10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q/A

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                         .

Commission file number: 001-14891

FRANKLIN WIRELESS CORP.

(Exact name of Registrant as specified in its charter)

Nevada (State or other jurisdiction of  incorporation or organization)	95-3733534  (I.R.S. Employer Identification Number)
9707 Waples Street Suite 150 San Diego, California (Address of principal executive offices)	92121 (Zip code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.001 per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filero Accelerated filero Non-accelerated filero Smaller reporting company x Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  x

Securities registered pursuant to Section 12(b) of the Act: None

The Registrant has 10,570,203 shares of common stock outstanding as of November 14, 2019.

EXPLANATORY NOTE

This Amendment No. 1 to the Quarterly Report on Form 10-Q is being filed solely to furnish the Interactive Data files as Exhibit 101, in accordance with Rule 405 of Regulation S-T. No other changes have been made to the Form 10-Q, as originally filed on November 14, 2019.

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PART IV

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit No.	Description
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.DEF	XBRL Taxonomy Definition Linkbase
101.LAB	XBRL Taxonomy Label Linkbase
101.PRE	XBRL Taxonomy Presentation Linkbase

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SIGNATURES

In accordance with Section 13 of 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Franklin Wireless Corp.
	By:	/s/ OC Kim
		OC Kim President (Principal Executive Officer)
	By:	/s/ OC Kim
		OC Kim Acting Chief Financial Officer (Principal Financial Officer)
Dated: November 18, 2019

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4. PROPERTY AND EQUIPMENT

3 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

	September 30, 2019			June 30, 2019
Machinery and facility	$	363,280		$	363,022
Office equipment		397,220			396,222
Molds		860,494			784,170
		1,620,994			1,543,414
Less accumulated depreciation		(1,431,660	)		(1,411,535	)
Total	$	189,334		$	131,879

Depreciation expense associated with property and equipment was $20,125 and $26,661 for the three months ended September 30, 2019 and 2018, respectively.

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8. LONG-TERM INCENTIVE PLAN AWARDS

3 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

LONG-TERM INCENTIVE PLAN AWARDS

NOTE 8 – LONG-TERM INCENTIVE PLAN AWARDS

We adopted the 2009 Stock Incentive Plan (“2009 Plan”) on June 11, 2009, which provided for the grant of incentive stock options and non-qualified stock options to our employees and directors. Options granted under the 2009 Plan generally have a term of ten years and generally vest and become exercisable at the rate of 33% after one year and 33% on the second and third anniversaries of the option grant dates. Historically, some stock option grants have included shorter vesting periods ranging from one to two years.

The estimated forfeiture rate considers historical turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations about the future. We periodically revise the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. There was no compensation expense recorded under this method for the three months ended September 30, 2019 and 2018.

A summary of the status of our stock options is presented below as of September 30, 2019:

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual		Aggregate
			Exercise		Life		Intrinsic
Options	Shares		Price		(In Years)		Value
Outstanding as of June 30, 2019		299,000	$	1.04		2.75	$	420,620
Granted		–		–		–		–
Exercised		–		–		–		–
Cancelled		–		–		–		–
Forfeited or Expired		–		–		–		–
Outstanding as of September 30, 2019		299,000	$	1.04		2.50	$	354,840
Exercisable as of September 30, 2019		299,000	$	1.04		2.50	$	354,840

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.23 as of September 30, 2019, 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 September 30, 2019, in the amount of 299,000 shares, was $0.92 per share.

As of September 30, 2019, there was no unrecognized compensation cost related to non-vested stock options granted.

A summary of the status of our stock options is presented below as of September 30, 2018: 

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual		Aggregate
			Exercise		Life		Intrinsic
Options	Shares		Price		(In Years)		Value
Outstanding as of June 30, 2018		299,000	$	1.04		2.75	$	241,220
Granted		–		–		–		–
Exercised		–		–		–		–
Cancelled		–		–		–		–
Forfeited or Expired		–		–		–		–
Outstanding as of September 30, 2018		299,000	$	1.04		2.49	$	301,020
Exercisable as of September 30, 2018		299,000	$	1.04		2.49	$	301,020

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.05 as of September 30, 2018, which would have been received by the option holders had all option holders exercised their options as of that date. The weighted-average grant-date fair value of stock options outstanding as of September 30, 2018, in the amount of 299,000 shares, was $0.92 per share.

As of September 30, 2018, there was no unrecognized compensation cost related to non-vested stock options granted.

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5. ACCRUED LIABILITIES (Tables)

3 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

Schedule of accrued liabilities

Accrued liabilities consisted of the following as of:

	September 30, 2019		June 30, 2019
Accrued salaries, payroll deductions owed to government entities	$	47,357	$	44,752
Accrued vacation		51,182		56,335
Accrued undelivered inventory		140,000		140,000
Taxes		55,954		408
Other accrued liabilities		–		6,163
Total	$	294,493	$	247,658

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1. BASIS OF PRESENTATION

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Franklin Wireless Corp. (“the Company”) have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and are presented in accordance with the requirements of Form 10-Q. In the opinion of management, the financial statements included herein contain all adjustments, including normal recurring adjustments, considered necessary to present fairly the financial position, the results of operations and comprehensive income (loss) and cash flows of the Company for the periods presented.  These financial statements and notes hereto should be read in conjunction with the financial statements and notes thereto for the fiscal year ended June 30, 2019 included in the Company’s Form 10-K filed on September 30, 2019.  The operating results or cash flows for the interim periods presented herein are not necessarily indicative of the results to be expected for any other interim period or the full year.

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8. Long-Term Incentive Plan Awards (Details - Option Activity) - USD ($)	3 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Shares
Number of Options Outstanding, Ending	299,000	299,000
Weighted-Average Exercise Price
Weighted Average Exercise Price Granted	$ 0.92	$ 0.92
Options [Member]
Shares
Number of Options Outstanding, Beginning	299,000	299,000	299,000	299,000
Number of Options Granted	0	0
Number of Options Exercised	0	0
Number of Options Cancelled	0	0
Number of Options Forfeited or Expired	0	0
Number of Options Outstanding, Ending	299,000	299,000	299,000	299,000
Number of Options Exercisable	299,000	299,000
Weighted-Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning	$ 1.04	$ 1.04	$ 1.04	$ 1.04
Weighted Average Exercise Price Granted
Weighted Average Exercise Price Exercised
Weighted Average Exercise Price Canceled
Weighted Average Exercise Price Forfeited or Expired
Weighted Average Exercise Price Outstanding, Ending	1.04	1.04	$ 1.04	$ 1.04
Weighted Average Exercise Price Exercisable	$ 1.04	$ 1.04
Weighted-Average Remaining Contractual Life (In Years)
Weighted Average Remaining Contractual Life (in years) Outstanding	2 years 6 months	2 years 5 months 27 days	2 years 9 months	2 years 9 months
Weighted Average Remaining Contractual Life (in years) Exercisable	2 years 6 months	2 years 5 months 27 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding, Beginning	$ 420,620	$ 241,220	$ 241,220	$ 241,220
Aggregate Intrinsic Value Granted	$ 0	$ 0
Aggregate Intrinsic Value Exercised	$ 0	$ 0
Aggregate Intrinsic Value Cancelled	$ 0	$ 0
Aggregate Intrinsic Value Forfeited or Expired	$ 0	$ 0
Aggregate Intrinsic Value Outstanding, Ending	$ 354,840	$ 301,020	$ 420,620	$ 241,220
Aggregate Intrinsic Value Exercisable	$ 354,840	$ 301,020

