Cover
Cover - shares | 9 Months Ended | |
Mar. 31, 2023 | May 15, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2023 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2023 | |
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(b) Security | Common Stock, par value $.001 per share | |
Trading Symbol | FKWL | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 11,784,280 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 17,569,754 | $ 26,277,418 |
Short-term investments-others | 16,408,586 | 16,336,659 |
Accounts receivable, net | 7,218,350 | 1,322,619 |
Other receivables, net | 30,483 | 40,132 |
Inventories, net | 5,911,294 | 4,197,863 |
Prepaid expenses and other current assets | 48,960 | 40,939 |
Prepaid income taxes | 10,363 | 0 |
Loan to an employee | 90,045 | 0 |
Advance payments to vendors | 57,360 | 174,796 |
Total current assets | 47,345,195 | 48,390,426 |
Property and equipment, net | 109,823 | 105,952 |
Intangible assets, net | 2,369,406 | 1,350,056 |
Deferred tax assets, non-current | 1,906,067 | 1,347,436 |
Goodwill | 273,285 | 273,285 |
Right of use assets | 227,814 | 448,621 |
Other assets | 125,258 | 126,095 |
TOTAL ASSETS | 52,356,848 | 52,041,871 |
Current liabilities: | ||
Accounts payable | 9,307,258 | 8,143,305 |
Income tax payable | 1,170 | 6,702 |
Unearned revenue | 166,422 | 231,624 |
Advance payments from customers | 2,237 | 0 |
Accrued liabilities | 733,407 | 589,907 |
Lease liabilities, current | 237,472 | 308,834 |
Total current liabilities | 10,447,966 | 9,280,372 |
Lease liabilities, non-current | 0 | 159,104 |
Total liabilities | 10,447,966 | 9,439,476 |
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 March 31, 2023, and June 30, 2022 | 0 | 0 |
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,784,280 and 11,684,280 shares issued and outstanding as of March 31, 2023, and June 30, 2022, respectively | 14,263 | 14,163 |
Additional paid-in capital | 14,264,248 | 13,593,426 |
Retained earnings | 30,706,560 | 31,964,246 |
Treasury stock, 2,549,208 shares as of March 31, 2023, and June 30, 2022 | (3,554,893) | (3,554,893) |
Accumulated other comprehensive loss | (1,049,865) | (984,152) |
Total Parent Company stockholders’ equity | 40,380,313 | 41,032,790 |
Non-controlling interests | 1,528,569 | 1,569,605 |
Total stockholders’ equity | 41,908,882 | 42,602,395 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 52,356,848 | $ 52,041,871 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2023 | Jun. 30, 2022 |
Statement of Financial Position [Abstract] | ||
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common stock par value | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares, Issued | 11,784,280 | 11,684,280 |
Common Stock, Shares, Outstanding | 11,784,280 | 11,684,280 |
Treasury stock shares | 2,549,208 | 2,549,208 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||||
Net sales | $ 11,851,971 | $ 6,687,287 | $ 28,944,554 | $ 11,852,936 |
Cost of goods sold | 9,806,461 | 5,327,957 | 24,359,140 | 9,636,662 |
Gross profit | 2,045,510 | 1,359,330 | 4,585,414 | 2,216,274 |
Operating expenses: | ||||
Selling, general and administrative | 1,463,433 | 1,390,719 | 4,039,035 | 3,493,328 |
Research and development | 1,052,672 | 1,050,180 | 2,999,207 | 3,179,221 |
Total operating expenses | 2,516,105 | 2,440,899 | 7,038,242 | 6,672,549 |
Loss from operations | (470,595) | (1,081,569) | (2,452,828) | (4,456,275) |
Other income, net: | ||||
Interest income | 158,418 | 1,745 | 281,155 | 5,555 |
Income from governmental subsidy | 7,197 | (871) | 41,510 | 93,109 |
Gain from the forgiveness of accounts payable and accrued liabilities | 25,293 | 0 | 190,293 | 0 |
Gain (loss) from foreign currency transactions | (199,226) | 54,540 | (75,004) | 223,785 |
Other income, net | 111,888 | 707 | 152,971 | 1,029 |
Total other income, net | 103,570 | 56,121 | 590,925 | 323,478 |
Loss before benefit for income taxes | (367,025) | (1,025,448) | (1,861,903) | (4,132,797) |
Income tax benefit | (578,664) | (238,852) | (563,181) | (1,126,860) |
Net income (loss) | 211,639 | (786,596) | (1,298,722) | (3,005,937) |
Less: non-controlling interests in net income (loss) of subsidiary at 33.7% | (35,990) | (15,778) | (41,036) | 54,083 |
Net income (loss) attributable to Parent Company | $ 247,629 | $ (770,818) | $ (1,257,686) | $ (3,060,020) |
Basic income (loss) per share attributable to Parent Company stockholders | $ 0.02 | $ (0.07) | $ (0.11) | $ (0.26) |
Diluted income (loss) per share attributable to Parent Company stockholders | $ 0.02 | $ (0.07) | $ (0.11) | $ (0.26) |
Weighted average common shares outstanding – basic | 11,784,280 | 11,594,280 | 11,720,776 | 11,593,857 |
Weighted average common shares outstanding – diluted | 11,784,280 | 11,594,280 | 11,720,776 | 11,593,857 |
Comprehensive income (loss) | ||||
Net income (loss) | $ 211,639 | $ (786,596) | $ (1,298,722) | $ (3,005,937) |
Translation adjustments | (139,752) | (85,973) | (65,713) | (286,659) |
Comprehensive income (loss) | 71,887 | (872,569) | (1,364,435) | (3,292,596) |
Less: comprehensive income (loss) attributable to non-controlling interest | (35,990) | (15,778) | (41,036) | 54,083 |
Comprehensive income (loss) attributable to controlling interest | $ 107,877 | $ (856,791) | $ (1,323,399) | $ (3,346,679) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock, Common [Member] | AOCI Attributable to Parent [Member] | Noncontrolling Interest [Member] | Total |
Balance - December 31, 2021 (unaudited) at Jun. 30, 2021 | $ 14,069 | $ 12,972,234 | $ 35,727,094 | $ (3,554,893) | $ (472,502) | $ 1,479,162 | $ 46,165,164 |
Beginning balace, shares at Jun. 30, 2021 | 11,590,281 | ||||||
Net loss attributable to Parent Company | (2,289,202) | (2,289,202) | |||||
Foreign exchange translation | (200,686) | (200,686) | |||||
Issuance of stock related to stock option exercised | $ 4 | 21,591 | 21,595 | ||||
Beginning balace, shares | 3,999 | ||||||
Compensation expense related to stock option granted | 192,465 | 192,465 | |||||
Comprehensive loss attributable to non-controlling interest | 69,861 | 69,861 | |||||
Balance - March 31, 2022 (unaudited) at Dec. 31, 2021 | $ 14,073 | 13,186,290 | 33,437,892 | (3,554,893) | (673,188) | 1,549,023 | 43,959,197 |
