10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the quarterly period ended March 31, 2020

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)

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

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

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)

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  [_]    No  [_]

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  [_]    No  [_]

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 Act).    Yes  [_]    No  [_]

The Registrant has 10,601,912 shares of common stock outstanding as of May 15, 2020.

FRANKLIN WIRELESS CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020

INDEX

		Page
PART I – Financial Information
Item 1:	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets as of March 31, 2020 (unaudited) and June 30, 2019	4
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended March 31, 2020 and 2019	5
	Consolidated Statements of Stockholders' Equity (unaudited) for the three and nine months ended March 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended March 31, 2020 and 2019	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4:	Controls and Procedures	25
PART II – Other Information
Item 1:	Legal Proceedings	26
Item 1A:	Risk Factors	26
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3:	Defaults Upon Senior Securities	26
Item 4:	Mine Safety Disclosures	26
Item 5:	Other Information	26
Item 6:	Exhibits	26
Signatures		27

2

NOTE ON FORWARD LOOKING STATEMENTS

You should keep in mind the following points as you read this Report on Form 10-Q:

The terms “we,” “us,” “our,” “Franklin,” “Franklin Wireless,” or the “Company” refer to Franklin Wireless Corp.

This Report on Form 10-Q contains statements which, to the extent they do not recite historical fact, constitute “forward looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements are used under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” and elsewhere in this Quarterly Report on Form 10-Q. You can identify these statements by the use of words like “may,” “will,” “could,” “should,” “project,” “believe,” “anticipate,” “expect,” “plan,” “estimate,” “forecast,” “potential,” “intend,” “continue,” and variations of these words or comparable words. Forward looking statements do not guarantee future performance and involve risks and uncertainties. Actual results may differ substantially from the results that the forward looking statements suggest for various reasons, including those discussed under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended June 30, 2019. These forward looking statements are made only as of the date of this Report on Form 10-Q. We do not undertake to update or revise the forward looking statements, whether as a result of new information, future events or otherwise.

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PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

FRANKLIN WIRELESS CORP.

CONSOLIDATED BALANCE SHEETS

	March 31, 2020			June 30,
	(unaudited)			2019
ASSETS
Current assets:
Cash and cash equivalents	$	7,614,126		$	6,447,505
Certificates of deposit account		5,358,054			5,380,226
Accounts receivable		11,236,606			4,138,469
Other receivables, net		51,404			40,807
Inventories, net		818,532			1,052,740
Prepaid expenses and other current assets		14,359			28,042
Advance payments to vendors		28,224			51,340
Total current assets		25,121,305			17,139,129
Property and equipment, net		221,738			131,879
Intangible assets, net		1,260,107			1,109,911
Deferred tax assets, non-current		1,924,611			2,282,975
Goodwill		273,285			273,285
Right of use asset		1,231,330			–
Other assets		281,402			258,097
TOTAL ASSETS	$	30,313,778		$	21,195,276
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	11,357,842		$	5,672,514
Income tax payable		49,799			654
Advance payments from customers		612			–
Accrued liabilities		350,490			247,658
Lease liabilities, current		394,769			–
Total current liabilities		12,153,512			5,920,826
Lease liabilities, non-current		884,851			–
Total liabilities		13,038,363			5,920,826
Commitments and contingencies (Note 7)
Stockholders’ equity:
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 March 31, 2020 and June 30, 2019		–			–
Common stock, par value $0.001 per share, authorized 50,000,000 shares; 10,601,912 and 10,570,203 shares issued and outstanding as of March 31, 2020 and June 30, 2019, respectively		14,004			13,972
Additional paid-in capital		7,470,009			7,442,272
Retained earnings		14,300,565			12,477,441
Treasury stock, 3,472,286 shares as of March 31, 2020 and June 30, 2019		(4,513,479	)		(4,513,479	)
Accumulated other comprehensive loss		(670,392	)		(634,802	)
Total Parent Company stockholders’ equity		16,600,707			14,785,404
Non-controlling interests		674,708			489,046
Total stockholders’ equity		17,275,415			15,274,450
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	30,313,778		$	21,195,276

See accompanying notes to consolidated financial statements.

4

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2020			2019			2020			2019
Net sales	$	15,546,182		$	8,966,140		$	37,680,312		$	31,480,832
Cost of goods sold		12,511,391			7,371,035			30,033,382			26,431,444
Gross profit		3,034,791			1,595,105			7,646,930			5,049,388
Operating expenses:
Selling, general and administrative		988,096			1,268,674			2,606,600			3,849,296
Research and development		834,478			714,092			2,754,414			2,186,755
Total operating expenses		1,822,574			1,982,766			5,361,014			6,036,051
Income (loss) from operations		1,212,217			(387,661	)		2,285,916			(986,663	)
Other income, net:
Interest income		38,679			48,921			134,270			82,673
Income from governmental subsidy		–			–			4,114			64,824
Other income (loss), net		42,000			2,984			68,378			(3,322	)
Total other income, net		80,679			51,905			206,762			144,175
Income (loss) before provision for income taxes		1,292,896			(335,756	)		2,492,678			(842,488	)
Income tax provision (benefit)		233,032			(108,244	)		408,892			(185,284	)
Net income (loss)		1,059,864			(227,512	)		2,083,786			(657,204	)
Less: non-controlling interests in net loss of subsidiary at 48.2%		–			–			–			(55,564	)
Less: non-controlling interests in net (loss) income of subsidiary at 35.8%		–			(69,698	)		189,106			(107,181	)
Less: non-controlling interests in net income of subsidiary at 33.7%		71,556			–			71,556			–
Net income (loss) attributable to Parent Company	$	988,308		$	(157,814	)	$	1,823,124		$	(494,459	)
Basic income (loss) per share attributable to Parent Company stockholders	$	0.09		$	(0.01	)	$	0.17		$	(0.05	)
Diluted income (loss) per share attributable to Parent Company stockholders	$	0.09		$	(0.01	)	$	0.17		$	(0.05	)
Weighted average common shares outstanding – basic		10,580,576			10,570,203			10,574,841			10,570,203
Weighted average common shares outstanding – diluted		10,699,773			10,570,203			10,694,038			10,570,203
Comprehensive income (loss)
Net income (loss)	$	1,059,864		$	(227,512	)	$	2,083,786		$	(657,204	)
Translation adjustments		(54,340	)		(4,351	)		(35,590	)		(7,650	)
Comprehensive income (loss)		1,005,524			(231,863	)		2,048,196			(664,854	)
Less: comprehensive income (loss) attributable to non-controlling interest		71,556			(69,698	)		260,662			(162,745	)
Comprehensive income (loss) attributable to controlling interest	$	933,968		$	(162,165	)	$	1,787,534		$	(502,109	)

See accompanying notes to consolidated financial statements.

5

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended March 31, 2020 (unaudited)

	Common Stock				Additional Paid-in		Retained		Treasury			Accumulated Other Comprehensive			Non-controlling			Total Stockholders
	Shares		Amount		Capital		Earnings		Stock			Loss			Interest			Equity
Balance - June 30, 2019		10,570,203	$	13,972	$	7,442,272	$	12,477,441	$	(4,513,479	)	$	(634,802	)	$	489,046		$	15,274,450
Net income attributable to Parent Company		–		–		–		834,816		–			–			–			834,816
Foreign exchange translation		–		–		–		–		–			18,750			–			18,750
Comprehensive income attributable to non-controlling interest		–		–		–		–		–			–			189,106			189,106
Balance – December 31, 2019 (unaudited)		10,570,203	$	13,972	$	7,442,272	$	13,312,257	$	(4,513,479	)	$	(616,052	)	$	678,152		$	16,317,122
Net income attributable to Parent Company		–		–		–		988,308		–			–			–			988,308
Foreign exchange translation		–		–		–		–		–			(54,340	)		–			(54,340	)
Comprehensive income attributable to non-controlling interest		–		–		–		–		–			–			71,556			71,556
Purchases of shares of a subsidiary		–		–		–		–		–			–			(75,000	)		(75,000	)
Issuance of stock related to stock option exercised		31,709		32		27,737		–		–			–			–			27,769
Balance – March 31, 2020 (unaudited)		10,601,912	$	14,004	$	7,470,009	$	14,300,565	$	(4,513,479	)	$	(670,392	)	$	674,708		$	17,275,415

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended March 31, 2019 (unaudited)

	Common Stock				Additional Paid-in		Retained			Treasury			Accumulated Other Comprehensive			Non-controlling			Total Stockholders
	Shares		Amount		Capital		Earnings			Stock			Loss			Interest			Equity
Balance - June 30, 2018		10,570,203	$	13,972	$	7,442,272	$	13,753,565		$	(4,513,479	)	$	(581,983	)	$	921,010		$	17,035,357
Net loss attributable to Parent Company		–		–		–		(336,645)			–			–			–			(336,645	)
Foreign exchange translation		–		–		–		–			–			(3,299	)		–			(3,299	)
Comprehensive loss attributable to non-controlling interest		–		–		–		–			–			–			(93,047	)		(93,047	)
Purchase of shares of a subsidy		–		–		–		–			–			–			(234,330	)		(234,330	)
Balance – December 31, 2018 (unaudited)		10,570,203	$	13,972	$	7,442,272	$	13,416,920		$	(4,513,479	)	$	(585,282	)	$	593,633		$	16,368,036
Net loss attributable to Parent Company		–		–		–		(157,814	)		–			–			–			(157,814	)
Foreign exchange translation		–		–		–		–			–			(4,351	)		–			(4,351	)
Comprehensive loss attributable to non-controlling interest		–		–		–		–			–			–			(69,698	)		(69,698	)
Balance – March 31, 2019 (unaudited)		10,570,203	$	13,972	$	7,442,272	$	13,259,106		$	(4,513,479	)	$	(589,633	)	$	523,935		$	16,136,173

See accompanying notes to consolidated financial statements.

