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NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Mar. 31, 2012

Significant Accounting Policies [Text Block]

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, a wholly-owned subsidiary, and a subsidiary with a majority voting interest of 51.8% (48.2% is owned by non-controlling interests) and 51.5% (48.5% is owned by non-controlling interests) as of March 31, 2012 and June 30, 2011, respectively, and 50.6% (49.4% was owned by non-controlling interests) prior to January, 2011. 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 subsidiaries applicable to non-controlling interests.

Non-controlling Interest in a Consolidated Subsidiary

On July 1, 2011, we entered into a Convertible Bond Purchase Agreement with our Korea-based subsidiary, Franklin Technology Inc. (“FTI”). Under this agreement, we purchased a convertible bond from FTI with an original principal amount of $500,000 that bears interest at a rate of 5% per annum (with interest payable semi-annually) and matures on July 1, 2016. Pursuant to the terms of this agreement, upon conversion, the bond will convert into FTI Common Stock at a price of approximately $0.55 per share. On August 11, 2011, we converted the full amount of the bond of $500,000 into 916,666 shares of FTI Common Stock at a price of approximately $0.55. Concurrent with the bond conversion, FTI raised $542,603 by issuing 853,328 shares of its common stock to new investors at a price of approximately $0.64 per share. As a result of these transactions, FTI’s total outstanding shares increased by 1,769,994 shares to 1,988,660 shares. As of March 31, 2012, we own 1,029,332 shares, or 51.8% of the outstanding capital stock of FTI, with 48.2% owned by non-controlling interests.

Segment Reporting

Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting,” requires public companies to report financial and descriptive information about their reportable operating segments. We identify our operating segments based on how management 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, the Caribbean and South America 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:	2012			2011			2012			2011
United States		$	2,184,064		$	8,320,087		$	6,619,799		$	31,295,861
Caribbean and South America			26,774			1,095,550			78,674			9,971,171
Asia			408,492			24,450			2,056,792			318,690
Totals		$	2,619,330		$	9,440,087		$	8,755,265		$	41,585,722

Long-lived assets, net:	March 31, 2012		June 30, 2011
United States	$	229,459	$	93,434
Asia		3,092,322		2,622,043
Totals	$	3,321,781	$	2,715,477

Estimates

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

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period presentation. This reclassification relates to amortization expense associated with capitalized product development previously reported as selling, general and administrative expense that has been reclassified to cost of goods sold for all periods presented. The amortization expense included in cost of goods sold for the three and nine months ended March 31, 2012 is $190,964 and $527,577, respectively, and $148,333 and $530,434 for the three and nine months ended March 31, 2011, respectively. This reclassification does not affect previously reported net sales, net income (loss), earnings per share, or any portion of our consolidated balance sheets or consolidated statements of cash flow for any period presented.

Allowance for Doubtful Accounts

Based upon our review of our collection history associated with all significant outstanding invoices, we do not believe an allowance for doubtful accounts is necessary, as of March 31, 2012 and June 30, 2011.

Revenue Recognition

We recognize revenue in accordance with ASC 605, “Revenue Recognition,” when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered. Accordingly, we recognize revenues from product sales upon shipment of the products to customers or when the products are received by the customers in accordance with the shipping or delivery terms. We provide a factory warranty for one year from the shipment date, which is covered by our vendors pursuant to purchase agreements.

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.

Goodwill

Intangible assets, consisting of goodwill, are accounted for in accordance with ASC Topic 350, Intangibles – Goodwill and Other (formerly SFAS No. 142, Goodwill and Other Intangibles) which does not permit the amortization of goodwill. Rather, these items must be tested for impairment annually and when events occur or circumstances change that would indicate the carrying amount may be impaired. Goodwill is recorded as the excess of purchase price over the fair value of the identifiable net assets acquired.

Our valuation methodology for assessing impairment, using both the discounted cash flows approach and the market approach, requires management to make judgments and assumptions based on historical experience and projections of future operating performance. Our annual impairment review performed on June 30, 2011 did not indicate that goodwill was impaired.

Capitalized Product Development

Capitalized product development, noted as Technology in progress in the Intangible Assets table, includes payroll, employee benefits, and other headcount-related expenses associated with product development. Once technological feasibility is reached, such costs are capitalized and amortized over the greater of the straight-line method using a three year useful life of the products commencing on the date that products are available for general release, or the ratio of actual sales to actual and estimated future sales. We determine that technological feasibility for our products is reached after all high-risk development issues have been resolved, which generally occurs shortly before the products are released to manufacturing.

As of March 31, 2012 and June 30, 2011, capitalized product development costs were $1,164,573 and $127,304, respectively, and are included in intangible assets in our consolidated balance sheet. During the three and nine months ended March 31, 2012, we incurred $439,235 and $1,321,141 in capitalized product development costs, respectively. All expenses incurred before technological feasibility is reached are expensed and included in our consolidated statements of operations.

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 in the Statement of Operations, amounted to $24,656 and $44,010 for the three months ended March 31, 2012, and 2011, respectively, and $64,844 and $472,160 for the nine months ended March 31, 2012 and 2011, respectively.

Warranties

We provide a factory warranty for one year which is covered by our vendors and manufacturers under purchase agreements between the Company and the vendors. In general, these products are shipped directly from our vendors to our customers. As a result, we do not have warranty exposure and do not accrue any warranty expenses.

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 market, 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. However, at March 31, 2012, we believe our inventory needs no such reserves and have recorded no inventory reserves.

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	5 years

Intangible Assets

The definite lived intangible assets consisted of the following at June 30, 2011:

Definite lived intangible assets:	Expected Life	Average Remaining Life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	1.3 years		$	490,000	$	285,833	$	204,167
Complete technology	3 years	1.8 years			1,517,683		592,936		924,747
Customer contracts / relationships	8 years	6.3 years			1,121,000		245,219		875,781
Technology in progress	Not Applicable		–		127,304		–		127,304
Software	5 years	4.3 years			155,004		14,027		140,977
Patent	10 years	9.8 years			2,441		60		2,381
Total at June 30, 2011				$	3,413,432	$	1,138,075	$	2,275,357

The definite lived intangible assets consisted of the following at March 31, 2012:

Definite lived intangible assets:	Expected Life	Average Remaining life		Gross Intangible Assets		Accumulated Amortization		Net Intangible Assets
Complete technology	3 years	0.6 years		$	490,000	$	408,333	$	81,667
Complete technology	3 years	1.1 years			1,517,683		972,357		545,326
Complete technology	3 years	2.8 years			283,872		23,656		260,216
Customer contracts / relationships	8 years	5.6 years			1,121,000		350,312		770,688
Technology in progress	Not Applicable		–		1,164,573		–		1,164,573
Software	5 years	3.5 years			160,650		36,723		123,927
Patent	10 years	9.0 years			11,944		235		11,709
Certification	3 years	2.6 years			23,770		3,962		19,808
Total at March 31, 2012				$	4,773,492	$	1,795,578	$	2,977,914

Long-lived Assets

In accordance with ASC 360, “Property, Plant, and Equipment,” 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 assets; 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.

We tested the long-lived assets for impairment as of June 30, 2011 by comparing the discounted cash flows of the assets to their carrying values and concluded that, as of June 30, 2011, no impairment existed. As of March 31, 2012, we are not aware of any events or changes in circumstances following June 30, 2011 that would indicate that the long-lived assets are impaired.

Income Taxes

We follow ASC 740, Income Taxes, which require the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

Based on management’s assessment, management believes that the Company is more likely than not to fully realize our deferred tax assets. As such, no valuation allowance has been established for the Company’s deferred tax assets. However, the Company may need to establish a valuation allowance should it continue to incur taxable losses.

We adopted ASC 740-10-25 on January 1, 2007, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. We must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. We did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25.

As of March 31, 2012, we have no material unrecognized tax benefits. We recorded an income tax benefit of $253,000 and $761,658 for the three and nine months ended March 31, 2012, respectively.

Concentrations of Credit Risk

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, 2012, net sales to our four largest customers accounted for 32%, 17%, 16% and 10% of our consolidated net sales and 74%, 0%, 0% and 0% of our accounts receivable balance as of March 31, 2012. In the same period in 2011, net sales from our two largest customers accounted for 61% and 14% of our consolidated net sales and 80% and 10% of our accounts receivable as of March 31, 2011. No other individual customer accounted for more than ten percent of total net sales for the nine months ended March 31, 2012 and 2011.

For the nine months ended March 31, 2012, we purchased our wireless data products from two major manufacturing companies located in various parts of Asia. If any of these manufacturing companies were to experience delays, capacity constraints or quality control problems, product shipments to our customers could be delayed, or our customers could consequently elect to cancel the underlying product purchase order, which would negatively impact the Company's revenue. For the nine months ended March 31, 2012, we purchased wireless data products from these suppliers in the amount of $4,870,524, or 90% of total purchases, and had related accounts payable of $1,255,322 as of March 31, 2012.

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 account. However, the Company does not anticipate any losses on excess deposits.

Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-05, Presentation of Comprehensive Income, eliminates the option of presenting the components of other comprehensive income (OCI) as part of the statement of changes in stockholders’ equity. The ASU instead permits an entity to present the total of comprehensive income, the components of net income, and the components of OCI either in a single continuous statement of comprehensive income or in two separate but consecutive statements. With either format, the entity is required to present each component of net income along with total net income, each component of OCI along with the total for OCI, and a total amount for comprehensive income. Also, the ASU requires entities to present, for either format, reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. This ASU is to be applied retrospectively. For public entities, the ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted, since compliance with the amendments is already permitted. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08, Testing Goodwill for Impairment, permits entities to determine first whether it is necessary to apply the traditional two-step goodwill impairment test, based on qualitative factors. An entity also has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to the first step of the two-step goodwill impairment test; an entity may resume performing the qualitative assessment in any subsequent period. Also under the amendments, an entity is no longer permitted to carry forward its detailed calculation of a reporting unit’s fair value from a prior year. The ASU also includes examples of events and circumstances for an entity to consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, which supersede the previous examples of events and circumstances that an entity should consider when testing goodwill for impairment between annual tests. An entity having a reporting unit with a zero or negative carrying amount will also consider the revised list of factors in determining whether to perform the second step of the impairment test. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-09, Disclosures about an Employer’s Participation in a Multiemployer Plan, requires employers to provide additional separate disclosures for multiemployer pension plans and multiemployer other postretirement benefit plans, including disclosures regarding: significant multiemployer plans in which an employer participates, the plan names and identifying numbers; level of an employer’s participation in the significant multiemployer plans; financial health of the significant multiemployer plans; and nature of the employer commitments to the plan. Using the Employer Identification Number, the plan name and, if applicable, the plan number, users of financial statements would be able to obtain additional information, including the funded status of the plan(s), from sources outside the financial statements such as the plan’s annual report (Form 5500). For other plans for which users are unable to obtain additional publicly available information outside the employer’s financial statements, the amendments in this ASU require the employer to make additional disclosures about the plan, including: a description of the nature of the plan benefits; a qualitative description of the extent to which the employer could be responsible for the obligations of the plan; and other quantitative information, to the extent available, as of the most recent date available, to help users understand the financial information about the plan. For public entities, the amendments in this ASU are effective for annual periods for fiscal years ending after December 15, 2011, with early adoption permitted. The amendments should be applied retrospectively for all prior periods presented. We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

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