Beginning balace, shares at Dec. 31, 2021 | 11,594,280 | ||||||
Balance - December 31, 2021 (unaudited) at Jun. 30, 2021 | $ 14,069 | 12,972,234 | 35,727,094 | (3,554,893) | (472,502) | 1,479,162 | 46,165,164 |
Beginning balace, shares at Jun. 30, 2021 | 11,590,281 | ||||||
Net loss attributable to Parent Company | (3,060,020) | ||||||
Comprehensive loss attributable to non-controlling interest | 54,083 | ||||||
Balance - March 31, 2022 (unaudited) at Mar. 31, 2022 | $ 14,073 | 13,367,437 | 32,667,074 | (3,554,893) | (759,161) | 1,533,245 | 43,267,775 |
Beginning balace, shares at Mar. 31, 2022 | 11,594,280 | ||||||
Balance - December 31, 2021 (unaudited) at Dec. 31, 2021 | $ 14,073 | 13,186,290 | 33,437,892 | (3,554,893) | (673,188) | 1,549,023 | 43,959,197 |
Beginning balace, shares at Dec. 31, 2021 | 11,594,280 | ||||||
Net loss attributable to Parent Company | (770,818) | (770,818) | |||||
Foreign exchange translation | (85,973) | (85,973) | |||||
Compensation expense related to stock option granted | 181,147 | 181,147 | |||||
Comprehensive loss attributable to non-controlling interest | (15,778) | (15,778) | |||||
Balance - March 31, 2022 (unaudited) at Mar. 31, 2022 | $ 14,073 | 13,367,437 | 32,667,074 | (3,554,893) | (759,161) | 1,533,245 | 43,267,775 |
Beginning balace, shares at Mar. 31, 2022 | 11,594,280 | ||||||
Balance - December 31, 2021 (unaudited) at Jun. 30, 2022 | $ 14,163 | 13,593,426 | 31,964,246 | (3,554,893) | (984,152) | 1,569,605 | 42,602,395 |
Beginning balace, shares at Jun. 30, 2022 | 11,684,280 | ||||||
Net loss attributable to Parent Company | (1,505,315) | (1,505,315) | |||||
Foreign exchange translation | 74,039 | 74,039 | |||||
Issuance of stock related to stock option exercised | $ 100 | 133,900 | 134,000 | ||||
Beginning balace, shares | 100,000 | ||||||
Compensation expense related to stock option granted | 360,525 | 360,525 | |||||
Comprehensive loss attributable to non-controlling interest | (5,046) | (5,046) | |||||
Balance - March 31, 2022 (unaudited) at Dec. 31, 2022 | $ 14,263 | 14,087,851 | 30,458,931 | (3,554,893) | (910,113) | 1,564,559 | 41,660,598 |
Beginning balace, shares at Dec. 31, 2022 | 11,784,280 | ||||||
Balance - December 31, 2021 (unaudited) at Jun. 30, 2022 | $ 14,163 | 13,593,426 | 31,964,246 | (3,554,893) | (984,152) | 1,569,605 | 42,602,395 |
Beginning balace, shares at Jun. 30, 2022 | 11,684,280 | ||||||
Net loss attributable to Parent Company | (1,257,686) | ||||||
Comprehensive loss attributable to non-controlling interest | (41,036) | ||||||
Balance - March 31, 2022 (unaudited) at Mar. 31, 2023 | $ 14,263 | 14,264,248 | 30,706,560 | (3,554,893) | (1,049,865) | 1,528,569 | 41,908,882 |
Beginning balace, shares at Mar. 31, 2023 | 11,784,280 | ||||||
Balance - December 31, 2021 (unaudited) at Dec. 31, 2022 | $ 14,263 | 14,087,851 | 30,458,931 | (3,554,893) | (910,113) | 1,564,559 | 41,660,598 |
Beginning balace, shares at Dec. 31, 2022 | 11,784,280 | ||||||
Net loss attributable to Parent Company | 247,629 | 247,629 | |||||
Foreign exchange translation | (139,752) | (139,752) | |||||
Compensation expense related to stock option granted | 176,397 | 176,397 | |||||
Comprehensive loss attributable to non-controlling interest | (35,990) | (35,990) | |||||
Balance - March 31, 2022 (unaudited) at Mar. 31, 2023 | $ 14,263 | $ 14,264,248 | $ 30,706,560 | $ (3,554,893) | $ (1,049,865) | $ 1,528,569 | $ 41,908,882 |
Beginning balace, shares at Mar. 31, 2023 | 11,784,280 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,298,722) | $ (3,005,937) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 41,341 | 68,105 |
Amortization of intangible assets | 595,218 | 396,535 |
Stock based compensation | 536,922 | 373,612 |
Bad debt expense | 0 | 23,781 |
Forgiveness of debts | (190,293) | 0 |
Amortization of right of use assets | 220,807 | 232,560 |
Deferred tax (benefit) | (558,631) | (1,171,345) |
(Decrease) increase in cash due to change in: | ||
Accounts receivable | (5,886,082) | 477,155 |
Inventories | (1,713,431) | (6,676,070) |
Prepaid expenses and other current assets | (8,021) | (144,099) |
Prepaid income taxes | (10,363) | (102,055) |
Loan to an employee | (90,045) | 0 |
Advance payments to vendors | 117,436 | (164,610) |
Other assets | 837 | 104,937 |
Accounts payable | 1,214,246 | 2,533,695 |
Income tax payable | (5,532) | (176,599) |
Unearned revenue from customers | (65,202) | 361,527 |
Lease liabilities | (230,466) | (242,218) |
Advance payments from customers | 2,237 | 0 |
Accrued liabilities | 283,500 | (185,376) |
Net cash used in operating activities | (7,044,244) | (7,296,402) |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of short-term investments | (71,927) | (1,240,376) |
Purchases of property and equipment | (45,212) | (39,570) |
Payments for capitalized product development costs | (1,601,998) | (475,366) |
Purchases of intangible assets | (12,570) | (25,172) |
Net cash used in investing activities | (1,731,707) | (1,780,484) |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Cash received from exercise of stock options | 134,000 | 21,595 |
Net cash provided by financing activities | 134,000 | 21,595 |
Effect of foreign currency translation | (65,713) | (286,659) |
Net decrease in cash and cash equivalents | (8,707,664) | (9,341,950) |
Cash and cash equivalents, beginning of period | 26,277,418 | 45,796,006 |
Cash and cash equivalents, end of period | 17,569,754 | 36,454,056 |
Cash paid during the periods for: | ||