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5. Accrued Liabilities (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Payables and Accruals [Abstract]
Accrued salaries, payroll deductions owed to government entities	$ 47,357	$ 44,752
Accrued vacation	51,182	56,335
Accrued undelivered inventory	140,000	140,000
Taxes	55,954	408
Other accrued liabilities	0	6,163
Total	$ 294,493	$ 247,658

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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net sales	$ 8,870,275	$ 13,328,936
Cost of goods sold	6,849,763	11,155,717
Gross profit	2,020,512	2,173,219
Operating expenses:
Selling, general, and administrative	848,761	1,304,019
Research and development	895,512	757,216
Total operating expenses	1,744,273	2,061,235
Income from operations	276,239	111,984
Other income (loss), net:
Interest income	55,030	3,052
Income from governmental subsidy	4,093	64,188
Other income (loss), net	15,592	(14,084)
Total other income (loss), net	74,715	53,156
Income before provision for income taxes	350,954	165,140
Income tax provision	60,974	41,970
Net income	289,980	123,170
Non-controlling interests in net loss of subsidiary	(36,042)	55,564
Net income attributable to Parent Company	$ 253,938	$ 178,734
Basic earnings per share attributable to Parent Company stockholders	$ 0.02	$ 0.02
Diluted earnings per share attributable to Parent Company stockholders	$ 0.02	$ 0.02
Weighted average common shares outstanding - basic	10,570,203	10,570,203
Weighted average common shares outstanding - diluted	10,705,500	10,682,166
Comprehensive income
Net income	$ 289,980	$ 123,170
Translation adjustments	(18,317)	(13,843)
Comprehensive income	271,663	109,327
Comprehensive (income) loss attributable to non-controlling interest	(36,042)	55,564
Comprehensive income attributable to controlling interest	$ 235,621	$ 164,891

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3. Summary of Significant Accounting Policies (Details - Segments) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Net sales	$ 8,870,275	$ 13,328,936
United States [Member]
Net sales	8,862,647	13,318,837
EMEA [Member]
Net sales	0	4,759
Asia [Member]
Net sales	$ 7,628	$ 5,340

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3. Summary of Significant Accounting Policies (Details - Useful lives)	3 Months Ended
	Sep. 30, 2019
Machinery [Member]
Estimated useful lives	6 years
Office Equipment [Member]
Estimated useful lives	5 years
Molds [Member]
Estimated useful lives	3 years
Vehicles[Member]
Estimated useful lives	5 years
Computers and software [Member]
Estimated useful lives	5 years
Furniture and fixtures [Member]
Estimated useful lives	7 years
Facilities Improvements [Member]
Estimated useful lives	5 years or life of the lease, whichever is shorter

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8. LONG-TERM INCENTIVE PLAN AWARDS (Tables)

3 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Stock Option Activity

A summary of the status of our stock options is presented below as of September 30, 2019:

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual		Aggregate
			Exercise		Life		Intrinsic
Options	Shares		Price		(In Years)		Value
Outstanding as of June 30, 2019		299,000	$	1.04		2.75	$	420,620
Granted		–		–		–		–
Exercised		–		–		–		–
Cancelled		–		–		–		–
Forfeited or Expired		–		–		–		–
Outstanding as of September 30, 2019		299,000	$	1.04		2.50	$	354,840
Exercisable as of September 30, 2019		299,000	$	1.04		2.50	$	354,840

A summary of the status of our stock options is presented below as of September 30, 2018: 

					Weighted-
					Average
			Weighted-		Remaining
			Average		Contractual		Aggregate
			Exercise		Life		Intrinsic
Options	Shares		Price		(In Years)		Value
Outstanding as of June 30, 2018		299,000	$	1.04		2.75	$	241,220
Granted		–		–		–		–
Exercised		–		–		–		–
Cancelled		–		–		–		–
Forfeited or Expired		–		–		–		–
Outstanding as of September 30, 2018		299,000	$	1.04		2.49	$	301,020
Exercisable as of September 30, 2018		299,000	$	1.04		2.49	$	301,020

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3. Summary of Significant Accounting Policies (Details - Contract liabilities) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Contract liabilities	$ 294,744	$ 140,000
Advance Payments From Customers [Member]
Contract liabilities	154,744	0
Undelivered Products [Member]
Contract liabilities	$ 140,000	$ 140,000

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4. PROPERTY AND EQUIPMENT (Tables)

3 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment consisted of the following as of:

	September 30, 2019			June 30, 2019
Machinery and facility	$	363,280		$	363,022
Office equipment		397,220			396,222
Molds		860,494			784,170
		1,620,994			1,543,414
Less accumulated depreciation		(1,431,660	)		(1,411,535	)
Total	$	189,334		$	131,879

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of 64.2% (35.8% is owned by non-controlling interests) as of September 30, 2019 and June 30, 2019. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests.

Non-controlling Interest in a Consolidated Subsidiary

As of September 30, 2019, the non-controlling interest was $525,088, which represents a $36,042 increase from $489,046 as of June 30, 2019.

Segment Reporting

Public companies are required to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. We have one reportable segment, consisting of the sale of wireless access products.

We generate revenues from three geographic areas, consisting of the United States, EMEA and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements.  The following table contains certain financial information by geographic area:

	Three Months Ended
	September 30,
Net sales:	2019		2018
United States	$	8,862,647	$	13,318,837
Europe, the Middle East and Africa (“EMEA”)		–		4,759
Asia		7,628		5,340
Totals	$	8,870,275	$	13,328,936

Long-lived assets, net (property and equipment and intangible assets):	September 30, 2019		June 30, 2019
United States	$	1,549,028	$	1,209,159
Asia		31,025		32,631
Totals	$	1,580,053	$	1,241,790

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit.

Allowance for Doubtful Accounts

Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of September 30, 2019 and June 30, 2019.

