net 4,299 7,035 Intangibles 156,334 84,831 Tax credits 202,958 133,451 Inventory reserve 155,133 30,591 Other, net 145,679 12,693 Total deferred tax assets 1,401,661 439,250 Deferred tax liabilities: Deferred state taxes (46,565 ) (29,056 ) State tax (205 ) (110 ) Property and equipment, net (7,865 ) (22,536 ) Total deferred tax liabilities (54,225 ) (51,702 ) Less valuation allowance – – Net deferred tax asset $ 1,347,436 $ 387,548 |
Schedule of unrecognized tax benefits | Schedule of unrecognized tax benefits Balance as of June 30, 2020 $ 296,832 Gross increase 38,427 Balance as of June 30, 2021 335,259 Gross increase 29,789 Balance as of June 30, 2022 $ 365,048 |
(LOSS) EARNINGS PER SHARE (Tabl
(LOSS) EARNINGS PER SHARE (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | Schedule of earnings per share Year Ended June 30, 2022 2021 Net (loss) income attributable to Parent Company $ (3,762,848 ) $ 17,699,035 Weighted-average shares of common stock outstanding: Basic 11,613,812 11,350,946 Dilutive effect of common stock equivalents arising from stock options – 241,955 Diluted Outstanding shares 11,613,812 11,592,901 Basic (loss) earnings per share attributable to Parent Company stockholders $ (0.32 ) $ 1.56 Diluted (loss) earnings per share attributable to Parent Company stockholders $ (0.32 ) $ 1.53 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Schedule of Future Minimum Rental Payments for Operating Leases Payments due by June 30, 2023 2024 Total Administrative office, San Diego, CA $ 321,930 $ 160,965 $ 482,895 Total Obligations $ 321,930 $ 160,965 $ 482,895 |
Maturities of lease liabilities | Maturities of lease liabilities Operating Leases Fiscal 2023 $ 321,930 Fiscal 2024 160,965 Total lease payments 482,895 Less imputed interest (14,957 ) Total $ 467,938 |
LONG-TERM INCENTIVE PLAN AWAR_2
LONG-TERM INCENTIVE PLAN AWARDS (Tables) | 12 Months Ended |
Jun. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | 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, 2020 251,291 $ 1.05 1.95 $ 1,124,525 Granted 299,000 5.40 – – Exercised (61,291 ) 1.22 – – Forfeited or expired (5,000 ) 5.40 – – Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (93,999 ) 0.80 – – Forfeited or expired (12,000 ) 5.40 – – Outstanding as of June 30, 2022 766,001 $ 3.85 3.37 $ 183,270 Exercisable as of June 30, 2022 345,366 $ 3.84 2.42 $ 183,270 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Net sales | $ 23,997,762 | $ 184,115,345 |
North America [Member] | ||
Net sales | 23,305,366 | 183,771,146 |
South America [Member] | ||
Net sales | 2,375 | 17,500 |
Asia [Member] | ||
Net sales | $ 690,021 | $ 326,699 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments Long-Lived Assets) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Long-lived assets, net (property and equipment and intangible assets) | $ 1,456,008 | $ 1,398,360 |
UNITED STATES | ||
Long-lived assets, net (property and equipment and intangible assets) | 1,374,747 | 1,349,320 |
Asia [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | $ 81,261 | $ 49,040 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Receivables) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 1,322,619 | $ 2,542,429 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Contract liabilities) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Accounting Policies [Abstract] | ||
Undelivered products | $ 371,624 | $ 140,000 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Useful lives) | 12 Months Ended |
Jun. 30, 2022 | |
Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 6 years |
Office Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Tools, Dies and Molds [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Vehicles [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Computer Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 7 years |
