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Item 7. Management’s Discussion and Analysis

2021-09-28 compared with 2020-09-17 · 276 added, 321 removed, 67 unchanged (90% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and

related notes included elsewhere in this report.

This report contains certain forward-looking statements relating to future events

or our future financial performance.

These statements are subject to risks and uncertainties which could cause actual results to

differ materially from those discussed in this report.

You are cautioned not to place undue reliance on this information which

speaks only as of the date of this report.

We are not obligated to publicly update this information, whether as a result of new

information, future events or otherwise, except to the extent we are required to do so in connection with our obligation to file

reports with the SEC.

For a discussion of the important risks to our business and future operating performance, see the discussion

under the caption “Item 1A.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and

analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related

notes included elsewhere in this report.

This report contains certain forward-looking statements relating to future events or our future

financial performance.

These statements are subject to risks and uncertainties which could cause actual results to differ materially from

those discussed in this report.

You are cautioned not to place undue reliance on this information which speaks only as of the date of

We are not obligated to publicly update this information, whether as a result of new information, future events or otherwise,

except to the extent we are required to do so in connection with our obligation to file reports with the SEC.

For a discussion of the

important risks to our business and future operating performance, see the discussion under the caption “Item 1A.

Risk Factors”

and under the caption “Factors That May Influence Future Results of

Operations”

In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report

might not occur.

and under the caption “Factors That May Influence Future Results of Operations”

In light of these risks, uncertainties

and assumptions, the forward-looking events discussed in this report might not occur.

BUSINESS OVERVIEW

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of intelligent wireless solutions including mobile hotspots, routers, trackers, and other devices.

Our designs integrate innovative

hardware and software enabling machine-to-machine (M2M) applications and the Internet of Things (IoT).

Our M2M and IoT solutions

include embedded modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications

based on 5G/4G wireless technology.

We have a majority

ownership position in 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 designs integrate innovative hardware

and software, enabling machine-to-machine (M2M) applications and the Internet of Things (IoT).

Our M2M and IoT solutions include embedded

modules, modems and gateways built to deliver reliable always-on connectivity supporting a broad spectrum of applications based on 5G/4G

wireless technology.

We have a majority ownership

position in 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 the Middle East and Africa ("EMEA") and Asia.

FACTORS THAT MAY INFLUENCE FUTURE RESULTS

OF OPERATIONS

We believe that our

revenue growth will be influenced largely by (1) the successful maintenance of our existing customers, (2) the rate of increase

in demand for wireless data products, (3) customer acceptance for our new products, (4) new customer relationships and contracts,

and (5) our ability to meet customers’

We have entered into

and expect to continue to enter into new customer relationships and contracts for the supply of our products, and this may require

significant demands on our resources, resulting in increased operating, selling, and marketing expenses associated with such new

Our global customer base

extends primarily from North America to countries in the Caribbean and South America, and Asia.

FACTORS THAT MAY INFLUENCE FUTURE RESULTS OF

We believe that our revenue

growth will be influenced largely by (1) the successful maintenance of our existing customers, (2) the rate of increase in demand for

wireless data products, (3) customer acceptance for our new products, (4) new customer relationships and contracts, and (5) our ability

to meet customers’

We have entered into and expect

to continue to enter into new customer relationships and contracts for the supply of our products, and this may require significant demands

on our resources, resulting in increased operating, selling, and marketing expenses associated with such new customers.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition

In April 2016, the

FASB issued Accounting Standards Update No.

2016-10, Revenue from Contracts with Customers (Topic 606) (ASU 2016-10), which amends

and adds clarity to certain aspects of the guidance set forth in the upcoming revenue standard (ASU 2014-09) related to identifying

performance obligations and licensing.

In May 2016, the FASB issued Accounting Standards Update No.

2016-11, Revenue Recognition

(Topic 605), which amends and rescinds certain revenue recognition guidance previously released within ASU 2014-09.

the FASB issued Accounting Standards Update No.