Revenue Recognition

On July 1, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of June 30, 2018. Results for the reporting period beginning after July 1, 2018 are presented under Topic 606. We recorded no change in retained earnings as of July 1, 2018 as a result of the cumulative impact of adopting Topic 606.

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended September 30, 2019 was not material.

Disaggregation of Revenue

In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Contract Balances

We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. We, however, recognize a contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services.

The balances of our trade receivables are as follows: 

	September 30, 2019		June 30, 2019
Accounts Receivable	$	8,100,930	$	4,138,469

The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended September 30, 2019 and June 30, 2019.

Our contract liabilities are as follows:

	September 30, 2019		June 30, 2019
Advance payments from customers	$	154,744	$	–
Undelivered products		140,000		140,000
Totals	$	294,744	$	140,000

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Our performance obligations are primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 95% of net sales for the three months ended September 30, 2019. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 5% of net sales for the three months ended September 30, 2019. The majority of our revenue recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer at completion of the shipping process.

As of September 30, 2019, 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 expense associated with capitalized product development costs associated with complete technology.

Capitalized Product Development Costs

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) 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 greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers.

As of September 30, 2019, and June 30, 2019, capitalized product development costs in progress were $814,020 and $465,352, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the three months ended September 30, 2019 and 2018, we incurred $348,668 and $33,905, respectively, in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income (loss).

Research and Development Costs

Costs associated with research and development are expensed as incurred. Research and development costs were $895,512 and $757,216 for the three months ended September 30, 2019 and 2018, respectively.

Warranties

We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures.

Shipping and Handling Costs

Costs associated with product shipping and handling are expensed as incurred.  Shipping and handling costs, which are included in selling, general and administrative expenses on the consolidated statements of comprehensive income (loss), were $173,108 and $352,091 for the three months ended September 30, 2019 and 2018, respectively.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds and short-term government bonds mutual funds that are readily convertible to cash and have a $1.00 net asset value.

Inventories

Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable and can fluctuate significantly caused by factors beyond the control of the Company. We may write down our inventory value for potential obsolescence and excess inventory.  As of September 30, 2019, and June 30, 2019, we have recorded an inventory reserve in the amounts of $553,281, for inventories that we have identified as obsolete or slow-moving.

Property and Equipment

Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Machinery	6 years
Office equipment	5 years
Molds	3 years
Vehicles	5 years
Computers and software	5 years
Furniture and fixtures	7 years
Facilities improvements	5 years or life of the lease, whichever is shorter

Goodwill and Intangible Assets

Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.”  Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired.  Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.”  Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was deemed necessary as of September 30, 2019 or June 30, 2019.

The definite lived intangible assets consisted of the following as of September 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	2.5 years	$	18,397	$	3,066	$	15,331
Technology in progress	Not Applicable	-		814,020		–		814,020
Software	5 years	2.5 years		424,227		289,704		134,523
Patents	10 years	6.2 years		58,884		9,243		49,641
Certifications & licenses	3 years	0.7 years		3,336,946		2,959,742		377,204
Total as of September 30, 2019			$	4,652,474	$	3,261,755	$	1,390,719

The definite lived intangible assets consisted of the following as of June 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	3.0 years	$	18,397	$	–	$	18,397
Technology in progress	Not Applicable	-		465,352		–		465,352
Software	5 years	2.7 years		423,436		278,266		145,170
Patents	10 years	6.3 years		58,884		8,729		50,155
Certifications & licenses	3 years	0.8 years		3,319,461		2,888,624		430,837
Total as of June 30, 2019			$	4,285,530	$	3,175,619	$	1,109,911

Amortization expense recognized during the three months ended September 30, 2019 and 2018 was $86,136 and $123,805, respectively.

Long-lived Assets

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 asset; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends.  An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount.

As of September 30, 2019, and June 30, 2019, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Stock-based Compensation

The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. 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. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income (loss) based upon the underlying recipients' roles within the Company.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense.

As of September 30, 2019, we have no material unrecognized tax benefits. We recorded an income tax provisions of $60,974 and $41,970 for the three months ended September 30, 2019 and 2018, respectively. We also recorded a decrease in deferred tax asset, non-current, of $11,175 and $41,970 for the three months ended September 30, 2019 and 2018.

Earnings per Share Attributable to Common Stockholders

Earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan.

 Concentrations

We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary.  No reserve was required or recorded for any of the periods presented.

Substantially all of our revenues are derived from sales of wireless data products.  Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively.

A significant portion of our revenue is derived from a small number of customers. For the three months ended September 30, 2019, sales to our three largest customers accounted for 65%, 11%, and 11% of our consolidated net sales and 65%, 10%, and 2% of our accounts receivable balance, as of September 30, 2019. In the same period in 2018, sales to our four largest customers accounted for 40%, 16%, 14%, and 13% of our consolidated net sales and 56%, 0%, 2%, and 20% of our accounts receivable balance, as of September 30, 2018. No other customers accounted for more than ten percent of total net sales for the three months ended September 30, 2019 and 2018, and no other customers accounted for more than ten percent of total accounts receivable as of September 30, 2019 and 2018.

For the three months ended September 30, 2019, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If these manufacturing companies were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact the Company's revenue.  For the three months ended September 30, 2019, we purchased wireless data products from these manufacturers in the amount of $7,598,831, or 92% of total purchases, and had related accounts payable of $7,994,460 as of September 30, 2019. For the three months ended September 30, 2018, we purchased wireless data products from one manufacturer in the amount of $8,850,932, or 78% of total purchases, and had related accounts payable of $10,050,080 as of September 30, 2018.

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 Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which amends existing standards for leases to increase transparency and comparability among organizations by requiring recognition of lease assets and liabilities on the balance sheet and requiring disclosure of key information about such arrangements. We adopted the standard as of July 1, 2019, and the adoption of the new standard resulted in the recording of operating lease right-of-use (“ROU”) assets and operating lease liabilities of $1,501,203 and $1,507,367, respectively, as of July 1, 2019, with the difference due to the existing lease liabilities of $6,164. The standard did not affect our consolidated net income or cash flows. See Note 7 for the further details.

Recently Issued Accounting Pronouncements

In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act on items within AOCI to retained earnings. We do not expect that the adoption of this update will impact the Company’s consolidated financial statements.

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7. COMMITMENTS AND CONTINGENCIES

3 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Leases

We lease approximately 12,775 square feet of office space in San Diego, California, at a monthly rent of $23,115, pursuant to a lease that expired in October 2019 and was then extended at a monthly rent of $25,754 to December 31, 2023. In addition to monthly rent, the lease includes payment for certain common area costs. 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. Rent expense for this office space was $69,344 for the three months ended September 30, 2019 and 2018.

