What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-09-13 compared with 2021-09-28 · 109 added, 112 removed, 231 unchanged (49% of the section changed)

12 unchanged sentences

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”

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” below.

In light of these risks, uncertainties

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

to meet customers’

to meet customers’ demands.

We have entered into and expect

17 unchanged sentences

In accordance with Topic

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.

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

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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June 30, 2021

Accounts Receivable

Accounts Receivable, net

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, 2022 and June 30, 2021.

Included in the Accounts Receivable

balance is a passthrough amount of $837,000.00.

These transactions were a direct result of an agreement between our vendor and our customer.

There is a corresponding balance of $837,000 in our Accounts Payable account to offset.

Our contract liabilities,

4 unchanged sentences

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.

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.

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Accounting Standards Codification

(“ASC”) Topic 350, “Intangibles - Goodwill and Other”

includes software that is part of a product or process to

(“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.

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During the year ended June 30, 2022, we incurred $658,544 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.

development costs, and all costs incurred before technological feasibility is reached are expensed and included in our consolidated statements

of comprehensive income.

Deferred income tax assets

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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.

As of June 30, 2022, we have federal and state net operating loss carryforwards of approximately $3.3 million and $40,000,

respectively.

Under the Tax Cuts and Jobs

Act (the “Act”), which was signed into law on December 22, 2017, the federal net operating loss of approximately $2.5 million,

which was recognized on or after January 1, 2018, will carry forward indefinitely.

The federal net operating loss of approximately $0.8

million, which was recognized on or before December 31, 2017, will expire through 2035.

The state net operating loss of approximately

$40,000 will begin to expire through 2042.

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

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

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Operating expenses

Income (loss) from operations

(Loss) income from operations

Other income, net

Net income (loss) before income taxes

Income tax provision (benefit)

Net income (loss)

non-controlling interest in net income (loss) of subsidiary

Net income (loss) attributable to Parent Company stockholders

Net (loss) income before income taxes

Income tax (benefit) provision

Net (loss) income

non-controlling interest in net income of subsidiary

Net (loss) income attributable to Parent Company stockholders

YEAR ENDED JUNE 30, 2022, COMPARED TO YEAR ENDED JUNE 30, 2021

NET SALES - Net sales

decreased by $160,117,583, or 87.0%, to $23,997,762 for the year ended June 30, 2022 from $184,115,345 for the corresponding period of

For the year ended June 30, 2022, net sales by geographic regions, consisting of North America, the Caribbean and South America,

and Asia were $23,305,366 (97.1% of net sales), $2,375 (0.0% of net sales), and $690,021 (2.9% of net sales), respectively.

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.

Net sales in North America

decreased by $160,465,780, or 87.3%, to $23,305,366 for the year ended June 30, 2022, from $183,771,146 for the corresponding period of

The decrease in net sales in North America was primarily due to the reduction of demand for wireless products from one major carrier

customer, resulting from the unprecedented high volume of demand for wireless products during the prior period, which coincided with the

early stages of the Covid-19 Pandemic period.

Net sales in the Caribbean and South America decreased by $15,125, or 86.4%, to $2,375 for

the year ended June 30, 2022, from $17,500 for the corresponding period of 2021.

Net sales in Asia increased by $363,322, or 111.2%, to

$690,021 for the year ended June 30, 2022, from $326,699 for the corresponding period of 2021.

The increase in net sales was primarily

due to the revenue generated from the material sales by FTI, which typically vary from period to period.

GROSS PROFIT - Gross

profit decreased by $28,647,438, or 88.2%, to $3,816,583 for the year ended June 30, 2022, from $32,464,021 for the corresponding period

The gross profit in terms of net sales percentage was 15.9% for the year ended June 30, 2022, compared to 17.6% for the corresponding

period of 2021.

The decrease 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 $854,236, or 8.9%, to $8,791,475 for the year ended June 30, 2022, from $9,645,711 for the corresponding

period of 2021.

Selling, general, and administrative

expenses decreased by $568,504 to $4,509,344 for the year ended June 30, 2022, from $5,077,848 for the corresponding period of 2021.

decrease in selling, general, and administrative expenses was primarily due to decreased shipping and handling charges of approximately

$480,000, decreased payroll expense as well as bad debt expense of approximately $340,000, which are partially offset by the increased

compensation expense related to stock options granted for employees and amortization expense of approximately $165,000 and $141,000, respectively.

Research and development expense

decreased by $285,732 to $4,282,131 for the year ended June 30, 2022, from $4,567,863 for the corresponding period of 2021.

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

and other research and development costs of approximately $104,000 and $182,000, respectively.

OTHER INCOME, NET -

Other income, net decreased by $351,748, or 57.0%, to $265,419 for the year ended June 30, 2022, from $617,167 for the corresponding period

The decrease was primarily due to the forgiveness of the Payroll Protection Plan loan during the fiscal year 2021, with no similar

transaction in fiscal year 2022, as well as decreased product development funding received by FTI from a government entity.

This was partially

offset by the gain from the favorable changes in foreign currency exchange rates in FTI and the increased interest income earned from

the money market accounts and certificates of deposit.

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

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

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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

The decrease in gross profit

in terms of net sales percentage was primarily due to competitive selling prices and the increase in production costs.

OPERATING EXPENSES

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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 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

- Operating expenses decreased by $400,585, or 5.1%, to $7,446,361 for the year ended June 30, 2020, from $7,846,946 for the corresponding

period of 2019.

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 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 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 expense was primarily due to the

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

OTHER INCOME, NET

- Other income, net increased by $15,810, or 7.71%, to $220,764 for the year ended June 30, 2020, from $204,954 for the corresponding

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.

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.

LIQUIDITY AND CAPITAL RESOURCES

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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.

– Net cash used in operating activities for the year ended June 30, 2022, was $7,407,355, and net cash provided by operating activities

for the year ended June 30, 2021 was $12,104,199.

The $7,407,355 in net cash

used in operating activities for the year ended June 30, 2022, was primarily due to the increase in inventory and decrease in accounts

payable of $3,222,344 and $1,537,287, respectively, as well as our operating results (net loss adjusted for depreciation, amortization,

and other non-cash charges), which was offset by the decrease of accounts receivable of $1,205,938.

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

1 unchanged sentence

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, 2022, and 2021 was $11,675,028 and $722,520, 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.

The $11,675,028 in net cash

used in investing activities for the year ended June 30, 2022, was primarily due to the purchases of short-term investments and capitalized

product development of $10,950,625 and $658,544, 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.

FINANCING ACTIVITIES

– Net cash provided by financing activities for the years ended June 30, 2022, and 2021 was $75,445 and $6,074,759, 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 $75,445 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.

by financing activities for the year ended June 30, 2022, was from the exercise of stock options.

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 options.

OFF-BALANCE SHEET ARRANGEMENTS

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

See Item 1A, “Risk

Factors”

included in this report.

See Item 1A, “Risk

Factors” included in this report.

If we are unable to generate

2 unchanged sentences

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.

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

QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK.

Not applicable.

STATEMENTS AND SUPPLEMENTARY DATA

FINANCIAL STATEMENTS AND

SUPPLEMENTARY DATA

The financial statements and

1 unchanged sentence

beginning on page F-1.

CHANGES IN AND DISAGREEMENTS

WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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