2016-12, Revenue from Contracts with Customers (Topic 606) (ASU 2016-12), which

provides narrow scope improvements and practical expedients related to ASU 2014-09.

Through June 30, 2018,

we recognized revenue in accordance with Accounting Standards Codification ("ASC") 605, “Revenue Recognition,”

when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured, and delivery

of products has occurred or services have been rendered.

Accordingly, we recognized revenues from product sales upon shipment of

the products to the customers or when the products are received by the customers in accordance with shipping or delivery terms.

We provided a warranty for one year from the shipment or delivery date, which was covered by our vendors pursuant to purchase agreements.

Any net warranty related expenditures made by us have historically not been material.

Under our sales return policy, customers

may generally return products that are under warranty for repair or replacement.

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, while prior period amounts have not

been adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

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.

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.

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.

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.

historical averages, that provision for the year ended June 30, 2020 was not material.

Disaggregation of

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

Using historical averages, that provision for the year ended

June 30, 2021, was not material.

Disaggregation of Revenue

In accordance with Topic 606,

we disaggregate revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred.

We determined that disaggregating revenue into these categories meets the disclosure objective in Topic 606, which is to depict how the

nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

Contract Balances

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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:

We typically invoice our customers

as soon as control of an asset is transferred, and a receivable is established.

We, however, recognize a contract liability when a customer

prepays for goods and/or services, or we have not delivered goods under the contract since we have not yet transferred control of the

goods and/or services.

The balances of our trade receivables are as follows:

June 30, 2021

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Accounts Receivable

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, 2020 and

June 30, 2019.

The balance of contract assets

was immaterial as we did not have a significant amount of un-invoiced receivables in the periods ended June 30, 2021 and June 30, 2020.

Our contract liabilities,

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Performance Obligations

A performance obligation

is a promise in a contract to transfer a distinct good or service to the customer and is the unit of measurement in Topic 606.

At contract inception, we assess the products and services promised in our contracts with customers.

We then identify performance

obligations to transfer distinct products or services to the customer.

To identify performance obligations, we consider all the

products or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business

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.

inception, we assess the products and services promised in our contracts with customers.

We then identify performance obligations to transfer

distinct products or services to the customer.

To identify performance obligations, we consider all the products or services promised

in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

Our performance obligations

are satisfied at a point in time.

Revenue from products transferred to customers at a single point in time accounted for 99% of

net sales for the year ended June 30, 2020.

Revenue for non-recurring engineering projects is based on the percentage completion

of a project and accounted for 1% of net sales for the year ended June 30, 2020.

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, 2020,

our contracts do not contain any unsatisfied performance obligations, except for undelivered products.

Capitalized Product

Development Costs

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, 2020,

and June 30, 2019, capitalized product development costs in progress were $140,193 and $465,352, respectively, and these amounts

are included in intangible assets in our consolidated balance sheets.

During the year ended June 30, 2020, we incurred $343,360

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).

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.

As of June 30, 2020, we have federal and state net operating loss carryforwards of

approximately $1.2 million and no state net operating loss carryforwards.

Under the Tax Cuts and Jobs Act (the “Act”),

which was signed into law on December 22, 2017, the federal net operating loss recognized on or after January 1, 2018 will carry

forward indefinitely.

The federal net operating loss of $1.2 million, which was recognized on or before December 31, 2017, will

expire through 2035, and the federal net operating loss recognized on or after January 1, 2018, which will carry forward indefinitely,

The utilization of net operating loss carryforwards may be subject to limitations under provisions of the Internal Revenue

Code Section 382 and similar state provisions.

Under the provision

of ASC 740 “Application of the Uncertain Tax Position Provisions”

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, 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.

benefits of an uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained based on technical

Revenue from products transferred to customers at a single point in time accounted for over 99% of net

sales for the year ended June 30, 2021.

Revenue for non-recurring engineering projects is based on the percentage completion of a project

and accounted for under 1% of net sales for the year ended June 30, 2021.

