v3.22.2.2

Summary of Significant Accounting Policies | 3 Months Ended
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Sep. 30, 2022
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Note 1 – Summary of Significant Accounting Policies Corporate History, Nature of Business, Mergers and Acquisitions Galaxy Next Generation LTD CO. ("Galaxy CO") was organized in the state of Georgia in February 2017 while R&G Sales, Inc. ("R&G") was organized in the state of Georgia in August 2004. Galaxy CO merged with R&G ("common controlled merger") on March 16, 2018, with R&G becoming the surviving company. R&G subsequently changed its name to Galaxy Next Generation, Inc. ("Private Galaxy"). FullCircle Registry, Inc., ("FLCR") is a holding company created for the purpose of acquiring small profitable businesses to provide exit plans for those company's owners. FLCR's subsidiary, FullCircle Entertainment, Inc. ("Entertainment" or "FLCE"), owned and operated Georgetown 14 Cinemas, a fourteen-theater movie complex located in Indianapolis, Indiana. On June 22, 2018, Private Galaxy consummated a reverse triangular merger whereby Galaxy merged with and into FLCR by the stockholders of Private Galaxy transferring all of the shares of stock of Private Galaxy into a newly formed subsidiary which was formed specifically for the transaction ("Galaxy MS") and the stockholders receiving shares of stock of FLCR. The merger resulted in Private Galaxy MS becoming a wholly-owned subsidiary of FLCR. For accounting purposes, the acquisition of Private Galaxy by FLCR is considered a reverse acquisition, an acquisition transaction where the acquired company, Galaxy, is considered the acquirer for accounting purposes, notwithstanding the form of the transaction. The primary reason the transaction is being treated as a purchase by Private Galaxy rather than a purchase by FLCR is that FLCR is a public reporting company, and Private Galaxy's stockholders gained majority control of the outstanding voting power of FLCR's equity securities. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements of the Company prior to the merger are those of Private Galaxy. The financial statements after the completion of the merger include the combined assets and liabilities of the combined company (collectively Private Galaxy, FLCR and FLCE). In recognition of Private Galaxy's merger with FLCR, several things occurred: (1) FLCR amended its articles of incorporation to change its name from FullCircle Registry, Inc. to Galaxy Next Generation, Inc.; (2) the Company changed its fiscal year end to June 30, effective June 2018; (3) the Company's authorized shares of preferred stock were increased to 200,000,000 and authorized shares of common stock were increased to 4,000,000,000, (prior to the Reverse Stock Split) both with a par value of $0.0001; and (4) the Board of Directors and Executive Officers approved Gary LeCroy, President and Director; Magen McGahee, Secretary and Director; and Carl Austin, Director; and (5) the primary business operated by the combined company became the business that was operated by Private Galaxy. On September 3, 2019, Galaxy acquired 100% of the stock of Interlock Concepts, Inc. ("Concepts") and Ehlert Solutions Group, Inc. ("Solutions"). The purchase price for the acquisition was 1,350,000 shares of common stock and a two year note payable to the seller for $3,000,000. The note payable to the seller is subject to adjustment based on the achievement of certain future gross revenues and successful completion of certain pre-acquisition withholding tax issues of Concepts and Solutions. Solutions and Concepts are Utah-based audio design and manufacturing companies creating innovative products that provide fundamental tools for building notification systems primarily to K-12 education market customers located primarily in the north and northwest United States. Solutions and Concepts' products and services allow institutions access to intercom, scheduling, and notification systems with improved ease of use. The products provide an open architecture solution to customers which allows the products to be used in both existing and new environments. Intercom, public announcement (PA), bell and control solutions are easily added and integrated within the open architecture design and software model. These products combine elements over a common internet protocol (IP) network, which minimizes infrastructure requirements and reduces costs by combining systems. On October 15, 2020, Galaxy acquired the assets of Classroom Technologies Solutions, Inc. ("Classroom Tech") for consideration of (a) paying off a secured Classroom Tech loan, not to exceed the greater of 50% of the value of the Classroom Tech assets acquired or $120,000; (b) the issuance of a promissory note in the amount of $44,526 to a Classroom Tech designee; and (c) the issuance of 10 million shares of common stock to the seller of Classroom Tech. Classroom Tech provides cutting-edge presentation products to schools, training facilities, churches, corporations and retail establishments. Their high-quality solutions are customized to meet a variety of needs and budgets in order to provide the best in education and presentation technology. Classroom Tech direct-sources and imports many devices and components which allows the Company to be innovative, nimble, and capable of delivering a broad range of cost-effective solutions. Classroom Tech also offers in-house service and repair facilities and carries many top brands. Galaxy is a manufacturer and U.S. distributor of interactive learning technology hardware and software that allows the presenter and participant to engage in a fully collaborative instructional environment. Galaxy's products include Galaxy's own private-label interactive touch screen panel as well as numerous other national and international branded peripheral and communication devices. New technologies like Galaxy's own touchscreen