6

FRANKLIN WIRELESS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	2,083,786		$	(657,204	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		67,829			72,459
Amortization of intangible assets		344,382			339,708
Deferred tax (benefit)		358,364			(186,126	)
Amortization of right of use asset		48,290			–
Increase (decrease) in cash due to change in:
Accounts receivable		(7,098,137	)		(31,885	)
Other receivables		(10,597	)		97,752
Inventories		234,208			844,090
Prepaid expenses and other current assets		13,683			(5,148	)
Prepaid income tax		–			25,144
Advance payments to vendors		23,116			24,688
Other assets		(23,305	)		(97,698	)
Accounts payable		5,685,328			(969,177	)
Advance payments from customers		612			(157,138	)
Income tax payable		49,145			–
Accrued liabilities		102,832			(16,491	)
Net cash provided by (used in) operating activities		1,879,536			(717,026	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of short-term investments		22,172			–
Purchases of shares of a subsidiary		(75,000	)		(234,330	)
Purchases of property and equipment		(157,688	)		(63,779	)
Payments for capitalized development costs		(343,360	)		(168,910	)
Purchases of intangible assets		(151,218	)		(20,928	)
Net cash used in investing activities		(705,094	)		(487,947	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock related to stock options exercised		27,769			–
Net cash provided by financing activities		27,769			–
Effect of foreign currency translation		(35,590	)		(7,650	)
Net increase (decrease) in cash and cash equivalents		1,166,621			(1,212,623	)
Cash and cash equivalents, beginning of period		6,447,505			11,975,944
Cash and cash equivalents, end of period	$	7,614,126		$	10,763,321
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest	$	–		$	–
Income taxes	$	(800	)	$	(800	)

See accompanying notes to consolidated financial statements.

7

FRANKLIN WIRELESS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

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.

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 66.3% (33.7% is owned by non-controlling interests) and 64.2% (35.8% is owned by non-controlling interests) as of March 31, 2020 and as of June 30, 2019, respectively. 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 March 31, 2020, the non-controlling interest was $674,708, which represents a $185,662 increase from $489,046 as of June 30, 2019. The increase in the non-controlling interest of $185,662 was comprised of two components (1) an addition of $260,663 from the income in the subsidiary of $740,295 incurred during the nine month period March 31, 2020 and (2) a reduction in the ownership percentage of the non-controlling interests due to the purchase by the Company of 43,333 shares of the subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders.  The purchase decreased the non-controlling interests’ ownership percentage from 35.8% to 33.7%. 

8

As of March 31, 2019, the purchase of by the Company of 246,663 shares of the subsidiary for $234,330 ($0.95 per share) from three non-controlling shareholders decreased the non-controlling interests’ ownership percentage from 48.2% to 35.8%.

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				Nine Months Ended
	March 31,				March 31,
Net sales:	2020		2019		2020		2019
United States	$	15,444,110	$	8,898,775	$	37,342,577	$	31,234,107
Europe, the Middle East and Africa (“EMEA”)		–		63,347		–		224,427
Asia		102,072		4,018		337,735		22,298
Totals	$	15,546,182	$	8,966,140	$	37,680,312	$	31,480,832

Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	March 31, 2020		June 30, 2019
United States	$	1,436,258	$	1,209,159
Asia		45,587		32,631
Totals	$	1,481,845	$	1,241,790

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP 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.

9

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 March 31, 2020 and June 30, 2019.

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. In May 2016 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.

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 nine months ended March 31, 2020 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.

10

The balances of our trade receivables are as follows:

	March 31, 2020		June 30, 2019
Accounts Receivable	$	11,236,606	$	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 March 31, 2020 and June 30, 2019.

Our contract liabilities are as follows:

	March 31, 2020		June 30, 2019
Undelivered products	$	140,612	$	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 99% of net sales for the nine months ended March 31, 2020. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 1% of net sales for the nine months ended March 31, 2020. 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 March 31, 2020, 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.

11

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 March 31, 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. For the three and nine months ended March 31, 2020, we incurred $9,692 and $343,360, respectively, and for the three and nine months ended March 31, 2019, we incurred $104,505 and $168,910, 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 $834,478 and $714,092 for the three months ended March 31, 2020 and 2019, respectively, and $2,754,414 and $2,186,755 for the nine months ended March 31, 2020 and 2019, 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 $166,701 and $262,596 for the three months ended March 31, 2020 and 2019, respectively, and $339,849 and $978,275 for the nine months ended March 31, 2020 and 2019, 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.

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 March 31, 2020, and June 30, 2019, we have recorded an inventory reserve in the amounts of $468,165 and $553,281, respectively, for inventories that we have identified as obsolete or slow-moving.

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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 recognized as of March 31, 2020 and June 30, 2019.

The definite lived intangible assets consisted of the following as of March 31, 2020:

Definite lived intangible assets:	Expected Life	Average Remaining life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years		2.0 years	$	18,397	$	6,132	$	12,265
Technology in progress	Not Applicable		–		140,192		–		140,192
Software	5 years		2.2 years		524,834		320,656		204,178
Patents	10 years		6.0 years		59,016		10,282		48,734
Certifications & licenses	3 years		1.1 years		4,037,669		3,182,931		854,738
Total as of March 31, 2020				$	4,780,108	$	3,520,001	$	1,260,107

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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 for the three months ended March 31, 2020 and 2019 was $146,114 and $93,777 respectively, and for the nine months ended March 31, 2020 and 2019 was $344,382 and $339,708, 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 March 31, 2020, we are 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. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income (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.

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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 March 31, 2020, we have no material unrecognized tax benefits. We recorded an income tax expense of $233,032 and $408,892 for the three and nine months ended March 31, 2020, respectively. We also recorded a decrease in deferred tax asset, non-current, of $233,195 and $358,364 for the three and nine months ended March 31, 2020, respectively, and an increase in deferred tax asset, non-current, of $108,251 and $186,126 for the three and nine months ended March 31, 2019, respectively.

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 nine months ended March 31, 2020, sales to our two largest customers accounted for 42% and 32% of our consolidated net sales, and 53% and 25% of our accounts receivable balance as of March 31, 2020. In the same period in 2019, sales to our two largest customers accounted for 57% and 23% of our consolidated net sales, and 70% and 22% of our accounts receivable balance as of March 31, 2019. No other customers accounted for more than ten percent of total net sales for the nine months ended March 31, 2020 and 2019, and no other customers accounted for more than ten percent of total accounts receivable as of March 31, 2020 and 2019.

For the nine months ended March 31, 2020, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If this manufacturing company 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 nine months ended March 31, 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. No other manufacturing companies accounted for more than ten percent of total purchase for the nine months ended March 31, 2020 and 2019.

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In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations and where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While the Company expects this situation may increase demand for its products, the related impact cannot be reasonably estimated at this time.

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 (ASC 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 using the modified retrospective approach. 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. As of the adoption date, we have no finance leases. As permitted under ASC 842, we elected several practical expedients that permit us to not reassess (1) whether existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability. The standard did not affect our consolidated net income or cash flows. See Note 7 for the further details.

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

	March 31, 2020			June 30, 2019
Machinery and facility	$	363,782		$	363,022
Office equipment		420,166			396,222
Molds		917,154			784,170
		1,701,102			1,543,414
Less accumulated depreciation		(1,479,364	)		(1,411,535	)
Total	$	221,738		$	131,879

Depreciation expense associated with property and equipment was $23,958 and $17,889 for the three months ended March 31, 2020 and 2019, respectively, and $67,829 and $72,459 for the nine months ended March 31, 2020 and 2019, respectively.

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NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

	March 31, 2020		June 30, 2019
Accrued salaries and payroll deductions owed to government entities	$	73,608	$	44,752
Accrued vacation		45,625		56,335
Accrued undelivered inventory		140,000		140,000
Taxes		13,257		408
Other accrued liabilities		78,000		6,163
Total	$	350,490	$	247,658

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.