Most of our revenue 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, 2021, our contracts

do not contain any unsatisfied performance obligations, except for undelivered products.

Capitalized Product Development

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, 2021, and June

30, 2020, capitalized product development costs in progress were $602,388 and $140,192, respectively, and these amounts are included in

intangible assets in our consolidated balance sheets.

During the year ended June 30, 2021, we incurred $694,909 in capitalized product

development costs, In addition, we disposed of certain technology in progress, primarily comprised of certifications and licenses, in

the amount of $140,192, as we concluded it had little likelihood of economic success based on its performance test results..

incurred before technological feasibility is reached are expensed and included in our consolidated statements of comprehensive income.

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.

As of June 30, 2021, we have federal and state net operating loss carryforwards of approximately $0.8 million and no state

net operating loss carryforwards.

Under the Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017,

the federal net operating loss recognized on or after January 1, 2018, will carry forward indefinitely.

The federal net operating loss

of $0.8 million, which was recognized on or before December 31, 2017, will expire through 2035, and the federal net operating loss recognized

on or after January 1, 2018, which will carry forward indefinitely, is $0.

The utilization of net operating loss carryforwards may be

subject to limitations under provisions of the Internal Revenue Code Section 382 and similar state provisions.

Under the provision of ASC

740 “Application of the Uncertain Tax Position Provisions”

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, 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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Refer to NOTE 2 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

Refer to NOTE 2 - SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following table

sets forth, for the years ended June 30, 2020, 2019, and 2018, our statements of operations including data expressed as a percentage

The following table sets forth,

for the years ended June 30, 2021, 2020, and 2019, our statements of operations including data expressed as a percentage of sales:

(as a percentage of sales)

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Income (loss) from operations

Other income (expense), net

Other income, net

Net income (loss) before income taxes

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YEAR ENDED JUNE 30, 2021 COMPARED TO YEAR ENDED JUNE 30, 2020

Net sales increased by $38,603,398, or 105.9%, to $75,072,298 for the year ended June 30, 2020 from $36,468,900 for the corresponding

NET SALES - Net sales

increased by $109,043,047, or 145.3%, to $184,115,345 for the year ended June 30, 2021 from $75,072,298 for the corresponding period of

For the year ended June 30, 2021, net sales by geographic regions, consisting of North America, the Caribbean and South America,

and Asia were $183,771,146 (99.8% of net sales), $17,500 (0.0% of net sales), and $326,699 (0.2% of net sales), respectively.

year ended June 30, 2020, net sales by geographic regions, consisting of North America, the Caribbean and South America, and Asia were

$74,839,778 (99.7% of net sales), $0 (0.0% of net sales), and $232,520 (0.3% of net sales), respectively.

Net sales in North America

increased by $108,931,368, or 145.6%, to $183,771,146 for the year ended June 30, 2021, from $74,839,778 for the corresponding period

The increase in net sales in North America resulted primarily from increased demand for wireless connectivity due to people working

and attending school remotely.

High volume sales to school districts rapidly rolling out remote learning programs was a significant driver

for increased sales through our primary customers due to the Covid-19 pandemic.

Net sales also increased due to the timing of orders placed

by a carrier customer, from which a significant portion of our revenue was derived (approximately 63% of our consolidated net sales for

this period).

Net sales in the Caribbean and South America increased by $17,500, or 100.0%, to $17,500 for the year ended June 30, 2021,

from $0 for the corresponding period of 2020.

Net sales in Asia increased by $94,179, or 40.5%, to $326,699 for the year ended June 30,

2021, from $232,520 for the corresponding period of 2020.

The increase in net sales was primarily due to product development service revenue

generated by FTI, which typically varies from period to period.

GROSS PROFIT - Gross

profit increased by $17,939,536, or 123.5%, to $32,464,021 for the year ended June 30, 2021, from $14,524,485 for the corresponding period

The gross profit in terms of net sales percentage was 17.6% for the year ended June 30, 2021, compared to 19.3% for the corresponding

period of 2020.