Facility Czeug 8sa Ge 9nc [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years or life of the lease, whichever is shorter |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Intangibles) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Indefinite-Lived Intangible Assets [Line Items] | ||
Intangible Assets, Gross | $ 2,794,789 | $ 2,112,471 |
Accumulated Amortization | 1,444,733 | 865,721 |
Intangible Assets, Net | $ 1,350,056 | $ 1,246,750 |
Complete Technology [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Intangible Assets, Gross | $ 18,397 | $ 18,397 |
Accumulated Amortization | 18,397 | 15,331 |
Intangible Assets, Net | 0 | $ 3,066 |
Remaining Life | 6 months | |
Technology In Progess [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Intangible Assets, Gross | 187,343 | $ 602,388 |
Accumulated Amortization | 0 | 0 |
Intangible Assets, Net | $ 187,343 | $ 602,388 |
Computer Software, Intangible Asset [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 5 years | 5 years |
Intangible Assets, Gross | $ 423,147 | $ 399,811 |
Accumulated Amortization | 314,855 | 268,495 |
Intangible Assets, Net | $ 108,292 | $ 131,316 |
Remaining Life | 2 years | 3 years |
Patent [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 10 years | 10 years |
Intangible Assets, Gross | $ 21,543 | $ 21,105 |
Accumulated Amortization | 15,122 | 12,951 |
Intangible Assets, Net | $ 6,421 | $ 8,154 |
Remaining Life | 2 years 6 months | 3 years 10 months 24 days |
Certification And Licenses [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Intangible Assets, Gross | $ 2,144,359 | $ 1,070,770 |
Accumulated Amortization | 1,096,359 | 568,944 |
Intangible Assets, Net | $ 1,048,000 | $ 501,826 |
Remaining Life | 1 year 1 month 6 days | 1 year 7 months 6 days |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Amortization) | Jun. 30, 2022 USD ($) |
Accounting Policies [Abstract] | |
FY2023 | $ 557,856 |
FY2024 | 381,973 |
FY2025 | 181,342 |
FY2026 | 14,042 |
FY2027 | 10,000 |
Thereafter | $ 17,500 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Product Information [Line Items] | ||
Noncontrolling interest percentage | 66.30% | 66.30% |
Noncontrolling interest | $ 1,569,605 | $ 1,479,162 |
Increase (decrease) in noncontrolling interest | 90,443 | |
Allowance for doubtful accounts | 0 | 0 |
Product development costs | 500,000 | 360,000 |
Capitalized product development costs | 187,343 | 602,388 |
Product development costs incurred | 658,544 | 694,909 |
Research and development costs | 4,282,131 | 4,567,863 |
Warranty expense | 0 | 0 |
Shipping and handling expense | 246,290 | 723,617 |
Inventory reserve | 557,155 | 0 |
Goodwill impairment | 0 | 0 |
Amortization | 579,012 | 435,571 |
Gain (Loss) on Disposition of Assets | 3,228,261 | |
[custom:TechnologyInProgress] | 140,192 | |
Products purchased | 20,181,179 | 151,651,324 |
Accounts payable | $ 8,143,305 | $ 9,718,989 |
Revenue Benchmark [Member] | Customer 1 [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 70% | 63% |
Revenue Benchmark [Member] | Customer 2 [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 13% | 30% |
Accounts Receivable [Member] | Customer 1 [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 0% | 0% |
Accounts Receivable [Member] | Customer 2 [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 84% | |
Total Purchases [Member] | Supplier Concentration Risk [Member] | Suppliers [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 98.30% | 99% |
Products purchased | $ 22,319,313 | $ 138,516,044 |
Accounts payable | $ 7,409,273 | $ 9,096,451 |
Noncontrolling Interests [Member] | ||
Product Information [Line Items] | ||
Noncontrolling interest percentage | 33.70% | 33.70% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 971,698 | $ 933,787 |
Less accumulated depreciation | (865,746) | (782,177) |
