Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2021 | Sep. 28, 2021 | Dec. 31, 2020 | |
Long-lived assets, net (property and equipment and intangible assets) | |||
Entity Registrant Name | FRANKLIN WIRELESS CORP | ||
Entity Central Index Key | 0000722572 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 2021 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --06-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Incorporation, State or Country Code | NV | ||
Entity File Number | 001-14891 | ||
Entity Interactive Data Current | Yes | ||
Entity Shell Company | false | ||
Entity Public Float | $ 137,599,000 | ||
Entity Common Stock, Shares Outstanding | 11,590,281 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 45,796,006 | $ 28,161,644 |
Certificates of deposit account | 5,386,034 | 5,381,918 |
Accounts receivable | 2,542,429 | 15,973,537 |
Other receivables, net | 50,040 | 61,090 |
Inventories, net | 975,519 | 11,783,403 |
Prepaid expenses and other current assets | 44,984 | 21,588 |
Advance payments to vendors | 40,630 | 27,838 |
Total current assets | 54,835,642 | 61,411,018 |
Property and equipment, net | 151,610 | 220,889 |
Intangible assets, net | 1,246,750 | 1,125,152 |
Deferred tax assets, non-current | 387,548 | 938,188 |
Goodwill | 273,285 | 273,285 |
Right of use assets | 753,263 | 1,139,670 |
Other assets | 140,539 | 283,369 |
TOTAL ASSETS | 57,788,637 | 65,391,571 |
Current liabilities: | ||
Accounts payable | 9,718,989 | 42,083,255 |
Income tax payable | 333,503 | 34,713 |
Accrued liabilities | 785,525 | 466,021 |
Lease liabilities, current | 317,519 | 400,508 |
Total current liabilities | 11,155,536 | 42,984,497 |
Lease liabilities, non-current | 467,937 | 784,233 |
Notes payable, payroll protection plan loan | 0 | 487,300 |
Total liabilities | 11,623,473 | 44,256,030 |
Commitments and contingencies (Note 8) | ||
Parent Company stockholders' equity: | ||
Preferred stock, par value $0.001 per share, authorized 10,000,000 shares; No preferred stock issued and outstanding as of June 30, 2021, and 2020 | 0 | 0 |
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,590,281 and 10,605,912 shares issued and outstanding as of June 30, 2021, and 2020, respectively | 14,069 | 14,007 |
Additional paid-in capital | 12,972,234 | 7,475,365 |
Retained earnings | 35,727,094 | 18,028,059 |
Treasury stock, 2,549,208 and 3,472,286 shares as of June 30, 2021, and 2020, respectively | (3,554,893) | (4,513,479) |
Accumulated other comprehensive loss | (472,502) | (650,426) |
Total Parent Company stockholders' equity | 44,686,002 | 20,353,526 |
Non-controlling interests | 1,479,162 | 782,015 |
Total stockholders' equity | 46,165,164 | 21,135,541 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 57,788,637 | $ 65,391,571 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2021 | Jun. 30, 2020 |
Statement of Financial Position [Abstract] | ||
Preferred stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock Authorized | 10,000,000 | 10,000,000 |
Preferred stock Issued | 0 | 0 |
Preferred stock Outstanding | 0 | 0 |
Common stock par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common stock Authorized | 50,000,000 | 50,000,000 |
Common stock Issued | 11,590,281 | 10,605,912 |
Common stock Outstanding | 11,590,281 | 10,605,912 |
Treasury stock shares | 2,549,208 | 3,472,286 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Income Statement [Abstract] | ||
Net sales | $ 184,115,345 | $ 75,072,298 |
Cost of goods sold | 151,651,324 | 60,547,813 |
Gross profit | 32,464,021 | 14,524,485 |
Operating expenses: | ||
Selling, general, and administrative | 5,077,848 | 3,699,859 |
Research and development | 4,567,863 | 3,746,502 |
Total operating expenses | 9,645,711 | 7,446,361 |
Income from operations | 22,818,310 | 7,078,124 |
Other income, net: | ||
Interest income | 8,789 | 159,749 |
Income from governmental subsidy | 147,166 | 16,282 |
Gain from the forgiveness of payroll protection plan loan | 487,300 | 0 |
Other income (expense), net | (26,088) | 44,733 |
Total other income, net | 617,167 | 220,764 |
Income before provision for income taxes | 23,435,477 | 7,298,888 |
Income tax provision | 5,039,295 | 1,380,301 |
Net income | 18,396,182 | 5,918,587 |
Less: non-controlling interests in net income of subsidiary at 35.8% | 0 | 189,105 |
Less non-controlling interests in net income of subsidiary at 33.7% | 697,147 | 178,864 |
Net income attributable to Parent Company | $ 17,699,035 | $ 5,550,618 |
Basic earnings per share attributable to Parent Company stockholders | $ 1.56 | $ 0.52 |
Diluted earnings per share attributable to Parent Company stockholders | $ 1.53 | $ 0.52 |
Weighted average common shares outstanding - basic | 11,350,946 | 10,581,499 |
Weighted average common shares outstanding - diluted | 11,592,901 | 10,715,979 |
Comprehensive income | ||
Net income | $ 18,396,182 | $ 5,918,587 |
Translation adjustments | 177,924 | (15,624) |
Comprehensive income | 18,574,106 | 5,902,963 |
Less: comprehensive income attributable to non-controlling interest | 697,147 | 367,969 |
Comprehensive income attributable to controlling interest | $ 17,876,959 | $ 5,534,994 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Common Stock | Additional Paid-In Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Noncontrolling Interest | Total |
Beginning balace, shares at Jun. 30, 2019 | 10,570,203 | ||||||
Beginning balace, value at Jun. 30, 2019 | $ 13,972 | $ 7,442,272 | $ 12,477,441 | $ (4,513,479) | $ (634,802) | $ 489,046 | $ 15,274,450 |
Net loss attributable to Parent Company | 5,550,618 | 5,550,618 | |||||
Foreign exchange translation | (15,624) | (15,624) | |||||
Issuance of stock related to stock options exercised, shares | 35,709 | ||||||
Issuance of stock related to stock options exercised, value | $ 35 | 33,093 | 33,128 | ||||
Comprehensive income (loss) attributable to non-controlling interest | 367,969 | 367,969 | |||||
Purchases of shares of a subsidiary | (75,000) | (75,000) | |||||
Stock based compensation | 0 | ||||||
Ending balance, shares at Jun. 30, 2020 | 10,605,912 | ||||||
Ending balance, value at Jun. 30, 2020 | $ 14,007 | 7,475,365 | 18,028,059 | (4,513,479) | (650,426) | 782,015 | 21,135,541 |
Net loss attributable to Parent Company | 17,699,035 | 17,699,035 | |||||
Foreign exchange translation | 177,924 | 177,924 | |||||
Issuance of stock related to stock options exercised, shares | 61,291 | ||||||
Issuance of stock related to stock options exercised, value | $ 62 | 74,689 | 74,751 | ||||
Comprehensive income (loss) attributable to non-controlling interest | 697,147 | 697,147 | |||||
Sales of treasury stock, shares | 923,078 | ||||||
Sales of treasury stock | 5,041,422 | 958,586 | 6,000,008 | ||||
Stock based compensation | 380,758 | 380,758 | |||||
Ending balance, shares at Jun. 30, 2021 | 11,590,281 | ||||||
Ending balance, value at Jun. 30, 2021 | $ 14,069 | $ 12,972,234 | $ 35,727,094 | $ (3,554,893) | $ (472,502) | $ 1,479,162 | $ 46,165,164 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 18,396,182 | $ 5,918,587 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 90,322 | 92,736 |
Amortization of intangible assets | 435,571 | 482,792 |
Stock based compensation | 380,758 | 0 |
Bad debt expense | 338,185 | 0 |
Forgiveness of payroll protection plan loan | (487,300) | 0 |
Disposal of intangible assets | 140,192 | 38,498 |
Amortization of right of use assets | 386,407 | 361,533 |
Deferred tax (benefit) | 550,640 | 1,344,787 |
Increase (decrease) in cash due to change in: | ||
Accounts receivable | 13,103,973 | (11,855,351) |
Inventories | 10,807,884 | (10,730,663) |
Prepaid expenses and other current assets | (23,396) | 6,454 |
Advance payments to vendors | (12,792) | 23,502 |
Other assets | 142,830 | (25,272) |
Accounts payable | (32,364,266) | 36,410,741 |
Income tax payable | 298,790 | 34,059 |
Lease liabilities | (399,285) | (316,462) |
Accrued liabilities | 319,504 | 218,363 |
Net cash provided by operating activities | 12,104,199 | 22,004,304 |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of short-term investments | (4,116) | (1,692) |
Purchases of shares of a subsidiary | 0 | (75,000) |
Purchases of property and equipment | (21,043) | (181,746) |
Payments for capitalized product development costs | (694,909) | (343,360) |