For the year ended June 30, 2020, net sales by geographic regions, consisting of the United States, EMEA

(Europe, the Middle East and Africa) and Asia were $74,839,778 (99.7% of net sales), $0 (0.0% of net sales), and $232,520 (0.3%

of net sales), respectively.

For the year ended June 30, 2019, net sales by geographic regions, consisting of the United States,

EMEA (Europe, the Middle East and Africa) and Asia were $36,217,387 (99.3% of net sales), $224,427 (0.6% of net sales) and $27,086

(0.1% of net sales), respectively.

Net sales in the United

States increased by $38,622,391, or 106.6%, to $74,839,778 for the year ended June 30, 2020, from $36,217,387 for the corresponding

The increase in gross profit was primarily due to the change in net sales as described above.

decrease in gross profit in terms of net sales percentage was primarily due to competitive selling prices and the increase in production

OPERATING EXPENSES

- Operating expenses increased by $2,199,350, or 29.5%, to $9,645,711 for the year ended June 30, 2021, from $7,446,361 for the corresponding

period of 2020.

The increase in net sales in the United States resulted primarily from increased demand for wireless connectivity

due to people working and attending school remotely.

High volume sales to school districts rapidly rolling out remote learning

programs was a significant driver for increased sales through our primary customers during the Covid-19 Pandemic period.

also increased due to a newly launched product and the timing of orders placed by a new carrier customer, from which a significant

portion of our revenue was derived.

(46% of our consolidated net sales for the year ended June 30, 2020).

Net sales in EMEA decreased

by $224,427, or 100.0%, to $0 for the year ended June 30, 2020, from $224,427 for the corresponding period of 2019.

in net sales was due to the discontinued orders for a product placed by a carrier customer in Africa compared to the corresponding

Selling, general, and administrative

expenses increased by $1,377,989 to $5,077,848 for the year ended June 30, 2021, from $3,699,859 for the corresponding period of 2020.

The increase in selling, general, and administrative expenses was primarily due to increased payroll expense as well as compensation expense

related to stock options granted for employees (approximately $560,000), increased bad debt expense of approximately $340,000, increased

professional fees of approximately $130,000, and increased shipping and handling charges of approximately $80,000.

Research and development expense

increased by $821,361 to $4,567,863 for the year ended June 30, 2021, from $3,746,502 for the corresponding period of 2020.

in research and development expense was primarily due to the increased payroll expense for employees involved in research and development

and other research and development costs.

OTHER INCOME, NET

- Other income, net increased by $396,403, or 179.6%, to $617,167 for the year ended June 30, 2021, from $220,764 for the corresponding

period of 2020.

Net sales in Asia increased by $205,434, or 105.9%, to $232,520 for the year ended June 30, 2020, from $27,086

for the corresponding period of 2019.

The increase in net sales was primarily due to product development service revenue generated

by FTI, which typically varies from period to period.

GROSS PROFIT -

Gross profit increased by $8,784,996, or 153.1%, to $14,524,485 for the year ended June 30, 2020, from $5,739,489 for the corresponding

The increase was primarily due to the gain from the forgiveness of the Payroll Protection Plan loan and increased product

development funding received by FTI from a government entity, which was partially offset by the loss from the unfavorable changes in

foreign currency exchange rates in FTI and the decreased interest income earned from the money market accounts and certificates of deposit.

YEAR ENDED JUNE 30, 2020 COMPARED TO YEAR ENDED JUNE 30, 2019

NET SALES - Net sales

increased by $38,603,398, or 105.9%, to $75,072,298 for the year ended June 30, 2020 from $36,468,900 for the corresponding period of

For the year ended June 30, 2020, net sales by geographic regions, consisting of the United States, EMEA (Europe, the Middle

East and Africa) and Asia were $74,839,778 (99.7% of net sales), $0 (0.0% of net sales), and $232,520 (0.3% of net sales), respectively.

For the year ended June 30, 2019, net sales by geographic regions, consisting of the United States, EMEA (Europe, the Middle East and

Africa) and Asia were $36,217,387 (99.3% of net sales), $224,427 (0.6% of net sales) and $27,086 (0.1% of net sales), respectively.