panels are sold along with renowned brands such as Google Chromebooks, Microsoft Surface Tablets, Lenovo & Acer computers, Verizon WiFi and more. Galaxy's distribution channel consists of approximately 44 resellers across the U.S. who primarily sell its products within the commercial and educational market. Galaxy does not control where the resellers focus their resell efforts; however, the K-12 education market is the largest customer base for Galaxy products comprising nearly 90% of Galaxy's sales. In addition, Galaxy also possesses its own reseller channel where it sells directly to the K-12 market, primarily throughout the Southeast region of the United States. The Entertainment segment was sold on February 6, 2019 in exchange for 193 Galaxy common shares. Impact COVID-19 Aid, Relief and Economic Security Act The Cares Act allowed employers to defer the deposit and payment of the employer’s share of Social Security taxes from March 27, 2020 through September 30, 2021. The deferred deposits of the employer’s share of Social Security tax must be deposited 50% by December 31, 2021, and 50% by December 31, 2022. The Company’s remaining deferred deposits and current payments due amounted to approximately $491,000 and $458,000 at September 30, 2022 and June 30, 2022, respectively. In the three months ended September 30, 2022 and 2021, the Company applied for Employee Retention Credits and has recognized approximately $0 and $40,000 as a reduction to operating expenses in the consolidated statements of operations. The Covid-19 pandemic that began in early 2020 caused shelter-in-place policies, unexpected factory closures, supply chain disruptions, and market volatilities across the globe. As a result of the economic disruptions and unprecedented market volatilities and uncertainties driven by the Covid-19 outbreak, the Company experienced some supply chain disruptions. However, the Company has not experienced any significant payment delays or defaults by our customers as a result of the COVID-19 pandemic. The full impact of the Covid-19 outbreak continues to evolve as of the date of this report. The depth and duration of the pandemic remains unknown. Despite the availability of vaccines, recent surges in the infection rate and the detection of new variants of the virus have reinforced the general consensus that the containment of Covid-19 remains a challenge. Management is actively monitoring the global situation and its effect on its financial condition, liquidity, operations, suppliers, industry, and workforce. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Any reference in these footnotes to applicable guidance is meant to refer to the authoritative U.S. generally accepted accounting principles ("GAAP") as found in the Accounting Standards Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). The financial statements include the consolidated assets and liabilities of the combined company (collectively Private Galaxy FLCR Interlock Concepts, Inc., Ehlert Solutions Group, Inc., and Classroom Tech, referred to collectively as the "Company"). All intercompany transactions and accounts have been eliminated in the consolidation. The Company is an over-the-counter public company traded under the stock symbol listing GAXY (formerly FLCR). Use of Estimates The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used in preparing the consolidated financial statements include those assumed in computing valuation of goodwill and intangible assets, valuation of convertible notes payable and warrants, and the valuation of deferred tax assets. It is reasonably possible that the significant estimates used will change within the next year. Reverse Stock Split Unless otherwise noted, all share and per share data referenced in the consolidated financial statements and the notes thereto have been retroactively adjusted to reflect the one-for-two hundred reverse stock split effective March 7, 2022 of our authorized and outstanding shares of common stock. As a result of the reverse stock split, certain amounts in the consolidated financial statements and the notes thereto may be slightly different than previously reported due to rounding of fractional shares, and adjustment for the reverse split. Capital Structure The Company's capital structure is as follows:
|  | September 30, 2022 |  |  |  |
|  | Authorized |  | Issued |  | Outstanding |  |  |  |
Common stock |  | 200,000,000 |  | 21,353,550 |  | 21,353,357 |  | $.0001 par value, one vote per share
Preferred stock – All Series |  | 200,000,000 |  | - |  | - |  | $.0001 par value
Preferred stock - Series A |  | 750,000 |  | - |  | - |  | $.0001 par value; no voting rights
Preferred stock - Series B |  | 1,000,000 |  | - |  | - |  | $.0001 par value; voting rights of 10 votes for 1 Series B share; 2% preferred dividend payable annually
Preferred stock - Series C |  | 9,000,000 |  | - |  | - |  | $.0001 par value; 500 votes per share, convertible to common stock
Preferred stock - Series F |  | 15,000 |  | 11,414 |  | 11,414 |  | $.0001 par value; no voting right, convertible to common at a fixed price per share
Preferred stock - Series G |  | 51 |  | 51 |  | 51 |  | $.0001 par value; no dividend rights, voting rights with common stock as a single series, one share equals 1% of the total voting rights, not subject to splits
|  | June 30, 2022 |  |  |  |
|  | Authorized |  | Issued |  | Outstanding |  |  |  |
Common stock |  | 20,000,000 |  | 19,169,128 |  | 19,168,935 |  | $.0001 par value, one vote per share
Preferred stock – All Series |  | 200,000,000 |  | - |  | - |  | $.0001 par value
Preferred stock - Series A |  | 750,000 |  | - |  | - |  | $.0001 par value; no voting rights
Preferred stock - Series B |  | 1,000,000 |  | - |  | - |  | $.0001 par value; voting rights of 10 votes for 1 Series B share; 2% preferred dividend payable annually
Preferred stock - Series C |  | 9,000,000 |  | - |  | - |  | $.0001 par value; 500 votes per share, convertible to common stock