Our Korea-based subsidiary, FTI, leases approximately 10,000 square feet of office space in Seoul, Korea, at a monthly rent of approximately $8,000, pursuant to a lease that expired on September 1, 2019 and was extended to August 31, 2021. Beginning on June 12, 2015, FTI leased additional office space consisting of approximately 2,682 square feet, also located in Seoul, Korea, at a monthly rent of approximately $2,700, and the lease was extended to August 31, 2021. In addition to monthly rent, the lease provides for periodic cost of living increases in the base rent and payment for certain common area costs. These facilities are covered by an appropriate level of insurance and we believe them to be suitable for our use and adequate for our present needs. Rent expense related to these leases was approximately $32,100 for the three months ended September 30, 2019 and 2018.

We lease one corporate housing facility primarily for our employees who travel, under a non-cancelable operating lease that expired September 4, 2019 and was extended to September 4, 2020. Rent expense related to this lease was $2,304 and $2,561 for the three months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, we used discount rates of 4.0% and 2.8% in determining our operating lease liabilities for the office spaces in San Diego, California, and South Korea, respectively. These rates represented our incremental borrowing rates at that time. Short-term leases with initial terms of twelve months or less are not capitalized.

Maturities of lease liabilities are as follows:

	Operating Leases
Fiscal 2020	$	274,041
Fiscal 2021		439,824
Fiscal 2022		341,579
Fiscal 2023		321,930
Fiscal 2024		160,965
Total lease payments		1,538,339
Less imputed interest		(113,485	)
Total	$	1,424,854

Litigation

We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Management does not expect any material adverse outcome.

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, which is associated with Anydata’s irrevocable purchase orders received from its customer. We have delivered approximately 25,000 units and 7,000 units during our second and fourth quarters of fiscal 2018, respectively, and an additional 18,000 units during our first quarter of fiscal 2019. Sales to Anydata were approximately $1.8 million for the year ended June 30, 2019. We have received information that Anydata may not be able to fulfill the entire purchase commitment for which parts have already been ordered with our main vendor, Quanta. Management believes that the Company will be able to supply some of the products to another customer and has received personal guarantees from the principals of Anydata. As of September 30, 2019, the remaining purchase commitment unfulfilled by Anydata to the Company was approximately $3.1 million. The total remaining product purchase commitment with Quanta was approximately $1.7 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 September 30, 2019, we paid $100,000 for the right to call on inventory and recorded an additional $49,580 as a prepaid expense related to pricing adjustments, which has been agreed with Quanta for other products to ensure demand is met. As of September 30, 2019, there is a reasonable possibility we may incur a loss, however, the amount is not estimable at this time.

Change of Control Agreements

On September 21, 2009, we entered into Change of Control Agreements with OC Kim, our President, and Yun J. (David) Lee, our Chief Operating Officer. Each Change of Control Agreement provides for a lump sum payment to the officer in case of a change of control of the Company. The term includes the acquisition of Common Stock of the Company resulting in one person or company owning more than 50% of the outstanding shares, a significant change in the composition of the Board of Directors of the Company during any 12-month period, a reorganization, merger, consolidation or similar transaction resulting in the transfer of ownership of more than fifty percent (50%) of the Company's outstanding Common Stock, or a liquidation or dissolution of the Company or sale of substantially all of the Company's assets.

The Change of Control Agreement with Mr. Kim calls for a payment of $5 million upon a change of control, and the agreement with Mr. Lee calls for a payment of $2 million upon a change of control.

The Board of Directors has approved extension of the Change of Control Agreements with Mr. Kim and Mr. Lee, through September 30, 2021.

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Consolidated Statements of Comprehensive Income (Loss) (Parenthetical)	Sep. 30, 2019	Sep. 30, 2018
Noncontrolling Interest
Non-controlling interests percentage owned	35.80%	48.20%

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Document and Entity Information - shares	3 Months Ended
	Sep. 30, 2019	Nov. 14, 2019
Document And Entity Information
Entity Registrant Name	FRANKLIN WIRELESS CORP
Entity Central Index Key	0000722572
Document Type	10-Q/A
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Incorporation, State or Country Code	NV
Entity File Number	001-14891
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding		10,570,203
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

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2. BUSINESS OVERVIEW

3 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS OVERVIEW

NOTE 2 - BUSINESS OVERVIEW

We are a provider of intelligent wireless solutions including mobile hotspots, routers and modems as well as innovative hardware and software products that support machine-to-machine (M2M) applications and the Internet of Things (IoT). Our M2M and IoT solutions include embedded modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications. These products are designed to solve wireless connectivity challenges in a variety of vertical markets including video surveillance, digital signage, home security, oil and gas exploration, kiosks, fleet management, smart grid, vehicle diagnostics, telematics and many more.

We have a majority ownership position in Franklin Technology Inc. ("FTI"), a research and development company located in Seoul, South Korea. FTI primarily provides design and development services to us for our wireless products.

Our products are generally marketed and sold directly to wireless operators, and indirectly through strategic partners and distributors. Our global customer base extends primarily from the United States to countries in South America, the Caribbean, Europe, the Middle East and Africa ("EMEA") and Asia.

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8. Long-Term Incentive Plan Awards (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Share-based Payment Arrangement [Abstract]
Share based compensation expense	$ 0	$ 0
Weighted average grant-date fair value of stock options	299,000	299,000
Weighted average grant-date fair value of stock options, per share price	$ 0.92	$ 0.92
Unrecognized compensation cost related to non-vested options	$ 0	$ 0

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6. Earnings (Loss) Per Share (Details) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share [Abstract]
Net income attributable to parent company	$ 253,938	$ 178,734
Weighted-average shares of common stock outstanding:
Basic shares outstanding	10,570,203	10,570,203
Dilutive effect of common stock equivalents arising from stock options	135,297	111,963
Diluted shares outstanding	10,705,500	10,682,166
Basic earnings per share	$ 0.02	$ 0.02
Diluted earnings per share	$ 0.02	$ 0.02

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6. EARNINGS (LOSS) PER SHARE (Tables)

3 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of earnings (loss) per share

The weighted average number of shares outstanding used to compute earnings (loss) per share is as follows:

	Three Months Ended September 30,
	2019		2018
Net income attributable to Parent Company	$	253,938	$	178,734
Weighted-average shares of common stock outstanding:
Basic shares outstanding		10,570,203		10,570,203
Dilutive effect of common stock equivalents arising from stock options		135,297		111,963
Diluted shares outstanding		10,705,500		10,682,166
Basic earnings per share	$	0.02	$	0.02
Diluted earnings per share	$	0.02	$	0.02

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3. Summary of Significant Accounting Policies (Details - Segments Long-Lived Assets) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Long-lived assets, net (property and equipment and intangible assets)	$ 1,580,053	$ 1,241,790
United States [Member]
Long-lived assets, net (property and equipment and intangible assets)	1,549,028	1,209,159
Asia [Member]
Long-lived assets, net (property and equipment and intangible assets)	$ 31,025	$ 32,631

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3. Summary of Significant Accounting Policies (Details - Intangibles) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2019	Jun. 30, 2019
Intangible Assets, Gross	$ 4,652,474	$ 4,285,530
Accumulated Amortization	3,261,755	3,175,619
Intangible Assets, Net	1,390,719	1,109,911
Technology In Progress [Member]
Intangible Assets, Gross	814,020	465,352
Accumulated Amortization	0	0
Intangible Assets, Net	$ 814,020	$ 465,352
Complete Technology [Member]
Expected Life	3 years	3 years
Average Remaining Life	2 years 6 months	3 years
Intangible Assets, Gross	$ 18,397	$ 18,397
Accumulated Amortization	3,066	0
Intangible Assets, Net	$ 15,331	$ 18,397
Software [Member]
Expected Life	5 years	5 years
Average Remaining Life	2 years 6 months	2 years 8 months 12 days
Intangible Assets, Gross	$ 424,227	$ 423,436
Accumulated Amortization	289,704	278,266
Intangible Assets, Net	$ 134,523	$ 145,170
Patents [Member]
Expected Life	10 years	10 years
Average Remaining Life	6 years 2 months 12 days	6 years 3 months 19 days
Intangible Assets, Gross	$ 58,884	$ 58,884
Accumulated Amortization	9,243	8,729
Intangible Assets, Net	$ 49,641	$ 50,155
Certifications And Licenses [Member]
Expected Life	3 years	3 years
Average Remaining Life	8 months 12 days	9 months 18 days
Intangible Assets, Gross	$ 3,336,946	$ 3,319,461
Accumulated Amortization	2,959,742	2,888,624
Intangible Assets, Net	$ 377,204	$ 430,837

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 289,980	$ 123,170
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	20,125	26,661
Amortization of intangible assets	86,136	123,805
Deferred tax	11,175	41,970
Amortization of right of use asset	1,541	0
Increase (decrease) in cash due to change in:
Accounts receivable	(4,015,838)	(739,652)
Inventories	(1,153,573)	(325,292)
Prepaid expenses and other current assets	2,894	(1,637)
Advance payments to vendors	28,725	40,845
Other assets	(23,390)	(256)
Accounts payable	3,433,115	5,557,538
Income tax payable	49,145	0
Advance payments from customers	154,744	(5,951)
Accrued liabilities	46,835	19,764
Net cash (used in) provided by operating activities	(1,068,386)	4,860,965
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments	27,336	0
Purchases of property and equipment	(77,580)	(980)
Payments for capitalized development costs	(348,668)	(33,905)
Purchases of intangible assets	(18,276)	(1,098)
Net cash used in investing activities	(417,188)	(35,983)
Effect of foreign currency translation	(18,317)	(13,843)
Net (decrease) increase in cash and cash equivalents	(1,503,891)	4,811,139
Cash and cash equivalents, beginning of period	6,447,505	11,975,944
Cash and cash equivalents, end of period	4,943,614	16,787,083
Supplemental disclosure of cash flow information:
Cash paid during the periods for: Interest	0	0
Cash paid during the periods for: Income taxes	$ 0	$ 0

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2019	Jun. 30, 2019
Statement of Financial Position [Abstract]
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock Authorized	10,000,000	10,000,000
Preferred stock Issued	0	0
Preferred stock Outstanding	0	0
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock Authorized	50,000,000	50,000,000
Common stock Issued	10,570,203	10,570,203
Common stock Outstanding	10,570,203	10,570,203
Treasury stock shares	3,472,286	3,472,286

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7. Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Administrative office, San Diego, CA [Member]
Rent Expense	$ 69,344	$ 69,344
Administrative office, Korea [Member]
Rent Expense	32,100	32,100
Corporate housing facility [Member]
Rent Expense	$ 2,304	$ 2,561

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4. Property and Equipment (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Property, Plant and Equipment [Abstract]
Depreciation	$ 20,125	$ 26,661

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5. ACCRUED LIABILITIES

3 Months Ended

Sep. 30, 2019

Payables and Accruals [Abstract]

ACCRUED LIABILITIES

NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

	September 30, 2019		June 30, 2019
Accrued salaries, payroll deductions owed to government entities	$	47,357	$	44,752
Accrued vacation		51,182		56,335
Accrued undelivered inventory		140,000		140,000
Taxes		55,954		408
Other accrued liabilities		–		6,163
Total	$	294,493	$	247,658

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of 64.2% (35.8% is owned by non-controlling interests) as of September 30, 2019 and June 30, 2019. In the preparation of consolidated financial statements of the Company, intercompany transactions and balances are eliminated and net earnings are reduced by the portion of the net earnings of the subsidiary applicable to non-controlling interests.

Non-controlling Interest in a Consolidated Subsidiary

Non-controlling Interest in a Consolidated Subsidiary

As of September 30, 2019, the non-controlling interest was $525,088, which represents a $36,042 increase from $$489,046 as of June 30, 2019.

Segment Reporting

Segment Reporting

Public companies are required to report financial and descriptive information about their reportable operating segments.  We identify our operating segments based on how our chief operating decision maker internally evaluates separate financial information, business activities and management responsibility. We have one reportable segment, consisting of the sale of wireless access products.

We generate revenues from three geographic areas, consisting of the United States, EMEA and Asia. The following enterprise-wide disclosure is prepared on a basis consistent with the preparation of the consolidated financial statements.  The following table contains certain financial information by geographic area:

	Three Months Ended
	September 30,
Net sales:	2019		2018
United States	$	8,862,647	$	13,318,837
Europe, the Middle East and Africa (“EMEA”)		–		4,759
Asia		7,628		5,340
Totals	$	8,870,275	$	13,328,936

Long-lived assets, net (property and equipment and intangible assets):	September 30, 2019		June 30, 2019
United States	$	1,549,028	$	1,209,159
Asia		31,025		32,631
Totals	$	1,580,053	$	1,241,790

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The carrying amounts of financial instruments such as cash equivalents, short-term investments, accounts receivable, accounts payable and debt approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash into financial instruments which are readily convertible into cash, such as money market funds and certificates of deposit.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

Based upon our review of our collection history as well as the current balances associated with all significant customers and associated invoices, we do not believe an allowance for doubtful accounts was necessary as of September 30, 2019 and June 30, 2019.