Net sales in the United States

increased by $38,622,391, or 106.6%, to $74,839,778 for the year ended June 30, 2020, from $36,217,387 for the corresponding period of

The increase in net sales in the United States resulted primarily from increased demand for wireless connectivity due to people

working and attending school remotely.

High volume sales to school districts rapidly rolling out remote learning programs was a significant

driver for increased sales through our primary customers during the Covid-19 Pandemic period.

Net sales also increased due to a newly

launched product and the timing of orders placed by a new carrier customer, from which a significant portion of our revenue was derived.

(46% of our consolidated net sales for the year ended June 30, 2020).

Net sales in EMEA decreased by $224,427, or 100.0%, to $0 for the

year ended June 30, 2020, from $224,427 for the corresponding period of 2019.

The decrease in net sales was due to the discontinued orders

for a product placed by a carrier customer in Africa compared to the corresponding period of 2019.

Net sales in Asia increased by $205,434,

or 105.9%, to $232,520 for the year ended June 30, 2020, from $27,086 for the corresponding period of 2019.

The increase in net sales

was primarily due to product development service revenue generated by FTI, which typically varies from period to period.

GROSS PROFIT - Gross

profit increased by $8,784,996, or 153.1%, to $14,524,485 for the year ended June 30, 2020, from $5,739,489 for the corresponding period

The gross profit in terms of net sales percentage was 19.3% for the year ended June 30, 2020, compared to 15.7% for the corresponding

period of 2019.

The gross profit in terms of net sales percentage was 19.3% for the year ended June 30, 2020, compared to 15.7%

for the corresponding period of 2019.

The increase in gross profit was primarily due to the change in net sales as described

The increase in gross profit and gross profit in terms of net sales percentage was primarily due to a newly launched product,

with a higher selling price, as well as the product development service revenues generated by Franklin and FTI, which involve lower

costs of goods sold.

The increase in gross profit was primarily due to the change in net sales as described above.

The increase in gross profit

and gross profit in terms of net sales percentage was primarily due to a newly launched product, with a higher selling price, as well

as the product development service revenues generated by Franklin and FTI, which involve lower costs of goods sold.

OPERATING EXPENSES

1 unchanged sentence

period of 2019.

Selling, general, and administrative decreased by $1,191,506 to $3,699,859 for the year ended June 30, 2020,

Selling, general, and administrative expenses decreased by $1,191,506 to $3,699,859 for the year ended June 30,

2020, from $4,891,365.

The decrease in selling, general, and administrative was primarily due to the decreased payroll expense for employees

involved in selling, general, and administrative by approximately $700,000 as well as the significant decrease in shipping and

handling costs within selling, general, and administrative costs by $497,298, resulting from the positively restructured shipping

involved in selling, general, and administrative capacities by approximately $700,000 as well as the significant decrease in shipping

and handling costs within selling, general, and administrative costs by $497,298, resulting from the positively restructured shipping

terms with a major vendor despite the increased volume of product shipments.

Research and development increased by $790,921 to

Research and development expense increased by $790,921 to

$3,746,502 for the year ended June 30, 2020, from $2,955,581.

The increase in research and development was primarily due to the

The increase in research and development expense was primarily due to the

increased reimbursement in payroll expense for employees involved in research and development.

2 unchanged sentences

period of 2019.

The increase was primarily due to the increased interest income earned from money market accounts and certificates

of deposit, as well as the gain from appreciation on favorable foreign currency change, which is partially offset by the decreased

product development funding received by FTI from a government entity.

YEAR ENDED JUNE 30, 2019 COMPARED TO YEAR ENDED JUNE 30,

Net sales increased by $6,403,067, or 21.3%, to $36,468,900 for the year ended June 30, 2019 from $30,065,833 for the corresponding

period of 2018.