For the three and nine months ended March 31, 2019, we were in a net loss position and have excluded 299,000 stock options from the calculation of diluted net loss per shares because these securities are anti-dilutive. The weighted average number of shares outstanding used to compute loss per share is as follows:

	Three Months ended March 31,					Nine Months Ended March 31,
	2020		2019			2020		2019
Net income (loss) attributable to Parent Company	$	988,308	$	(157,814	)	$	1,823,124	$	(494,459	)
Weighted-average shares of common stock outstanding:
Basic shares outstanding		10,580,576		10,570,203			10,574,841		10,570,203
Dilutive effect of common stock equivalents arising from stock options		119,197		–			119,197		–
Diluted shares outstanding		10,699,773		10,570,203			10,694,038		10,570,203
Basic income (loss) per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)
Diluted income (loss) earnings per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)

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 $77,263 and $69,345 for the three months ended March 31, 2020 and 2019 and $221,231 and $208,035 for the nine months ended March 31, 2020 and 2019.

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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 March 31, 2020 and 2019, and approximately $96,300 for the nine months ended March 31, 2020 and 2019.

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 approximately $2,146 and $2,535 for the three months ended March 31, 2020 and 2019, and approximately $6,667 and $7,626 for the nine months ended March 31, 2020 and 2019.

As of March 31, 2020, we used discount rates of 4.0% and 2.8% in determining our operating lease liabilities for the office spaces in San Diego, California, and South Korea, respectively. These rates represented our incremental borrowing rates at that time. Short-term leases with initial terms of twelve months or less are not capitalized. Both our San Diego and Korean office leases were extensions of previous leases and neither contains any further extension provisions.

Maturities of lease liabilities are as follows:

	Operating Leases
Fiscal 2020	$	109,378
Fiscal 2021		437,510
Fiscal 2022		341,193
Fiscal 2023		321,930
Fiscal 2024		160,965
Total lease payments		1,370,976
Less imputed interest		(91,356	)
Total	$	1,279,620

Other Contingencies

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 by Anydata 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 we have already ordered parts from 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 March 31, 2020, 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 $2.0 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 March 31, 2020, we paid $100,000 for the right to call on inventory and recorded an additional $49,580 as a prepaid expense related to pricing adjustments, which has been agreed with Quanta for other products to ensure demand is met. As of March 31, 2020, there is a reasonable possibility we may incur a loss, however, the amount is not estimable at this time.

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Litigation

We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Management does not believe that the outcome of these matters will have any material adverse effect on the Company.

COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations and where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While the Company expects this situation may increase demand for its products, the related impact cannot be reasonably estimated 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.

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 and nine months ended March 31, 2020 and 2019.

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A summary of the status of our stock options is presented below as of March 31, 2020:

						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		(31,709	)		0.88		–		129,373
Cancelled		–			–		–		–
Forfeited or Expired		(12,000	)		1.35		–		48,960
Outstanding as of March 31, 2020		255,291		$	1.05		2.20	$	773,626
Exercisable as of March 31, 2020		255,291		$	1.05		2.20	$	773,626

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $4.08 as of March 31, 2020, 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 March 31, 2020, in the amount of 255,291 shares, was $0.93 per share.

As of March 31, 2020, 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 March 31, 2019:

					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 March 31, 2019		299,000	$	1.04		2.00	$	525,270
Exercisable as of March 31, 2019		299,000	$	1.04		2.00	$	525,270

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.80 as of March 31, 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 March 31, 2019, in the amount of 299,000 shares, was $0.92 per share.

As of March 31, 2019, there was no unrecognized compensation cost related to non-vested stock options granted.

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ITEM 2.  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. Risk Factors” and under the caption “Factors That May Influence Future Results of Operations” in the Company’s Form 10-K for the year ended June 30, 2019, filed on September 30, 2019.  In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur.

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 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 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 of our new products, (4) new customer relationships and contracts, and (5) our ability to meet customers’ demands.

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

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Management evaluates these estimates and assumptions on an ongoing basis. Our estimates and assumptions have been prepared on the basis of the most current reasonably available information. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions.

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We have several critical accounting policies, which were described in our Annual Report on Form 10-K for the year ended June 30, 2019, that are both important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective and complex judgments. Typically, the circumstances that make these judgments difficult, subjective and complex have to do with making estimates about the effect of matters that are inherently uncertain. There were no material changes to our critical accounting policies for the nine months ended March 31, 2020.

RESULTS OF OPERATIONS

The following table sets forth, for the three and nine months ended March 31, 2020 and 2019, our statements of comprehensive income including data expressed as a percentage of sales:

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
	2020		2019			2020		2019
Net sales		100.0%		100.0%			100.0%		100.0%
Cost of goods sold		80.5%		82.2%			79.7%		84.0%
Gross profit		19.5%		17.8%			20.3%		16.0%
Operating expenses		11.7%		22.1%			14.2%		19.2%
Income (loss) from operations		7.8%		(4.3%	)		6.1%		(3.2%	)
Other income (expense), net		0.5%		0.6%			0.5%		0.5%
Net income (loss) before income taxes		8.3%		(3.7%	)		6.6%		(2.7%	)
Income tax provision (benefit)		1.5%		(1.2%	)		1.1%		(0.6%	)
Net income (loss)		6.8%		(2.5%	)		5.5%		(2.1%	)
Less: non-controlling interest in net income (loss) of subsidiary		0.4%		(0.8%	)		0.7%		(0.5%	)
Net income (loss) attributable to Parent Company stockholders		6.4%		(1.7%	)		4.8%		(1.6%	)

THREE MONTHS ENDED MARCH 31, 2020 COMPARED TO THREE MONTHS ENDED MARCH 31, 2019

NET SALES - Net sales increased by $6,580,042, or 73.4%, to $15,546,182 for the three months ended March 31, 2020 from $8,966,140 for the corresponding period of 2019. For the three months ended March 31, 2020, net sales by geographic regions, consisting of the United States and Canada, EMEA, and Asia were $15,444,110 (99.3% of net sales), $0 (0.0% of net sales), and $102,072 (0.7% of net sales), respectively. For the three months ended March 31, 2019, net sales by geographic regions, consisting of the United States and Canada, EMEA, and Asia were $8,898,775 (99.2% of net sales), $63,347 (0.7% of net sales), and $4,018 (0.1% of net sales), respectively.

Net sales in the United States and Canada increased by $6,545,335, or 73.6%, to 15,444,110 for the three months ended March 31, 2020 from $8,898,775 for the corresponding period of 2019. The increase in net sales in the United States and Canada resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. 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 (35% of our consolidated net sales for the three months ended March 31, 2020), as well as increased product demand (up 24%) from one major carrier customer compared to the corresponding period of 2019. Net sales in EMEA decreased by $63,347, or 100.0%, to $0 for the three months ended March 31, 2020 from $63,347 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 $98,054, or 2,440.4%, to $102,072 for the three months ended March 31, 2020 from $4,018 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.

22

GROSS PROFIT - Gross profit increased by $1,439,686, or 90.3%, to $3,034,791 for the three months ended March 31, 2020 from $1,595,105 for the corresponding period of 2019. The gross profit in terms of net sales percentage was 19.5% for the three months ended March 31, 2020 compared to 17.8% 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 in terms of net sales percentage was primarily due to a newly launched product, which involves higher selling price, as well as the product development service revenues generated by FTI, which involve lower costs of goods sold.

OPERATING EXPENSES - Operating expenses decreased by $160,192, or 8.1%, to $1,822,574 for the three months ended March 31, 2020 from $1,982,766 for the corresponding period of 2019. The decrease in operating expenses was primarily due to the significantly decreased shipping and handling costs resulting from the positively restructured shipping terms with a major vendor despite the increased volume of product shipments.

OTHER INCOME (LOSS), NET - Other income (loss), net increased by $28,774, or 55.4%, to $80,679 for the three months ended March 31, 2020 from $51,905 for the corresponding period of 2019. The increase was primarily due to increased other income recognized from the forgiven vacation liabilities for the three months ended March 31, 2020.

NINE MONTHS ENDED MARCH 31, 2020 COMPARED TO NINE MONTHS ENDED MARCH 31, 2019

NET SALES - Net sales increased by $6,199,480, or 19.7%, to $37,680,312 for the nine months ended March 31, 2020 from $31,480,832 for the corresponding period of 2019. For the nine months ended March 31, 2020, net sales by geographic regions, consisting of the United States and Canada, EMEA, and Asia were $37,342,577 (99.1% of net sales), $0 (0.0% of net sales) and $337,735 (0.0% of net sales), respectively. For the nine months ended March 31, 2019, net sales by geographic regions, consisting of the United States and Canada, South America and the Caribbean, EMEA and Asia, were $31,234,107 (99.2% of net sales), $0 (0.0% of net sales), $224,427 (0.7% of net sales) and $22,298 (0.1% of net sales), respectively.