Income taxes | $ (800) | $ (316,355) |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary, Franklin Technology Inc. (“FTI”), with a majority voting interest of 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 March 31, 2023, or June 30, 2022. Non-controlling Interest in a Consolidated Subsidiary As of March 31, 2023, the non-controlling interest was $ 1,528,569 41,036 1,569,605 41,036 121,924 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 Three Months Ended Nine Months Ended March 31, March 31, Net sales: 2023 2022 2023 2022 North America $ 11,720,894 $ 6,687,287 $ 28,778,479 $ 11,143,335 Caribbean and South America – – – 2,375 Asia 131,077 – 166,075 707,226 Totals $ 11,851,971 $ 6,687,287 $ 28,944,554 $ 11,852,936 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): March 31, 2023 June 30, 2022 North America $ 2,298,520 $ 1,374,747 Asia 180,709 81,261 Totals $ 2,479,229 $ 1,456,008 Use of 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. 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. 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, as of March 31, 2023, we did no Revenue Recognition In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (ASU 2016-10), which amends and adds clarity to certain aspects of the guidance set forth in the original revenue standard (ASU 2014-09) related to identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update No. 2016-11, Revenue Recognition (Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09. In May 2016 the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which provides narrow scope improvements and practical expedients related to ASU 2014-09. On July 1, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of June 30, 2018. Results for the reporting period beginning after July 1, 2018 are presented under Topic 606. We recorded no change in retained earnings as of July 1, 2018 as a result of the cumulative impact of adopting Topic 606. Contracts with Customers Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hotspot 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 nine months ended March 31, 2023 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 March 31, 2023 June 30, 2022 Accounts Receivable $ 7,218,350 $ 1,322,619 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended March 31, 2023, and June 30, 2022. Our contract liabilities are as follows: Schedule of contract liabilities March 31, 2023 June 30, 2022 Undelivered products $ 168,659 $ 371,624 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. In order 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 primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 99.9% of net sales for the nine months ended March 31, 2023. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 0.1% of net sales for the nine months ended March 31, 2023. The majority of our revenue recognized at a point in time is for the sale of hotspot router products. Revenue from these contracts is recognized when the customer is able to 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 March 31, 2023, 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 $ 229,884 564,143 79,284 238,109 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 is 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 3 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 March 31, 2023, and June 30, 2022, capitalized product development costs in progress were $ 196,875 187,343 555,018 1,601,998 21,677 475,366 Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 1,052,672 1,050,180 2,999,207 3,179,221 Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the consolidated statements of comprehensive income, were $ 58,730 42,706 188,836 145,658 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. 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 the control of the Company. We may write down our inventory value for potential obsolescence and excess inventory. As of March 31, 2023, and June 30, 2022, we have recorded inventory reserves in the amount of $ 557,155 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 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was deemed necessary as of March 31, 2023 or June 30, 2022. 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. As of March 31, 2023, and June 30, 2022, we were not aware of any events or changes in circumstances 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. Compensation costs are recognized over the period that an employee provides service in exchange for the award, i.e. the 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. 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. As of March 31, 2023, we have no material unrecognized tax benefits. We recorded an income tax benefit of $ 578,664 563,181 238,852 1,126,860 573,314 558,631 238,852 1,171,345 Earnings per Share Attributable to Common Stockholders Earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. Concentrations 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 nine months ended March 31, 2023, sales to our two largest customers accounted for 64 27 0 85 49 26 45 0 For the nine months ended March 31, 2023, we purchased the majority of our wireless data products from three manufacturing companies located in Asia. If these manufacturing companies 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 the Company's revenue. For the nine months ended March 31, 2023, we purchased wireless data products from these manufacturers in the amount of $ 25,347,466 99 9,001,053 15,758,962 99 11,664,549 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. |
BUSINESS OVERVIEW
BUSINESS OVERVIEW | 9 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
BUSINESS OVERVIEW | NOTE 2 - BUSINESS OVERVIEW We are a leading provider of integrated wireless solutions utilizing the latest in 4G LTE (fourth generation long-term evolution) and 5G (fifth generation) technologies including mobile hotspots, routers, CPEs (Customer Premise Equipment), and various trackers. Our integrated software subscription services provide users remote capabilities including mobile device management (MDM) and software defined wide area networking (SD-WAN). We have majority ownership of Franklin Technology Inc. (FTI), a research and development company based in Seoul, South Korea. FTI primarily provides design and development services for our wireless products. Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our global customer base primarily extends from North America to Asia. |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | NOTE 3 – BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Franklin Wireless Corp. have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q. In the opinion of management, the financial statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the financial position, the results of operations and comprehensive income (loss) and cash flows of the Company for the periods presented. These financial statements and notes hereto should be read in conjunction with the financial statements and notes thereto for the fiscal year ended June 30, 2022 included in our Form 10-K filed on September 13, 2022. The operating results or cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year. |