Total | 105,952 | 151,610 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 67,848 | 67,044 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 312,785 | 291,191 |
Tools, Dies and Molds [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 575,552 | 575,552 |
Vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 15,513 | $ 0 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 87,743 | $ 90,322 |
Disposed of depreciated property ad equipment | $ 4,175 | $ 812,416 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Payables and Accruals [Abstract] | ||
Accrued payroll deductions owed to government entities | $ 55,387 | $ 66,307 |
Accrued vacation | 65,602 | 73,900 |
Accrued undelivered inventory | 140,000 | 140,000 |
Accrued commission for service providers | 40,000 | 52,500 |
Accrued commission to a customer | 288,306 | 451,898 |
Other accrued liabilities | 612 | 920 |
Total | $ 589,907 | $ 785,525 |
INCOME TAXES (Details - Provisi
INCOME TAXES (Details - Provision for Income Taxes) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Current income tax (benefit) expense: | ||
Federal | $ (127,998) | $ 4,217,883 |
State | 975 | (525) |
Foreign | 49,843 | 256,636 |
Total Current income tax expense (benefit) | (77,180) | 4,473,994 |
Deferred income tax (benefit) expense: | ||
Federal | (876,513) | 142,242 |
State | (83,375) | 155,410 |
Foreign | 0 | 267,649 |
Total deferred income tax expense (benefit) | (959,888) | 565,301 |
(Benefit) provision for income taxes | $ (1,037,068) | $ 5,039,295 |
INCOME TAXES (Details - Reconci
INCOME TAXES (Details - Reconciliation of Tax Rate) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items | $ (982,130) | $ 4,929,611 |
State tax, net of federal tax benefit | (82,840) | 125,237 |
Nondeductible expenses | 870 | 22,688 |
R&D credits | (46,643) | (56,950) |
Global intangible low-taxed income | 152,930 | 95,419 |
Foreign rate difference | (16,279) | 39,146 |
Others | (62,976) | (13,523) |
Forgiveness of payroll protection plan loan | 0 | (102,333) |
Change in valuation allowance | 0 | 0 |
(Benefit) provision for income taxes | $ (1,037,068) | $ 5,039,295 |
INCOME TAXES (Details - Deferre
INCOME TAXES (Details - Deferred Income Taxes) - USD ($) | Jun. 30, 2022 | Jun. 30, 2021 |
Deferred tax asset: | ||
Net operating losses | $ 737,258 | $ 170,649 |
State tax | 0 | 0 |
Lease accounting, net | 4,299 | 7,035 |
Intangibles | 156,334 | 84,831 |
Tax credits | 202,958 | 133,451 |
Inventory reserve | 155,133 | 30,591 |
Other, net | 145,679 | 12,693 |
Total deferred tax assets | 1,401,661 | 439,250 |
Deferred tax liabilities: | ||
Deferred state taxes | (46,565) | (29,056) |
State tax | (205) | (110) |
Property and equipment, net | (7,865) | (22,536) |
Total deferred tax liabilities | (54,225) | (51,702) |
Less valuation allowance | 0 | 0 |
Net deferred tax asset | $ 1,347,436 | $ 387,548 |
INCOME TAXES (Details - Unrecog
INCOME TAXES (Details - Unrecognized tax benefits) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||
Beginning Balance | $ 335,259 | $ 296,832 |
Gross increase | 29,789 | 38,427 |
Ending Balance | $ 365,048 | $ 335,259 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2022 | Jan. 01, 2018 | Dec. 31, 2017 | |
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | $ 40,000 | ||
Domestic Tax Authority [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | $ 3,300,000 | $ 2,500,000 | $ 800,000 |
Carryforward expiration dates | 2035 | ||
State and Local Jurisdiction [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | $ 40,000 |
(LOSS) EARNINGS PER SHARE (Deta
(LOSS) EARNINGS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Earnings Per Share [Abstract] | ||
Net (loss) income attributable to Parent Company | $ (3,762,848) | $ 17,699,035 |
Weighted-average shares of common stock outstanding: | ||
Basic | 11,613,812 | 11,350,946 |
Dilutive effect of common stock equivalents arising from stock options | 0 | 241,955 |