Revenue Recognition

Revenue Recognition

On July 1, 2018, we adopted ASU 2014-09 using the modified retrospective method applied to those contracts that were not completed or substantially complete as of June 30, 2018. Results for the reporting period beginning after July 1, 2018 are presented under Topic 606. We recorded no change in retained earnings as of July 1, 2018 as a result of the cumulative impact of adopting Topic 606.

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in contracts primarily consist of hot spot routers. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract, primarily in the form of a purchase order. Since the customer typically agrees to a stated rate and price in the purchase order that does not vary over the life of the contract, the majority of our contracts do not contain variable consideration. We establish a provision for estimated warranty and returns. Using historical averages, that provision for the year ended September 30, 2019 was not material.

Disaggregation of Revenue

In accordance with Topic 606, we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Contract Balances

We perform our obligations under a contract with a customer by transferring products in exchange for consideration from the customer. We typically invoice our customers as soon as control of an asset is transferred, and a receivable is established. We, however, recognize a contract liability when a customer prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the goods and/or services.

The balances of our trade receivables are as follows: 

	September 30, 2019		June 30, 2019
Accounts Receivable	$	8,100,930	$	4,138,469

The balance of contract assets was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended September 30, 2019 and June 30, 2019.

Our contract liabilities are as follows:

	September 30, 2019		June 30, 2019
Advance payments from customers	$	154,744	$	–
Undelivered products		140,000		140,000
Totals	$	294,744	$	140,000

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606. At contract inception, we assess the products and services promised in our contracts with customers. We then identify performance obligations to transfer distinct products or services to the customer. In order to identify performance obligations, we consider all the products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Our performance obligations are primarily satisfied at a point in time. Revenue from products transferred to customers at a single point in time accounted for 95% of net sales for the three months ended September 30, 2019. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 5% of net sales for the three months ended September 30, 2019. The majority of our revenue recognized at a point in time is for the sale of hot-spot router products. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer at completion of the shipping process.

As of September 30, 2019, 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 expense associated with capitalized product development costs associated with complete technology.

Capitalized Product Development Costs

Capitalized Product Development Costs

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) 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 greater of straight-line amortization or the ratio of the current gross revenues to the current and anticipated future gross revenues. The amortization begins when the products are available for general release to our customers.

As of September 30, 2019, and June 30, 2019, capitalized product development costs in progress were $814,020 and $465,352, respectively, and these amounts are included in intangible assets in our consolidated balance sheets. During the three months ended September 30, 2019 and 2018, we incurred $348,668 and $33,905, respectively, in capitalized product development costs, and such amounts are primarily comprised of certifications and licenses. All costs incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income (loss).

Research and Development Costs

Research and Development Costs

Costs associated with research and development are expensed as incurred. Research and development costs were $895,512 and $757,216 for the three months ended September 30, 2019 and 2018, respectively.

Warranties

Warranties

We provide a warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. As a result, we believe we do not have any net warranty exposure and do not accrue any warranty expenses. Historically, the Company has not experienced any material net warranty expenditures.

Shipping and Handling Costs

Shipping and Handling Costs

Costs associated with product shipping and handling are expensed as incurred.  Shipping and handling costs, which are included in selling, general and administrative expenses on the consolidated statements of comprehensive income (loss), were $173,108 and $352,091 for the three months ended September 30, 2019 and 2018, respectively.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flow, we consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds and short-term government bonds mutual funds that are readily convertible to cash and have a $1.00 net asset value.

Inventories

Inventories

Our inventories consist of finished goods and are stated at the lower of cost or net realizable value, cost being determined on a first-in, first-out basis. We assess the inventory carrying value and reduce it, if necessary, to its net realizable value based on customer orders on hand, and internal demand forecasts using management’s best estimates given information currently available. Our customer demand is highly unpredictable and can fluctuate significantly caused by factors beyond the control of the Company. We may write down our inventory value for potential obsolescence and excess inventory.  As of September 30, 2019, and June 30, 2019, we have recorded an inventory reserve in the amounts of $553,281, for inventories that we have identified as obsolete or slow-moving.

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost. Significant additions or improvements extending useful lives of assets are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Machinery	6 years
Office equipment	5 years
Molds	3 years
Vehicles	5 years
Computers and software	5 years
Furniture and fixtures	7 years
Facilities improvements	5 years or life of the lease, whichever is shorter

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and are accounted for in accordance with ASC 805, “Business Combinations.”  Goodwill represents the excess of the purchase price over the fair value of the tangible and intangible net assets acquired.  Intangible assets are recorded at their fair value at the date of acquisition. Goodwill and other intangible assets are accounted for in accordance with ASC 350, “Goodwill and Other Intangible Assets.”  Goodwill and other intangible assets are tested for impairment at least annually and any related impairment losses are recognized in earnings when identified. No impairment was deemed necessary as of September 30, 2019 or June 30, 2019.

The definite lived intangible assets consisted of the following as of September 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	2.5 years	$	18,397	$	3,066	$	15,331
Technology in progress	Not Applicable	-		814,020		–		814,020
Software	5 years	2.5 years		424,227		289,704		134,523
Patents	10 years	6.2 years		58,884		9,243		49,641
Certifications & licenses	3 years	0.7 years		3,336,946		2,959,742		377,204
Total as of September 30, 2019			$	4,652,474	$	3,261,755	$	1,390,719

The definite lived intangible assets consisted of the following as of June 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	3.0 years	$	18,397	$	–	$	18,397
Technology in progress	Not Applicable	-		465,352		–		465,352
Software	5 years	2.7 years		423,436		278,266		145,170
Patents	10 years	6.3 years		58,884		8,729		50,155
Certifications & licenses	3 years	0.8 years		3,319,461		2,888,624		430,837
Total as of June 30, 2019			$	4,285,530	$	3,175,619	$	1,109,911

Amortization expense recognized during the three months ended September 30, 2019 and 2018 was $86,136 and $123,805, respectively.

Long-lived Assets

Long-lived Assets

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 asset; significant changes in our strategic business objectives and utilization of the asset; or significant negative industry or economic trends.  An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset are less than its carrying amount.

As of September 30, 2019, and June 30, 2019, we were not aware of any events or changes in circumstances that would indicate that the long-lived assets are impaired.

Stock-based Compensation

Stock-based Compensation

The Company’s employee share-based awards result in a cost that is measured at fair value on an award’s grant date, based on the estimated number of awards that are expected to vest. 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. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income (loss) based upon the underlying recipients' roles within the Company.

Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Accordingly, deferred tax assets and liabilities are determined based on the difference between the financial statement and income tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets, unless it is more likely than not such assets will be realized. Current income taxes are based on the year’s taxable income for federal and state income tax reporting purposes and the annual change in deferred taxes.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of income tax expense.

As of September 30, 2019, we have no material unrecognized tax benefits. We recorded an income tax provisions of $60,974 and $41,970 for the three months ended September 30, 2019 and 2018, respectively. We also recorded a decrease in deferred tax asset, non-current, of $11,175 and $41,970 for the three months ended September 30, 2019 and 2018.

Earnings per Share Attributable to Common Stockholders

Earnings per Share Attributable to Common Stockholders

Earnings per share is calculated by dividing the net income by the weighted-average number of common shares that were outstanding for the period, without consideration for potential common shares. Diluted earnings per share is calculated by dividing the net income by the sum of the weighted-average number of dilutive potential common shares outstanding for the period determined using the treasury-stock method or the as-converted method. Potentially dilutive shares are comprised of common stock options outstanding under our stock plan.

Concentrations

Concentrations

We extend credit to our customers and perform ongoing credit evaluations of such customers. We evaluate our accounts receivable on a regular basis for collectability and provide for an allowance for potential credit losses as deemed necessary.  No reserve was required or recorded for any of the periods presented.

Substantially all of our revenues are derived from sales of wireless data products.  Any significant decline in market acceptance of our products or in the financial condition of our existing customers could impair our ability to operate effectively.

A significant portion of our revenue is derived from a small number of customers. For the three months ended September 30, 2019, sales to our three largest customers accounted for 65%, 11%, and 11% of our consolidated net sales and 65%, 10%, and 2% of our accounts receivable balance, as of September 30, 2019. In the same period in 2018, sales to our four largest customers accounted for 40%, 16%, 14%, and 13% of our consolidated net sales and 56%, 0%, 2%, and 20% of our accounts receivable balance, as of September 30, 2018. No other customers accounted for more than ten percent of total net sales for the three months ended September 30, 2019 and 2018, and no other customers accounted for more than ten percent of total accounts receivable as of September 30, 2019 and 2018.

For the three months ended September 30, 2019, we purchased the majority of our wireless data products from two manufacturing companies located in Asia. If these manufacturing companies were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact the Company's revenue.  For the three months ended September 30, 2019, we purchased wireless data products from these manufacturers in the amount of $7,598,831, or 92% of total purchases, and had related accounts payable of $7,994,460 as of September 30, 2019. For the three months ended September 30, 2018, we purchased wireless data products from one manufacturer in the amount of $8,850,932, or 78% of total purchases, and had related accounts payable of $10,050,080 as of September 30, 2018.

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 Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (ASU 2016-02), which amends existing standards for leases to increase transparency and comparability among organizations by requiring recognition of lease assets and liabilities on the balance sheet and requiring disclosure of key information about such arrangements. We adopted the standard as of July 1, 2019, and the adoption of the new standard resulted in the recording of operating lease right-of-use (“ROU”) assets and operating lease liabilities of $1,501,203 and $1,507,367, respectively, as of July 1, 2019, with the difference due to the existing lease liabilities of $6,164. The standard did not affect our consolidated net income or cash flows. See Note 7 for the further details.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In February 2018, the FASB issued Accounting Standards Update (ASU) 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. Under the amendments in ASU 2018-02, an entity may elect to reclassify the income tax effects of the Tax Cuts and Jobs Act on items within AOCI to retained earnings. We do not expect that the adoption of this update will impact the Company’s consolidated financial statements.

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7. Commitments and Contingencies (Details) - USD ($)	Sep. 30, 2019	Jul. 02, 2019
Commitments and Contingencies Disclosure [Abstract]
Fiscal 2020	$ 274,041
Fiscal 2021	439,824
Fiscal 2022	341,579
Fiscal 2023	321,930
Fiscal 2024	160,965
Total lease payments	1,538,339
Less imputed interest	(113,485)
Total	$ 1,424,854	$ 1,507,367

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4. Property and Equipment (Details) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Property and equipment, gross	$ 1,620,994	$ 1,543,414
Less accumulated depreciation	(1,431,660)	(1,411,535)
Total	189,334	131,879
Machinery and Facility [Member]
Property and equipment, gross	363,280	363,022
Office Equipment [Member]
Property and equipment, gross	397,220	396,222
Molds [Member]
Property and equipment, gross	$ 860,494	$ 784,170

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Consolidated Statements Of Stockholders' Equity (Unaudited) - USD ($)	Common Stock	Additional Paid-In Capital	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Loss	Noncontrolling Interest	Total
Beginning balace, shares at Jun. 30, 2018	10,570,203
Beginning balace, value at Jun. 30, 2018	$ 13,972	$ 7,442,272	$ 13,753,565	$ (4,513,479)	$ (581,983)	$ 921,010	$ 17,035,357
Net income attributable to Parent Company			178,734				178,734
Foreign exchange translation					(13,843)		(13,843)
Comprehensive income attributable to non-controlling interest						(55,564)	(55,564)
Ending balance, shares at Sep. 30, 2018	10,570,203
Ending balance, value at Sep. 30, 2018	$ 13,972	7,442,272	13,932,299	(4,513,479)	(595,826)	865,446	17,144,684
Beginning balace, shares at Jun. 30, 2019	10,570,203
Beginning balace, value at Jun. 30, 2019	$ 13,972	7,442,272	12,477,441	(4,513,479)	(634,802)	489,046	15,274,450
Net income attributable to Parent Company			253,938				253,938
Foreign exchange translation					(18,317)		(18,317)
Comprehensive income attributable to non-controlling interest						36,042	36,042
Ending balance, shares at Sep. 30, 2019	10,570,203
Ending balance, value at Sep. 30, 2019	$ 13,972	$ 7,442,272	$ 12,731,379	$ (4,513,479)	$ (653,119)	$ 525,088	$ 15,546,113

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Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Current assets:
Cash and cash equivalents	$ 4,943,614	$ 6,447,505
Certificates of deposit account	5,352,890	5,380,226
Accounts receivable	8,100,930	4,138,469
Other receivables, net	94,184	40,807
Inventories, net	2,206,313	1,052,740
Prepaid expenses and other current assets	25,148	28,042
Advance payments to vendors	22,615	51,340
Total current assets	20,745,694	17,139,129
Property and equipment, net	189,334	131,879
Intangible assets, net	1,390,719	1,109,911
Deferred tax assets, non-current	2,271,800	2,282,975
Goodwill	273,285	273,285
Right of use asset	1,423,313	0
Other assets	281,487	258,097
TOTAL ASSETS	26,575,632	21,195,276
Current liabilities
Accounts payable	9,105,629	5,672,514
Income tax payable	49,799	654
Advance payments from customers	154,744	0
Accrued liabilities	294,493	247,658
Lease liabilities, current	338,718	0
Total current liabilities	9,943,383	5,920,826
Lease liabilities, non-current	1,086,136	0
Total liabilities	11,029,519	5,920,826
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 September 30, 2019 and June 30, 2019	0	0
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 10,570,203 shares issued and outstanding as of September 30, 2019 and June 30, 2019	13,972	13,972
Additional paid-in capital	7,442,272	7,442,272
Retained earnings	12,731,379	12,477,441
Treasury stock, 3,472,286 shares as of September 30, 2019 and June 30, 2019	(4,513,479)	(4,513,479)
Accumulated other comprehensive loss	(653,119)	(634,802)
Total Parent Company stockholders' equity	15,021,025	14,785,404
Non-controlling interests	525,088	489,046
Total stockholders' equity	15,546,113	15,274,450
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 26,575,632	$ 21,195,276

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6. EARNINGS (LOSS) PER SHARE

3 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

NOTE 6 – EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are computed using the weighted average number of shares outstanding during the period. Diluted earnings per share represent basic earnings per share adjusted to include the potentially dilutive effect of outstanding stock options.

The weighted average number of shares outstanding used to compute earnings (loss) per share is as follows:

	Three Months Ended September 30,
	2019		2018
Net income attributable to Parent Company	$	253,938	$	178,734
Weighted-average shares of common stock outstanding:
Basic shares outstanding		10,570,203		10,570,203
Dilutive effect of common stock equivalents arising from stock options		135,297		111,963
Diluted shares outstanding		10,705,500		10,682,166
Basic earnings per share	$	0.02	$	0.02
Diluted earnings per share	$	0.02	$	0.02

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Segment information by geographic areas

The following table contains certain financial information by geographic area:

	Three Months Ended
	September 30,
Net sales:	2019		2018
United States	$	8,862,647	$	13,318,837
Europe, the Middle East and Africa (“EMEA”)		–		4,759
Asia		7,628		5,340
Totals	$	8,870,275	$	13,328,936

Long-lived assets, net (property and equipment and intangible assets):	September 30, 2019		June 30, 2019
United States	$	1,549,028	$	1,209,159
Asia		31,025		32,631
Totals	$	1,580,053	$	1,241,790

Schedule of receivables

The balances of our trade receivables are as follows: 

	September 30, 2019		June 30, 2019
Accounts Receivable	$	8,100,930	$	4,138,469

Schedule of contract liabilities

Our contract liabilities are as follows:

	September 30, 2019		June 30, 2019
Advance payments from customers	$	154,744	$	–
Undelivered products		140,000		140,000
Totals	$	294,744	$	140,000

Useful lives of property and equipment

Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Machinery	6 years
Office equipment	5 years
Molds	3 years
Vehicles	5 years
Computers and software	5 years
Furniture and fixtures	7 years
Facilities improvements	5 years or life of the lease, whichever is shorter

Schedule of Intangible Assets

The definite lived intangible assets consisted of the following as of September 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	2.5 years	$	18,397	$	3,066	$	15,331
Technology in progress	Not Applicable	-		814,020		–		814,020
Software	5 years	2.5 years		424,227		289,704		134,523
Patents	10 years	6.2 years		58,884		9,243		49,641
Certifications & licenses	3 years	0.7 years		3,336,946		2,959,742		377,204
Total as of September 30, 2019			$	4,652,474	$	3,261,755	$	1,390,719

The definite lived intangible assets consisted of the following as of June 30, 2019:

Definite lived intangible assets:	Expected Life	Average Remaining life	Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	3.0 years	$	18,397	$	–	$	18,397
Technology in progress	Not Applicable	-		465,352		–		465,352
Software	5 years	2.7 years		423,436		278,266		145,170
Patents	10 years	6.3 years		58,884		8,729		50,155
Certifications & licenses	3 years	0.8 years		3,319,461		2,888,624		430,837
Total as of June 30, 2019			$	4,285,530	$	3,175,619	$	1,109,911

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3. Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jul. 02, 2019	Jun. 30, 2019
Noncontrolling interest	$ 525,088			$ 489,046
Increase (decrease) in noncontrolling interest	(36,042)
Net income (loss) of subsidiary	(115,182)
Allowance for doubtful accounts	0			0
Product development costs incurred during period	348,668	$ 33,905
Research and development costs	895,512	757,216
Selling, general and administrative expenses	848,761	1,304,019
Inventory reserve	553,281			553,281
Impairment recognized	0	0
Amortization of intangible assets	86,136	123,805
Unrecognized tax benefits	0			0
Income tax provision (benefit)	60,974	41,970
Increase (decrease) in tax deferred asset	(11,175)	(41,970)
Accounts payable	9,105,629			5,672,514
Operating lease right-of-use assets	1,423,313		$ 1,501,203	0
Operating lease liabilities	1,424,854		$ 1,507,367
Shipping and Handling [Member]
Selling, general and administrative expenses	173,108	$ 352,091
Intangible Assets [Member]
Capitalized product development costs	$ 814,020			$ 465,352
Accounts Receivable [Member] | Customer 1 [Member]
Concentration of credit risk	65.00%	56.00%
Accounts Receivable [Member] | Customer 2 [Member]
Concentration of credit risk	10.00%	0.00%
Accounts Receivable [Member] | Customer 3 [Member]
Concentration of credit risk	2.00%	2.00%
Accounts Receivable [Member] | Customer 4 [Member]
Concentration of credit risk		20.00%
Sales [Member] | Customer 1 [Member]
Concentration of credit risk	65.00%	40.00%
Sales [Member] | Customer 2 [Member]
Concentration of credit risk	11.00%	16.00%
Sales [Member] | Customer 3 [Member]
Concentration of credit risk	11.00%	14.00%
Sales [Member] | Customer 4 [Member]
Concentration of credit risk		13.00%
Purchases [Member] | Supplier Concentration Risk [Member]
Concentration of credit risk	92.00%	78.00%
Products purchased, cost of goods sold	$ 7,598,831	$ 8,850,932
Accounts payable	$ 7,994,460	$ 10,050,080

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7. COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Maturities of lease liabilities are as follows:

	Operating Leases
Fiscal 2020	$	274,041
Fiscal 2021		439,824
Fiscal 2022		341,579
Fiscal 2023		321,930
Fiscal 2024		160,965
Total lease payments		1,538,339
Less imputed interest		(113,485	)
Total	$	1,424,854

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3. Summary of Significant Accounting Policies (Details - Receivables) - USD ($)	Sep. 30, 2019	Jun. 30, 2019
Accounting Policies [Abstract]
Accounts Receivable	$ 8,100,930	$ 4,138,469