DEFINITE LIVED INTANGIBLE ASSET
DEFINITE LIVED INTANGIBLE ASSETS | 9 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
DEFINITE LIVED INTANGIBLE ASSETS | NOTE 4 – DEFINITE LIVED INTANGIBLE ASSETS The definite lived intangible assets consisted of the following as of March 31, 2023: Schedule of definite lived 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 – 196,875 – 196,875 Software 5 1.7 423,147 343,379 79,768 Patents 10 3.4 34,113 17,672 16,441 Certifications & licenses 3 1.3 3,736,825 1,660,503 2,076,322 Total as of March 31, 2023 $ 4,409,357 $ 2,039,951 $ 2,369,406 The definite lived intangible assets consisted of the following as of June 30, 2022: 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 Amortization expense recognized for the three months ended March 31, 2023 and 2022 was $ 234,325 170,406 595,218 396,535 Schedule of future amortization expense FY2023 FY2024 FY2025 FY2026 FY2027 Thereafter Total $ 255,366 $ 929,184 $ 709,018 $ 249,392 $ 11,131 $ 18,440 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 5 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: Schedule of property and equipment March 31, 2023 June 30, 2022 Machinery and Commercial Equipment $ 25,178 $ 67,848 Office equipment 231,430 312,785 Molds 479,718 575,552 Vehicle 15,513 15,513 751,839 971,698 Less accumulated depreciation (642,016 ) (865,746 ) Total $ 109,823 $ 105,952 Depreciation expenses associated with property and equipment were $ 11,316 22,465 41,341 68,105 265,071 4,174 |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 9 Months Ended |
Mar. 31, 2023 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | NOTE 6 - ACCRUED LIABILITIES Accrued liabilities consisted of the following as of: Schedule of accrued liabilities March 31, 2023 June 30, 2022 Accrued payroll deductions owed to government entities $ 48,162 $ 55,387 Accrued salaries and incentives 250,000 – Accrued vacation 153,335 65,602 Accrued undelivered inventory – 140,000 Accrued commission for service providers 33,750 40,000 Accrued commission to a customer 248,160 288,306 Other accrued liabilities – 612 Total $ 733,407 $ 589,907 |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 9 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
EARNINGS (LOSS) PER SHARE | NOTE 7 – EARNINGS (LOSS) PER SHARE For the three months ended March 31, 2023, we have calculated the dilutive effect of common stock arising from 649,001 stock options and excluded these securities from the calculation of diluted net income per share as they are anti-dilutive. For the nine months ended March 31, 2023, we were in a net loss position and have excluded 649,001 861,001 The weighted average number of shares outstanding used to compute earnings per share is as follows: Schedule of earnings per share Three Months ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Net income (loss) attributable to Parent Company $ 247,629 $ (770,818 ) $ (1,257,686 ) $ (3,060,020 ) Weighted-average shares of common stock outstanding: Basic shares outstanding 11,784,280 11,594,280 11,720,776 11,593,857 Dilutive effect of common stock equivalents arising from stock options – – – – Diluted shares outstanding 11,784,280 11,594,280 11,720,776 11,593,857 Basic (loss) income per share $ 0.02 $ (0.07 ) $ (0.11 ) $ (0.26 ) Diluted (loss) income per share $ 0.02 $ (0.07 ) $ (0.11 ) $ (0.26 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Mar. 31, 2023 | |
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. With effect from July 1, 2019, we have adopted the provisions of the new standard. We 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 us to run off existing leases, as initially classified as operating and classify new leases after implementation under the new standard as the business evolves. We have operating leases principally for both Franklin Wireless Corp. and Franklin Technologies Inc. Management evaluates each lease independently to determine the purpose and necessity to its future operations in addition to other appropriate facts and circumstances. We adopted Topic 842 using a modified retrospective approach for our existing leases at July 1, 2019. The adoption of Topic 842 impacted our 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 office space consisting of approximately 12,775 square feet, located in San Diego, California, at a monthly rent of $ 23,115 77,263 231,789 Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases will expire on August 31, 2023. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. Rent expense related to these leases was approximately $ 32,100 96,300 We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that will expire on September 4, 2023. Rent expense related to this lease was $ 2,106 2,150 6,057 6,562 As of March 31, 2023, we used a discount rate of 4.0 Future minimum payments under operating leases are as follows: Schedule of future minimum rental payments for operating leases Operating Lease Fiscal 2023 $ 80,483 Fiscal 2024 160,965 Total lease payments 241,448 Less imputed interest (3,976 ) Total $ 237,472 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 million. The total product purchase commitment with Quanta was approximately $2.9 million. We have not recorded a receivable from Anydata, nor a liability owed to Quanta. Management believes that, at this time, a loss contingency is reasonably possible but not estimable as to how much ultimately would be paid to Quanta. As of June 30, 2020, we paid $ 100,000 49,580 149,580 Aperture Net LLC. v. Franklin Wireless Corp. On November 29, 2022 Aperture Net LLC (“Aperture Net”) filed a patent infringement suit against Franklin, alleging that Franklin Wireless’ R910 Mobile Hotspot infringes U.S. Patent No. 6711,204 (the “204 Patent”), entitled “Channel sounding for a spread-spectrum signal.” This matter has been dismissed from the court by mutual agreement of the parties on March 27th, 2023. 