Diluted Outstanding shares | 11,613,812 | 11,592,901 |
Basic (loss) earnings per share attributable to Parent Company stockholders | $ (0.32) | $ 1.56 |
Diluted (loss) earnings per share attributable to Parent Company stockholders | $ (0.32) | $ 1.53 |
(LOSS) EARNINGS PER SHARE (De_2
(LOSS) EARNINGS PER SHARE (Details Narrative) - shares | 12 Months Ended | |
Jun. 30, 2022 | Jun. 30, 2021 | |
Earnings Per Share [Abstract] | ||
Anti-dilutive shares excluded from EPS | 766,001 | 484,000 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liability under operating leases) | Jun. 30, 2022 USD ($) |
2023 | $ 321,930 |
2024 | 160,965 |
Total | 482,895 |
Administrative Office San Diego C A [Member] | |
2023 | 321,930 |
2024 | 160,965 |
Total | $ 482,895 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liabilities) | Jun. 30, 2022 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Fiscal 2023 | $ 321,930 |
Fiscal 2024 | 160,965 |
Total lease payments | 482,895 |
Less imputed interest | (14,957) |
Total | $ 467,938 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |||
Jun. 30, 2022 | Jun. 30, 2021 | Dec. 30, 2020 | Jun. 30, 2020 | |
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||
Operating Lease, Expense | $ 446,057 | $ 446,614 | ||
Anydata [Member] | ||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||
Purchase commitment | $ 3,100,000 | |||
Quanta [Member] | ||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||
Purchase commitment | $ 2,900,000 | |||
Payment made for inventory | $ 100,000 | |||
Prepaid expense | $ 149,580 | $ 49,580 | ||
Administrative Office San Diego C A [Member] | ||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||
Operating lease discount rate | 4% |
LONG-TERM INCENTIVE PLAN AWAR_3
LONG-TERM INCENTIVE PLAN AWARDS (Details - Option Activity) - Equity Option [Member] - USD ($) | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jun. 30, 2019 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of Options Outstanding, Beginning | 484,000 | 251,291 | |
Weighted Average Exercise Price Outstanding, Beginning | $ 3.67 | $ 1.05 | |
Weighted Average Remaining Contractual Life (in years) Outstanding | 3 years 4 months 13 days | 2 years 9 months 29 days | 1 year 11 months 12 days |
Aggregate Intrinsic Value Outstanding, Beginning | $ 2,662,830 | $ 1,124,525 | |
Number of Options Granted | 388,000 | 299,000 | |
Weighted Average Exercise Price Granted | $ 3.38 | $ 5.40 | |
Aggregate Intrinsic Value Granted | $ 0 | $ 0 | |
Number of Options Exercised | (93,999) | (61,291) | |
Weighted Average Exercise Price Exercised | $ 0.80 | $ 1.22 | |
Aggregate Intrinsic Value Exercised | $ 0 | $ 0 | |
Number of Options Cancelled | (12,000) | (5,000) | |
Weighted Average Exercise Price Forfeited or expired | $ 5.40 | $ 5.40 | |
Aggregate Intrinsic Value Forfeited or expired | $ 0 | $ 0 | |
Number of Options Outstanding, Ending | 766,001 | 484,000 | |
Weighted Average Exercise Price Outstanding, Ending | $ 3.85 | $ 3.67 | |
Aggregate Intrinsic Value Outstanding, Ending | $ 183,270 | $ 2,662,830 | |
Number of Options Exercisable | 345,366 | ||
Weighted Average Exercise Price Exercisable | $ 3.84 | ||
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 5 months 1 day | ||
Aggregate Intrinsic Value Exercisable | $ 183,270 |
LONG-TERM INCENTIVE PLAN AWAR_4
LONG-TERM INCENTIVE PLAN AWARDS (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2022 | Jun. 30, 2021 | Jul. 31, 2020 | |
Share-Based Payment Arrangement [Abstract] | |||
Common stock shares | 800,000 | ||
Share based compensation expense | $ 545,841 | $ 380,758 | |
Weighted average grant-date fair value of stock options | 766,001 | ||
Weighted average grant-date fair value of stock options, per share price | $ 3.17 | ||
Unrecognized compensation cost related to non-vested options | $ 1,311,085 |