Preferred stock - Series F |  | 15,000 |  | 11,414 |  | 11,414 |  | $.0001 par value; no voting rights, convertible to common at a fixed price of $0.37per share; stated value is $1,000 per share
Preferred stock - Series G |  | 51 |  | 51 |  | 51 |  | $.0001 par value; no dividend rights, voting rights with common stock as a single series, one share equals 1% of the total voting rights, not subject to splits
Authorized common stock increased from 20,000,000 to 200,000,000 on August 31, 2022. There was a 1:200 reverse split effective on March 7, 2022. There is no publicly traded market for the preferred shares. The Preferred Series D and E were retired in December 2021. Preferred Series G were issued in June 2022, pursuant to Employment Agreements (Note 10). There are 85,556,140common shares reserved at September 30, 2022 under terms of notes payable agreements, and the Stock Plan (see Notes 5 and 12). There are 4,048,590 issued common shares that are restricted as of September 30, 2022. The shares will become free-trading upon satisfaction of certain terms within the debt agreements. Supplier Agreement Contract assets and contract liabilities are as follows:
| September 30, 2022 |  | June 30, 2022
Contract assets | $ 55,125 |  | $ 55,125
Contract liabilities | - |  | -
For the three months ended September 30, 2022 and 2021, the Company recognized $0 and $433,609 of revenues related to supplier agreements. Accounts Receivable Management deemed no allowance for doubtful accounts was necessary at September 30, 2022 and June 30, 2022. At September 30, 2022 and June 30, 2022, $647,433 and $175,436 of total accounts receivable were considered unbilled and recorded as deferred revenue. Inventories Management estimates $116,362 and $116,362 of inventory reserves at September 30, 2022 and June 30, 2022, respectively. Goodwill, Intangible Assets and Product Development Costs Goodwill, intangible assets, and product development costs are comprised of the following at September 30, 2022:
| Cost |  | Accumulated Amortization | Net Book Value |  | Total
Goodwill | $ 834,220 |  | - | $834,220 |  | $ 834,220
Finite-lived assets: |  |  |  |  |  |
Customer list | $ 888,869 |  | $ (516,370) | $ 372,499 |  | $ 372,499
Vendor relationships | 480,115 |  | (288,515) | 191,600 |  | 191,600
Capitalized product development cost | 1,392,590 |  | (567,777) | 824,813 |  | 824,813
| $ 2,761,574 |  | $ (1,372,662) | $ 1,388,912 |  | $1,388,912
Goodwill, intangible assets, and product development costs are comprised of the following at June 30, 2022:
| Cost |  | Accumulated Amortization |  | Net Book Value |  | Impairment |  | Total
Goodwill | $ 834,220 |  | $ - |  | $ 834,220 |  | $ - |  | $ 834,220
Finite-lived assets: |  |  |  |  |  |  |  |  |
Customer list | $ 922,053 |  | $ (472,320) |  | $ 449,733 |  | $ (33,184) |  | $ 416,549
Vendor relationships | 484,816 |  | (264,565) |  | 220,251 |  | (4,701) |  | 215,550
Product development costs | 1,279,686 |  | (468,594) |  | 811,092 |  | - |  | 811,092
| $ 2,686,555 |  | $ (1,205,479) |  | $ 1,481,076 |  | $ (37,885) |  | $ 1,443,191
Intangible assets such as customer lists and vendor relationships are stated at the lower of cost or fair value. They are amortized on a straight-line basis over periods ranging from three to six years, representing the period over which the Company expects to receive future economic benefits from these assets. The Company acquired certain intangible assets. During the year ended June 30, 2022, the Company impaired $37,885 of the intangible assets related to the acquisition of Classroom Tech. Amortization of these intangible assets amounted to $68,000 and $70,343 for the three months ended September 30, 2022 and 2021. Costs incurred in designing and developing classroom technology products are expensed as research and development until technological feasibility has been established. Technological feasibility is established upon completion of a detail product design, or in its absence, completion of a working model. Upon the achievement of technological feasibility, development costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Management's judgment is required in determining whether a product provides new or additional functionality, the point at which various products enter the stages at which costs may be capitalized, assessing the ongoing value and impairment of the capitalized costs and determining the estimated useful lives over which the costs are amortized. Annual amortization expense is calculated based on the straight-line method over the product's estimated economic lives, which are typically three to six years. Amortization of product development costs incurred begins when the related products are available for general release to customers. Amortization of product development costs of $99,183 and $54,534 for the three months ended September 30, 2022 and 2021, is included in cost of revenues in the Company's unaudited condensed consolidated statements of operations. Estimated amortization expense related to finite-lived intangible assets for the next five years is: $641,886 for fiscal year 2023, $455,322 for fiscal year 2024, $138,633 for fiscal year 2025, $87,624 for fiscal year 2026, and $46,515 for fiscal year 2027 and $18,932 thereafter. Recent Accounting Pronouncements The Company has implemented all new applicable accounting pronouncements that are in effect and applicable. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. In December 2019, the FASB issued ASU No. 2019-12 "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12") by removing certain exceptions to the general principles. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption of the amendments is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company adopted the new guidance on July 1, 2022 in its consolidated financial statements.

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