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. Severance Agreement On November 10, 2022 the Company and OC Kim, its President, entered into an amendment of the employment letter agreement dated September 7, 2021. The amendment provides for a severance payment of $3 million if Mr. Kim voluntarily terminates his employment by the Company or if he voluntarily terminates his employment due to a “change in circumstances,” generally defined as a material breach by the Company of its salary and benefit obligations or a significant reduction in Mr. Kim’s title or responsibilities. In the case of a termination of employment by the Company for cause (generally defined as conviction of a felony, or a misdemeanor where imprisonment is imposed, commission of any act of theft, fraud, dishonesty, or material falsification of any employment or Company records, or improper disclosure of the Company's confidential or proprietary information), the Company is to make a severance payment of $1,500,000. In either case, any unvested options become immediately vested. In the amendment, Mr. Kim also agrees that, for a period of two years after termination, he will not disparage the Company or its officers, solicit any of its employees to terminate their employment, or disclose any of the Company’s proprietary information. In addition, the amendment provides for the payment of an incentive bonus to Mr. Kim of $125,000 for each calendar quarter during the remaining four year term of the employment letter, with the first such bonus due on December 31, 2022. 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 | 9 Months Ended |
Mar. 31, 2023 | |
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. 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 (the “2020 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 $ 536,922 373,612 A summary of the status of our stock options is presented below as of March 31, 2023: 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, 2022 766,001 $ 3.85 3.37 $ 183,270 Granted – – – – Exercised (100,000 ) 1.34 – – Cancelled – – – – Forfeited or expired (17,000 ) 5.40 – – Outstanding as of March 31, 2023 649,001 $ 4.24 3.12 $ 595,200 Exercisable as of March 31, 2023 405,277 $ 4.63 2.85 $ 248,724 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $4.98 as of March 31, 2023, 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 March 31, 2022, in the amount of 649,001 3.35 724,837 A summary of the status of our stock options is presented below as of March 31, 2022: Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (3,999 ) 5.40 – – Cancelled – – – – Forfeited or expired (7,000 ) 5.40 – – Outstanding as of March 31, 2022 861,001 $ 3.52 3.26 $ 804,040 Exercisable as of March 31, 2022 382,588 $ 3.04 1.88 $ 589,219 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $3.985 as of March 31, 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 March 31, 2022, in the amount of 861,001 2.92 1,503,518 |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary, Franklin Technology Inc. (“FTI”), with a majority voting interest of 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 March 31, 2023, or June 30, 2022. |
Non-controlling Interest in a Consolidated Subsidiary | Non-controlling Interest in a Consolidated Subsidiary As of March 31, 2023, the non-controlling interest was $ 1,528,569 41,036 1,569,605 41,036 121,924 |
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 Three Months Ended Nine Months Ended March 31, March 31, Net sales: 2023 2022 2023 2022 North America $ 11,720,894 $ 6,687,287 $ 28,778,479 $ 11,143,335 Caribbean and South America – – – 2,375 Asia 131,077 – 166,075 707,226 Totals $ 11,851,971 $ 6,687,287 $ 28,944,554 $ 11,852,936 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): March 31, 2023 June 30, 2022 North America $ 2,298,520 $ 1,374,747 Asia 180,709 81,261 Totals $ 2,479,229 $ 1,456,008 |
Use of Estimates | Use of 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. |
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. |
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, as of March 31, 2023, we did no |
Revenue Recognition | Revenue Recognition In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606) (ASU 2016-10), which amends and adds clarity to certain aspects of the guidance set forth in the original revenue standard (ASU 2014-09) related to identifying performance obligations and licensing. In May 2016, the FASB issued Accounting Standards Update No. 2016-11, Revenue Recognition (Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09. In May 2016 the FASB issued Accounting Standards Update No. 2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which provides narrow scope improvements and practical expedients related to ASU 2014-09. On July 1, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of June 30, 2018. Results for the reporting period beginning after July 1, 2018 are presented under Topic 606. We recorded no change in retained earnings as of July 1, 2018 as a result of the cumulative impact of adopting Topic 606. Contracts with Customers Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hotspot 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 nine months ended March 31, 2023 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 March 31, 2023 June 30, 2022 Accounts Receivable $ 7,218,350 $ 1,322,619 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended March 31, 2023, and June 30, 2022. Our contract liabilities are as follows: Schedule of contract liabilities March 31, 2023 June 30, 2022 Undelivered products $ 168,659 $ 371,624 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. In order 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 primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 99.9% of net sales for the nine months ended March 31, 2023. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 0.1% of net sales for the nine months ended March 31, 2023. The majority of our revenue recognized at a point in time is for the sale of hotspot router products. Revenue from these contracts is recognized when the customer is able to 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 March 31, 2023, 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 $ 229,884 564,143 79,284 238,109 |