For the year ended June 30, 2019, net sales by geographic regions, consisting of the United States, South

America and the Caribbean, EMEA (Europe, the Middle East and Africa) and Asia were $36,217,387 (99.3% of net sales), $0 (0.0% of

net sales), $224,427 (0.6% of net sales) and $27,086 (0.1% of net sales), respectively.

Net sales in the United

States increased by $6,982,376, or 23.9%, to $36,217,387 for the year ended June 30, 2019, from $29,235,011 for the corresponding

period of 2018.

The increase in net sales was primarily due to the average of 46% increased product demand from four major carrier

customers, which was increased by the favorable effect of sales that fluctuate significantly from period to period due to timing

of orders placed by several customers.

Net sales in the South American and Caribbean regions decreased by $238,970, or 100%, to

$0 for the year ended June 30, 2019, from $238,970 for the corresponding period of 2018.

The decrease was primarily due to the

general nature of sales in these regions, which often fluctuate significantly from period to period due to timing of orders placed

by a relatively small number of customers.

Net sales in EMEA decreased by $111,418, or 33.2%, to $224,427 for the year ended June

30, 2019, from $335,845 for the corresponding period of 2018.

The decrease in net sales was due to the discontinued orders of a

product placed by a carrier customer in Africa.

Net sales in Asia decreased by $228,921, or 89.4%, to $27,086 for the year ended

June 30, 2019, from $256,007 for the corresponding period of 2018.

The decrease in net sales was primarily due to lower component

sales generated by FTI, which typically vary from period to period in connection with its customers’

production schedule.

GROSS PROFIT -

Gross profit increased by $547,775, or 10.6%, to $5,739,489 for the year ended June 30, 2019, from $5,191,714 for the corresponding

period of 2018.

The gross profit in terms of net sales percentage was 15.7% for the year ended June 30, 2019, compared to 17.3%

for the corresponding period of 2018.

The increase in gross profit was primarily due to the change in net sales as described above.

The decrease in gross profit in terms of net sales percentage was primarily due to variations in customer and product mix, competitive

selling prices and product costs which generally vary from period to period and region to region.

OPERATING EXPENSES

- Operating expenses decreased by $36,638, or 0.5%, to $7,846,946 for the year ended June 30, 2019, from $7,883,584 for the corresponding

period of 2018.

For the year ended June 30, 2019, operating expenses consisted of selling, general, and administrative costs

of $4,891,365 and research and development costs of $2,955,581, respectively.

Selling, general,

and administrative costs increased by $379,797, or 8.4%, to $4,891,365 for the year ended June 30, 2019, from $4,511,568 for the

corresponding period of 2018.

The increase in selling, general, and administrative costs was primarily due to the increase in delivery

charges by $325,303 due to the increased sales.

Research and development costs decreased by $416,435, or 12.3%, to $2,955,581 for

the year ended June 30, 2019, from $3,372,016 for the corresponding period of 2018.

The decrease in research and development costs

was primarily due to the decrease in research and development payroll expense and the related expenses from a cost reduction effort

especially for the early portion of fiscal 2019, as well as increased capitalized product development cost.

OTHER INCOME, NET

- Other income, net decreased by $127,368, or 38.33%, to $204,954 for the year ended June 30, 2019, from $332,322 for the corresponding

period of 2018.

The decrease was primarily due to the decreased product development funding received by FTI from a government entity

as the periods of the associated projects expired, which is partially offset by the increased interest income earned from the newly

opened money market accounts and the certificates of deposit.

The increase was primarily due to the increased interest income earned from money market accounts and certificates of

deposit, as well as the gain from appreciation on favorable foreign currency change, which is partially offset by the decreased product

development funding received by FTI from a government entity.

LIQUIDITY AND CAPITAL RESOURCES

Our historical operating

results, capital resources and financial position, in combination with current projections and estimates, were considered in management's

plan and intentions to fund our operations over a reasonable period of time, which we define as the twelve-month period ending

June 30, 2020.

For purposes of liquidity disclosures, we assess the likelihood that we have sufficient available working capital

and other principal sources of liquidity to fund our operating activities and obligations as they become due.