Net sales in the United States and Canada increased by $6,108,470, or 19.6%, to $37,342,577 for the nine months ended March 31, 2020 from $31,234,107 for the corresponding period of 2019. The increase in net sales in the United States and Canada resulted primarily from increased demand for wireless connectivity due to people working and attending school remotely. 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. (32% of our consolidated net sales for the nine months ended March 31, 2020). Net sales in EMEA decreased by $224,427, or 100.0%, to $0 for the nine months ended March 31, 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 $315,437, or 1,414.6%, to $337,735 for the nine months ended March 31, 2020 from $22,298 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 $2,597,542, or 51.4%, to $7,646,930 for the nine months ended March 31, 2020 from $5,049,388 for the corresponding period of 2018. The gross profit in terms of net sales percentage was 20.3% for the nine months ended March 31, 2020, compared to 16.0% for the corresponding period of 2019. The increase in gross profit was primarily due to increased demand for wireless connectivity due to people working and attending school remotely. Net sales also increased 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, which involves 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 $675,037, or 11.2%, to $5,361,014 for the nine months ended March 31, 2020 from $6,036,051 for the corresponding period of 2019. The decrease in operating expenses was primarily due to the significantly decreased shipping and handling costs resulting from the positively restructured shipping terms with a major vendor despite the increased volume of product shipments.

23

OTHER INCOME (LOSS), NET - Other income (loss), net increased by $62,587, or 43.4%, to $206,762 for the nine months ended March 31, 2020 from $144,175 for the corresponding period of 2019. The increase in other income (loss), net was primarily due to the higher interest income earned from the newly opened money market account and the certificate of deposit account as well as the increased favorable effect in foreign currency exchange rates that occurred in FTI, which is partially offset by the discontinued product development funding received by FTI from the South Korean government during the nine months ended March 31, 2020.

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 from the date of the filing of this Form 10-Q.  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 March 31, 2020 consisted of cash and cash equivalents as well as short-term investments of $12,972,180.  We believe we have sufficient available capital to cover our existing operations and obligations through at least one year from the date of the filing of this Form 10-Q.  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 in operating activities for the nine months ended March 31, 2020 was $1,879,536, and net cash used in operating activities for nine months ended March 31, 2019 was $717,026.

The $1,879,536 in net cash provided by operating activities for the nine months ended March 31, 2020 was primarily due to the increase in accounts payable of $5,685,328 and our operating results of $2,902,651 (net income adjusted for depreciation, amortization, and other non-cash charges), which were partially offset by the increase in accounts receivable of $7,098,137.

The $717,026 in net cash used in operating activities for the nine months ended March 31, 2019 was primarily due to the decrease in accounts payable and advance payments from customers of $969,177 and $157,138, respectively, as well as our operating results (net income adjusted for depreciation, amortization and other non-cash charges), which were partially offset by the decreases in inventories of $844,090.

INVESTING ACTIVITIES - Net cash used in investing activities for the nine months ended March 31, 2020 and 2019 was $705,094 and $487,947, respectively.

The $705,094 in net cash used in investing activities for the nine months ended March 31, 2020 was primarily due to the payments for capitalized product development, intangible assets, and property and equipment of $343,360, $151,218, and $157,688, respectively, as well as the payments for purchase of additional shares of the subsidiary of $75,000.

The $487,947 in net cash used in investing activities for nine months ended March 31, 2019 was primarily due to the payments for purchase of additional shares of the subsidiary of $234,330 as well as the purchase of capitalized product development of $168,910. The $351,704 in net cash used in investing activities for the nine months ended March 31, 2018 was primarily due to the payments for capitalized product development of $291,386 as well as the purchases of intangible assets of $38,520.

24

FINANCING ACTIVITIES - Net cash provided by financing activities for the nine months ended March 31, 2020 and 2019 was $27,769 and $0, respectively, which was due to the cash received from the exercise of stock options for the nine months ended March 31,2020.

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

Refer to NOTE 7 - COMMITMENTS AND CONTINGENCIES in the Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

Refer to NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES in the Consolidated Financial Statements.

OFF-BALANCE SHEET ARRANGEMENTS

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company,” the Company is not required to respond to this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our President and Acting Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based upon that evaluation, our President and Acting Chief Financial Officer have concluded that, as of March 31, 2020, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to our management, including our principal executive and principal accounting officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934 and as a result of adopting Topic 842) during the nine months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have provided information about legal proceedings in which we are involved in Note 7 of the notes to consolidated financial statements for the nine months ended March 31, 2020, contained within this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, filed with the SEC on September 30, 2019 (the “Annual Report”), includes a detailed discussion of our risk factors under the heading “PART I, ITEM 1A – RISK FACTORS.” You should carefully consider the risk factors discussed in our Annual Report, as well as other information in this quarterly report. Any of these risks could cause our business, financial condition, results of operations and future growth prospects to suffer. We are not aware of any material changes from the risk factors previously disclosed.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

26

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: May 15, 2020

27

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, OC Kim, President of Franklin Wireless Corp., certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Franklin Wireless Corp.;
2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ OC KIM                      

OC Kim

President

May 15, 2020

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, OC Kim, Acting Chief Financial Officer of Franklin Wireless Corp., certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Franklin Wireless Corp.;
2)	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4)	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5) I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ OC Kim                    

OC Kim

Acting Chief Financial Officer

May 15, 2020

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Franklin Wireless Corp. (the "Company") on Form 10-Q for the three and nine months ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, OC Kim, President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ OC KIM                   

OC Kim

President

May 15, 2020

A signed copy of this written statement required by section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Franklin Wireless Corp. (the "Company") on Form 10-Q for the three and nine months ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, OC Kim, President of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ OC Kim                     

OC Kim

Acting Chief Financial Officer

May 15, 2020

A signed copy of this written statement required by section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

3. Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Jul. 02, 2019	Jun. 30, 2019
Noncontrolling interest	$ 674,708		$ 674,708			$ 489,046
Increase (decrease) in noncontrolling interest			185,662
Net income (loss) of subsidiary			$ 572,693
Purchases of shares of a subsidiary, shares			43,333	246,663
Purchases of shares of a subsidiary			$ 75,000	$ 234,330
Allowance for doubtful accounts	0		0			0
Capitalized product development costs	140,193		140,193			465,352
Product development costs incurred during period	9,692	$ 104,505	343,360	168,910
Research and development costs	834,478	714,092	2,754,414	2,186,755
Selling, general and administrative expenses	988,096	1,268,674	2,606,600	3,849,296
Inventory reserve	468,165		468,165			553,281
Goodwill and intangible assets impairment			0	0
Amortization of intangible assets	146,114	93,777	344,382	339,708
Unrecognized tax benefits	0		0			0
Income tax provision (benefit)	233,032	(108,244)	408,892	(185,284)
Increase (decrease) in tax deferred asset	(233,195)	108,251	(358,364)	186,126
Operating lease right-of-use assets	1,231,330		1,231,330		$ 1,501,203	$ 0
Operating lease liabilities	$ 1,279,620		$ 1,279,620		$ 1,507,367
Non-Controlling Interest [Member]
Equity interest owned	33.70%		33.70%			35.80%
Shipping and Handling [Member]
Selling, general and administrative expenses	$ 166,701	$ 262,596	$ 339,849	$ 978,275
Product [Member] | Transferred At Point In Time [Member]
Concentration of credit risk			99.00%
Non-recurring Engineering Projects [Member] | Transferred Over Time [Member]
Concentration of credit risk			1.00%
Accounts Receivable [Member] | Customer 1 [Member]
Concentration of credit risk			53.00%	70.00%
Accounts Receivable [Member] | Customer 2 [Member]
Concentration of credit risk			25.00%	22.00%
Sales [Member] | Customer 1 [Member]
Concentration of credit risk			42.00%	57.00%
Sales [Member] | Customer 2 [Member]
Concentration of credit risk			32.00%	23.00%

XML

7. COMMITMENTS AND CONTINGENCIES (Tables)

9 Months Ended

Mar. 31, 2020

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	$	109,378
Fiscal 2021		437,510
Fiscal 2022		341,193
Fiscal 2023		321,930
Fiscal 2024		160,965
Total lease payments		1,370,976
Less imputed interest		(91,356	)
Total	$	1,279,620

XML

3. Summary of Significant Accounting Policies (Details - Receivables) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Accounting Policies [Abstract]
Accounts Receivable	$ 11,236,606	$ 4,138,469

XML

8. Long-Term Incentive Plan Awards (Details - Option Activity) - USD ($)	9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Shares
Number of Options Outstanding, Ending	255,291	299,000
Weighted-Average Exercise Price
Weighted Average Exercise Price Granted	$ 0.93	$ 0.93
Options [Member]
Shares
Number of Options Outstanding, Beginning	299,000	299,000
Number of Options Granted	0	0
Number of Options Exercised	(31,709)	0
Number of Options Cancelled	0	0
Number of Options Forfeited or Expired	(12,000)	0
Number of Options Outstanding, Ending	255,291	299,000
Number of Options Exercisable	255,291	299,000
Weighted-Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning	$ 1.04	$ 1.04
Weighted Average Exercise Price Granted
Weighted Average Exercise Price Exercised	0.88
Weighted Average Exercise Price Canceled
Weighted Average Exercise Price Forfeited or Expired	1.35
Weighted Average Exercise Price Outstanding, Ending	1.05	1.04
Weighted Average Exercise Price Exercisable	$ 1.05	$ 1.04
Weighted-Average Remaining Contractual Life (In Years)
Weighted Average Remaining Contractual Life (in years) Outstanding	2 years 2 months 12 days	2 years
Weighted Average Remaining Contractual Life (in years) Exercisable	2 years 2 months 12 days	2 years
Aggregate Intrinsic Value
Aggregate Intrinsic Value Outstanding, Beginning	$ 420,620	$ 241,220
Aggregate Intrinsic Value Exercised	$ 129,373
Aggregate Intrinsic Value Forfeited or Expired	$ 48,960
Aggregate Intrinsic Value Outstanding, Ending	$ 773,626	525,270
Aggregate Intrinsic Value Exercisable	$ 773,626	$ 525,270

XML

5. Accrued Liabilities (Details) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Payables and Accruals [Abstract]
Accrued salaries and payroll deductions owed to government entities	$ 73,608	$ 44,752
Accrued vacation	45,625	56,335
Accrued undelivered inventory	140,000	140,000
Taxes	13,257	408
Other accrued liabilities	78,000	6,163
Total	$ 350,490	$ 247,658

XML

6. EARNINGS (LOSS) PER SHARE

9 Months Ended

Mar. 31, 2020

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.

For the three and nine months ended March 31, 2019, we were in a net loss position and have excluded 299,000 stock options from the calculation of diluted net loss per shares because these securities are anti-dilutive. The weighted average number of shares outstanding used to compute loss per share is as follows:

	Three Months ended March 31,					Nine Months Ended March 31,
	2020		2019			2020		2019
Net income (loss) attributable to Parent Company	$	988,308	$	(157,814	)	$	1,823,124	$	(494,459	)
Weighted-average shares of common stock outstanding:
Basic shares outstanding		10,580,576		10,570,203			10,574,841		10,570,203
Dilutive effect of common stock equivalents arising from stock options		119,197		–			119,197		–
Diluted shares outstanding		10,699,773		10,570,203			10,694,038		10,570,203
Basic income (loss) per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)
Diluted income (loss) earnings per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)

XML

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Segment information by geographic areas

The following table contains certain financial information by geographic area:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
Net sales:	2020		2019		2020		2019
United States	$	15,444,110	$	8,898,775	$	37,342,577	$	31,234,107
Europe, the Middle East and Africa (“EMEA”)		–		63,347		–		224,427
Asia		102,072		4,018		337,735		22,298
Totals	$	15,546,182	$	8,966,140	$	37,680,312	$	31,480,832

Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	March 31, 2020		June 30, 2019
United States	$	1,436,258	$	1,209,159
Asia		45,587		32,631
Totals	$	1,481,845	$	1,241,790

Schedule of receivables

The balances of our trade receivables are as follows:

	March 31, 2020		June 30, 2019
Accounts Receivable	$	11,236,606	$	4,138,469

Schedule of contract liabilities

Our contract liabilities are as follows:

	March 31, 2020		June 30, 2019
Undelivered products	$	140,612	$	140,000

Useful lives of property and equipment

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

Schedule of Intangible Assets

The definite lived intangible assets consisted of the following as of March 31, 2020:

Definite lived intangible assets:	Expected Life	Average Remaining life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years		2.0 years	$	18,397	$	6,132	$	12,265
Technology in progress	Not Applicable		–		140,192		–		140,192
Software	5 years		2.2 years		524,834		320,656		204,178
Patents	10 years		6.0 years		59,016		10,282		48,734
Certifications & licenses	3 years		1.1 years		4,037,669		3,182,931		854,738
Total as of March 31, 2020				$	4,780,108	$	3,520,001	$	1,260,107

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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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			(336,645)				(336,645)
Foreign exchange translation					(3,299)		(3,299)
Comprehensive income attributable to non-controlling interest						(93,047)	(93,047)
Purchase of shares of a subsidy						(234,330)	(234,330)
Ending balance, shares at Dec. 31, 2018	10,570,203
Ending balance, value at Dec. 31, 2018	$ 13,972	7,442,272	13,416,920	(4,513,479)	(585,282)	593,633	16,368,036
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							(494,459)
Foreign exchange translation							(7,650)
Comprehensive income attributable to non-controlling interest							(162,745)
Ending balance, shares at Mar. 31, 2019	10,570,203
Ending balance, value at Mar. 31, 2019	$ 13,972	7,442,272	13,259,106	(4,513,479)	(589,633)	523,935	16,136,173
Beginning balace, shares at Dec. 31, 2018	10,570,203
Beginning balace, value at Dec. 31, 2018	$ 13,972	7,442,272	13,416,920	(4,513,479)	(585,282)	593,633	16,368,036
Net income attributable to Parent Company			(157,814)				(157,814)
Foreign exchange translation					(4,351)		(4,351)
Comprehensive income attributable to non-controlling interest						(69,698)	(69,698)
Ending balance, shares at Mar. 31, 2019	10,570,203
Ending balance, value at Mar. 31, 2019	$ 13,972	7,442,272	13,259,106	(4,513,479)	(589,633)	523,935	16,136,173
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			834,816				834,816
Foreign exchange translation					18,750		18,750
Comprehensive income attributable to non-controlling interest						189,106	189,106
Ending balance, shares at Dec. 31, 2019	10,570,203
Ending balance, value at Dec. 31, 2019	$ 13,972	7,442,272	13,312,257	(4,513,479)	(616,052)	678,152	16,317,122
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							1,823,124
Foreign exchange translation							(35,590)
Comprehensive income attributable to non-controlling interest							260,662
Ending balance, shares at Mar. 31, 2020	10,601,912
Ending balance, value at Mar. 31, 2020	$ 14,004	7,470,009	14,300,565	(4,513,479)	(670,392)	674,708	17,275,415
Beginning balace, shares at Dec. 31, 2019	10,570,203
Beginning balace, value at Dec. 31, 2019	$ 13,972	7,442,272	13,312,257	(4,513,479)	(616,052)	678,152	16,317,122
Net income attributable to Parent Company			988,308				988,308
Foreign exchange translation					(54,340)		(54,340)
Comprehensive income attributable to non-controlling interest						71,556	71,556
Purchase of shares of a subsidy						(75,000)	(75,000)
Issuance of stock related to stock option exercised, shares	31,709
Issuance of stock related to stock option exercised, value	$ 32	27,737					27,769
Ending balance, shares at Mar. 31, 2020	10,601,912
Ending balance, value at Mar. 31, 2020	$ 14,004	$ 7,470,009	$ 14,300,565	$ (4,513,479)	$ (670,392)	$ 674,708	$ 17,275,415

XML

Document and Entity Information - shares	9 Months Ended
	Mar. 31, 2020	May 15, 2020
Cover [Abstract]
Entity Registrant Name	FRANKLIN WIRELESS CORP
Entity Central Index Key	0000722572
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
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		10,601,912
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

XML

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Mar. 31, 2020

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 66.3% (33.7% is owned by non-controlling interests) and 64.2% (35.8% is owned by non-controlling interests) as of March 31, 2020 and as of June 30, 2019, respectively. 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 March 31, 2020, the non-controlling interest was $674,708, which represents a $185,662 increase from $489,046 as of June 30, 2019. The increase in the non-controlling interest of $185,662 was comprised of two components (1) an addition of $260,663 from the income in the subsidiary of $740,295 incurred during the nine month period March 31, 2020 and (2) a reduction in the ownership percentage of the non-controlling interests due to the purchase by the Company of 43,333 shares of the subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders.  The purchase decreased the non-controlling interests’ ownership percentage from 35.8% to 33.7%. 

As of March 31, 2019, the purchase of by the Company of 246,663 shares of the subsidiary for $234,330 ($0.95 per share) from three non-controlling shareholders decreased the non-controlling interests’ ownership percentage from 48.2% to 35.8%.

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				Nine Months Ended
	March 31,				March 31,
Net sales:	2020		2019		2020		2019
United States	$	15,444,110	$	8,898,775	$	37,342,577	$	31,234,107
Europe, the Middle East and Africa (“EMEA”)		–		63,347		–		224,427
Asia		102,072		4,018		337,735		22,298
Totals	$	15,546,182	$	8,966,140	$	37,680,312	$	31,480,832

Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	March 31, 2020		June 30, 2019
United States	$	1,436,258	$	1,209,159
Asia		45,587		32,631
Totals	$	1,481,845	$	1,241,790

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP 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 March 31, 2020 and June 30, 2019.

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. In May 2016 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.

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 nine months ended March 31, 2020 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:

	March 31, 2020		June 30, 2019
Accounts Receivable	$	11,236,606	$	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 March 31, 2020 and June 30, 2019.

Our contract liabilities are as follows:

	March 31, 2020		June 30, 2019
Undelivered products	$	140,612	$	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 99% of net sales for the nine months ended March 31, 2020. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 1% of net sales for the nine months ended March 31, 2020. 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 March 31, 2020, 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 March 31, 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. For the three and nine months ended March 31, 2020, we incurred $9,692 and $343,360, respectively, and for the three and nine months ended March 31, 2019, we incurred $104,505 and $168,910, 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 $834,478 and $714,092 for the three months ended March 31, 2020 and 2019, respectively, and $2,754,414 and $2,186,755 for the nine months ended March 31, 2020 and 2019, 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 $166,701 and $262,596 for the three months ended March 31, 2020 and 2019, respectively, and $339,849 and $978,275 for the nine months ended March 31, 2020 and 2019, 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.

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 March 31, 2020, and June 30, 2019, we have recorded an inventory reserve in the amounts of $468,165 and $553,281, respectively, for inventories that we have identified as obsolete or slow-moving.

Property and Equipment

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

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

Goodwill and Intangible Assets

Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and 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 recognized as of March 31, 2020 and June 30, 2019.

The definite lived intangible assets consisted of the following as of March 31, 2020:

Definite lived intangible assets:	Expected Life	Average Remaining life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years		2.0 years	$	18,397	$	6,132	$	12,265
Technology in progress	Not Applicable		–		140,192		–		140,192
Software	5 years		2.2 years		524,834		320,656		204,178
Patents	10 years		6.0 years		59,016		10,282		48,734
Certifications & licenses	3 years		1.1 years		4,037,669		3,182,931		854,738
Total as of March 31, 2020				$	4,780,108	$	3,520,001	$	1,260,107

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 for the three months ended March 31, 2020 and 2019 was $146,114 and $93,777 respectively, and for the nine months ended March 31, 2020 and 2019 was $344,382 and $339,708, 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 March 31, 2020, we are 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. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income (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 March 31, 2020, we have no material unrecognized tax benefits. We recorded an income tax expense of $233,032 and $408,892 for the three and nine months ended March 31, 2020, respectively. We also recorded a decrease in deferred tax asset, non-current, of $233,195 and $358,364 for the three and nine months ended March 31, 2020, respectively, and an increase in deferred tax asset, non-current, of $108,251 and $186,126 for the three and nine months ended March 31, 2019, respectively.

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 nine months ended March 31, 2020, sales to our two largest customers accounted for 42% and 32% of our consolidated net sales, and 53% and 25% of our accounts receivable balance as of March 31, 2020. In the same period in 2019, sales to our two largest customers accounted for 57% and 23% of our consolidated net sales, and 70% and 22% of our accounts receivable balance as of March 31, 2019. No other customers accounted for more than ten percent of total net sales for the nine months ended March 31, 2020 and 2019, and no other customers accounted for more than ten percent of total accounts receivable as of March 31, 2020 and 2019.

For the nine months ended March 31, 2020, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If this manufacturing company 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 nine months ended March 31, 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. No other manufacturing companies accounted for more than ten percent of total purchase for the nine months ended March 31, 2020 and 2019.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations and where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While the Company expects this situation may increase demand for its products, the related impact cannot be reasonably estimated at this time.

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 (ASC 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 using the modified retrospective approach. 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. As of the adoption date, we have no finance leases. As permitted under ASC 842, we elected several practical expedients that permit us to not reassess (1) whether existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability. The standard did not affect our consolidated net income or cash flows. See Note 7 for the further details.

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7. Commitments and Contingencies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Anydata [Member]
Purchase commitment	$ 3,100,000		$ 3,100,000
Quanta [Member]
Purchase commitment	2,000,000		2,000,000
Payment made for inventory	100,000		100,000
Prepaid expense	49,580		49,580
Administrative office, San Diego, CA [Member]
Rent Expense	$ 77,263	$ 69,345	$ 221,231	$ 208,035
Operating lease discount rate	4.00%		4.00%
Administrative office, Korea [Member]
Rent Expense	$ 32,100	32,100	$ 96,300	96,300
Operating lease discount rate	2.80%		2.80%
Corporate housing facility [Member]
Rent Expense	$ 2,146	$ 2,535	$ 6,667	$ 7,626

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4. Property and Equipment (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Property, Plant and Equipment [Abstract]
Depreciation	$ 23,958	$ 17,889	$ 67,829	$ 72,459

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7. COMMITMENTS AND CONTINGENCIES

9 Months Ended

Mar. 31, 2020

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 $77,263 and $69,345 for the three months ended March 31, 2020 and 2019 and $221,231 and $208,035 for the nine months ended March 31, 2020 and 2019.

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 March 31, 2020 and 2019, and approximately $96,300 for the nine months ended March 31, 2020 and 2019.

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 approximately $2,146 and $2,535 for the three months ended March 31, 2020 and 2019, and approximately $6,667 and $7,626 for the nine months ended March 31, 2020 and 2019.

As of March 31, 2020, we used discount rates of 4.0% and 2.8% in determining our operating lease liabilities for the office spaces in San Diego, California, and South Korea, respectively. These rates represented our incremental borrowing rates at that time. Short-term leases with initial terms of twelve months or less are not capitalized. Both our San Diego and Korean office leases were extensions of previous leases and neither contains any further extension provisions.

Maturities of lease liabilities are as follows:

	Operating Leases
Fiscal 2020	$	109,378
Fiscal 2021		437,510
Fiscal 2022		341,193
Fiscal 2023		321,930
Fiscal 2024		160,965
Total lease payments		1,370,976
Less imputed interest		(91,356	)
Total	$	1,279,620

Other Contingencies

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 by Anydata 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 we have already ordered parts from 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 March 31, 2020, 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 $2.0 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 March 31, 2020, we paid $100,000 for the right to call on inventory and recorded an additional $49,580 as a prepaid expense related to pricing adjustments, which has been agreed with Quanta for other products to ensure demand is met. As of March 31, 2020, there is a reasonable possibility we may incur a loss, however, the amount is not estimable at this time.

Litigation

We are from time to time involved in certain legal proceedings and claims arising in the ordinary course of business. Management does not believe that the outcome of these matters will have any material adverse effect on the Company.

COVID-19

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations and where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While the Company expects this situation may increase demand for its products, the related impact cannot be reasonably estimated 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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4. PROPERTY AND EQUIPMENT (Tables)

9 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

	March 31, 2020			June 30, 2019
Machinery and facility	$	363,782		$	363,022
Office equipment		420,166			396,222
Molds		917,154			784,170
		1,701,102			1,543,414
Less accumulated depreciation		(1,479,364	)		(1,411,535	)
Total	$	221,738		$	131,879

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2. BUSINESS OVERVIEW

9 Months Ended

Mar. 31, 2020

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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Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Net sales	$ 15,546,182	$ 8,966,140	$ 37,680,312	$ 31,480,832
Cost of goods sold	12,511,391	7,371,035	30,033,382	26,431,444
Gross profit	3,034,791	1,595,105	7,646,930	5,049,388
Operating expenses:
Selling, general, and administrative	988,096	1,268,674	2,606,600	3,849,296
Research and development	834,478	714,092	2,754,414	2,186,755
Total operating expenses	1,822,574	1,982,766	5,361,014	6,036,051
Income (loss) from operations	1,212,217	(387,661)	2,285,916	(986,663)
Other income (loss), net:
Interest income	38,679	48,921	134,270	82,673
Income from governmental subsidy	0	0	4,114	64,824
Other income (loss), net	42,000	2,984	68,378	(3,322)
Total other income, net	80,679	51,905	206,762	144,175
Income (loss) before provision for income taxes	1,292,896	(335,756)	2,492,678	(842,488)
Income tax provision (benefit)	233,032	(108,244)	408,892	(185,284)
Net income (loss)	1,059,864	(227,512)	2,083,786	(657,204)
Less: non-controlling interests in net loss of subsidiary at 48.2%	0	0	0	(55,564)
Less: non-controlling interests in net (loss) income of subsidiary at 35.8%	0	(69,698)	189,106	(107,181)
Less: non-controlling interests in net income of subsidiary at 33.7%	71,556	0	71,556	0
Net income (loss) attributable to Parent Company	$ 988,308	$ (157,814)	$ 1,823,124	$ (494,459)
Basic income (loss) per share attributable to Parent Company stockholders	$ 0.09	$ (0.01)	$ 0.17	$ (0.05)
Diluted income (loss) per share attributable to Parent Company stockholders	$ 0.09	$ (0.01)	$ 0.17	$ (0.05)
Weighted average common shares outstanding - basic	10,580,576	10,570,203	10,574,841	10,570,203
Weighted average common shares outstanding - diluted	10,699,773	10,570,203	10,694,038	10,570,203
Comprehensive income (loss)
Net income (loss)	$ 1,059,864	$ (227,512)	$ 2,083,786	$ (657,204)
Translation adjustments	(54,340)	(4,351)	(35,590)	(7,650)
Comprehensive income (loss)	1,005,524	(231,863)	2,048,196	(664,854)
Less: comprehensive income (loss) attributable to non-controlling interest	71,556	(69,698)	260,662	(162,745)
Comprehensive income (loss) attributable to controlling interest	$ 933,968	$ (162,165)	$ 1,787,534	$ (502,109)

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8. LONG-TERM INCENTIVE PLAN AWARDS (Tables)

9 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Stock Option Activity

A summary of the status of our stock options is presented below as of March 31, 2020:

						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		(31,709	)		0.88		–		129,373
Cancelled		–			–		–		–
Forfeited or Expired		(12,000	)		1.35		–		48,960
Outstanding as of March 31, 2020		255,291		$	1.05		2.20	$	773,626
Exercisable as of March 31, 2020		255,291		$	1.05		2.20	$	773,626

A summary of the status of our stock options is presented below as of March 31, 2019:

					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 March 31, 2019		299,000	$	1.04		2.00	$	525,270
Exercisable as of March 31, 2019		299,000	$	1.04		2.00	$	525,270

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3. Summary of Significant Accounting Policies (Details - Contract liabilities) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Undelivered Products [Member]
Undelivered products	$ 140,612	$ 140,000

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4. Property and Equipment (Details) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Property and equipment, gross	$ 1,701,102	$ 1,543,414
Less accumulated depreciation	(1,479,364)	(1,411,535)
Total	221,738	131,879
Machinery and Facility [Member]
Property and equipment, gross	363,782	363,022
Office Equipment [Member]
Property and equipment, gross	420,166	396,222
Molds [Member]
Property and equipment, gross	$ 917,154	$ 784,170

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6. EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Schedule of earnings (loss) per share

	Three Months ended March 31,					Nine Months Ended March 31,
	2020		2019			2020		2019
Net income (loss) attributable to Parent Company	$	988,308	$	(157,814	)	$	1,823,124	$	(494,459	)
Weighted-average shares of common stock outstanding:
Basic shares outstanding		10,580,576		10,570,203			10,574,841		10,570,203
Dilutive effect of common stock equivalents arising from stock options		119,197		–			119,197		–
Diluted shares outstanding		10,699,773		10,570,203			10,694,038		10,570,203
Basic income (loss) per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)
Diluted income (loss) earnings per share	$	0.09	$	(0.01	)	$	0.17	$	(0.05	)

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5. ACCRUED LIABILITIES

9 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

ACCRUED LIABILITIES

NOTE 5 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of:

	March 31, 2020		June 30, 2019
Accrued salaries and payroll deductions owed to government entities	$	73,608	$	44,752
Accrued vacation		45,625		56,335
Accrued undelivered inventory		140,000		140,000
Taxes		13,257		408
Other accrued liabilities		78,000		6,163
Total	$	350,490	$	247,658

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary with a majority voting interest of 66.3% (33.7% is owned by non-controlling interests) and 64.2% (35.8% is owned by non-controlling interests) as of March 31, 2020 and as of June 30, 2019, respectively. 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 March 31, 2020, the non-controlling interest was $674,708, which represents a $185,662 increase from $489,046 as of June 30, 2019. The increase in the non-controlling interest of $185,662 was comprised of two components (1) an addition of $260,663 from the income in the subsidiary of $740,295 incurred during the nine month period March 31, 2020 and (2) a reduction in the ownership percentage of the non-controlling interests due to the purchase by the Company of 43,333 shares of the subsidiary for $75,000 ($1.73 per share) from three non-controlling shareholders.  The purchase decreased the non-controlling interests’ ownership percentage from 35.8% to 33.7%. 

As of March 31, 2019, the purchase of by the Company of 246,663 shares of the subsidiary for $234,330 ($0.95 per share) from three non-controlling shareholders decreased the non-controlling interests’ ownership percentage from 48.2% to 35.8%.

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				Nine Months Ended
	March 31,				March 31,
Net sales:	2020		2019		2020		2019
United States	$	15,444,110	$	8,898,775	$	37,342,577	$	31,234,107
Europe, the Middle East and Africa (“EMEA”)		–		63,347		–		224,427
Asia		102,072		4,018		337,735		22,298
Totals	$	15,546,182	$	8,966,140	$	37,680,312	$	31,480,832

Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	March 31, 2020		June 30, 2019
United States	$	1,436,258	$	1,209,159
Asia		45,587		32,631
Totals	$	1,481,845	$	1,241,790

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP 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 March 31, 2020 and June 30, 2019.

Revenue Recognition

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. In May 2016 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.

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 nine months ended March 31, 2020 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:

	March 31, 2020		June 30, 2019
Accounts Receivable	$	11,236,606	$	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 March 31, 2020 and June 30, 2019.

Our contract liabilities are as follows:

	March 31, 2020		June 30, 2019
Undelivered products	$	140,612	$	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 99% of net sales for the nine months ended March 31, 2020. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 1% of net sales for the nine months ended March 31, 2020. 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 March 31, 2020, 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 March 31, 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. For the three and nine months ended March 31, 2020, we incurred $9,692 and $343,360, respectively, and for the three and nine months ended March 31, 2019, we incurred $104,505 and $168,910, 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 $834,478 and $714,092 for the three months ended March 31, 2020 and 2019, respectively, and $2,754,414 and $2,186,755 for the nine months ended March 31, 2020 and 2019, 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 $166,701 and $262,596 for the three months ended March 31, 2020 and 2019, respectively, and $339,849 and $978,275 for the nine months ended March 31, 2020 and 2019, 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.

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 March 31, 2020, and June 30, 2019, we have recorded an inventory reserve in the amounts of $468,165 and $553,281, respectively, for inventories that we have identified as obsolete or slow-moving.

Property and Equipment

Property and Equipment

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

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

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill and certain intangible assets were recorded in connection with the FTI acquisition in October 2009, and 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 recognized as of March 31, 2020 and June 30, 2019.

The definite lived intangible assets consisted of the following as of March 31, 2020:

Definite lived intangible assets:	Expected Life	Average Remaining life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years		2.0 years	$	18,397	$	6,132	$	12,265
Technology in progress	Not Applicable		–		140,192		–		140,192
Software	5 years		2.2 years		524,834		320,656		204,178
Patents	10 years		6.0 years		59,016		10,282		48,734
Certifications & licenses	3 years		1.1 years		4,037,669		3,182,931		854,738
Total as of March 31, 2020				$	4,780,108	$	3,520,001	$	1,260,107

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 for the three months ended March 31, 2020 and 2019 was $146,114 and $93,777 respectively, and for the nine months ended March 31, 2020 and 2019 was $344,382 and $339,708, 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 March 31, 2020, we are 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. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty's performance is complete or the date on which it is probable that performance will occur. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income (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 March 31, 2020, we have no material unrecognized tax benefits. We recorded an income tax expense of $233,032 and $408,892 for the three and nine months ended March 31, 2020, respectively. We also recorded a decrease in deferred tax asset, non-current, of $233,195 and $358,364 for the three and nine months ended March 31, 2020, respectively, and an increase in deferred tax asset, non-current, of $108,251 and $186,126 for the three and nine months ended March 31, 2019, respectively.

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 nine months ended March 31, 2020, sales to our two largest customers accounted for 42% and 32% of our consolidated net sales, and 53% and 25% of our accounts receivable balance as of March 31, 2020. In the same period in 2019, sales to our two largest customers accounted for 57% and 23% of our consolidated net sales, and 70% and 22% of our accounts receivable balance as of March 31, 2019. No other customers accounted for more than ten percent of total net sales for the nine months ended March 31, 2020 and 2019, and no other customers accounted for more than ten percent of total accounts receivable as of March 31, 2020 and 2019.

For the nine months ended March 31, 2020, we purchased the majority of our wireless data products from one manufacturing company located in Asia. If this manufacturing company 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 nine months ended March 31, 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. No other manufacturing companies accounted for more than ten percent of total purchase for the nine months ended March 31, 2020 and 2019.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic which continues to spread throughout the United States. On March 19, 2020, the Governor of California declared a health emergency and issued an order to close all nonessential businesses until further notice. As a maker of wireless connectivity devices, Franklin Wireless is deemed to be an essential business. Nonetheless, out of concern for our workers and pursuant to the government order, Franklin Wireless reduced the scope of its operations and where possible, certain workers began telecommuting from their homes. The continued spread of COVID-19 may result in a period of business disruption, including delays or disruptions in our supply chain. The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our products. While the Company expects this situation may increase demand for its products, the related impact cannot be reasonably estimated at this time.

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 (ASC 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 using the modified retrospective approach. 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. As of the adoption date, we have no finance leases. As permitted under ASC 842, we elected several practical expedients that permit us to not reassess (1) whether existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial indirect costs. The application of the practical expedients did not have a significant impact on the measurement of the operating lease liability. The standard did not affect our consolidated net income or cash flows. See Note 7 for the further details.