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 is 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 3 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 March 31, 2023, and June 30, 2022, capitalized product development costs in progress were $ 196,875 187,343 555,018 1,601,998 21,677 475,366 |
Research and Development Costs | Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 1,052,672 1,050,180 2,999,207 3,179,221 |
Warranties | Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. |
Shipping and Handling Costs | Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the consolidated statements of comprehensive income, were $ 58,730 42,706 188,836 145,658 |
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. |
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 the control of the Company. We may write down our inventory value for potential obsolescence and excess inventory. As of March 31, 2023, and June 30, 2022, we have recorded inventory reserves in the amount of $ 557,155 |
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 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was deemed necessary as of March 31, 2023 or June 30, 2022. |
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. As of March 31, 2023, and June 30, 2022, we were not aware of any events or changes in circumstances 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. Compensation costs are recognized over the period that an employee provides service in exchange for the award, i.e. the 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. 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. As of March 31, 2023, we have no material unrecognized tax benefits. We recorded an income tax benefit of $ 578,664 563,181 238,852 1,126,860 573,314 558,631 238,852 1,171,345 |
Earnings per Share Attributable to Common Stockholders | Earnings per Share Attributable to Common Stockholders Earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. |
Concentrations | Concentrations 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 nine months ended March 31, 2023, sales to our two largest customers accounted for 64 27 0 85 49 26 45 0 For the nine months ended March 31, 2023, we purchased the majority of our wireless data products from three manufacturing companies located in Asia. If these manufacturing companies 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 the Company's revenue. For the nine months ended March 31, 2023, we purchased wireless data products from these manufacturers in the amount of $ 25,347,466 99 9,001,053 15,758,962 99 11,664,549 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. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Segment information by geographic areas | Segment information by geographic areas Three Months Ended Nine Months Ended March 31, March 31, Net sales: 2023 2022 2023 2022 North America $ 11,720,894 $ 6,687,287 $ 28,778,479 $ 11,143,335 Caribbean and South America – – – 2,375 Asia 131,077 – 166,075 707,226 Totals $ 11,851,971 $ 6,687,287 $ 28,944,554 $ 11,852,936 |
Long lived assets by geographic area | Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): March 31, 2023 June 30, 2022 North America $ 2,298,520 $ 1,374,747 Asia 180,709 81,261 Totals $ 2,479,229 $ 1,456,008 |
Schedule of receivables | Schedule of receivables March 31, 2023 June 30, 2022 Accounts Receivable $ 7,218,350 $ 1,322,619 |
Schedule of contract liabilities | Schedule of contract liabilities March 31, 2023 June 30, 2022 Undelivered products $ 168,659 $ 371,624 |
Useful lives of property and equipment | Useful lives of property and equipment Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
DEFINITE LIVED INTANGIBLE ASS_2
DEFINITE LIVED INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of definite lived intangible assets | Schedule of definite lived 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 – 196,875 – 196,875 Software 5 1.7 423,147 343,379 79,768 Patents 10 3.4 34,113 17,672 16,441 Certifications & licenses 3 1.3 3,736,825 1,660,503 2,076,322 Total as of March 31, 2023 $ 4,409,357 $ 2,039,951 $ 2,369,406 The definite lived intangible assets consisted of the following as of June 30, 2022: 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 |
Schedule of future amortization expense | Schedule of future amortization expense FY2023 FY2024 FY2025 FY2026 FY2027 Thereafter Total $ 255,366 $ 929,184 $ 709,018 $ 249,392 $ 11,131 $ 18,440 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Schedule of property and equipment March 31, 2023 June 30, 2022 Machinery and Commercial Equipment $ 25,178 $ 67,848 Office equipment 231,430 312,785 Molds 479,718 575,552 Vehicle 15,513 15,513 751,839 971,698 Less accumulated depreciation (642,016 ) (865,746 ) Total $ 109,823 $ 105,952 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Schedule of accrued liabilities March 31, 2023 June 30, 2022 Accrued payroll deductions owed to government entities $ 48,162 $ 55,387 Accrued salaries and incentives 250,000 – Accrued vacation 153,335 65,602 Accrued undelivered inventory – 140,000 Accrued commission for service providers 33,750 40,000 Accrued commission to a customer 248,160 288,306 Other accrued liabilities – 612 Total $ 733,407 $ 589,907 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | Schedule of earnings per share Three Months ended March 31, Nine Months Ended March 31, 2023 2022 2023 2022 Net income (loss) attributable to Parent Company $ 247,629 $ (770,818 ) $ (1,257,686 ) $ (3,060,020 ) Weighted-average shares of common stock outstanding: Basic shares outstanding 11,784,280 11,594,280 11,720,776 11,593,857 Dilutive effect of common stock equivalents arising from stock options – – – – Diluted shares outstanding 11,784,280 11,594,280 11,720,776 11,593,857 Basic (loss) income per share $ 0.02 $ (0.07 ) $ (0.11 ) $ (0.26 ) Diluted (loss) income per share $ 0.02 $ (0.07 ) $ (0.11 ) $ (0.26 ) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum rental payments for operating leases | Schedule of future minimum rental payments for operating leases Operating Lease Fiscal 2023 $ 80,483 Fiscal 2024 160,965 Total lease payments 241,448 Less imputed interest (3,976 ) Total $ 237,472 |
