XML 21 R7.htm IDEA: XBRL DOCUMENT
v3.22.1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended
--- | ---
Mar. 31, 2022
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiary, Franklin Technology Inc. ("FTI"), with a majority voting interest of 66.3% (33.7% is owned by non-controlling interests) as of March 31, 2022, and June 30, 2021. 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. As consolidated financial statements are based on the assumption that they represent the financial position and operating results of a single economic entity, the retained earnings or deficit of the subsidiary at the date of acquisition, October 1, 2009, by the parent are excluded from consolidated retained earnings. When a subsidiary is consolidated, the consolidated financial statements include the subsidiary’s revenues, expenses, gains, and losses only from the date the subsidiary is initially consolidated, and the non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. There are no shares of the Company held by any subsidiaries as of March 31, 2022, or June 30, 2021. Non-controlling Interest in a Consolidated Subsidiary As of March 31, 2022, the non-controlling interest was $1,533,245, which represents a $54,083 increase from $1,479,162 as of June 30, 2021. The increase in the non-controlling interest of $54,083 was from income in the subsidiary of $160,385 incurred for the nine months ended March 31, 2022. Segment Reporting Accounting Standards Codification (“ASC”) 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 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 North America, 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:
Segment information by geographic areas |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  |  | Nine Months Ended |
|  | March 31, |  |  | March 31, |
Net sales: |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
North America |  | $ | 6,687,287 |  |  | $ | 44,054,824 |  |  | $ | 11,143,335 |  |  | $ | 17,285,374 |
Caribbean and South America |  |  | – |  |  |  | – |  |  |  | 2,375 |  |  |  | 17,500 |
Asia |  |  | – |  |  |  | 276,130 |  |  |  | 707,226 |  |  |  | 276,738 |
Totals |  | $ | 6,687,287 |  |  | $ | 44,330,954 |  |  | $ | 11,852,936 |  |  | $ | 173,147,982 |
Long lived assets by geographic area |  |  |  |  |  |  |  |
Long-lived assets, net (property and equipment and intangible assets): |  | March 31, 2022 |  |  | June 30, 2021 |
North America |  | $ | 1,389,573 |  |  | $ | 1,349,320 |
Asia |  |  | 84,225 |  |  |  | 49,040 |
Totals |  | $ | 1,473,828 |  |  | $ | 1,398,360 |
Use of 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. 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, as of March 31, 2022, we did not believe an allowance for doubtful accounts was necessary. Revenue Recognition 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 hotspot 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 quarter ended March 31, 2022 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:
Schedule of receivables |  |  |  |  |  |
|  | March 31, 2022 |  |  | June 30, 2021 |
Accounts Receivable |  | $ | 2,026,963 |  |  | $ | 2,542,429 |
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, 2022, and June 30, 2021. Our contract liabilities are as follows:
Useful lives of property and equipment |  |  |  |  |  |
|  | March 31, 2022 |  |  | June 30, 2021 |
Undelivered products |  | $ | 501,527 |  |  | $ | 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 99.9% of net sales for the nine months ended March 31, 2022. Revenue recognized over a period of time for non-recurring engineering projects is based on the percent complete of a project and accounted for 0.1% of net sales for the nine months ended March 31, 2022. The majority of our revenue recognized at a point in time is for the sale of hotspot 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, 2022, 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 expenses of approximately $79,284 and $238,109 associated with capitalized product development costs associated with complete technology for the three and nine months ended March 31, 2022, respectively, and $82,000 and $282,000 for the three and nine months ended March 31, 2021, respectively. Capitalized Product Development Costs Accounting Standards Codification (“ASC”) Topic 350, “Intangibles - Goodwill and Other” includes software that is part of a product or process to be sold to a customer and is accounted for under Subtopic 985-20. Our products contain embedded software internally developed by FTI, which is an integral part of these products because it allows the various components of the products to communicate with each other and the products are clearly unable to function without this coding. The costs of product development that are capitalized once technological feasibility is determined (noted as technology in progress in the Intangible Assets table in Note 3 to Notes to Consolidated Financial Statements) include related licenses, certification costs, 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, 2022, and June 30, 2021, capitalized product development costs in progress were $178,100 and $602,388, respectively, and the amounts are included in intangible assets in our consolidated balance sheets. For the three and nine months ended March 31, 2022, we incurred $21,677 and $475,366, respectively, and for the three and nine months ended March 31, 2021, we incurred $54,100 and $587,246, 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. Research and Development Costs Costs associated with research and development are expensed as incurred. Research and development costs were $1,050,180 and $1,199,525 for the three months ended March 31, 2022 and 2021, respectively, and $3,179,221 and $3,329,649 for the nine months ended March 31, 2022 and 2021, 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, were $42,706 and $147,202 for the three months ended March 31, 2022 and 2021, respectively, and $145,658 and $674,854 for the nine months ended March 31, 2022 and 2021, 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. We invest our excess cash into financial instruments which management believes are readily convertible into cash, such as money market funds that are readily convertible to cash and have a $1.00 net asset value. Short Term Investments We have invested excess funds in short term liquid assets, such as certificates of deposit. 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, 2022, and June 30, 2021, we did not record any reserve 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:
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
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 deemed necessary as of March 31, 2022 or June 30, 2021. 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. As of March 31, 2022, and June 30, 2021, we were 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. Compensation costs are recognized over the period that an employee provides service in exchange for the award, i.e. the 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. Stock-based compensation costs are reflected in the accompanying consolidated statements of comprehensive income 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, 2022, we have no material unrecognized tax benefits. We recorded an income tax benefit of $238,852 and $1,126,860 for the three and nine months ended March 31, 2022, respectively, and a provision for income taxes of $1,192,277 and $5,331,417 for the three and nine months ended March 31, 2021, respectively. We also recorded an increase in deferred tax asset, non-current, of $238,852 and $1,171,345 for the three and nine months ended March 31, 2022, respectively, and an increase in deferred tax asset, non-current, of $57,793 for the three months, and a decrease of $195,115 for nine months, ended March 31, 2021, 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, 2022, sales to our two largest customers accounted for 49% and 26% of our consolidated net sales, and 45% and 0% of our accounts receivable balance as of March 31, 2022. In the same period of 2021, sales to our two largest customers accounted for 61% and 32% of our consolidated net sales, and 0% and 96% of our accounts receivable balance as of March 31, 2021. No other customers accounted for more than ten percent of total net sales for the nine months ended March 31, 2022 and 2021. For the nine months ended March 31, 2022, 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. For the nine months ended March 31, 2022, we purchased wireless data products from these manufacturers in the amount of $15,758,962, or 99% of total purchases and had related accounts payable of $11,664,549 as of March 31, 2022. In the same period of 2021, we purchased wireless data products from these manufacturers in the amount of $130,256,593, or 99% of total purchases, and had related accounts payable of $27,250,783 as of March 31, 2021. 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.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=126899994&loc=d3e18726-107790 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI https://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration