Cover
Cover - USD ($) | 12 Months Ended | ||
Jun. 30, 2023 | Sep. 28, 2023 | Dec. 31, 2022 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Jun. 30, 2023 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2023 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity File Number | 001-14891 | ||
Entity Registrant Name | FRANKLIN WIRELESS CORP. | ||
Entity Central Index Key | 0000722572 | ||
Entity Tax Identification Number | 95-3733534 | ||
Entity Incorporation, State or Country Code | NV | ||
Entity Address, Address Line One | 9707 Waples Street | ||
Entity Address, Address Line Two | Suite 150 | ||
Entity Address, City or Town | San Diego | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 92121 | ||
City Area Code | (858) | ||
Local Phone Number | 623-0000 | ||
Title of 12(b) Security | Common Stock, par value $.001 per share | ||
Trading Symbol | FKWL | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 36,999,000 | ||
Entity Common Stock, Shares Outstanding | 11,784,280 | ||
Document Financial Statement Error Correction [Flag] | false | ||
Auditor Firm ID | 6651 | ||
Auditor Name | Paris, Kreit and Chiu CPA LLP | ||
Auditor Location | New York, NY |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 12,241,286 | $ 26,277,418 |
Short-term investments | 26,728,313 | 16,336,659 |
Accounts receivable, net | 8,949,802 | 1,322,619 |
Other receivables, net | 14,438 | 40,132 |
Inventories, net | 3,741,637 | 4,197,863 |
Prepaid expenses and other current assets | 36,687 | 40,939 |
Loan to an employee | 91,057 | 0 |
Advance payments to vendors | 53,875 | 174,796 |
Total current assets | 51,857,095 | 48,390,426 |
Property and equipment, net | 101,088 | 105,952 |
Intangible assets, net | 2,180,884 | 1,350,056 |
Deferred tax assets, non-current | 2,235,515 | 1,347,436 |
Goodwill | 273,285 | 273,285 |
Right of use assets | 152,665 | 448,621 |
Other assets | 126,546 | 126,095 |
TOTAL ASSETS | 56,927,078 | 52,041,871 |
Current liabilities: | ||
Accounts payable | 12,950,497 | 8,143,305 |
Income tax payable | 6,556 | 6,702 |
Unearned revenue | 117,351 | 231,624 |
Advance payments from customers | 29,137 | 0 |
Accrued legal contingency expense | 2,400,000 | 0 |
Accrued liabilities | 849,605 | 589,907 |
Lease liabilities, current | 159,104 | 308,834 |
Total current liabilities | 16,512,250 | 9,280,372 |
Lease liabilities, non-current | 0 | 159,104 |
Total liabilities | 16,512,250 | 9,439,476 |
Commitments and contingencies (Note 8) | ||
Parent Company stockholders’ equity | ||
Preferred stock, par value $0.001 per share, authorized 10,000,000 shares; No preferred stock issued and outstanding as of June 30, 2023, and 2022 | 0 | 0 |
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 11,784,280 and 11,684,280 shares issued and outstanding as of June 30, 2023, and 2022, respectively | 14,263 | 14,163 |
Additional paid-in capital | 14,438,196 | 13,593,426 |
Retained earnings | 29,101,225 | 31,964,246 |
Treasury stock, 2,549,208 shares as of June 30, 2023, and 2022 | (3,554,893) | (3,554,893) |
Accumulated other comprehensive loss | (1,071,930) | (984,152) |
Total Parent Company stockholders’ equity | 38,926,861 | 41,032,790 |
Non-controlling interests | 1,487,967 | 1,569,605 |
Total stockholders’ equity | 40,414,828 | 42,602,395 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 56,927,078 | $ 52,041,871 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2023 | Jun. 30, 2022 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 11,784,280 | 11,684,280 |
Common stock, shares outstanding | 11,784,280 | 11,684,280 |
Treasury stock shares | 2,549,208 | 2,549,208 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive (Loss) Income - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Income Statement [Abstract] | ||
Net sales | $ 45,948,516 | $ 23,997,762 |
Cost of goods sold | 38,927,774 | 20,181,179 |
Gross profit | 7,020,742 | 3,816,583 |
Operating expenses: | ||
Selling, general and administrative | 5,451,653 | 4,509,344 |
Research and development | 3,918,664 | 4,282,131 |
Total operating expenses | 9,370,317 | 8,791,475 |
Loss from operations | (2,349,575) | (4,974,892) |
Other income, net: | ||
Interest income | 459,869 | 71,375 |
Income from governmental subsidy | 43,784 | 91,567 |
Gain from the forgiveness of debts | 238,307 | 38,397 |
Loss from a legal contingency | (2,400,000) | 0 |
Other income (expense), net | 176,297 | 64,080 |
Total other income (expense), net | (1,481,743) | 265,419 |
Loss before benefit for income taxes | (3,831,318) | (4,709,473) |
Income tax benefit | (886,659) | (1,037,068) |
Net loss | (2,944,659) | (3,672,405) |
(Less) non-controlling interests in net (loss) income of subsidiary at 33.7% | (81,638) | 90,443 |
Net loss attributable to Parent Company | $ (2,863,021) | $ (3,762,848) |
Basic loss per share attributable to Parent Company stockholders | $ (0.24) | $ (0.32) |
Diluted loss per share attributable to Parent Company stockholders | $ (0.24) | $ (0.32) |
Weighted average common shares outstanding - basic | 11,736,609 | 11,613,812 |
Weighted average common shares outstanding - diluted | 11,736,609 | 11,613,812 |
Comprehensive loss | ||
Net loss | $ (2,944,659) | $ (3,672,405) |
Translation adjustments | (87,778) | (511,650) |
Comprehensive loss | (3,032,437) | (4,184,055) |
Less: comprehensive (loss) income attributable to non-controlling interest | (81,638) | 90,443 |
Comprehensive loss attributable to controlling interest | $ (2,950,799) | $ (4,274,498) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock, Common [Member] | AOCI Attributable to Parent [Member] | Noncontrolling Interest [Member] | Total |
Balance - June 30, 2022 at Jun. 30, 2021 | $ 14,069 | $ 12,972,234 | $ 35,727,094 | $ (3,554,893) | $ (472,502) | $ 1,479,162 | $ 46,165,164 |
Beginning balance, shares at Jun. 30, 2021 | 11,590,281 | ||||||
Net loss attributable to Parent Company | (3,762,848) | (3,762,848) | |||||
Foreign exchange translation | (511,650) | (511,650) | |||||
Issuance of stock related to stock option exercised | $ 94 | 75,351 | 75,445 | ||||
Issuance of stock related to stock options exercised, shares | 93,999 | ||||||
Balance - June 30, 2023 at Jun. 30, 2022 | $ 14,163 | 13,593,426 | 31,964,246 | (3,554,893) | (984,152) | 1,569,605 | 42,602,395 |
Comprehensive loss attributable to non-controlling interest | 90,443 | 90,443 | |||||
Stock based compensation | 545,841 | 545,841 | |||||
Ending balance, shares at Jun. 30, 2022 | 11,684,280 | ||||||
Net loss attributable to Parent Company | (2,863,021) | (2,863,021) | |||||
Foreign exchange translation | (87,778) | (87,778) | |||||
Issuance of stock related to stock option exercised | $ 100 | 133,900 | 134,000 | ||||
Issuance of stock related to stock options exercised, shares | 100,000 | ||||||
Balance - June 30, 2023 at Jun. 30, 2023 | $ 14,263 | 14,438,196 | 29,101,225 | (3,554,893) | (1,071,930) | 1,487,967 | 40,414,828 |
Comprehensive loss attributable to non-controlling interest | (81,638) | (81,638) | |||||
Stock based compensation | $ 710,870 | $ 710,870 | |||||
Ending balance, shares at Jun. 30, 2023 | 11,784,280 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
CASH FLOW FROM OPERATING ACTIVITIES: | ||
Net loss | $ (2,944,659) | $ (3,672,405) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation | 51,970 | 87,743 |
Amortization of intangible assets | 839,595 | 579,012 |
Stock based compensation | 710,870 | 545,841 |
Bad debt expense | 0 | 23,780 |
Forgiveness of debts | (238,307) | (38,397) |
Amortization of right of use assets | 295,956 | 304,642 |
Deferred tax benefit | (888,079) | (959,888) |
Increase (decrease) in cash due to change in working capital: | ||
Accounts receivable | (7,601,489) | 1,205,938 |
Inventories | 456,226 | (3,222,344) |
Prepaid expenses and other current assets | 4,252 | 4,045 |
Advance payments to vendors | 120,921 | (134,166) |
Other assets | (451) | 14,444 |
Accounts payable | 4,905,499 | (1,537,287) |
Income tax payable | (146) | (326,801) |
Unearned revenue | (114,273) | 231,624 |
Advance payment from customers | 29,137 | 0 |
Accrued legal contingency expense | 2,400,000 | 0 |
Accrued liabilities | 399,698 | (195,618) |
Lease liabilities | (308,834) | (317,518) |
Net cash used in operating activities | (1,882,114) | (7,407,355) |
CASH FLOW FROM INVESTING ACTIVITIES: | ||
Purchases of short-term investments | (10,391,654) | (10,950,625) |
Purchases of property and equipment | (47,106) | (42,085) |
Payments for capitalized product development costs | (1,631,376) | (658,544) |
Purchases of intangible assets | (39,047) | (23,774) |
Net cash used in investing activities | (12,109,183) | (11,675,028) |
CASH FLOW FROM FINANCING ACTIVITIES: | ||
Loan to an employee | (2,057) | 0 |
Cash received from exercise of stock options | 45,000 | 75,445 |
Net cash provided by financing activities | 42,943 | 75,445 |
Effect of foreign currency translation | (87,778) | (511,650) |
Net decrease in cash and cash equivalents | (14,036,132) | (19,518,588) |
Cash and cash equivalents, beginning of year | 26,277,418 | 45,796,006 |
Cash and cash equivalents, end of year | 12,241,286 | 26,277,418 |
Cash paid during the periods for: | ||
Income taxes | $ (800) | $ (200,350) |
BUSINESS OVERVIEW
BUSINESS OVERVIEW | 12 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
BUSINESS OVERVIEW | NOTE 1 - BUSINESS OVERVIEW We are a leading provider of integrated wireless solutions utilizing the latest in 5G (fifth generation) and 4G LTE (fourth generation long-term evolution) technologies including mobile hotspots, routers, fixed wireless routers, and various trackers. Our integrated software subscription services provide users remote capabilities including mobile device management (MDM) and software defined wide area networking (SD-WAN). We have majority ownership of Franklin Technology Inc. (FTI), a research and development company based in Seoul, South Korea. FTI primarily provides design and development services for our wireless products. Our products are generally marketed and sold directly to wireless operators and indirectly through strategic partners and distributors. Our global customer base primarily extends from North America to Asia. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the consolidated financial statements. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of approximately 66.3% (approximately 33.7 As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2023, or June 30, 2022. Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2023, the non-controlling interest was $ 1,487,967 81,638 1,569,605 242,554 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 shall generate revenues from three geographic areas, consisting of North America, the Caribbean and South America, and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements. The following table contains certain financial information by geographic area: Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2023 2022 North America $ 45,782,084 $ 23,305,366 Caribbean and South America – 2,375 Asia 166,432 690,021 Totals $ 45,948,516 $ 23,997,762 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2023 June 30, 2022 United States $ 2,083,902 $ 1,374,747 Asia 198,070 81,261 Totals $ 2,281,972 $ 1,456,008 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). Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do no Cash Flows Reporting We follow ASC 230, Statements of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category. We use the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and all items that are included in net (loss) income that do not affect operating cash receipts and payments. Related Parties We follow ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of our management and policies of the Company. (Refer to NOTE 11–RELATED PARTY TRANSACTIONS) Foreign Currency Translations We have a majority-owned subsidiary in foreign country, South Korea. Fluctuations in foreign currency impact the amount of total assets, liabilities, earnings and cash flows that we report for our foreign subsidiary upon the translation of these amounts into U.S. Dollars for, and as of the end of, each reporting period. In particular, the strengthening of the U.S. Dollar generally will reduce the reported amount of our foreign-denominated cash, cash equivalents, total revenues and total expense that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period. However, a majority of our consolidated revenue is denominated in U.S. Dollars, and therefore, our revenue is not directly subject to foreign currency risk. In accordance with FASB ASC 830, "Foreign Currency Matters" , when an operation has transactions denominated in a currency other than its functional currency, they are measured in the functional currency. Changes in the expected functional currency cash flows caused by changes in exchange rates are included in net income for the period. Leases In accordance with ASC 842, “Leases”, we determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, we determine whether it should be classified as an operating or finance lease. Operating leases are recorded in the balance sheet as right-of-use asset (“ROU asset”) and operating lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assts and liabilities. Lease expense for operating lease is recognized on a straight-line basis over the lease term. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term. 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 provisions for the years ended June 30, 2023, and 2022, were not material. Disaggregation of Revenue In accordance with Topic 606, “Revenue from Contracts with Customers”, 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 contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services. The balances of our trade receivables are as follows: Schedule of receivables June 30, 2023 June 30, 2022 Accounts Receivable, net $ 8,949,802 $ 1,322,619 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2023, and June 30, 2022. Included in the Accounts Receivable balance as of June 30, 2022, is a passthrough amount of $837,000. These transactions were a direct result of an agreement between our vendor and our customer. There is a corresponding balance of $837,000 in our Accounts Payable account as of June 30, 2022, to offset. There were no such balances as of June 30, 2023. Our contract liabilities, which are included in accrued liabilities on our consolidated balance sheets, are as follows: Schedule of contract liabilities June 30, 2023 June 30, 2022 Undelivered products $ 146,488 $ 371,624 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good and/or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and/or services promised in our contracts with customers. We then identify performance obligations to transfer distinct products and/or services to the customer. To identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2023, and 2022. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2023, and 2022. Most of our revenue that is recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2023, and 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of goods sold also includes amortization expenses of approximately $ 800,000 500,000 Capitalized Product Development Costs Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 2 to Notes to Consolidated Financial Statements) include certifications, licenses, 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 straight-line amortization. The amortization begins when the products are available for general release to our customers. As of June 30, 2023, and June 30, 2022, capitalized product development costs in progress were $ 203,838 187,343 1,631,376 Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 3,918,664 4,282,131 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 $ 234,681 246,290 Cash and Cash Equivalents For the purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value. Short Term Investments We have invested excess funds in short term liquid assets, such as certificates of deposit or money market funds. Inventories Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable and can fluctuate significantly caused by factors beyond our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2023, and 2022, we have recorded inventory reserves in the amount of $ 585,274 557,155 Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending the useful lives of assets are capitalized. Maintenance and repairs of revenue nature are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Useful lives of property and equipment Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and 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, 2023, and 2022. Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2023: Schedule of definite lived intangible assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 203,838 – 203,838 Software 5 1.6 423,762 347,228 76,534 Patents 10 7.0 59,975 21,108 38,867 Certifications & licenses 3 2.0 3,759,240 1,897,595 1,861,645 Total as of June 30, 2023 $ 4,465,212 2,284,328 2,180,884 The definite lived intangible assets consisted of the following as of June 30, 2022: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 Amortization expense recognized during the years ended June 30, 2023, and 2022 was $ 839,595 579,012 Schedule of future amortization expense FY2024 FY2025 FY2026 FY2027 FY2028 Thereafter Total $ 954,166 $ 721,265 $ 263,918 $ 18,296 $ 11,148 $ 8,253 Impairment of Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 30, 2023, 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 (loss) income based upon the underlying recipients' roles within the Company. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. (Loss) Earnings per Share Attributable to Common Stockholders In accordance with ASC 260, “Earnings per share”, basic (loss) earnings per share are calculated by dividing the net (loss) income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted (loss) earnings per share is calculated by dividing the net (loss) income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. 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 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, 2023, net sales to our two largest customers represented approximately 61 31 27 69 70 13 0 For the year ended June 30, 2023, we purchased the majority of our wireless data products from three 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, 2023, we purchased wireless data products from these suppliers in the amount of $ 37,505,858 99.6 12,598,741 22,319,313 98.3 7,409,273 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 September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Jun. 30, 2023 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | NOTE 3 - FAIR VALUE MEASUREMENTS Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows: · Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. · Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 inputs are unobservable inputs for the asset or liability. The carrying values of the Company’s financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, and accounts payable and debt, are calculated based on their approximate their fair values due to the short period of time to maturity or repayment. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds and certificates of deposit. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Jun. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consisted of the following as of: Schedule of property and equipment June 30, 2023 June 30, 2022 Machinery and Commercial Equipment $ 25,146 $ 67,848 Office equipment 233,608 312,785 Molds 479,466 575,552 Vehicle 15,513 15,513 753,733 971,698 Less accumulated depreciation (652,645 ) (865,746 ) Total $ 101,088 $ 105,952 Depreciation expense associated with property and equipment was $ 51,970 87,743 265,071 4,175 |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Jun. 30, 2023 | |
Payables and Accruals [Abstract] | |
ACCRUED LIABILITIES | NOTE 5 - ACCRUED LIABILITIES Accrued liabilities consist of the following as of: Schedule of accrued liabilities June 30, 2023 June 30, 2022 Accrued payroll deductions owed to government entities $ 52,923 $ 55,387 Accrued salaries and bonuses 375,000 – Accrued vacation 141,590 65,602 Accrued undelivered inventory – 140,000 Accrued commission for service providers 32,500 40,000 Accrued commission to a customer 247,592 288,306 Other accrued liabilities – 612 Total $ 849,605 $ 589,907 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 - INCOME TAXES Income tax benefit for the years ended June 30, 2023, and 2022 consists of the following: Schedule of income tax benefit Year Ended June 30, 2023 2022 Current income tax (benefit) expense: Federal $ 5,211 $ (127,998 ) State 975 975 Foreign (4,766 ) 49,843 Total Current income tax expense (benefit) 1,420 (77,180 ) Deferred income tax benefit: Federal (752,843 ) (876,513 ) State (6,155 ) (83,375 ) Foreign (129,081 ) – Total deferred income tax expense (benefit) (888,079 ) (959,888 ) Benefit for income taxes $ (886,659 ) $ (1,037,068 ) The benefit for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows: Schedule of effective income tax rate Year Ended June 30, 2023 2022 Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items $ (810,281 ) $ (982,130 ) State tax, net of federal tax benefit 15,082 (82,840 ) Nondeductible expenses 5,850 870 R&D credits (51,415 ) (46,643 ) Global intangible low-taxed income – 152,930 Foreign rate difference 4,743 (16,279 ) Others (50,638 ) (62,976 ) Change in valuation allowance – – Benefit for income taxes $ (886,659 ) $ (1,037,068 ) Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows: Schedule of deferred tax assets June 30, 2023 June 30, 2022 Deferred tax asset: Net operating losses $ 697,431 $ 737,258 State tax 205 – Lease accounting, net 1,359 4,299 Intangibles 735,680 156,334 Tax credits 191,544 202,958 Legal contingency expense reserve 504,000 – Inventory reserve 123,488 155,133 Other, net 104,044 145,679 Total deferred tax assets 2,357,751 1,401,661 Deferred tax liabilities: Deferred state taxes (49,787 ) (46,565 ) State tax – 205 Property and equipment, net (1,652 ) (7,865 ) Unrealized gain (loss) (70,797 ) – Total deferred tax liabilities (122,236 ) (54,225 ) Less valuation allowance – – Net deferred tax asset $ 2,235,515 $ 1,347,436 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, 2023, or 2022. As of June 30, 2023, we have federal and state net operating loss carryforwards of approximately $ 2.5 million 0.5 million 2.5 million 0 0.5 million We apply the provisions of ASC 740 related to accounting for uncertain tax positions, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Under this provision, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Tax benefits of an uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained based on technical merits. A reconciliation of the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax assets, is as follows: Schedule of unrecognized tax benefits Balance as of June 30, 2021 $ 335,259 Gross increase 29,789 Balance as of June 30, 2022 365,048 Gross increase 23,968 Balance as of June 30, 2023 $ 389,016 We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months. ASC 740 requires us to accrue interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to be paid. Our policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. We have not recorded any interest or penalties as the liability associated with the unrecognized tax benefits is immaterial. We are subject to taxation in the U.S., and various state and foreign jurisdictions. |
(LOSS) EARNINGS PER SHARE
(LOSS) EARNINGS PER SHARE | 12 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
(LOSS) EARNINGS PER SHARE | NOTE 7 – (LOSS) EARNINGS PER SHARE We report (loss) earnings per share in accordance with ASC 260, “Earnings Per Share.” Basic (loss) earnings per share are computed using the weighted average number of shares outstanding during the period. Diluted (loss) earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options by using the treasury stock method that the proceeds we receive from an in-the-money option exercise are used towards repurchasing common shares in the market. For the years ended June 30, 2023, and 2022, we were in a net loss position and have excluded 647,001 766,001 The weighted average number of shares outstanding used to compute loss per share is as follows: Schedule of earnings per share Year Ended June 30, 2023 2022 Net loss attributable to Parent Company $ (2,863,021 ) $ (3,762,848 ) Weighted-average shares of common stock outstanding: Basic 11,736,609 11,613,812 Dilutive effect of common stock equivalents arising from stock options – – Diluted Outstanding shares 11,736,609 11,613,812 Basic loss per share attributable to Parent Company stockholders $ (0.24 ) $ (0.32 ) Diluted loss per share attributable to Parent Company stockholders $ (0.24 ) $ (0.32 ) |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 8 - COMMITMENTS AND CONTINGENCIES Leases In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842). Topic 842 amended several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the period of adoption. We adopted ASC 842 as of July 1, 2019. We had an operating lease principally for both Franklin Wireless Corp. and Franklin Technologies Inc., in accordance with ASC 842. Adoption of the standard resulted in the initial recognition of operating lease right-of-use (“ROU”) assets and operating lease liabilities of $ 1,501,203 1,507,367 We determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. Operating leases are recorded in the balance sheet as right-of-use asset (“ROU asset”) and operating lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assets and liabilities. Lease expense for operating lease is recognized on a straight-line basis over the lease term. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term . On September 9, 2015, we signed a lease for new office space consisting of approximately 12,775 square feet, located in San Diego, California, which commenced on October 28, 2015. In addition to monthly rent, the new lease includes payment for certain common area costs. The term of the lease for the new office space was four years from the lease commencement date and was then extended at a monthly rent of $25,754, by an additional fifty months to December 31, 2023. Our facility is covered by an appropriate level of insurance, and we believe it to be suitable for our use and adequate for our present needs. Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space, at a monthly rent of approximately $8,000, and additional office space consisting of approximately 2,682 square feet at a monthly rent of approximately $2,700, both located in Seoul, Korea. These leases expired on August 31, 2023, and were extended by an additional twelve months to August 31, 2024. In addition to monthly rent, the leases provide for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance, and we believe them to be suitable for our use and adequate for our present needs. We lease one corporate housing facility, located in Seoul, Korea, primarily for our employees who travel, under a non-cancelable operating lease that expired on September 4, 2023, and were extended by an additional twelve months to September 4, 2024. Short-term leases with initial terms of twelve months or less are not capitalized, and our leases of the South Korean offices and corporate housing facility have been considered as short-term lease. The components of lease expense and supplemental cash flow information related to leases for the years ended June 30, 2023, and 2022 are as follows: As of June 30, 2023, we used discount rates of 4.0 445,548 446,057 Schedule of components of lease expense Years ended June 30, 2023 2022 Operating lease expense $ 309,053 $ 328,650 Short term lease cost 136,495 117,407 Total lease expense $ 445,548 $ 446,057 Remaining lease term-operating leases 0.5 Discount rate-operating lease 4 In accordance with ASC 842, maturity of operating lease liabilities as of June 30, 2023, was as follows: Schedule of future minimum rental payments for operating leases Payments due by June, 30 2024 Total Administrative office, San Diego, CA $ 160,965 $ 160,965 Total Obligations $ 160,965 $ 160,965 Schedule of future minimum rental payments for operating leases Operating Leases Fiscal 2024 $ 160,965 Total lease payments 160,965 Less imputed interest (1,861 ) Total $ 159,104 Litigation We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Verizon Jetpack Recall On April 8, 2021, Verizon issued a press release announcing that it was working with the U.S. Consumer Product Safety Commission (CPSC) to conduct a voluntary recall of certain Verizon Ellipsis Jetpack mobile hotspot devices, indicating that the lithium-ion battery in the devices can overheat, posing a fire and burn hazard. According to the CPSC release, the recall affects approximately 2.5 million devices. We import the devices and supply them to Verizon. Verizon first advised us of one alleged Jetpack device failure at the end of February 2021. We immediately began meeting with Verizon and requested access to the device. We also began internal testing to evaluate device performance. We did not receive any further incident information until the last week of March 2021. On April 1, 2021 we issued a press release announcing that we had received reports from Verizon about potential issues with the batteries in the devices. On April 9, 2021 we issued a press release announcing the voluntary recall by Verizon. As of the date of this report, we have been unable to recreate any device failures of the type identified by Verizon. All internal testing conducted to date has confirmed that the Jetpack devices are performing within normal parameters. We are not currently aware of any aspect of the Jetpack design that could cause the devices to fail in the way described in Verizon’s recall notice. Future Impact on Financial Performance We are striving to avoid any litigation with Verizon arising from the recall and have not been served with any legal action by Verizon relating to the products covered by the recall. We are not currently able to estimate the financial impact of the recall on our future operations. At this time, we do not have information that identifies the cause of the alleged incidents. We also do not have any specific legal claims or theories of causation for device failure incidents that would help us estimate the cost of potential future litigation. No liability has been recorded for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time. Franklin v. Anydata, Inc . We entered into a Professional Services Agreement with Anydata Corp. (“Anydata”) for the product ACT233F Smart Link OBD device on May 5, 2017, for a minimum purchase commitment of 250,000 units. We 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 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 we received personal guarantees from the ownership group of Anydata. As of June 30, 2019, the remaining unfulfilled purchase commitment was approximately $3.1 million. The total product purchase commitment with Quanta was approximately $2.9 million. We have not recorded a receivable from Anydata, nor a liability owed to Quanta. Management believes that, at this time, a loss contingency is reasonably possible but not estimable as to how much ultimately would be paid to Quanta. As of June 30, 2020, we paid $ 100,000 49,580 149,580 Shareholder Litigation Ali A shareholder action, Ali vs. Franklin Wireless Corp. et al. Case #3:21-cv-00687-AJB-MSB, was filed in the U.S. District Court, Southern District of California (San Diego) on April 16, 2021, alleging, among other things, that we had prior knowledge that the Verizon recall was likely and that we did not disclose that information to investors in a timely manner. The Class and Defendants have executed a Stipulation and Agreement of Settlement under which the Class releases all claims against Defendants in exchange for a payment by Defendants of $ 2.4 million Harwood / Martin A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Stephen Harwood, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv01837-AJB-MSB, on or about October 29, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, by Debra Martin, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case #21cv2091-AJB-MSB, on or about December 15, 2021, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. The Harwood and Martin actions have been consolidated into a single action in the U.S. District Court, Southern District of California (San Diego) titled “In re Franklin Wireless Corp. Derivative Litigation”, Case No.: 21cv1837-AJB (MSB). Discovery is ongoing at this time. Pape A legal action was filed in the Second Judicial District Court of Nevada in the County of Washoe against Franklin, as a nominal defendant, Barbara Pape, derivatively on behalf of nominal defendant Franklin Wireless Corp. v. O.C. Kim, et al., Case # CV22-00471, on or about March 21, 2022, claiming among other things, that we had prior knowledge that the recall was likely and that we did not disclose that information to investors in a timely manner. We believe these allegations are not supported by the facts and we will vigorously defend against such claims. The Company will vigorously defend such shareholder litigation and proceedings. No liability has been recorded for these litigations because the Company believes that any such liability is not probable and reasonably estimable at this time. “Short-Swing” Profits Litigation A legal action was filed in the U.S. District Court, Southern District of California (San Diego) against Franklin, as a nominal defendant, Nosirrah Management LLC v. Franklin Wireless et al., Case # 3:21-cv-01316-RSH-JLB, on or about July 22, 2021, claiming that our Chief Executive Officer, O.C. Kim, violated Section 16(b) of the Securities Exchange Act of 1934 for receiving “short-swing” profits from a sale and purchase of Franklin shares, in violation of that Act. We believe the allegations are not supported by the facts and we intend to vigorously defend against these claims. No liability has been recorded for this litigation because the Company believes that any such liability is not probable and reasonably estimable at this time. 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. The Change in Control Agreements, dated October 1, 2020, have been extended through September 30, 2024. Severance Agreement On November 10, 2022 the Company and OC Kim, its President, entered into an amendment of the employment letter agreement dated September 7, 2021. The amendment provides for a severance payment of $3 million if Mr. Kim voluntarily terminates his employment by the Company or if he voluntarily terminates his employment due to a “change in circumstances,” generally defined as a material breach by the Company of its salary and benefit obligations or a significant reduction in Mr. Kim’s title or responsibilities. In the case of a termination of employment by the Company for cause (generally defined as conviction of a felony, or a misdemeanor where imprisonment is imposed, commission of any act of theft, fraud, dishonesty, or material falsification of any employment or Company records, or improper disclosure of the Company's confidential or proprietary information), the Company is to make a severance payment of $1,500,000. In either case, any unvested options become immediately vested. In the amendment, Mr. Kim also agrees that, for a period of two years after termination, he will not disparage the Company or its officers, solicit any of its employees to terminate their employment, or disclose any of the Company’s proprietary information. In addition, the amendment provides for the payment of an incentive bonus to Mr. Kim of $125,000 for each calendar quarter during the remaining four year term of the employment letter, with the first such bonus due on December 31, 2022. Loan Agreement with Subsidiary On March 21, 2022, Franklin Wireless Corp. (the “Company”) entered into a Loan Agreement with Franklin Technology Incorporation, a Republic of Korea corporation (“FTI”), under which the Company agreed to loan US$ 10,000,000 The purpose of the loan is to allow FTI to purchase a facility in South Korea to house its operations, and to provide it with additional working capital. The purchase of such a facility with the loan proceeds is subject to the Company’s reasonable approval. Upon acquisition of the facility, FTI is required to grant the Company a mortgage on it to secure payment of the Note. The Note is for a term of five years, provides for annual payments of interest at 2% per annum, and is due and payable upon maturity. The Note and Loan Agreement include customary provisions for default and acceleration upon default, and a default interest rate of 7% per annum. International Tariffs We believe that our products are currently exempt from international tariffs upon import from our manufacturers to the United States. If this were to change at any point, a tariff of 10%-25% of the purchase price would be imposed. If such tariffs are imposed, they could have a materially adverse effect on sales and operating results. Customer Indemnification Under purchase orders and contracts for the sale of our products we may provide indemnification to our customers for potential intellectual property infringement claims for which we may have no corresponding recourse against our third-party licensors. This potential liability, if realized, could materially adversely affect our business, operating results and financial condition. |
LONG-TERM INCENTIVE PLAN AWARDS
LONG-TERM INCENTIVE PLAN AWARDS | 12 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
LONG-TERM INCENTIVE PLAN AWARDS | NOTE 9 - LONG-TERM INCENTIVE PLAN AWARDS We apply the provisions of ASC 718, “Compensation - Stock Compensation,” to all of our stock-based compensation awards, and use the Black-Scholes option pricing model to value stock options. Under this application, we record compensation expense for all awards granted. Compensation costs will be recognized over the period that an employee provides service in exchange for the award, i.e. the vesting period. In 2009, we adopted the Stock Incentive Plan (“2009 Plan”), which provided for the grant of incentive stock options and non-qualified stock options to our employees and directors. Options granted under the 2009 Plan generally have a term of ten years and generally vest and become exercisable at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant dates. Historically, some stock option grants have included shorter vesting periods ranging from one to two years. In July of 2020, the Board of Directors adopted the 2020 Franklin Wireless Corp. Stock Option Plan, which covers 800,000 The estimated forfeiture rate considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations about the future. We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. There were $ 710,870 545,841 A summary of the status of our stock options is presented below: Schedule of stock option activity Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (93,999 ) 0.80 – – Forfeited or expired (12,000 ) 5.40 – – Outstanding as of June 30, 2022 766,001 $ 3.85 3.37 $ 183,270 Granted – – – – Exercised (100,000 ) 1.34 – – Forfeited or expired (19,000 ) 5.40 – – Outstanding as of June 30, 2023 647,001 $ 4.24 2.88 $ 130,200 Exercisable as of June 30, 2023 457,577 $ 4.58 2.63 $ 65,219 The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $3.73 as of June 30, 2023, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of June 30, 2023, in the amount of 647,001 3.34 As of June 30, 2023, there was unrecognized compensation cost of $ 542,807 |
STOCKHOLDERS_ EQUITY
STOCKHOLDERS’ EQUITY | 12 Months Ended |
Jun. 30, 2023 | |
Equity [Abstract] | |
STOCKHOLDERS’ EQUITY | NOTE 10 – STOCKHOLDERS’ EQUITY Common Stock We have been authorized to issue 50,000,000 0.001 On December 22, 2022, we issued 100,000 11,784,280 11,684,280 Preferred Stock We have been authorized to issue 10,000,000 shares of preferred stock. $0.001 0.001 par value, but no preferred stock is issued and outstanding as of June 30, 2023 and 2022. Treasury Stock We had 2,549,208 3,554,893 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Jun. 30, 2023 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 11 – RELATED PARTY TRANSACTIONS For the years ended June 30, 2023, and 2022, there have not been any transactions, except as disclosed in Note 8, entered into or been a participant in which a related person had or will have a direct or indirect material interest. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 - SUBSEQUENT EVENTS The FASB issued ASC 855, “Subsequent Events.” ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company has evaluated all events or transactions that occurred after June 30, 2023, up through the date the financial statements were available to be issued. During these periods, the Company did not have any material recognizable subsequent events required to be disclosed to the financial statements as of September 28, 2023. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of approximately 66.3% (approximately 33.7 As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of June 30, 2023, or June 30, 2022. |
Non-controlling Interest in a Consolidated Subsidiary | Non-controlling Interest in a Consolidated Subsidiary As of June 30, 2023, the non-controlling interest was $ 1,487,967 81,638 1,569,605 242,554 |
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 shall generate revenues from three geographic areas, consisting of North America, the Caribbean and South America, and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements. The following table contains certain financial information by geographic area: Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2023 2022 North America $ 45,782,084 $ 23,305,366 Caribbean and South America – 2,375 Asia 166,432 690,021 Totals $ 45,948,516 $ 23,997,762 Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2023 June 30, 2022 United States $ 2,083,902 $ 1,374,747 Asia 198,070 81,261 Totals $ 2,281,972 $ 1,456,008 |
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). |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do no |
Cash Flows Reporting | Cash Flows Reporting We follow ASC 230, Statements of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category. We use the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and all items that are included in net (loss) income that do not affect operating cash receipts and payments. |
Related Parties | Related Parties We follow ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. Related parties are any entities or individuals that, through employment, ownership or other means, possess the ability to direct or cause the direction of our management and policies of the Company. (Refer to NOTE 11–RELATED PARTY TRANSACTIONS) |
Foreign Currency Translations | Foreign Currency Translations We have a majority-owned subsidiary in foreign country, South Korea. Fluctuations in foreign currency impact the amount of total assets, liabilities, earnings and cash flows that we report for our foreign subsidiary upon the translation of these amounts into U.S. Dollars for, and as of the end of, each reporting period. In particular, the strengthening of the U.S. Dollar generally will reduce the reported amount of our foreign-denominated cash, cash equivalents, total revenues and total expense that we translate into U.S. Dollars and report in our consolidated financial statements for, and as of the end of, each reporting period. However, a majority of our consolidated revenue is denominated in U.S. Dollars, and therefore, our revenue is not directly subject to foreign currency risk. In accordance with FASB ASC 830, "Foreign Currency Matters" , when an operation has transactions denominated in a currency other than its functional currency, they are measured in the functional currency. Changes in the expected functional currency cash flows caused by changes in exchange rates are included in net income for the period. |
Leases | Leases In accordance with ASC 842, “Leases”, we determine whether an arrangement contains a lease at inception. A lease is a contract that provides the right to control an identified asset for a period of time in exchange for consideration. For identified leases, we determine whether it should be classified as an operating or finance lease. Operating leases are recorded in the balance sheet as right-of-use asset (“ROU asset”) and operating lease obligation. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payment arising from the lease ROU assets and operating lease liabilities are recognized at the commencement date of the lease and measure based on the present value of lease payment over the lease term. The ROU asset also includes deferred rent liabilities. Our lease arrangement generally does not provide an implicit interest rate. As a result, in such situations, we use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We include options to extend or terminate the lease when it is reasonably certain that it will exercise that option in the measurement of its ROU assts and liabilities. Lease expense for operating lease is recognized on a straight-line basis over the lease term. We are also electing not to apply the recognition requirements to short-term leases of twelve months or less and instead will recognize lease payments as expense on a straight-line basis over the lease term. |
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 provisions for the years ended June 30, 2023, and 2022, were not material. Disaggregation of Revenue In accordance with Topic 606, “Revenue from Contracts with Customers”, 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 contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services. The balances of our trade receivables are as follows: Schedule of receivables June 30, 2023 June 30, 2022 Accounts Receivable, net $ 8,949,802 $ 1,322,619 The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2023, and June 30, 2022. Included in the Accounts Receivable balance as of June 30, 2022, is a passthrough amount of $837,000. These transactions were a direct result of an agreement between our vendor and our customer. There is a corresponding balance of $837,000 in our Accounts Payable account as of June 30, 2022, to offset. There were no such balances as of June 30, 2023. Our contract liabilities, which are included in accrued liabilities on our consolidated balance sheets, are as follows: Schedule of contract liabilities June 30, 2023 June 30, 2022 Undelivered products $ 146,488 $ 371,624 Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good and/or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and/or services promised in our contracts with customers. We then identify performance obligations to transfer distinct products and/or services to the customer. To identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. Our performance obligations are satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for over 99% of net sales for the year ended June 30, 2023, and 2022. Revenue for non-recurring engineering projects is based on the percentage completion of a project and accounted for under 1% of net sales for the year ended June 30, 2023, and 2022. Most of our revenue that is recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer can direct the use of and obtain substantially all of the benefits from the product, which generally coincides with title transfer at completion of the shipping process. As of June 30, 2023, and 2022, our contracts do not contain any unsatisfied performance obligations, except for undelivered products. |
Cost of Goods Sold | Cost of Goods Sold All costs associated with our contract manufacturers, as well as distribution, fulfillment and repair services, are included in our cost of goods sold. Cost of goods sold also includes amortization expenses of approximately $ 800,000 500,000 |
Capitalized Product Development Costs | Capitalized Product Development Costs Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and shall be accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product development that are capitalized once technological feasibility is determined (noted as Technology in progress in the Intangible Assets table, in Note 2 to Notes to Consolidated Financial Statements) include certifications, licenses, 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 straight-line amortization. The amortization begins when the products are available for general release to our customers. As of June 30, 2023, and June 30, 2022, capitalized product development costs in progress were $ 203,838 187,343 1,631,376 |
Research and Development Costs | Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $ 3,918,664 4,282,131 |
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 $ 234,681 246,290 |
Cash and Cash Equivalents | Cash and Cash Equivalents For the purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value. |
Short Term Investments | Short Term Investments We have invested excess funds in short term liquid assets, such as certificates of deposit or money market funds. |
Inventories | Inventories Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable and can fluctuate significantly caused by factors beyond our control. We may write down our inventory value for potential obsolescence and excess inventory. As of June 30, 2023, and 2022, we have recorded inventory reserves in the amount of $ 585,274 557,155 |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Significant additions or improvements extending the useful lives of assets are capitalized. Maintenance and repairs of revenue nature are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Useful lives of property and equipment Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and 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, 2023, and 2022. Intangible Assets The definite lived intangible assets consisted of the following as of June 30, 2023: Schedule of definite lived intangible assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 203,838 – 203,838 Software 5 1.6 423,762 347,228 76,534 Patents 10 7.0 59,975 21,108 38,867 Certifications & licenses 3 2.0 3,759,240 1,897,595 1,861,645 Total as of June 30, 2023 $ 4,465,212 2,284,328 2,180,884 The definite lived intangible assets consisted of the following as of June 30, 2022: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 Amortization expense recognized during the years ended June 30, 2023, and 2022 was $ 839,595 579,012 Schedule of future amortization expense FY2024 FY2025 FY2026 FY2027 FY2028 Thereafter Total $ 954,166 $ 721,265 $ 263,918 $ 18,296 $ 11,148 $ 8,253 |
Impairment of Long-lived Assets | Impairment of Long-lived Assets In accordance with ASC 360, “Property, Plant, and Equipment,” we review for impairment of long-lived assets and certain identifiable intangibles whenever events or circumstances indicate that the carrying amount of assets may not be recoverable. We consider the carrying value of assets may not be recoverable based upon our review of the following events or changes in circumstances: the asset’s ability to continue to generate income from operations and positive cash flow in future periods; loss of legal ownership or title to the assets; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount. We are not aware of any events or changes in circumstances during the year ended June 30, 2023, 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 (loss) income based upon the underlying recipients' roles within the Company. |
Income Taxes | Income Taxes The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes. The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense. |
(Loss) Earnings per Share Attributable to Common Stockholders | (Loss) Earnings per Share Attributable to Common Stockholders In accordance with ASC 260, “Earnings per share”, basic (loss) earnings per share are calculated by dividing the net (loss) income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted (loss) earnings per share is calculated by dividing the net (loss) income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. |
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 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, 2023, net sales to our two largest customers represented approximately 61 31 27 69 70 13 0 For the year ended June 30, 2023, we purchased the majority of our wireless data products from three 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, 2023, we purchased wireless data products from these suppliers in the amount of $ 37,505,858 99.6 12,598,741 22,319,313 98.3 7,409,273 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 September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50) |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Segment information by geographic areas | Segment information by geographic areas Fiscal Year Ended June 30, Net sales: 2023 2022 North America $ 45,782,084 $ 23,305,366 Caribbean and South America – 2,375 Asia 166,432 690,021 Totals $ 45,948,516 $ 23,997,762 |
Long lived assets by geographic area | Long lived assets by geographic area Long-lived assets, net (property and equipment and intangible assets): June 30, 2023 June 30, 2022 United States $ 2,083,902 $ 1,374,747 Asia 198,070 81,261 Totals $ 2,281,972 $ 1,456,008 |
Schedule of receivables | Schedule of receivables June 30, 2023 June 30, 2022 Accounts Receivable, net $ 8,949,802 $ 1,322,619 |
Schedule of contract liabilities | Schedule of contract liabilities June 30, 2023 June 30, 2022 Undelivered products $ 146,488 $ 371,624 |
Useful lives of property and equipment | Useful lives of property and equipment Machinery 6 years Office equipment 5 years Molds 3 years Vehicles 5 years Computers and software 5 years Furniture and fixtures 7 years Facilities improvements 5 years or life of the lease, whichever is shorter |
Schedule of definite lived intangible assets | Schedule of definite lived intangible assets Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 203,838 – 203,838 Software 5 1.6 423,762 347,228 76,534 Patents 10 7.0 59,975 21,108 38,867 Certifications & licenses 3 2.0 3,759,240 1,897,595 1,861,645 Total as of June 30, 2023 $ 4,465,212 2,284,328 2,180,884 The definite lived intangible assets consisted of the following as of June 30, 2022: Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Less Accumulated Amortization Net Intangible Assets Complete technology 3 – 18,397 18,397 – Technology in progress Not Applicable – 187,343 – 187,343 Software 5 2.0 423,147 314,855 108,292 Patents 10 2.5 21,543 15,122 6,421 Certifications & licenses 3 1.1 2,144,359 1,096,359 1,048,000 Total as of June 30, 2022 $ 2,794,789 1,444,733 1,350,056 |
Schedule of future amortization expense | Schedule of future amortization expense FY2024 FY2025 FY2026 FY2027 FY2028 Thereafter Total $ 954,166 $ 721,265 $ 263,918 $ 18,296 $ 11,148 $ 8,253 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Schedule of property and equipment June 30, 2023 June 30, 2022 Machinery and Commercial Equipment $ 25,146 $ 67,848 Office equipment 233,608 312,785 Molds 479,466 575,552 Vehicle 15,513 15,513 753,733 971,698 Less accumulated depreciation (652,645 ) (865,746 ) Total $ 101,088 $ 105,952 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Payables and Accruals [Abstract] | |
Schedule of accrued liabilities | Schedule of accrued liabilities June 30, 2023 June 30, 2022 Accrued payroll deductions owed to government entities $ 52,923 $ 55,387 Accrued salaries and bonuses 375,000 – Accrued vacation 141,590 65,602 Accrued undelivered inventory – 140,000 Accrued commission for service providers 32,500 40,000 Accrued commission to a customer 247,592 288,306 Other accrued liabilities – 612 Total $ 849,605 $ 589,907 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax benefit | Schedule of income tax benefit Year Ended June 30, 2023 2022 Current income tax (benefit) expense: Federal $ 5,211 $ (127,998 ) State 975 975 Foreign (4,766 ) 49,843 Total Current income tax expense (benefit) 1,420 (77,180 ) Deferred income tax benefit: Federal (752,843 ) (876,513 ) State (6,155 ) (83,375 ) Foreign (129,081 ) – Total deferred income tax expense (benefit) (888,079 ) (959,888 ) Benefit for income taxes $ (886,659 ) $ (1,037,068 ) |
Schedule of effective income tax rate | Schedule of effective income tax rate Year Ended June 30, 2023 2022 Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items $ (810,281 ) $ (982,130 ) State tax, net of federal tax benefit 15,082 (82,840 ) Nondeductible expenses 5,850 870 R&D credits (51,415 ) (46,643 ) Global intangible low-taxed income – 152,930 Foreign rate difference 4,743 (16,279 ) Others (50,638 ) (62,976 ) Change in valuation allowance – – Benefit for income taxes $ (886,659 ) $ (1,037,068 ) |
Schedule of deferred tax assets | Schedule of deferred tax assets June 30, 2023 June 30, 2022 Deferred tax asset: Net operating losses $ 697,431 $ 737,258 State tax 205 – Lease accounting, net 1,359 4,299 Intangibles 735,680 156,334 Tax credits 191,544 202,958 Legal contingency expense reserve 504,000 – Inventory reserve 123,488 155,133 Other, net 104,044 145,679 Total deferred tax assets 2,357,751 1,401,661 Deferred tax liabilities: Deferred state taxes (49,787 ) (46,565 ) State tax – 205 Property and equipment, net (1,652 ) (7,865 ) Unrealized gain (loss) (70,797 ) – Total deferred tax liabilities (122,236 ) (54,225 ) Less valuation allowance – – Net deferred tax asset $ 2,235,515 $ 1,347,436 |
Schedule of unrecognized tax benefits | Schedule of unrecognized tax benefits Balance as of June 30, 2021 $ 335,259 Gross increase 29,789 Balance as of June 30, 2022 365,048 Gross increase 23,968 Balance as of June 30, 2023 $ 389,016 |
(LOSS) EARNINGS PER SHARE (Tabl
(LOSS) EARNINGS PER SHARE (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of earnings per share | Schedule of earnings per share Year Ended June 30, 2023 2022 Net loss attributable to Parent Company $ (2,863,021 ) $ (3,762,848 ) Weighted-average shares of common stock outstanding: Basic 11,736,609 11,613,812 Dilutive effect of common stock equivalents arising from stock options – – Diluted Outstanding shares 11,736,609 11,613,812 Basic loss per share attributable to Parent Company stockholders $ (0.24 ) $ (0.32 ) Diluted loss per share attributable to Parent Company stockholders $ (0.24 ) $ (0.32 ) |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of components of lease expense | Schedule of components of lease expense Years ended June 30, 2023 2022 Operating lease expense $ 309,053 $ 328,650 Short term lease cost 136,495 117,407 Total lease expense $ 445,548 $ 446,057 Remaining lease term-operating leases 0.5 Discount rate-operating lease 4 |
Schedule of future minimum rental payments for operating leases | Schedule of future minimum rental payments for operating leases Payments due by June, 30 2024 Total Administrative office, San Diego, CA $ 160,965 $ 160,965 Total Obligations $ 160,965 $ 160,965 |
Schedule of future minimum rental payments for operating leases | Schedule of future minimum rental payments for operating leases Operating Leases Fiscal 2024 $ 160,965 Total lease payments 160,965 Less imputed interest (1,861 ) Total $ 159,104 |
LONG-TERM INCENTIVE PLAN AWAR_2
LONG-TERM INCENTIVE PLAN AWARDS (Tables) | 12 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of stock option activity | Schedule of stock option activity Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Life (In Years) Aggregate Intrinsic Value Outstanding as of June 30, 2021 484,000 $ 3.67 2.83 $ 2,662,830 Granted 388,000 3.38 – – Exercised (93,999 ) 0.80 – – Forfeited or expired (12,000 ) 5.40 – – Outstanding as of June 30, 2022 766,001 $ 3.85 3.37 $ 183,270 Granted – – – – Exercised (100,000 ) 1.34 – – Forfeited or expired (19,000 ) 5.40 – – Outstanding as of June 30, 2023 647,001 $ 4.24 2.88 $ 130,200 Exercisable as of June 30, 2023 457,577 $ 4.58 2.63 $ 65,219 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Net sales | $ 45,948,516 | $ 23,997,762 |
North America [Member] | ||
Net sales | 45,782,084 | 23,305,366 |
South America [Member] | ||
Net sales | 0 | 2,375 |
Asia [Member] | ||
Net sales | $ 166,432 | $ 690,021 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Segments Long-Lived Assets) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Long-lived assets, net (property and equipment and intangible assets) | $ 2,281,972 | $ 1,456,008 |
UNITED STATES | ||
Long-lived assets, net (property and equipment and intangible assets) | 2,083,902 | 1,374,747 |
Asia [Member] | ||
Long-lived assets, net (property and equipment and intangible assets) | $ 198,070 | $ 81,261 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Receivables) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Accounts Receivable, net | $ 8,949,802 | $ 1,322,619 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Contract liabilities) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Accounting Policies [Abstract] | ||
Undelivered products | $ 146,488 | $ 371,624 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Useful lives) | 12 Months Ended |
Jun. 30, 2023 | |
Machinery and Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 6 years |
Office Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Tools, Dies and Molds [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 3 years |
Vehicles [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Computer Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 7 years |
Facility Improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated useful lives | 5 years or life of the lease, whichever is shorter |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Intangible assets activity) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Indefinite-Lived Intangible Assets [Line Items] | ||
Intangible Assets, Gross | $ 4,465,212 | $ 2,794,789 |
Accumulated Amortization | 2,284,328 | 1,444,733 |
Intangible Assets, Net | $ 2,180,884 | $ 1,350,056 |
Complete Technology [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Intangible Assets, Gross | $ 18,397 | $ 18,397 |
Accumulated Amortization | 18,397 | 18,397 |
Intangible Assets, Net | 0 | 0 |
Technology In Progess [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Intangible Assets, Gross | 203,838 | 187,343 |
Accumulated Amortization | 0 | 0 |
Intangible Assets, Net | $ 203,838 | $ 187,343 |
Computer Software, Intangible Asset [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 5 years | 5 years |
Intangible Assets, Gross | $ 423,762 | $ 423,147 |
Accumulated Amortization | 347,228 | 314,855 |
Intangible Assets, Net | $ 76,534 | $ 108,292 |
Remaining Life | 1 year 7 months 6 days | 2 years |
Patent [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 10 years | 10 years |
Intangible Assets, Gross | $ 59,975 | $ 21,543 |
Accumulated Amortization | 21,108 | 15,122 |
Intangible Assets, Net | $ 38,867 | $ 6,421 |
Remaining Life | 7 years | 2 years 6 months |
Certification And Licenses [Member] | ||
Indefinite-Lived Intangible Assets [Line Items] | ||
Expected Life | 3 years | 3 years |
Intangible Assets, Gross | $ 3,759,240 | $ 2,144,359 |
Accumulated Amortization | 1,897,595 | 1,096,359 |
Intangible Assets, Net | $ 1,861,645 | $ 1,048,000 |
Remaining Life | 2 years | 1 year 1 month 6 days |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details - Amortization Expenses) | Jun. 30, 2023 USD ($) |
Accounting Policies [Abstract] | |
FY2024 | $ 954,166 |
FY2025 | 721,265 |
FY2026 | 263,918 |
FY2027 | 18,296 |
FY2028 | 11,148 |
Thereafter | $ 8,253 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Product Information [Line Items] | ||
Noncontrolling interest | $ 1,487,967 | $ 1,569,605 |
Increase (decrease) in noncontrolling interest | 81,638 | |
Loss in the subsidiary | 242,554 | |
Allowance for doubtful accounts | 0 | 0 |
Product development costs | 800,000 | 500,000 |
Capitalized product development costs | 203,838 | 187,343 |
Product development costs incurred | 1,631,376 | 658,544 |
Research and development expense | 3,918,664 | 4,282,131 |
Shipping and handling expense | 5,451,653 | 4,509,344 |
Inventory reserve | 585,274 | 557,155 |
Amortization of intangible assets | 839,595 | 579,012 |
Cost of Revenue | 38,927,774 | 20,181,179 |
Accounts payable current | 12,950,497 | 8,143,305 |
Wireless Data Products [Member] | ||
Product Information [Line Items] | ||
Cost of Revenue | 37,505,858 | 22,319,313 |
Accounts payable current | $ 12,598,741 | $ 7,409,273 |
Cost of Goods and Service, Product and Service Benchmark [Member] | Supplier Concentration Risk [Member] | Wireless Data Products [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 99.60% | 98.30% |
Customer 1 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 61% | 70% |
Customer 1 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 27% | 0% |
Customer 2 [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 31% | 13% |
Customer 2 [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||
Product Information [Line Items] | ||
Concentration of credit risk | 69% | |
Shipping and Handling [Member] | ||
Product Information [Line Items] | ||
Shipping and handling expense | $ 234,681 | $ 246,290 |
Franklin Technology Inc [Member] | ||
Product Information [Line Items] | ||
Subsidiary, Ownership Percentage, Noncontrolling Owner | 33.70% |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 753,733 | $ 971,698 |
Less accumulated depreciation | (652,645) | (865,746) |
Total | 101,088 | 105,952 |
Machinery and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 25,146 | 67,848 |
Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 233,608 | 312,785 |
Tools, Dies and Molds [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 479,466 | 575,552 |
Vehicle [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 15,513 | $ 15,513 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation | $ 51,970 | $ 87,743 |
Property and equipment written off | $ 265,071 | $ 4,175 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Payables and Accruals [Abstract] | ||
Accrued payroll deductions owed to government entities | $ 52,923 | $ 55,387 |
Accrued salaries and bonuses | 375,000 | 0 |
Accrued vacation | 141,590 | 65,602 |
Accrued undelivered inventory | 0 | 140,000 |
Accrued commission for service providers | 32,500 | 40,000 |
Accrued commission to a customer | 247,592 | 288,306 |
Other accrued liabilities | 0 | 612 |
Total | $ 849,605 | $ 589,907 |
INCOME TAXES (Details - Provisi
INCOME TAXES (Details - Provision for Income Taxes) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Current income tax (benefit) expense: | ||
Federal | $ 5,211 | $ (127,998) |
State | 975 | 975 |
Foreign | (4,766) | 49,843 |
Total Current income tax expense (benefit) | 1,420 | (77,180) |
Deferred income tax benefit: | ||
Federal | (752,843) | (876,513) |
State | (6,155) | (83,375) |
Foreign | (129,081) | 0 |
Total deferred income tax expense (benefit) | (888,079) | (959,888) |
Benefit for income taxes | $ (886,659) | $ (1,037,068) |
INCOME TAXES (Details - Reconci
INCOME TAXES (Details - Reconciliation of Tax Rate) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||
Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items | $ (810,281) | $ (982,130) |
State tax, net of federal tax benefit | 15,082 | (82,840) |
Nondeductible expenses | 5,850 | 870 |
R&D credits | (51,415) | (46,643) |
Global intangible low-taxed income | 0 | 152,930 |
Foreign rate difference | 4,743 | (16,279) |
Others | (50,638) | (62,976) |
Change in valuation allowance | 0 | 0 |
Benefit for income taxes | $ (886,659) | $ (1,037,068) |
INCOME TAXES (Details - Deferre
INCOME TAXES (Details - Deferred Income Taxes) - USD ($) | Jun. 30, 2023 | Jun. 30, 2022 |
Deferred tax asset: | ||
Net operating losses | $ 697,431 | $ 737,258 |
State tax | 205 | 0 |
Lease accounting, net | 1,359 | 4,299 |
Intangibles | 735,680 | 156,334 |
Tax credits | 191,544 | 202,958 |
Legal contingency expense reserve | 504,000 | 0 |
Inventory reserve | 123,488 | 155,133 |
Other, net | 104,044 | 145,679 |
Total deferred tax assets | 2,357,751 | 1,401,661 |
Deferred tax liabilities: | ||
Deferred state taxes | (49,787) | (46,565) |
State tax | 0 | 205 |
Property and equipment, net | (1,652) | (7,865) |
Unrealized gain (loss) | (70,797) | 0 |
Total deferred tax liabilities | (122,236) | (54,225) |
Less valuation allowance | 0 | 0 |
Net deferred tax asset | $ 2,235,515 | $ 1,347,436 |
INCOME TAXES (Details - Unrecog
INCOME TAXES (Details - Unrecognized tax benefits) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||
Beginning Balance | $ 365,048 | $ 335,259 |
Gross increase | 23,968 | 29,789 |
Ending Balance | $ 389,016 | $ 365,048 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | Jun. 30, 2023 | Jan. 01, 2018 | Dec. 31, 2017 |
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | $ 500,000 | ||
Domestic Tax Authority [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | 2,500,000 | $ 2,500,000 | $ 0 |
State and Local Jurisdiction [Member] | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforward | $ 500,000 |
(LOSS) EARNINGS PER SHARE (Deta
(LOSS) EARNINGS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Earnings Per Share [Abstract] | ||
Net loss attributable to Parent Company | $ (2,863,021) | $ (3,762,848) |
Weighted-average shares of common stock outstanding: | ||
Basic | 11,736,609 | 11,613,812 |
Dilutive effect of common stock equivalents arising from stock options | 0 | 0 |
Diluted Outstanding shares | 11,736,609 | 11,613,812 |
Basic loss per share attributable to Parent Company stockholders | $ (0.24) | $ (0.32) |
Diluted loss per share attributable to Parent Company stockholders | $ (0.24) | $ (0.32) |
(LOSS) EARNINGS PER SHARE (De_2
(LOSS) EARNINGS PER SHARE (Details Narrative) - shares | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Earnings Per Share [Abstract] | ||
Anti-dilutive shares excluded from EPS | 647,001 | 766,001 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details - Lease expenses) - USD ($) | 12 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease expense | $ 309,053 | $ 328,650 |
Short term lease cost | 136,495 | 117,407 |
Total lease expense | $ 445,548 | $ 446,057 |
Remaining lease term-operating leases | 6 months | |
Discount rate-operating lease | 4% |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liability under operating leases) | Jun. 30, 2023 USD ($) |
2024 | $ 160,965 |
Lessee, Operating Lease, Liability, to be Paid | 160,965 |
Administrative Office San Diego C A [Member] | |
2024 | 160,965 |
Total | $ 160,965 |
COMMITMENTS AND CONTINGENCIES_4
COMMITMENTS AND CONTINGENCIES (Details - Maturities of lease liabilities) | Jun. 30, 2023 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
Fiscal 2024 | $ 160,965 |
Total lease payments | 160,965 |
Less imputed interest | (1,861) |
Total | $ 159,104 |
COMMITMENTS AND CONTINGENCIES_5
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |||||
Jun. 30, 2023 | Jun. 30, 2022 | Mar. 21, 2023 | Dec. 31, 2020 | Jun. 30, 2020 | Jul. 01, 2019 | |
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||||
Operating lease right-of-use | $ 152,665 | $ 448,621 | ||||
Operating lease liabilities | $ 159,104 | |||||
Lessee, Operating Lease, Discount Rate | 4% | |||||
Operating Lease, Expense | $ 445,548 | $ 446,057 | ||||
Loan | $ 10,000,000 | |||||
Ali [Member] | ||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||||
Settlement amount | $ 2,400,000 | |||||
Quanta [Member] | ||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||||
Advances on Inventory Purchases | $ 100,000 | |||||
Prepaid expense | $ 149,580 | $ 49,580 | ||||
Franklin Technologies Inc [Member] | ||||||
Purchase Commitment, Excluding Long-Term Commitment [Line Items] | ||||||
Operating lease right-of-use | $ 1,501,203 | |||||
Operating lease liabilities | $ 1,507,367 |
LONG-TERM INCENTIVE PLAN AWAR_3
LONG-TERM INCENTIVE PLAN AWARDS (Details - Option Activity) - Equity Option [Member] - USD ($) | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Number of Options Outstanding, Beginning | 766,001 | 484,000 | |
Weighted Average Exercise Price Outstanding, Beginning | $ 3.85 | $ 3.67 | |
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 10 months 17 days | 3 years 4 months 13 days | 2 years 9 months 29 days |
Aggregate Intrinsic Value Outstanding, Beginning | $ 183,270 | $ 2,662,830 | |
Number of Options Granted | 0 | 388,000 | |
Weighted Average Exercise Price Granted | $ 0 | $ 3.38 | |
Number of Options Exercised | (100,000) | (93,999) | |
Weighted Average Exercise Price Exercised | $ 1.34 | $ 0.80 | |
Number of Options Forfeited or expired | (19,000) | (12,000) | |
Weighted Average Exercise Price Forfeited or expired | $ 5.40 | $ 5.40 | |
Number of Options Outstanding, Ending | 647,001 | 766,001 | 484,000 |
Weighted Average Exercise Price Outstanding, Ending | $ 4.24 | $ 3.85 | $ 3.67 |
Aggregate Intrinsic Value Outstanding, Ending | $ 130,200 | $ 183,270 | $ 2,662,830 |
Number of Options Exercisable | 457,577 | ||
Weighted Average Exercise Price Exercisable | $ 4.58 | ||
Weighted Average Remaining Contractual Life (in years) Exercisable | 2 years 7 months 17 days | ||
Aggregate Intrinsic Value Exercisable | $ 65,219 |
LONG-TERM INCENTIVE PLAN AWAR_4
LONG-TERM INCENTIVE PLAN AWARDS (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jul. 31, 2020 | |
Share-Based Payment Arrangement [Abstract] | |||
Shares, Issued | 800,000 | ||
Share based compensation expense | $ 710,870 | $ 545,841 | |
Weighted average grant-date fair value of stock options | 647,001 | ||
Weighted average grant-date fair value of stock options, per share price | $ 3.34 | ||
Unrecognized compensation cost related to non-vested options | $ 542,807 |
STOCKHOLDERS_ EQUITY (Details N
STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($) | Dec. 22, 2022 | Jun. 30, 2023 | Jun. 30, 2022 |
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Common stock, shares authorized | 50,000,000 | 50,000,000 | |
Common stock, par value | $ 0.001 | $ 0.001 | |
Common stock, shares issued | 11,784,280 | 11,684,280 | |
Common stock, shares outstanding | 11,784,280 | 11,684,280 | |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 | |
Preferred Stock, Par or Stated Value Per Share | $ 0.001 | $ 0.001 | |
Preferred Stock, Shares Outstanding | 0 | 0 | |
Treasury stock shares | 2,549,208 | 2,549,208 | |
Treasury stock, value | $ 3,554,893 | $ 3,554,893 | |
Common Stock [Member] | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Number of shares issued, shares | 100,000 |