LONG-TERM INCENTIVE PLAN AWAR_2
LONG-TERM INCENTIVE PLAN AWARDS (Tables) | 9 Months Ended |
Mar. 31, 2023 | |
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, 2022 766,001 $ 3.85 3.37 $ 183,270 Granted – – – – Exercised (100,000 ) 1.34 – – Cancelled – – – – Forfeited or expired (17,000 ) 5.40 – – Outstanding as of March 31, 2023 649,001 $ 4.24 3.12 $ 595,200 Exercisable as of March 31, 2023 405,277 $ 4.63 2.85 $ 248,724 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $4.98 as of March 31, 2023, 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 March 31, 2022, in the amount of 649,001 3.35 724,837 A summary of the status of our stock options is presented below as of March 31, 2022: Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (3,999 ) 5.40 – – Cancelled – – – – Forfeited or expired (7,000 ) 5.40 – – Outstanding as of March 31, 2022 861,001 $ 3.52 3.26 $ 804,040 Exercisable as of March 31, 2022 382,588 $ 3.04 1.88 $ 589,219 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | |
Net sales | $ 11,851,971 | $ 6,687,287 | $ 28,944,554 | $ 11,852,936 |
North America [Member] | ||||
Net sales | 11,720,894 | 6,687,287 | 28,778,479 | 11,143,335 |
South America [Member] | ||||
Net sales | 0 | 0 | 0 | 2,375 |
Asia [Member] | ||||
Net sales | $ 131,077 | $ 0 | $ 166,075 | $ 707,226 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments Long-Lived Assets) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Long-lived assets, net (property and equipment and intangible assets) | $ 2,479,229 | $ 1,456,008 |
North America [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | 2,298,520 | 1,374,747 |
Asia [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | $ 180,709 | $ 81,261 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Receivables) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 7,218,350 | $ 1,322,619 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Contract liabilities) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Undelivered products | $ 168,659 | $ 371,624 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Useful lives) | 9 Months Ended |
Mar. 31, 2023 | |
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 Closing [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 Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | Jun. 30, 2022 | |
Product Information [Line Items] | |||||
Noncontrolling interest | $ 1,528,569 | $ 1,528,569 | $ 1,569,605 | ||
Increase (decrease) in noncontrolling interest | 41,036 | ||||
Gain (Loss) on Disposition of Stock in Subsidiary | 121,924 | ||||
Allowance for doubtful accounts | 0 | 0 | |||
Product development costs | 229,884 | $ 79,284 | 564,143 | $ 238,109 | |
Capitalized product development costs | 196,875 | 196,875 | 187,343 | ||
Product development costs incurred | 555,018 | 21,677 | 1,601,998 | 475,366 | |
Research and Development Expense | 1,052,672 | 1,050,180 | 2,999,207 | 3,179,221 | |
Shipping and handling expense | 1,463,433 | 1,390,719 | 4,039,035 | 3,493,328 | |
Inventory reserve | 557,155 | 557,155 | |||
Income tax benefits | 578,664 | 238,852 | 563,181 | 1,126,860 | |
Increase (decrease) in deferred tax asset | 573,314 | 238,852 | 558,631 | 1,171,345 | |
Cost of Revenue | 9,806,461 | 5,327,957 | 24,359,140 | 9,636,662 | |
Accounts Payable, Current | 9,307,258 | 9,307,258 | $ 8,143,305 | ||
Wireless Data Products [Member] | |||||
Product Information [Line Items] | |||||
Cost of Revenue | 25,347,466 | 15,758,962 | |||
Accounts Payable, Current | 9,001,053 | 11,664,549 | $ 9,001,053 | $ 11,664,549 | |
Cost of Goods and Service, Product and Service Benchmark [Member] | Supplier Concentration Risk [Member] | Wireless Data Products [Member] | |||||
Product Information [Line Items] | |||||
Concentration of credit risk | 99% | 99% | |||
Customer 1 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration of credit risk | 64% | 49% | |||
Customer 1 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration of credit risk | 0% | 45% | |||
Customer 2 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration of credit risk | 27% | 26% | |||
Customer 2 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | |||||
Product Information [Line Items] | |||||
Concentration of credit risk | 85% | 0% | |||
Shipping and Handling [Member] | |||||
Product Information [Line Items] | |||||
Shipping and handling expense | $ 58,730 | $ 42,706 | $ 188,836 | $ 145,658 | |
Franklin Technology [Member] | |||||
Product Information [Line Items] | |||||
Noncontrolling interest percentage | 66.30% | 66.30% | |||
Noncontrolling Interests [Member] | |||||
Product Information [Line Items] | |||||
Noncontrolling interest percentage | 33.70% |
DEFINITE LIVED INTANGIBLE ASS_3
DEFINITE LIVED INTANGIBLE ASSETS (Details - Intangible assets activity) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Indefinite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | $ 4,409,357 | $ 2,794,789 |
Less Accumulated Amortization | 2,039,951 | 1,444,733 |
Net Intangible Assets | $ 2,369,406 | $ 1,350,056 |
Complete Technology [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Gross Intangible Assets | $ 18,397 | $ 18,397 |
Less Accumulated Amortization | 18,397 | 18,397 |
Net Intangible Assets | 0 | 0 |
Technology In Progess [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Gross Intangible Assets | 196,875 | 187,343 |
Less Accumulated Amortization | 0 | 0 |
Net Intangible Assets | $ 196,875 | $ 187,343 |
Computer Software, Intangible Asset [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 5 years | 5 years |
Gross Intangible Assets | $ 423,147 | $ 423,147 |
Less Accumulated Amortization | 343,379 | 314,855 |
Net Intangible Assets | $ 79,768 | $ 108,292 |
Average Remaining Life | 1 year 8 months 12 days | 2 years |
Patent [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 10 years | 10 years |
Gross Intangible Assets | $ 34,113 | $ 21,543 |
Less Accumulated Amortization | 17,672 | 15,122 |
Net Intangible Assets | $ 16,441 | $ 6,421 |
Average Remaining Life | 3 years 4 months 24 days | 2 years 6 months |
Certification And Licenses [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Gross Intangible Assets | $ 3,736,825 | $ 2,144,359 |
Less Accumulated Amortization | 1,660,503 | 1,096,359 |
Net Intangible Assets | $ 2,076,322 | $ 1,048,000 |
Average Remaining Life | 1 year 3 months 18 days | 1 year 1 month 6 days |
DEFINITE LIVED INTANGIBLE ASS_4
DEFINITE LIVED INTANGIBLE ASSETS (Details - Amortization Expenses) | Mar. 31, 2023 USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
FYE 2023 | $ 255,366 |
FYE 2024 | 929,184 |
FYE 2025 | 709,018 |
FYE 2026 | 249,392 |
FYE 2027 | 11,131 |
Thereafter | $ 18,440 |
DEFINITE LIVED INTANGIBLE ASS_5
DEFINITE LIVED INTANGIBLE ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization of Intangible Assets | $ 234,325 | $ 170,406 | $ 595,218 | $ 396,535 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 751,839 | $ 971,698 |
Less accumulated depreciation | (642,016) | (865,746) |
Total | 109,823 | 105,952 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 25,178 | 67,848 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 231,430 | 312,785 |
Tools, Dies and Molds [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 479,718 | 575,552 |
Vehicle [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 15,513 | $ 15,513 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation | $ 11,316 | $ 22,465 | $ 41,341 | $ 68,105 |
Disposed of depreciated property ad equipment | $ 265,071 | $ 4,174 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Mar. 31, 2023 | Jun. 30, 2022 |
Payables and Accruals [Abstract] | ||
Accrued payroll deductions owed to government entities | $ 48,162 | $ 55,387 |
Accrued salaries and incentives | 250,000 | 0 |
Accrued vacation | 153,335 | 65,602 |
Accrued undelivered inventory | 0 | 140,000 |
Accrued commission for service providers | 33,750 | 40,000 |
Accrued commission to a customer | 248,160 | 288,306 |
Other accrued liabilities | 0 | 612 |
Total | $ 733,407 | $ 589,907 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) attributable to Parent Company | $ 247,629 | $ (770,818) | $ (1,257,686) | $ (3,060,020) |
Weighted-average shares of common stock outstanding: | ||||
Basic shares outstanding | 11,784,280 | 11,594,280 | 11,720,776 | 11,593,857 |
Dilutive effect of common stock equivalents arising from stock options | 0 | 0 | 0 | 0 |
Diluted shares outstanding | 11,784,280 | 11,594,280 | 11,720,776 | 11,593,857 |
Basic (loss) income per share | $ 0.02 | $ (0.07) | $ (0.11) | $ (0.26) |
Diluted (loss) income per share | $ 0.02 | $ (0.07) | $ (0.11) | $ (0.26) |
EARNINGS (LOSS) PER SHARE (Deta
EARNINGS (LOSS) PER SHARE (Details Narrative) - shares | 9 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Earnings Per Share [Abstract] | ||
Anti-dilutive shares excluded from EPS | 649,001 | 861,001 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liabilities) | Mar. 31, 2023 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Fiscal 2023 | $ 80,483 |
Fiscal 2024 | 160,965 |
Total lease payments | 241,448 |
Less imputed interest | (3,976) |
Total | $ 237,472 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||||
Sep. 09, 2015 | Mar. 31, 2023 | Mar. 31, 2022 | Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2020 | Jun. 30, 2020 | |
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | |||||||
Monthly rent | $ 23,115 | ||||||
Rent Expense | $ 2,106 | $ 2,150 | $ 6,057 | $ 6,562 | |||
Quanta [Member] | |||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | |||||||
Advances on Inventory Purchases | $ 100,000 | ||||||
Prepaid expense | $ 149,580 | $ 49,580 | |||||
Administrative Office San Diego C A [Member] | |||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | |||||||
Rent Expense | 77,263 | 77,263 | 231,789 | 231,789 | |||
Administrative Office Korea [Member] | |||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | |||||||
Rent Expense | $ 32,100 | $ 32,100 | $ 96,300 | $ 96,300 | |||
Operating lease discount rate | 4% | 4% |
LONG-TERM INCENTIVE PLAN AWAR_3
LONG-TERM INCENTIVE PLAN AWARDS (Details - Option Activity) - Equity Option [Member] - USD ($) | 9 Months Ended | 12 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Jun. 30, 2022 | Jun. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
Number of Options Outstanding, Beginning | 766,001 | 484,000 | 484,000 | |
Weighted Average Exercise Price Outstanding, Beginning | $ 3.85 | $ 3.67 | $ 3.67 | |
Weighted Average Remaining Contractual Life (in years) Exercisable | 3 years 1 month 13 days | 3 years 3 months 3 days | 3 years 4 months 13 days | 2 years 9 months 29 days |
Aggregate Intrinsic Value Outstanding, Beginning | $ 183,270 | $ 2,662,830 | $ 2,662,830 | |
Number of Options Granted | 0 | 388,000 | ||
Weighted Average Exercise Price Granted | $ 3.38 | |||
Number of Options Exercised | (100,000) | (3,999) | ||
Weighted Average Exercise Price Exercised | $ 1.34 | $ 5.40 | ||
Number of Options Cancelled | 0 | 0 | ||
Weighted Average Exercise Price Canceled | $ 0 | $ 0 | ||
Number of Options Forfeited or expired | (17,000) | (7,000) | ||
Weighted Average Exercise Price Forfeited or expired | $ 5.40 | $ 5.40 | ||
Number of Options Outstanding, Ending | 649,001 | 861,001 | 766,001 | 484,000 |
Weighted Average Exercise Price Outstanding, Ending | $ 4.24 | $ 3.52 | $ 3.85 | $ 3.67 |
Aggregate Intrinsic Value Outstanding, Ending | $ 595,200 | $ 804,040 | $ 183,270 | $ 2,662,830 |
Number of Options Exercisable | 405,277 | 382,588 | ||
Weighted Average Exercise Price Exercisable | $ 4.63 | $ 3.04 | ||
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 10 months 6 days | 1 year 10 months 17 days | ||
Aggregate Intrinsic Value Exercisable | $ 248,724 | $ 589,219 |
LONG-TERM INCENTIVE PLAN AWAR_4
LONG-TERM INCENTIVE PLAN AWARDS (Details Narrative) - USD ($) | 9 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Jul. 31, 2020 | |
Share-Based Payment Arrangement [Abstract] | |||
Common stock shares | 800,000 | ||
Share based compensation expense | $ 536,922 | $ 373,612 | |
Weighted average grant-date fair value of stock options | 649,001 | 861,001 | |
Weighted average grant-date fair value of stock options, per share price | $ 3.35 | $ 2.92 | |
Unrecognized compensation cost related to non-vested options | $ 724,837 | $ 1,503,518 |