Purchases of intangible assets | (2,452) | (193,171) |
Net cash used in investing activities | (722,520) | (794,969) |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Proceeds of payroll protection plan loan | 0 | 487,300 |
Sales of common stock sold from treasury stock | 6,000,008 | 0 |
Cash received from exercise of stock options | 74,751 | 33,128 |
Net cash provided by financing activities | 6,074,759 | 520,428 |
Effect of foreign currency translation | 177,924 | (15,624) |
Net increase in cash and cash equivalents | 17,634,362 | 21,714,139 |
Cash and cash equivalents, beginning of year | 28,161,644 | 6,447,505 |
Cash and cash equivalents, end of year | 45,796,006 | 28,161,644 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the periods for: Income taxes | (4,124,485) | (800) |
Non-cash investing and financing activities: | ||
Initial adoption of right to use assets | 0 | 1,501,203 |
Initial adoption of lease liabilities | $ 0 | $ 1,501,203 |
1. BUSINESS OVERVIEW
1. BUSINESS OVERVIEW | 12 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS OVERVIEW | NOTE 1 - BUSINESS OVERVIEW We are a leading provider of intelligent wireless solutions including mobile hotspots, routers, trackers, and other devices. Our designs integrate innovative hardware and software enabling machine-to-machine (M2M) applications and the Internet of Things (IoT). Our M2M and IoT solutions include embedded modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications based on 5G/4G wireless technology. We have a majority ownership position in Franklin Technology Inc. ("FTI"), a research and development company located in Seoul, South Korea. FTI primarily provides design and development services to us for our wireless products. Our products are generally marketed and sold directly to wireless operators, and indirectly through strategic partners and distributors. Our global customer base extends primarily from North America, the Caribbean and South America, and Asia. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of 66.3% (33.7% is owned by non-controlling interests) as of June 30, 2021, and 2020. For the year ended June 30, 2020, the increase in the majority voting interest in percentage from 64.2% to 66.3% was due to the purchase by the Company of 43,333 shares of the subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders. The purchase decreased the non-controlling interests’ ownership percentage from 35.8% to 33.7%. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests. As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2021, or June 30, 2020. Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2021, the non-controlling interest was $1,479,162, which represents a $697,147 increase from $782,015 as of June 30, 2020. The increase in the non-controlling interest of $697,147 was from income in the subsidiary of $2,071,302 incurred for the year ended June 30, 2021. 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: Fiscal Year Ended June 30, Net sales: 2021 2020 North America $ 183,771,146 $ 74,839,778 Caribbean and South America 17,500 – Asia 326,699 232,520 Totals $ 184,115,345 $ 75,072,298 Long-lived assets, net (property and equipment and intangible assets): June 30, 2021 June 30, 2020 United States $ 1,349,320 $ 1,302,353 Asia 49,040 43,688 Totals $ 1,398,360 $ 1,346,041 Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit (see Note 3). Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of June 30, 2021, and June 30, 2020. Revenue Recognition Contracts with Customers Revenue from sales of products and services is derived from contracts with customers. The products and services covered by contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended June 30, 2021, 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: June 30, 2021 June 30, 2020 Accounts Receivable $ 2,542,429 $ 15,973,537 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2021, and June 30, 2020. Our contract liabilities are as follows: June 30, 2021 June 30, 2020 Undelivered products $ 140,000 $ 140,000 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. 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 satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2021. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2021. Most of our revenue recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2021, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of goods sold also includes amortization expenses of approximately $360,000 and $405,000 associated with capitalized product development costs associated with complete technology for the years ended June 30, 2021, and 2020, respectively. Capitalized Product Development Costs Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product development that are capitalized once technological feasibility is determined (noted as technology in progress in the Intangible Assets table in Note 2 to Notes to Consolidated Financial Statements) include related licenses, certification costs, payroll, employee benefits, and other headcount-related expenses associated with product development. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved. Once the products are available for general release to our customers, we cease capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers. As of June 30, 2021, and June 30, 2020, capitalized product development costs in progress were $602,388 and $140,192, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the year ended June 30, 2021, we incurred $694,909 in capitalized product development costs and disposed a technology in progress in the amount of $140,192 as we identified it has the great unlikelihood of economic success based on its performance test results, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income. Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $4,567,863 and $3,746,502 for the years ended June 30, 2021, and 2020, respectively. Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the statements of comprehensive income, were $723,617 and $642,930 for the years ended June 30, 2021, and 2020, respectively. Cash and Cash Equivalents For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. 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 of 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 our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2021, and 2020, we have recorded inventory reserves in the amount of $0 and $399,437, respectively, for inventories that we have identified as obsolete or slow-moving. Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and were accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was recognized during the years ended June 30, 2021, and 2020. Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 years 3.0 years 399,811 268,495 131,316 Patents 10 years 3.9 years 21,105 12,951 8,154 Certifications & licenses 3 years 1.6 years 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 The definite lived intangible assets consisted of the following as of June 30, 2020: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 1.8 years 18,397 7,666 10,731 Technology in progress Not Applicable - 140,192 – 140,192 Software 5 years 2.9 years 525,930 338,593 187,337 Patents 10 years 7.0 years 20,734 10,821 9,913 Certifications & licenses 3 years 1.9 years 4,078,310 3,301,331 776,979 Total as of June 30, 2020 $ 4,783,563 $ 3,658,411 $ 1,125,152 Amortization expense recognized during the years ended June 30, 2021, and 2020 was $435,571 and $482,792, respectively. For the year ended June 30, 2021, FY2022 FY2023 FY2024 FY2025 FY2026 Thereafter Total $ 528,655 $ 341,133 $ 198,944 $ 98,521 $ 25,442 $ 54,055 Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 31, 2021, that would indicate that the long-lived assets are impaired. Stock-based Compensation The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. Stock-based compensation is recognized on a straight-line basis over the award’s vesting period. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles within the Company. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. Earnings per Share Attributable to Common Stockholders Basic earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. Concentrations of Credit Risk We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods presented. Substantially all of our revenues are derived from sales of wireless data products. Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively. A significant portion of our revenue is derived from a small number of customers. For the year ended June 30, 2021, net sales to our two largest customers represented 63% and 30% of our consolidated net sales, respectively, and 0% and 84% of our accounts receivable balance as of June 30, 2021. For the year ended June 30, 2020, net sales to our two largest customers represented 46% and 36% of our consolidated net sales, respectively, and 21% and 72% of our accounts receivable balance as of June 30, 2020. No other customer accounted for more than ten percent of total net sales. For the year ended June 30, 2021, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If they were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact our revenue. For the year ended June 30, 2021, we purchased wireless data products from these suppliers in the amount of $138,516,044, or 99% of total purchases, and had related accounts payable of $9,096,451 as of June 30, 2021. For the year ended June 30, 2020, we purchased wireless data products from these suppliers in the amount of $67,179,379, or 94% of total purchases, and had related accounts payable of $41,181,840, as of June 30, 2020. We maintain our cash accounts with established commercial banks. Such cash deposits exceed the Federal Deposit Insurance Corporation insured limit of $250,000 for each financial institution. However, we do not anticipate any losses on excess deposits. Recently Issued Accounting Pronouncements In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated other comprehensive income to retained earnings. We do not expect that the adoption of this update will impact the Company’s consolidated financial statements. |
3. FAIR VALUE MEASUREMENTS
3. FAIR VALUE MEASUREMENTS | 12 Months Ended |
Jun. 30, 2021 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 3 - FAIR VALUE MEASUREMENTS Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. • Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 inputs are unobservable inputs for the asset or liability. The carrying values of the Company’s financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and debt, are calculated based on their approximate their fair values due to the short period of time to maturity or repayment. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds and certificates of deposit. |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: June 30, 2021 June 30, 2020 Machinery and Commercial Equipment $ 67,044 $ 364,054 Office equipment 291,191 420,941 Molds 575,552 940,165 933,787 1,725,160 Less accumulated depreciation (782,177 ) (1,504,271 ) Total $ 151,610 $ 220,889 Depreciation expense associated with property and equipment was $90,322 and $92,736 for the fiscal years ended June 30, 2021, and 2020, respectively, and is included in selling, general, and administrative expenses on the consolidated statements of comprehensive income. For the year ended June 30, 2021, we disposed the fully depreciated property ad equipment in the amount of $812,416. |
5. ACCRUED LIABILITIES
5. ACCRUED LIABILITIES | 12 Months Ended |
Jun. 30, 2021 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | NOTE 5 - ACCRUED LIABILITIES Accrued liabilities consisted of the following as of: June 30, 2021 June 30, 2020 Accrued payroll deductions owed to government entities $ 66,307 $ 39,380 Accrued salaries and bonuses – 129,000 Accrued vacation 73,900 58,467 Accrued undelivered inventory 140,000 140,000 Accrued commission for service providers 52,500 98,500 Accrued commission to a customer 451,898 – Other accrued liabilities 920 674 Total $ 785,525 $ 466,021 |
6. INCOME TAXES
6. INCOME TAXES | 12 Months Ended |
Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 - INCOME TAXES Income tax provision for the years ended June 30, 2021, and 2020 consists of the following: Year Ended June 30, 2021 2020 Current income tax expense (benefit): Federal $ 4,217,883 $ 33,039 State (525 ) 2,475 Foreign 256,636 – 4,473,994 35,514 Deferred income tax expense (benefit): Federal 142,242 1,323,265 State 155,410 (293,773 ) Foreign 267,649 315,295 565,301 1,344,787 Provision for income taxes $ 5,039,295 $ 1,380,301 The provisions for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows: Year Ended June 30, 2021 2020 Federal income tax, at statutory rate of 21% applied to earnings before income taxes and extraordinary items $ 4,929,611 $ 1,533,352 State tax, net of federal tax benefit 125,237 128,406 ) Nondeductible expenses 22,688 (45,345 ) R&D credits (56,950 ) (36,841 ) Global intangible low-taxed income 95,419 31,060 Foreign rate difference 39,146 74,256 Other (13,523 ) 53,943 Forgiveness of payroll protection plan loan (102,333 ) – Change in valuation allowance – (358,530 ) Provision (benefit) for income taxes $ 5,039,295 $ 1,380,301 Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows: June 30, 2021 June 30, 2020 Deferred tax asset: Net operating losses $ 170,649 $ 507,402 State tax – 520 Lease accounting 7,035 10,078 Intangibles 84,831 38,154 Tax credits 133,451 346,091 Inventory reserve 30,591 103,450 Other, net 12,693 38,085 Total deferred tax assets 439,250 1,043,780 Deferred tax liabilities: Deferred state taxes (29,056 ) (61,692 ) State tax (110 ) – Fixed asset (22,536 ) (43,900 ) Total deferred tax liabilities (51,702 ) (105,592 ) Less valuation allowance – – Net deferred tax asset $ 387,548 $ 938,188 Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We have evaluated the available evidence supporting the realization of our gross deferred tax assets, including the amount and timing of forecasted future taxable income. Management determined it is more likely than not that the federal deferred tax assets will be fully realized, and no valuation allowance is necessary as of June 30, 2021 or 2020. As of June 30, 2021, we have federal net operating loss carryforwards of approximately $0.8 million and no state net operating loss carryforwards. Under the Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017, the federal net operating loss recognized on or after January 1, 2018 will carry forward indefinitely. The federal net operating loss of $0.8 million, which recognized on or before December 31, 2017, will expire through 2035, and the federal net operating loss recognized on or after January 1, 2018, which will carry forward indefinitely, is 0. The utilization of net operating loss carryforwards may be subject to limitations under provisions of the Internal Revenue Code Section 382 and similar state provisions. We apply the provisions of ASC 740 related to accounting for uncertain tax positions, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Under this provision, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Tax benefits of an uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained based on technical merits. A reconciliation of the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax assets, is as follows: Balance as of June 30, 2019 $ 275,262 Gross increase 21,570 Balance as of June 30, 2020 296,832 Gross increase 38,427 Balance as of June 30, 2021 $ 335,259 We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months. ASC 740 requires us to accrue interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to be paid. Our policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. We have not recorded any interest or penalties as the liability associated with the unrecognized tax benefits is immaterial. We are subject to taxation in the U.S., and various state and foreign jurisdictions. |
7. EARNINGS PER SHARE
7. EARNINGS PER SHARE | 12 Months Ended |
Jun. 30, 2021 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | NOTE 7 - EARNINGS PER SHARE We report earnings per share in accordance with ASC 260, “Earnings Per Share.” Basic earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options by using the treasury stock method that the proceeds we receive from an in-the-money option exercise are used towards repurchasing common shares in the market. For the years ended June 30, 2021, and 2020, we have calculated the diluted effect of common stocks arising from 484,000 and 251,291 stock options, respectively. The weighted average number of shares outstanding used to compute earnings per share is as follows: Year Ended June 30, 2021 2020 Net income attributable to Parent Company $ 17,699,035 $ 5,550,618 Weighted-average shares of common stock outstanding: Basic 11,350,946 10,581,499 Dilutive effect of common stock equivalents arising from stock options 241,955 134,480 Diluted Outstanding shares 11,592,901 10,715,979 Basic earnings per share attributable to Parent Company stockholders $ 1.56 $ 0.52 Diluted earnings per share attributable to Parent Company stockholders $ 1.53 $ 0.52 |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 - COMMITMENTS AND CONTINGENCIES Leases On September 9, 2015, we signed a lease for new office space consisting of approximately 12,775 square feet, located in San Diego, California, at a monthly rent of $25,754, which commenced on October 28, 2015. In addition to monthly rent, the new lease includes payment for certain common area costs. The term of the lease for the new office space was four years from the lease commencement date and was then extended at a monthly rent of $25,752, by an additional fifty months to December 31, 2023. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs. Our Korea-based subsidiary, FTI leases approximately 10,000 square feet of office space, located in Seoul, Korea, at a monthly rent of approximately $8,000 and the additional office space consisting of approximately 2,682 square feet, also located in Seoul, Korea, at a monthly rent of approximately $2,700 that expired on August 31, 2021, and extended by an additional twelve months to August 31, 2022. We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2021, and extended by an additional twelve months to September 4, 2022. Rent expense for the years ended June 30, 2021, and 2020 was $446,614 and $435,683, respectively. Future minimum payments under operating leases are as follows: Payments due by June 30, 2022 2023 2024 Total Administrative office, San Diego, CA $ 321,930 $ 321,930 $ 160,965 $ 804,825 Administrative office, Korea 20,849 – – 20,849 Total Obligations $ 342,779 $ 321,930 $ 160,965 $ 825,674 As of June 30, 2021, we used discount rates of 4.0% and 2.8% in determining our operating lease liabilities for the office spaces in San Diego, California, and South Korea, respectively. These rates represented our incremental borrowing rates at that time. Short-term leases with initial terms of twelve months or less are not capitalized. Both our San Diego and Korean office leases were extensions of previous leases and neither contains any further extension provisions. Future minimum payments under operating leases are as follows: Operating Leases Fiscal 2022 $ 342,779 Fiscal 2023 321,930 Fiscal 2024 160,965 Total lease payments 825,674 Less imputed interest (40,218 ) Total $ 785,456 Litigation We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Management does not expect any material adverse outcome. Verizon Jetpack Recall On April 8 th 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 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 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. We are continuing to investigate the alleged device failures. At the time of the recall announcement, only two of the devices involved in the 15 alleged incidents had been physically inspected by Verizon. We have not yet had the opportunity to inspect any of these devices, but we have retained an expert to assist in the process. We are actively discussing ways to resolve the consequences of the recall, including the costs to Verizon of conducting the recall, impacts on our manufacturing partners and our future business relationship with Verizon. Our suppliers and component manufactures, as well as relevant insurance carriers have been notified and are also participating. Future Impact on Financial Performance We need to resolve the recall to ensure future sales to Verizon. Discussions are ongoing but no agreement for future products have been reached at this time. We are striving to avoid litigation arising from the recall and have not received court filings from any of the parties involved at this time. 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 allow us to estimate the ultimate cost of potential future litigation. Although the recall notice identified 2.5 million devices, we are unable to predict the number of units that may be returned or the costs and damages that may be alleged in the future. Shareholder Litigation We have been made aware of legal actions alleging, among other things, that we had prior knowledge that the recall was likely and did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we intend to vigorously defend against these claims. Swing Profits Litigation A legal action was filed against Franklin, as a nominal defendant, on or about July 22, 2021, claiming that OC Kim violated rule 16b of the Securities Act for taking swing profits from a sale and purchase of shares in violation of the Act. We believe the allegations are not supported by the facts and we intend to vigorously defend against these claims. 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 for the right to call on inventory and recorded an additional $49,580 as a prepaid expense related to pricing adjustments, which has been agreed with Quanta for other products to ensure demand is met, and for the quarter ended December 31, 2020, the prepaid expense of $149,580 has been recorded as a cost of goods sold. As of June 30, 2021, there is a reasonable possibility we may incur a loss; however, the amount is not estimable at this time. On January 25 th COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, we are deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, we reduced the scope of our operations and, where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While we expect this situation may increase demand for its products, the related impact cannot be reasonably estimated at this time. Change of Control Agreements On October 1, 2020, we entered into Change of Control Agreements with OC Kim, our President, and Yun J. (David) Lee, our Chief Operating Officer. Each Change of Control Agreement provides for a lump sum payment to the officer in case we experience a change of control. The term includes the acquisition of our Common Stock resulting in one person or company owning more than 50% of the outstanding shares, a significant change in the composition of the Board of Directors during any 12-month period, a reorganization, merger, consolidation or similar transaction resulting in the transfer of ownership of more than fifty percent (50%) of our outstanding Common Stock, or a liquidation or dissolution or sale of substantially all of our assets. The Change of Control Agreement with Mr. Kim calls for a payment of $5 million upon a change of control, and the agreement with Mr. Lee calls for a payment of $2 million upon a change of control. International Tariffs We believe that our products are currently exempt from international tariffs upon import from our manufacturers to the United States. If this were to change at any point, a tariff of 10%-25% of the purchase price would be imposed. If such tariffs are imposed, they could have a materially adverse effect on sales and operating results. Customer Indemnification Under purchase orders and contracts for the sale of our products we may provide indemnification to our customers for potential intellectual property infringement claims for which we may have no corresponding recourse against our third-party licensors. This potential liability, if realized, could materially adversely affect our business, operating results and financial condition. |
9. LONG-TERM INCENTIVE PLAN AWA
9. LONG-TERM INCENTIVE PLAN AWARDS | 12 Months Ended |
Jun. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
LONG-TERM INCENTIVE PLAN AWARDS | NOTE 9 - LONG-TERM INCENTIVE PLAN AWARDS We apply the provisions of ASC 718, “Compensation - Stock Compensation,” to all of our stock-based compensation awards, and use the Black-Scholes option pricing model to value stock options. Under this application, we record compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award, i.e. the vesting period. In 2009, we adopted the Stock Incentive Plan (“2009 Plan”), which provided for the grant of incentive stock options and non-qualified stock options to our employees and directors. Options granted under the 2009 Plan generally have a term of ten years and generally vest and become exercisable at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant dates. Historically, some stock option grants have included shorter vesting periods ranging from one to two years. In July of 2020, the Board of Directors adopted the 2020 Franklin Wireless Corp. Stock Option Plan, which covers 800,000 shares of Common Stock. The Plan provide for the grant of incentive stock options, non-qualified stock options and restricted stock to our employees, directors, and independent contractors. These options will have such vesting or other provisions as may be established by the Board of Directors at the time of each grant. 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 $380,758 and $0 compensation expenses recorded under this method for the years ended June 30, 2021, and 2020, respectively. A summary of the status of our stock options is presented below: Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2019 299,000 $ 1.04 2.75 $ 241,220 Granted – – – – Exercised (35,709 ) 0.93 – – Cancelled – – – – Forfeited or expired (12,000 ) 1.35 – – Outstanding as of June 30, 2020 251,291 $ 1.05 1.95 $ 1,124,525 Granted 299,000 5.40 – – Exercised (61,291 ) 1.22 – – Cancelled – – – – Forfeited or expired (5,000 ) 5.40 – – Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Exercisable as of June 30, 2021 190,000 $ 0.99 0.95 $ 1,554,450 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $9.17 as of June 30, 2021, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of June 30, 2021, in the amount of 484,000 shares was $3.02 per share. As of June 30, 2021, there was unrecognized compensation cost of $808,225 related to non-vested stock options granted. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of 66.3% (33.7% is owned by non-controlling interests) as of June 30, 2021, and 2020. For the year ended June 30, 2020, the increase in the majority voting interest in percentage from 64.2% to 66.3% was due to the purchase by the Company of 43,333 shares of the subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders. The purchase decreased the non-controlling interests’ ownership percentage from 35.8% to 33.7%. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests. As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2021, or June 30, 2020. |
Non-controlling Interest in a Consolidated Subsidiary | Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2021, the non-controlling interest was $1,479,162, which represents a $697,147 increase from $782,015 as of June 30, 2020. The increase in the non-controlling interest of $697,147 was from income in the subsidiary of $2,071,302 incurred for the year ended June 30, 2021. |
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: Fiscal Year Ended June 30, Net sales: 2021 2020 North America $ 183,771,146 $ 74,839,778 Caribbean and South America 17,500 – Asia 326,699 232,520 Totals $ 184,115,345 $ 75,072,298 Long-lived assets, net (property and equipment and intangible assets): June 30, 2021 June 30, 2020 United States $ 1,349,320 $ 1,302,353 Asia 49,040 43,688 Totals $ 1,398,360 $ 1,346,041 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of financial instruments such as cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit (see Note 3). |
Estimates | Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of June 30, 2021, and June 30, 2020. |
Revenue Recognition | Revenue Recognition Contracts with Customers Revenue from sales of products and services is derived from contracts with customers. The products and services covered by contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended June 30, 2021, 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: June 30, 2021 June 30, 2020 Accounts Receivable $ 2,542,429 $ 15,973,537 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2021, and June 30, 2020. Our contract liabilities are as follows: June 30, 2021 June 30, 2020 Undelivered products $ 140,000 $ 140,000 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. 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 satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2021. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2021. Most of our revenue recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2021, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. |
Cost of Goods Sold | Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of goods sold also includes amortization expenses of approximately $360,000 and $405,000 associated with capitalized product development costs associated with complete technology for the years ended June 30, 2021, and 2020, respectively. |
Capitalized Product Development Costs | Capitalized Product Development Costs Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product development that are capitalized once technological feasibility is determined (noted as technology in progress in the Intangible Assets table in Note 2 to Notes to Consolidated Financial Statements) include related licenses, certification costs, payroll, employee benefits, and other headcount-related expenses associated with product development. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved. Once the products are available for general release to our customers, we cease capitalizing the product development costs and any additional costs, if any, are expensed. The capitalized product development costs are amortized on a product-by-product basis using the greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers. As of June 30, 2021, and June 30, 2020, capitalized product development costs in progress were $602,388 and $140,192, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the year ended June 30, 2021, we incurred $694,909 in capitalized product development costs and disposed a technology in progress in the amount of $140,192 as we identified it has the great unlikelihood of economic success based on its performance test results, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income. |
Research and Development Costs | Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $4,567,863 and $3,746,502 for the years ended June 30, 2021, and 2020, respectively. |
Warranties | Warranties We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures. |
Shipping and Handling Costs | Shipping and Handling Costs Costs associated with product shipping and handling are expensed as incurred. Shipping and handling costs, which are included in selling, general and administrative expenses on the statements of comprehensive income, were $723,617 and $642,930 for the years ended June 30, 2021, and 2020, respectively. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. 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 of 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 our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2021, and 2020, we have recorded inventory reserves in the amount of $0 and $399,437, respectively, for inventories that we have identified as obsolete or slow-moving. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and were accounted for in accordance with ASC 805, “Business Combinations.” Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired. Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.” Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was recognized during the years ended June 30, 2021, and 2020. |
Intangible Assets | Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 years 3.0 years 399,811 268,495 131,316 Patents 10 years 3.9 years 21,105 12,951 8,154 Certifications & licenses 3 years 1.6 years 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 The definite lived intangible assets consisted of the following as of June 30, 2020: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 1.8 years 18,397 7,666 10,731 Technology in progress Not Applicable - 140,192 – 140,192 Software 5 years 2.9 years 525,930 338,593 187,337 Patents 10 years 7.0 years 20,734 10,821 9,913 Certifications & licenses 3 years 1.9 years 4,078,310 3,301,331 776,979 Total as of June 30, 2020 $ 4,783,563 $ 3,658,411 $ 1,125,152 Amortization expense recognized during the years ended June 30, 2021, and 2020 was $435,571 and $482,792, respectively. For the year ended June 30, 2021, FY2022 FY2023 FY2024 FY2025 FY2026 Thereafter Total $ 528,655 $ 341,133 $ 198,944 $ 98,521 $ 25,442 $ 54,055 |
Long-lived Assets | Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 31, 2021, that would indicate that the long-lived assets are impaired. |
Stock-based Compensation | Stock-based Compensation The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. Stock-based compensation is recognized on a straight-line basis over the award’s vesting period. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. Transactions with non-employees in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income based upon the underlying recipients' roles within the Company. |
Income Taxes | Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. |
Earnings per Share Attributable to Common Stockholders | Earnings per Share Attributable to Common Stockholders Basic earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. |
Concentrations of Credit Risk | Concentrations of Credit Risk We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary. No reserve was required or recorded for any of the periods presented. Substantially all of our revenues are derived from sales of wireless data products. Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively. A significant portion of our revenue is derived from a small number of customers. For the year ended June 30, 2021, net sales to our two largest customers represented 63% and 30% of our consolidated net sales, respectively, and 0% and 84% of our accounts receivable balance as of June 30, 2021. For the year ended June 30, 2020, net sales to our two largest customers represented 46% and 36% of our consolidated net sales, respectively, and 21% and 72% of our accounts receivable balance as of June 30, 2020. No other customer accounted for more than ten percent of total net sales. For the year ended June 30, 2021, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If they were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact our revenue. For the year ended June 30, 2021, we purchased wireless data products from these suppliers in the amount of $138,516,044, or 99% of total purchases, and had related accounts payable of $9,096,451 as of June 30, 2021. For the year ended June 30, 2020, we purchased wireless data products from these suppliers in the amount of $67,179,379, or 94% of total purchases, and had related accounts payable of $41,181,840, as of June 30, 2020. We maintain our cash accounts with established commercial banks. Such cash deposits exceed the Federal Deposit Insurance Corporation insured limit of $250,000 for each financial institution. However, we do not anticipate any losses on excess deposits. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act of 2017 on items within accumulated other comprehensive income to retained earnings. We do not expect that the adoption of this update will impact the Company’s consolidated financial statements. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Abstract] | |
Segment information by geographic areas | The following table contains certain financial information by geographic area: Fiscal Year Ended June 30, Net sales: 2021 2020 North America $ 183,771,146 $ 74,839,778 Caribbean and South America 17,500 – Asia 326,699 232,520 Totals $ 184,115,345 $ 75,072,298 |
Long lived assets by geographic area | Long-lived assets, net (property and equipment and intangible assets): June 30, 2021 June 30, 2020 United States $ 1,349,320 $ 1,302,353 Asia 49,040 43,688 Totals $ 1,398,360 $ 1,346,041 |
Schedule of receivables | The balances of our trade receivables are as follows: June 30, 2021 June 30, 2020 Accounts Receivable $ 2,542,429 $ 15,973,537 |
Schedule of contract liabilities | Our contract liabilities are as follows: June 30, 2021 June 30, 2020 Undelivered products $ 140,000 $ 140,000 |
Useful lives of property and equipment | Depreciation is computed using the straight-line method over the estimated useful lives as follows: Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Intangible Assets | The definite lived intangible assets consisted of the following as of June 30, 2021: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 0.5 years 18,397 15,331 3,066 Technology in progress Not Applicable – 602,388 – 602,388 Software 5 years 3.0 years 399,811 268,495 131,316 Patents 10 years 3.9 years 21,105 12,951 8,154 Certifications & licenses 3 years 1.6 years 1,070,770 568,944 501,826 Total as of June 30, 2021 $ 2,112,471 $ 865,721 $ 1,246,750 The definite lived intangible assets consisted of the following as of June 30, 2020: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 years 1.8 years 18,397 7,666 10,731 Technology in progress Not Applicable - 140,192 – 140,192 Software 5 years 2.9 years 525,930 338,593 187,337 Patents 10 years 7.0 years 20,734 10,821 9,913 Certifications & licenses 3 years 1.9 years 4,078,310 3,301,331 776,979 Total as of June 30, 2020 $ 4,783,563 $ 3,658,411 $ 1,125,152 |
Schedule of Expected Amortization Expense | The amortization expenses of the definite lived intangible assets for the next five years and thereafter are as follows: FY2022 FY2023 FY2024 FY2025 FY2026 Thereafter Total $ 528,655 $ 341,133 $ 198,944 $ 98,521 $ 25,442 $ 54,055 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consisted of the following as of: June 30, 2021 June 30, 2020 Machinery and Commercial Equipment $ 67,044 $ 364,054 Office equipment 291,191 420,941 Molds 575,552 940,165 933,787 1,725,160 Less accumulated depreciation (782,177 ) (1,504,271 ) Total $ 151,610 $ 220,889 |
5. ACCRUED LIABILITIES (Tables)
5. ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Accrued liabilities consisted of the following as of: June 30, 2021 June 30, 2020 Accrued payroll deductions owed to government entities $ 66,307 $ 39,380 Accrued salaries and bonuses – 129,000 Accrued vacation 73,900 58,467 Accrued undelivered inventory 140,000 140,000 Accrued commission for service providers 52,500 98,500 Accrued commission to a customer 451,898 – Other accrued liabilities 920 674 Total $ 785,525 $ 466,021 |
6. INCOME TAXES (Tables)
6. INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income tax provision from continuing operations | Income tax provision for the years ended June 30, 2021, and 2020 consists of the following: Year Ended June 30, 2021 2020 Current income tax expense (benefit): Federal $ 4,217,883 $ 33,039 State (525 ) 2,475 Foreign 256,636 – 4,473,994 35,514 Deferred income tax expense (benefit): Federal 142,242 1,323,265 State 155,410 (293,773 ) Foreign 267,649 315,295 565,301 1,344,787 Provision for income taxes $ 5,039,295 $ 1,380,301 |
Schedule of effective income tax rate | The provisions for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows: Year Ended June 30, 2021 2020 Federal income tax, at statutory rate of 21% applied to earnings before income taxes and extraordinary items $ 4,929,611 $ 1,533,352 State tax, net of federal tax benefit 125,237 128,406 ) Nondeductible expenses 22,688 (45,345 ) R&D credits (56,950 ) (36,841 ) Global intangible low-taxed income 95,419 31,060 Foreign rate difference 39,146 74,256 Other (13,523 ) 53,943 Forgiveness of payroll protection plan loan (102,333 ) – Change in valuation allowance – (358,530 ) Provision (benefit) for income taxes $ 5,039,295 $ 1,380,301 |
Schedule of deferred tax assets | Significant components of our deferred tax assets are as follows: June 30, 2021 June 30, 2020 Deferred tax asset: Net operating losses $ 170,649 $ 507,402 State tax – 520 Lease accounting 7,035 10,078 Intangibles 84,831 38,154 Tax credits 133,451 346,091 Inventory reserve 30,591 103,450 Other, net 12,693 38,085 Total deferred tax assets 439,250 1,043,780 Deferred tax liabilities: Deferred state taxes (29,056 ) (61,692 ) State tax (110 ) – Fixed asset (22,536 ) (43,900 ) Total deferred tax liabilities (51,702 ) (105,592 ) Less valuation allowance – – Net deferred tax asset $ 387,548 $ 938,188 |
Schedule of unrecognized tax benefits | A reconciliation of the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax assets, is as follows: Balance as of June 30, 2019 $ 275,262 Gross increase 21,570 Balance as of June 30, 2020 296,832 Gross increase 38,427 Balance as of June 30, 2021 $ 335,259 |
7. EARNINGS PER SHARE (Tables)
7. EARNINGS PER SHARE (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | The weighted average number of shares outstanding used to compute earnings per share is as follows: Year Ended June 30, 2021 2020 Net income attributable to Parent Company $ 17,699,035 $ 5,550,618 Weighted-average shares of common stock outstanding: Basic 11,350,946 10,581,499 Dilutive effect of common stock equivalents arising from stock options 241,955 134,480 Diluted Outstanding shares 11,592,901 10,715,979 Basic earnings per share attributable to Parent Company stockholders $ 1.56 $ 0.52 Diluted earnings per share attributable to Parent Company stockholders $ 1.53 $ 0.52 |
8. COMMITMENTS AND CONTINGENC_2
8. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | Future minimum payments under operating leases are as follows: Payments due by June 30, 2022 2023 2024 Total Administrative office, San Diego, CA $ 321,930 $ 321,930 $ 160,965 $ 804,825 Administrative office, Korea 20,849 – – 20,849 Total Obligations $ 342,779 $ 321,930 $ 160,965 $ 825,674 |
Maturities of lease liabilities | Future minimum payments under operating leases are as follows: Operating Leases Fiscal 2022 $ 342,779 Fiscal 2023 321,930 Fiscal 2024 160,965 Total lease payments 825,674 Less imputed interest (40,218 ) Total $ 785,456 |
9. LONG-TERM INCENTIVE PLAN A_2
9. LONG-TERM INCENTIVE PLAN AWARDS (Tables) | 12 Months Ended |
Jun. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | A summary of the status of our stock options is presented below: Weighted- Average Weighted- Remaining Average Contractual Aggregate Exercise Life Intrinsic Options Shares Price (In Years) Value Outstanding as of June 30, 2019 299,000 $ 1.04 2.75 $ 241,220 Granted – – – – Exercised (35,709 ) 0.93 – – Cancelled – – – – Forfeited or expired (12,000 ) 1.35 – – Outstanding as of June 30, 2020 251,291 $ 1.05 1.95 $ 1,124,525 Granted 299,000 5.40 – – Exercised (61,291 ) 1.22 – – Cancelled – – – – Forfeited or expired (5,000 ) 5.40 – – Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Exercisable as of June 30, 2021 190,000 $ 0.99 0.95 $ 1,554,450 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details - Segments) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Net sales | $ 184,115,345 | $ 75,072,298 |
North America [Member] | ||
Net sales | 183,771,146 | 74,839,778 |
Caribbean and South America [Member] | ||
Net sales | 17,500 | 0 |
Asia [Member] | ||
Net sales | $ 326,699 | $ 232,520 |
2. Summary of Significant Acc_5
2. Summary of Significant Accounting Policies (Details - Segments Long-Lived Assets) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Long-lived assets, net (property and equipment and intangible assets) | $ 1,398,360 | $ 1,346,041 |
United States [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | 1,349,320 | 1,302,353 |
Asia [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | $ 49,040 | $ 43,688 |
2. Summary of Significant Acc_6
2. Summary of Significant Accounting Policies (Details - Receivables) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Accounting Policies [Abstract] | ||
Accounts Receivable | $ 2,542,429 | $ 15,973,537 |
2. Summary of Significant Acc_7
2. Summary of Significant Accounting Policies (Details - Contract liabilities) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Accounting Policies [Abstract] | ||
Undelivered products | $ 140,000 | $ 140,000 |
2. Summary of Significant Acc_8
2. Summary of Significant Accounting Policies (Details - Useful lives) | 12 Months Ended |
Jun. 30, 2021 | |
Machinery [Member] | |
Estimated useful lives | 6 years |
Office Equipment [Member] | |
Estimated useful lives | 5 years |
Molds [Member] | |
Estimated useful lives | 3 years |
Vehicles[Member] | |
Estimated useful lives | 5 years |
Computers and software [Member] | |
Estimated useful lives | 5 years |
Furniture and fixtures [Member] | |
Estimated useful lives | 7 years |
Facilities [Member] | |
Estimated useful lives | 5 years or life of the lease, whichever is shorter |
2. Summary of Significant Acc_9
2. Summary of Significant Accounting Policies (Details - Intangibles) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Intangible Assets, Gross | $ 2,112,471 | $ 4,783,563 |
Accumulated Amortization | 865,721 | 3,658,411 |
Intangible Assets, Net | $ 1,246,750 | $ 1,125,152 |
Complete Technology [Member] | ||
Expected Life | 3 years | 3 years |
Remaining Life | 18 days | 1 year 9 months 18 days |
Intangible Assets, Gross | $ 18,397 | $ 18,397 |
Accumulated Amortization | 15,331 | 7,666 |
Intangible Assets, Net | 3,066 | 10,731 |
Technology in progress [Member] | ||
Intangible Assets, Gross | 602,388 | 140,192 |
Accumulated Amortization | 0 | 0 |
Intangible Assets, Net | $ 602,388 | $ 140,192 |
Software [Member] | ||
Expected Life | 5 years | 5 years |
Remaining Life | 3 years | 2 years 1 month 2 days |
Intangible Assets, Gross | $ 399,811 | $ 525,930 |
Accumulated Amortization | 268,495 | 338,593 |
Intangible Assets, Net | $ 131,316 | $ 187,337 |
Patents [Member] | ||
Expected Life | 10 years | 10 years |
Remaining Life | 3 years 10 months 25 days | 7 years |
Intangible Assets, Gross | $ 21,105 | $ 20,734 |
Accumulated Amortization | 12,951 | 10,821 |
Intangible Assets, Net | $ 8,154 | $ 9,913 |
Certifications And Licenses [Member] | ||
Expected Life | 3 years | 3 years |
Remaining Life | 1 year 7 months 6 days | 1 year 10 months 25 days |
Intangible Assets, Gross | $ 1,070,770 | $ 4,078,310 |
Accumulated Amortization | 568,944 | 3,301,331 |
Intangible Assets, Net | $ 501,826 | $ 776,979 |
2. Summary of Significant Ac_10
2. Summary of Significant Accounting Policies (Details - Amortization) | Jun. 30, 2021USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
FYE 2022 | $ 528,655 |
FYE 2023 | 341,133 |
FYE 2024 | 198,944 |
FYE 2025 | 98,521 |
FYE 2026 | 25,442 |
Thereafter | $ 54,055 |
2. Summary of Significant Ac_11
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Purchases of shares of a subsidiary, shares | 43,333 | |
Purchases of shares of a subsidiary | $ 0 | $ (75,000) |
Noncontrolling interest percentage | 66.30% | 64.20% |
Noncontrolling interest | $ 1,479,162 | $ 782,015 |
Increase (decrease) in noncontrolling interest | 697,147 | |
Allowance for doubtful accounts | 0 | 0 |
Capitalized product development costs | 602,388 | 140,192 |
Product development costs incurred | 694,909 | 343,360 |
Technology in progress | 140,192 | |
Research and development costs | 4,567,863 | 3,746,502 |
Warranty expense | 0 | 0 |
Shipping and handling expense | 5,077,848 | 3,699,859 |
Inventory reserve | 0 | 399,437 |
Goodwill impairment | 0 | 0 |
Amortization expense | 435,571 | 482,792 |
Disposition of intangible assets | 3,228,261 | |
Products purchased | 151,651,324 | 60,547,813 |
Accounts payable | $ 9,718,989 | $ 42,083,255 |
Noncontrolling Interest [Member] | ||
Noncontrolling interest percentage | 66.30% | 33.70% |
Shipping and Handling [Member] | ||
Shipping and handling expense | $ 723,617 | $ 642,930 |
Sales Revenue Net [Member] | Customer 1 [Member] | Customer Concentration Risk [Member] | ||
Concentration of credit risk | 63.00% | 46.00% |
Sales Revenue Net [Member] | Customer 2 [Member] | Customer Concentration Risk [Member] | ||
Concentration of credit risk | 30.00% | 36.00% |
Purchases [Member] | Supplier Concentration Risk [Member] | Suppliers [Member] | ||
Concentration of credit risk | 99.00% | 94.00% |
Products purchased | $ 138,516,044 | $ 67,179,379 |
Accounts payable | $ 9,096,451 | |
Accounts Receivable [Member] | Customer 1 [Member] | Customer Concentration Risk [Member] | ||
Concentration of credit risk | 0.00% | 21.00% |
Accounts Receivable [Member] | Customer 2 [Member] | Customer Concentration Risk [Member] | ||
Concentration of credit risk | 84.00% | 72.00% |
Accounts Payable [Member] | Supplier Concentration Risk [Member] | Suppliers [Member] | ||
Accounts payable | $ 41,181,840 |
4. Property and Equipment (Deta
4. Property and Equipment (Details) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Property and equipment, gross | $ 933,787 | $ 1,725,160 |
Less accumulated depreciation | (782,177) | (1,504,271) |
Total | 151,610 | 220,889 |
Machinery and Commercial Equipment [Member] | ||
Property and equipment, gross | 67,044 | 364,054 |
Office Equipment [Member] | ||
Property and equipment, gross | 291,191 | 420,941 |
Molds [Member] | ||
Property and equipment, gross | $ 575,552 | $ 940,165 |
4. Property and Equipment (De_2
4. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 90,322 | $ 92,736 |
Disposed of depreciated property ad equipment | $ 812,416 |
5. Accrued Liabilities (Details
5. Accrued Liabilities (Details) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Payables and Accruals [Abstract] | ||
Accrued payroll deductions owed to government entities | $ 66,307 | $ 39,380 |
Accrued salaries and bonuses | 0 | 129,000 |
Accrued vacation | 73,900 | 58,467 |
Accrued undelivered inventory | 140,000 | 140,000 |
Accrued commission for service providers | 52,500 | 98,500 |
Accrued commission to a customer | 451,898 | 0 |
Other accrued liabilities | 920 | 674 |
Total | $ 785,525 | $ 466,021 |
6. Income Taxes (Details - Prov
6. Income Taxes (Details - Provision for Income Taxes) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Current income tax expense (benefit): | ||
Federal | $ 4,217,883 | $ 33,039 |
State | (525) | 2,475 |
Foreign | 256,636 | 0 |
Total Current income tax expense (benefit) | 4,473,994 | 35,514 |
Deferred income tax expense (benefit): | ||
Federal | 142,242 | 1,323,265 |
State | 155,410 | (293,773) |
Foreign | 267,649 | 315,295 |
Total deferred income tax expense (benefit) | 565,301 | 1,344,787 |
Provision for income taxes | $ 5,039,295 | $ 1,380,301 |
6. Income Taxes (Details - Reco
6. Income Taxes (Details - Reconciliation of Tax Rate) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation | ||
Federal income tax, at statutory rate of 21% applied to earnings before income taxes and extraordinary items | $ 4,929,611 | $ 1,533,352 |
State tax, net of federal tax benefit | 125,237 | 128,406 |
Nondeductible expenses | 22,688 | (45,345) |
R&D Credits | (56,950) | (36,841) |
Global intangible low-taxed income | 95,419 | 31,060 |
Foreign rate difference | 39,146 | 74,256 |
Other | (13,523) | 53,943 |
Forgiveness of payroll protection plan loan | (102,333) | |
Change in valuation allowance | (358,530) | |
Benefit for income taxes | $ 5,039,295 | $ 1,380,301 |
6. Income Taxes (Details - Defe
6. Income Taxes (Details - Deferred Income Taxes) - USD ($) | Jun. 30, 2021 | Jun. 30, 2020 |
Deferred tax asset: | ||
Net operating losses | $ 170,649 | $ 507,402 |
State tax | 0 | 520 |
Lease accounting | 7,035 | 10,078 |
Intangibles | 84,831 | 38,154 |
Tax credits | 133,451 | 346,091 |
Inventory reserve | 30,591 | 103,450 |
Other, net | 12,693 | 38,085 |
Total deferred tax assets | 439,250 | 1,043,780 |
Deferred tax liabilities: | ||
Deferred state taxes | (29,056) | (61,692) |
State tax | (110) | 0 |
Fixed asset | (22,536) | (43,900) |
Total deferred tax liabilities | (51,702) | (105,592) |
Less valuation allowance | 0 | 0 |
Net deferred tax asset | $ 387,548 | $ 938,188 |
6. Income Taxes (Details - Unre
6. Income Taxes (Details - Unrecognized tax benefits) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Reconciliation of unrecognized tax benefits | ||
Beginning Balance | $ 296,832 | $ 275,262 |
Gross increase | 38,427 | 21,570 |
Ending Balance | $ 335,259 | $ 296,832 |
6. Income Taxes (Details Narrat
6. Income Taxes (Details Narrative) - Federal [Member] - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Operating loss carryforward | $ 800,000 | |
Carryforward expiration dates | Dec. 31, 2035 | |
Effective income tax | 21.00% | 21.00% |
7. Earnings Per Share (Details)
7. Earnings Per Share (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Earnings Per Share [Abstract] | ||
Net income attributable to Parent Company | $ 17,699,035 | $ 5,550,618 |
Weighted-average shares of common stock outstanding: | ||
Basic | 11,350,946 | 10,581,499 |
Dilutive effect of common stock equivalents arising from stock options | 241,955 | 134,480 |
Diluted Outstanding shares | 11,592,901 | 10,715,979 |
Basic earnings per share attributable to Parent Company stockholders | $ 1.56 | $ 0.52 |
Diluted earnings per share attributable to Parent Company stockholders | $ 1.53 | $ 0.52 |
7. Earnings (Loss) Per Share (D
7. Earnings (Loss) Per Share (Details Narrative) - shares | 12 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Earnings Per Share [Abstract] | ||
Anti-dilutive shares excluded from EPS | 484,000 | 251,291 |
8. Commitments and Contingenc_3
8. Commitments and Contingencies (Details - Maturities of lease liability under operating leases) | Jun. 30, 2021USD ($) |
Payments Due by June 30, | |
2022 | $ 342,779 |
2023 | 321,930 |
2024 | 160,965 |
Total | 825,674 |
Administrative office, San Diego, CA [Member] | |
Payments Due by June 30, | |
2022 | 321,930 |
2023 | 321,930 |
2024 | 160,965 |
Total | 804,825 |
Administrative office, Korea [Member] | |
Payments Due by June 30, | |
2022 | 20,849 |
2023 | 0 |
2024 | 0 |
Total | $ 20,849 |
8. Commitments and Contingenc_4
8. Commitments and Contingencies (Details - Maturities of lease liabilities) | Jun. 30, 2021USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Fiscal 2022 | $ 342,779 |
Fiscal 2023 | 321,930 |
Fiscal 2024 | 160,965 |
Total lease payments | 825,674 |
Less imputed interest | (40,218) |
Total | $ 785,456 |
8. Commitments and Contingenc_5
8. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Dec. 30, 2020 | |
Rent Expense | $ 446,614 | $ 435,683 | |
Anydata [Member] | |||
Purchase commitment | $ 3,100,000 | ||
Quanta [Member] | |||
Purchase commitment | 2,900,000 | ||
Payment made for inventory | 100,000 | ||
Prepaid expense | $ 49,580 | $ 149,580 | |
Administrative office, San Diego, CA [Member] | |||
Operating lease discount rate | 4.00% | ||
Administrative office, Korea [Member] | |||
Operating lease discount rate | 2.80% |
9. Long-Term Incentive Plan A_3
9. Long-Term Incentive Plan Awards (Details - Option Activity) - Options [Member] - USD ($) | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2019 | |
Shares | |||
Number of Options Outstanding, Beginning | 251,291 | 299,000 | |
Number of Options Granted | 299,000 | 0 | |
Number of Options Exercised | (61,291) | (35,709) | |
Number of Options Cancelled | 0 | 0 | |
Number of Options Forfeited or expired | (5,000) | (12,000) | |
Number of Options Outstanding, Ending | 484,000 | 251,291 | 299,000 |
Number of Options Exercisable | 190,000 | ||
Weighted-Average Exercise Price | |||
Weighted Average Exercise Price Outstanding, Beginning | $ 1.05 | $ 1.04 | |
Weighted Average Exercise Price Granted | 5.40 | ||
Weighted Average Exercise Price Exercised | 1.22 | 0.93 | |
Weighted Average Exercise Price Canceled | |||
Weighted Average Exercise Price Forfeited or expired | 5.40 | 1.35 | |
Weighted Average Exercise Price Outstanding, Ending | 3.67 | $ 1.05 | $ 1.04 |
Weighted Average Exercise Price Exercisable | $ 0.99 | ||
Weighted-Average Remaining Contractual Life (In Years) | |||
Weighted Average Remaining Contractual Life (in years) Outstanding | 2 years 9 months 29 days | 1 year 11 months 12 days | 2 years 9 months |
Weighted Average Remaining Contractual Life (in years) Exercisable | 11 months 12 days | ||
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value Outstanding, Beginning | $ 1,124,525 | $ 241,220 | |
Aggregate Intrinsic Value Granted | $ 0 | $ 0 | |
Aggregate Intrinsic Value Exercised | $ 0 | $ 0 | |
Aggregate Intrinsic Value Cancelled | $ 0 | $ 0 | |
Aggregate Intrinsic Value Forfeited or expired | $ 0 | $ 0 | |
Aggregate Intrinsic Value Outstanding, Ending | $ 2,662,830 | $ 1,124,525 | $ 241,220 |
Aggregate Intrinsic Value Exercisable | $ 1,554,450 |
9. Long-Term Incentive Plan A_4
9. Long-Term Incentive Plan Awards (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jul. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |||
Share based compensation expense | $ 380,758 | $ 0 | |
Weighted average grant-date fair value of stock options | 484,000 | ||
Weighted average grant-date fair value of stock options, per share price | $ 3.02 | ||
Unrecognized compensation cost related to non-vested options | $ 808,225 | ||
Common stock shares | 800,000 |