Our principal source

of liquidity as of June 30, 2020 consisted of cash and cash equivalents as well as short-term investments of $33,543,562.

believe we have sufficient available capital to cover our existing operations and obligations through at least June 30, 2020.

Our long-term future cash requirements will depend on numerous factors, including our revenue base, profit margins, product development

activities, market acceptance of our products, future expansion plans and ability to control costs.

If we are unable to achieve

our current business plan or secure additional funding that may be required, we would need to curtail our operations or take other

similar actions outside the ordinary course of business in order to continue to operate as a going concern.

Our historical operating results,

capital resources and financial position, in combination with current projections and estimates, were considered in management's plan

and intentions to fund our operations over a reasonable period of time, which we define as the twelve-month period ending June 30, 2021.

For purposes of liquidity disclosures, we assess the likelihood that we have sufficient available working capital and other principal

sources of liquidity to fund our operating activities and obligations as they become due.

Our principal source of liquidity

as of June 30, 2021 consisted of cash and cash equivalents as well as short-term investments of $51,182,040.

We believe we have

sufficient available capital to cover our existing operations and obligations through at least June 30, 2022.

Our long-term future

cash requirements will depend on numerous factors, including our revenue base, profit margins, product development activities, market

acceptance of our products, future expansion plans and ability to control costs.

If we are unable to achieve our current business

plan or secure additional funding that may be required, we would need to curtail our operations or take other similar actions outside

the ordinary course of business in order to continue to operate as a going concern.

OPERATING ACTIVITIES

Net cash provided by operating activities for year ended June 30, 2021, and 2020 was $12,104,199 and $22,004,304, respectively.

The $22,004,304 in

net cash provided by operating activities for the year ended June 30, 2020 was primarily due to the increase in accounts payable

of $36,410,741, caused by a sudden increase in Wi-Fi hotspot production, as well as our operating results (net loss adjusted for

depreciation, amortization and other non-cash charges), which were partially offset by an increase in accounts receivable of $11,855,351

as well as the increase in inventory of $10,730,663.

The $775,090 in net

cash provided by operating activities for the year ended June 30, 2019 was primarily due to the decrease in accounts receivable

of $3,852,985 as well as the decrease in inventory of $304,813, which was partially offset by the decrease in accounts payable

of $1,937,071.

The $12,104,199 in net cash

provided by operating activities for the year ended June 30, 2021, was primarily due to the decrease in accounts receivable and inventory

of $13,103,973 and $10,807,884, respectively, as well as our operating results (net income adjusted for depreciation, amortization and

other non-cash charges), which was offset by the decrease in accounts payable of $32,364,266.

The $22,004,304 in net cash

provided by operating activities for the year ended June 30, 2020, was primarily due to the increase in accounts payable of $36,410,741,

caused by a sudden increase in Wi-Fi hotspot production, as well as our operating results (net loss adjusted for depreciation, amortization

and other non-cash charges), which were partially offset by an increase in accounts receivable of $11,855,351 as well as the increase

in inventory of $10,730,663.

INVESTING ACTIVITIES

Net cash used in investing activities for the years ended June 30, 2021 and 2020 was $722,520 and $794,969, respectively.

The $794,969 in net

cash used in investing activities for the year ended June 30, 2020 was primarily due to the purchases of capitalized product development,

intangible asset, and property and equipment of $343,360, $193,171 and $181,746, respectively, as well as the payments for additional

shares of a subsidiary of $75,000.

The $6,250,710 in

net cash used in investing activities for the year ended June 30, 2019 was primarily due to the payments for purchase of short-term

investments of $5,380,226 and additional shares of the subsidiary of $234,330 as well as the purchases of capitalized product development,

intangible assets, and property and equipment of $465,352, $70,034, and $100,768, respectively.

The $722,520 in net cash used

in investing activities for the year ended June 30, 2021, was primarily due to the purchases of capitalized product development and property

and equipment of $694,909 and $21,043, respectively.