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8. Long-Term Incentive Plan Awards (Details Narrative) - USD ($)	9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Payment Arrangement [Abstract]
Share based compensation expense	$ 0	$ 0
Weighted average grant-date fair value of stock options	255,291	299,000
Weighted average grant-date fair value of stock options, per share price	$ 0.93	$ 0.93
Unrecognized compensation cost related to non-vested options	$ 0	$ 0

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6. Earnings (Loss) Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Net income attributable to parent company	$ 988,308	$ (157,814)	$ 834,816	$ (336,645)	$ 1,823,124	$ (494,459)
Weighted-average shares of common stock outstanding:
Basic shares outstanding	10,580,576	10,570,203			10,574,841	10,570,203
Dilutive effect of common stock equivalents arising from stock options	119,197	0			119,197	0
Diluted shares outstanding	10,699,773	10,570,203			10,694,038	10,570,203
Basic income (loss) per share	$ 0.09	$ (0.01)			$ 0.17	$ (0.05)
Diluted income (loss) per share	$ 0.09	$ (0.01)			$ 0.17	$ (0.05)

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ 2,083,786	$ (657,204)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	67,829	72,459
Amortization of intangible assets	344,382	339,708
Deferred tax (benefit)	358,364	(186,126)
Amortization of right of use asset	48,290	0
Increase (decrease) in cash due to change in:
Accounts receivable	(7,098,137)	(31,885)
Other receivables	(10,597)	97,752
Inventories	234,208	844,090
Prepaid expenses and other current assets	13,683	(5,148)
Prepaid income tax	0	25,144
Advance payments to vendors	23,116	24,688
Other assets	(23,305)	(97,698)
Accounts payable	5,685,328	(969,177)
Advance payments from customers	612	(157,138)
Income tax payable	49,145	0
Accrued liabilities	102,832	(16,491)
Net cash provided by (used in) operating activities	1,879,536	(717,026)
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments	22,172	0
Purchases of shares of a subsidiary	(75,000)	(234,330)
Purchases of property and equipment	(157,688)	(63,779)
Payments for capitalized development costs	(343,360)	(168,910)
Purchases of intangible assets	(151,218)	(20,928)
Net cash used in investing activities	(705,094)	(487,947)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock related to stock options exercised	27,769	0
Net cash provided by financing activities	27,769	0
Effect of foreign currency translation	(35,590)	(7,650)
Net increase (decrease) in cash and cash equivalents	1,166,621	(1,212,623)
Cash and cash equivalents, beginning of period	6,447,505	11,975,944
Cash and cash equivalents, end of period	7,614,126	10,763,321
Supplemental disclosure of cash flow information:
Cash paid during the periods for: Interest	0	0
Cash paid during the periods for: Income taxes	$ (800)	$ (800)

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Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Current assets:
Cash and cash equivalents	$ 7,614,126	$ 6,447,505
Certificates of deposit account	5,358,054	5,380,226
Accounts receivable	11,236,606	4,138,469
Other receivables, net	51,404	40,807
Inventories, net	818,532	1,052,740
Prepaid expenses and other current assets	14,359	28,042
Advance payments to vendors	28,224	51,340
Total current assets	25,121,305	17,139,129
Property and equipment, net	221,738	131,879
Intangible assets, net	1,260,107	1,109,911
Deferred tax assets, non-current	1,924,611	2,282,975
Goodwill	273,285	273,285
Right of use asset	1,231,330	0
Other assets	281,402	258,097
TOTAL ASSETS	30,313,778	21,195,276
Current liabilities
Accounts payable	11,357,842	5,672,514
Income tax payable	49,799	654
Advance payments from customers	612	0
Accrued liabilities	350,490	247,658
Lease liabilities, current	394,769	0
Total current liabilities	12,153,512	5,920,826
Lease liabilities, non-current	884,851	0
Total liabilities	13,038,363	5,920,826
Commitments and contingencies (Note 7)	0	0
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 March 31, 2020 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 December 31, 2019 and June 30, 2019	14,004	13,972
Additional paid-in capital	7,470,009	7,442,272
Retained earnings	14,300,565	12,477,441
Treasury stock, 3,472,286 shares as of March 31, 2020 and June 30, 2019	(4,513,479)	(4,513,479)
Accumulated other comprehensive loss	(670,392)	(634,802)
Total Parent Company stockholders' equity	16,600,707	14,785,404
Non-controlling interests	674,708	489,046
Total stockholders' equity	17,275,415	15,274,450
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 30,313,778	$ 21,195,276

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3. Summary of Significant Accounting Policies (Details - Segments Long-Lived Assets) - USD ($)	Mar. 31, 2020	Jun. 30, 2019
Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	$ 1,481,845	$ 1,241,790
United States [Member]
Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	1,436,258	1,209,159
Asia [Member]
Long-lived assets, net (property and equipment, intangible assets, and right of use asset):	$ 45,587	$ 32,631

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3. Summary of Significant Accounting Policies (Details - Intangibles) - USD ($)	9 Months Ended	12 Months Ended
	Mar. 31, 2020	Jun. 30, 2019
Intangible Assets, Gross	$ 4,780,108	$ 4,285,530
Accumulated Amortization	3,520,001	3,175,619
Intangible Assets, Net	1,260,107	1,109,911
Technology In Progress [Member]
Intangible Assets, Gross	140,192	465,352
Accumulated Amortization	0	0
Intangible Assets, Net	$ 140,192	$ 465,352
Complete Technology [Member]
Expected Life	3 years	3 years
Average Remaining Life	2 years	3 years
Intangible Assets, Gross	$ 18,397	$ 18,397
Accumulated Amortization	6,132	0
Intangible Assets, Net	$ 12,265	$ 18,397
Software [Member]
Expected Life	5 years	5 years
Average Remaining Life	2 years 2 months 12 days	2 years 8 months 12 days
Intangible Assets, Gross	$ 524,834	$ 423,436
Accumulated Amortization	320,656	278,266
Intangible Assets, Net	$ 204,178	$ 145,170
Patents [Member]
Expected Life	10 years	10 years
Average Remaining Life	6 years	6 years 3 months 19 days
Intangible Assets, Gross	$ 59,016	$ 58,884
Accumulated Amortization	10,282	8,729
Intangible Assets, Net	$ 48,734	$ 50,155
Certifications And Licenses [Member]
Expected Life	3 years	3 years
Average Remaining Life	1 year 1 month 6 days	9 months 18 days
Intangible Assets, Gross	$ 4,037,669	$ 3,319,461
Accumulated Amortization	3,182,931	2,888,624
Intangible Assets, Net	$ 854,738	$ 430,837

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3. Summary of Significant Accounting Policies (Details - Segments) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2020	Mar. 31, 2019
Net sales	$ 15,546,182	$ 8,966,140	$ 37,680,312	$ 31,480,832
United States [Member]
Net sales	15,444,110	8,898,775	34,342,577	31,234,107
EMEA [Member]
Net sales	0	63,347	0	224,427
Asia [Member]
Net sales	$ 102,072	$ 4,018	$ 337,735	$ 22,298

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3. Summary of Significant Accounting Policies (Details - Useful lives)	9 Months Ended
	Mar. 31, 2020
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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4. PROPERTY AND EQUIPMENT

9 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of:

	March 31, 2020			June 30, 2019
Machinery and facility	$	363,782		$	363,022
Office equipment		420,166			396,222
Molds		917,154			784,170
		1,701,102			1,543,414
Less accumulated depreciation		(1,479,364	)		(1,411,535	)
Total	$	221,738		$	131,879

Depreciation expense associated with property and equipment was $23,958 and $17,889 for the three months ended March 31, 2020 and 2019, respectively, and $67,829 and $72,459 for the nine months ended March 31, 2020 and 2019, respectively.

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8. LONG-TERM INCENTIVE PLAN AWARDS

9 Months Ended

Mar. 31, 2020

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 and nine months ended March 31, 2020 and 2019.

A summary of the status of our stock options is presented below as of March 31, 2020:

						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		(31,709	)		0.88		–		129,373
Cancelled		–			–		–		–
Forfeited or Expired		(12,000	)		1.35		–		48,960
Outstanding as of March 31, 2020		255,291		$	1.05		2.20	$	773,626
Exercisable as of March 31, 2020		255,291		$	1.05		2.20	$	773,626

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $4.08 as of March 31, 2020, 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 March 31, 2020, in the amount of 255,291 shares, was $0.93 per share.

As of March 31, 2020, 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 March 31, 2019:

					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 March 31, 2019		299,000	$	1.04		2.00	$	525,270
Exercisable as of March 31, 2019		299,000	$	1.04		2.00	$	525,270

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based upon the Company’s closing stock price of $2.80 as of March 31, 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 March 31, 2019, in the amount of 299,000 shares, was $0.92 per share.

As of March 31, 2019, there was no unrecognized compensation cost related to non-vested stock options granted.

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5. ACCRUED LIABILITIES (Tables)

9 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of accrued liabilities

	March 31, 2020		June 30, 2019
Accrued salaries and payroll deductions owed to government entities	$	73,608	$	44,752
Accrued vacation		45,625		56,335
Accrued undelivered inventory		140,000		140,000
Taxes		13,257		408
Other accrued liabilities		78,000		6,163
Total	$	350,490	$	247,658

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7. Commitments and Contingencies (Details) - USD ($)	Mar. 31, 2020	Jul. 02, 2019
Commitments and Contingencies Disclosure [Abstract]
Fiscal 2020	$ 109,378
Fiscal 2021	437,510
Fiscal 2022	341,193
Fiscal 2023	321,930
Fiscal 2024	160,965
Total lease payments	1,370,976
Less imputed interest	(91,356)
Total	$ 1,279,620	$ 1,507,367

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1. BASIS OF PRESENTATION

9 Months Ended

Mar. 31, 2020

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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Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2020	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	10,601,912	10,570,203
Common stock Outstanding	10,601,912	10,570,203
Treasury stock shares	3,472,286	3,472,286