The $794,969 in net cash used

in investing activities for the year ended June 30, 2020, was primarily due to the purchases of capitalized product development, intangible

asset, and property and equipment of $343,360, $193,171, and $181,746, respectively, as well as the payments for additional shares of

a subsidiary of $75,000.

FINANCING ACTIVITIES

Net cash provided by financing activities for the years ended June 30, 2021 and 2020 was $6,074,759 and $520,428, respectively.

The $520,418 in net

cash provided by financing activities for the years ended June 30, 2020 was due to the cash received from a loan under the Payroll

Protection Program and the exercise of stock options of $487,300 and $33,128, respectively.

The $6,074,759 in net cash

provided by financing activities for the year ended June 30, 2021, was primarily due to the $6,000,008 aggregate purchase price, paid

to us in cash by investors for the issuance of 923,078 shares of Common Stock, as well as $74,751 received from the exercise of stock

The $520,418 in net cash provided

by financing activities for the year ended June 30, 2020, was due to the cash received from a loan under the Payroll Protection Program

and the exercise of stock options of $487,300 and $33,128, respectively.

OFF-BALANCE SHEET ARRANGEMENTS

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

The following table

summarizes our contractual obligations and commitments as of June 30, 2020, and the effect such obligations could have on our liquidity

and cash flow in future periods:

The following table summarizes

our contractual obligations and commitments as of June 30, 2021, and the effect such obligations could have on our liquidity and cash

flow in future periods:

Payments due by June 30,

Total Obligations

Refer to ITEM 2.

FUTURE LIQUIDITY AND CAPITAL REQUIREMENTS

For the next twelve

months, we may require in excess of $5 million for capital expenditures, software licenses and for testing and certifying new products.

We believe we will be

able to fund our future cash requirements for operations from our cash available, operating cash flows, bank lines of credit and

issuance of equity securities.

We believe these sources of funds will be sufficient to continue our operations and planned capital

expenditures.

However, we will be required to raise additional debt or equity capital if we are unable to generate sufficient cash

flow from operations to fund the expansion of our sales and to satisfy the related working capital requirements for the next twelve

Our ability to satisfy such obligations also depends upon our future performance, which in turn is subject to general economic

conditions and regional risks, and to financial, business and other factors affecting our operations, including factors beyond

See Item 1A, “Risk Factors”

For the next twelve months,

we may require in excess of $5 million for capital expenditures, software licenses and for testing and certifying new products.

We believe we will be able

to fund our future cash requirements for operations from our cash available, operating cash flows, bank lines of credit and issuance of

equity securities.

We believe these sources of funds will be sufficient to continue our operations and planned capital expenditures.

we will be required to raise additional debt or equity capital if we are unable to generate sufficient cash flow from operations to fund

the expansion of our sales and to satisfy the related working capital requirements for the next twelve months.

Our ability to satisfy

such obligations also depends upon our future performance, which in turn is subject to general economic conditions and regional risks,

and to financial, business and other factors affecting our operations, including factors beyond our control.

See Item 1A, “Risk

Factors”

included in this report.

If we are unable to

generate sufficient cash flow from operations to meet our obligations and commitments, we will be required to raise additional

debt or equity capital.

If we are unable to generate

sufficient cash flow from operations to meet our obligations and commitments, we will be required to raise additional debt or equity capital.

Additionally, we may be required to sell material assets or operations or delay or forego expansion opportunities.

We might not be able to effect these alternative strategies to raise funds including credit lines and loans, on satisfactory terms,

QUANTITATIVE AND

QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We might not be able

to effect these alternative strategies to raise funds including credit lines and loans, on satisfactory terms, if at all.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

FINANCIAL STATEMENTS

AND SUPPLEMENTARY DATA

The financial statements

and the supplementary financial information required by this Item and included in this report are listed in the Index to Financial

Statements beginning on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and

the supplementary financial information required by this Item and included in this report are listed in the Index to Financial Statements

beginning on page F-1.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis