| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles
of Consolidation The
consolidated financial statements include the accounts of the Company and a subsidiary with a majority voting interest of 51.8%
(48.2% is owned by non-controlling interests) as of March 31, 2016 and June 30, 2015. 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, 2016, the non-controlling interest was $859,529, which represents a $320,831 increase from $538,698 as of June 30,
2015. The increase was due to the net income of subsidiary of $665,073 for the nine months ended March 31, 2016, of which 48.2%
was attributable to the non-controlling interests. 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 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 four geographic areas, consisting of the United States, the Caribbean and South America, 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: 2016 2015 2016 2015
United States $ 14,145,611 $ 6,999,431 $ 39,616,528 $ 26,725,077
Caribbean and South America 699 100,699 1,415,052
Europe, the Middle East and Africa (EMEA) 3,154,126 6,485,441 4,517,524
Asia 21,285 55,589 3,627,953
Totals $ 14,146,310 $ 10,174,842 $ 46,258,257 $ 36,285,606
Long-lived assets, net (property and equipment
and intangible assets): March
31, 2016 June
30, 2015
United States $ 1,089,842 $ 785,144
Asia 393,530 571,629
Totals $ 1,483,372 $ 1,356,773 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, 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 management believes 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, 2016 and June 30, 2015. 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 shipping or delivery terms. We provide a warranty for one year from the shipment
date, which is covered by our vendors pursuant to purchase agreements. Any net warranty related expenditures made by us have not
historically been material. Under our sales return policy, customers may generally return products that are under warranty for
repair or replacement. 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 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 shall be 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) include payroll, employee benefits, and other headcount-related expenses associated with product
development. Related licenses and certification costs are also capitalized. 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, 2016 and June 30, 2015, capitalized product development costs in progress were $135,000 and $0, respectively, and
these amounts are included in intangible assets in our consolidated balance sheets. During the three months and nine months ended
March 31, 2016, we incurred $60,223 and $663,800 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 $693,540 and $722,781 for
the three months ended March 31, 2016 and 2015, respectively, and $2,209,718 and $2,238,684 for the nine months ended March 31,
2016 and 2015, 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. In general, our products are shipped directly from our vendors to our customers. 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 $435,500 and $201,249
for the three months ended March 31, 2016 and 2015, respectively, and $1,106,928 and $876,827 for the nine months ended March
31, 2016 and 2015, 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 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 managements 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, 2016 and June 30, 2015, we have
recorded an inventory reserve in the amount of $120,867 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 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 during the periods ended March
31, 2016 and June 30, 2015. The
definite lived intangible assets consisted of the following as of March 31, 2016:
Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net
Intangible Assets
Complete technology 3 years $ 490,000 $ 490,000 $
Complete technology 3 years 1,517,683 1,517,683
Complete technology 3 years 281,714 281,714
Complete technology 3 years 361,249 361,249
Complete technology 3 years 174,009 174,009
Complete technology 3 years 909,962 909,962
Complete technology 3 years 1.0 years 65,000 43,333 21,667
Complete technology 3 years 1.8
years 2,402 1,001 1,401
Complete technology 3 years 2.0
years 6,405 2,135 4,270
Supply and development agreement 8 years 1.6
years 1,121,000 910,813 210,187
Technology in progress Not Applicable 135,000 135,000
Software 5 years 1.5
years 214,332 192,308 22,024
Patents 10 years 7.3
years 58,390 2,207 56,183
Certifications and licenses 3 years 2.3
years 2,472,359 1,697,898 774,461
Total as of March 31, 2016 $ 7,809,505 $ 6,584,312 $ 1,225,193 The
definite lived intangible assets consisted of the following as of June 30, 2015:
Definite lived intangible assets: Expected Life Average Remaining life Gross Intangible Assets Accumulated Amortization Net
Intangible Assets
Complete technology 3 years $ 490,000 $ 490,000 $
Complete technology 3 years 1,517,683 1,517,683
Complete technology 3 years 281,714 281,714
Complete technology 3 years 361,249 361,249
Complete technology 3 years 0.3
years 174,009 159,508 14,501
Complete technology 3 years 0.5
years 909,962 733,025 176,937
Complete technology 3 years 1.8
years 65,000 27,083 37,917
Complete technology 3 years 2.5
years 2,402 400 2,002
Complete technology 3 years 2.8
years 6,405 534 5,871
Supply and development agreement 8 years 2.3
years 1,121,000 805,719 315,281
Technology in progress Not Applicable
Software 5 years 1.1
years 197,418 158,284 39,134
Patents 10 years 6.8
years 57,655 1,005 56,650
Certifications and licenses 3 years 0.4
years 1,783,561 1,389,573 393,988
Total
as of June 30, 2015 $ 6,968,058 $ 5,925,777 $ 1,042,281 Amortization
expense recognized during the three months ended March 31, 2016 and 2015 was $174,488 and $317,066, respectively, and during the
nine months ended March 31, 2016 and 2015 was $658,535 and $970,576, respectively. 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 assets 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, 2016, 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
Companys employee share-based awards result in a cost that is measured at fair value on an awards 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 awards 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 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 years 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 managements 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, 2016, we have no material unrecognized tax benefits. We recorded an income tax provision of $254,806 and $404,795
for the three and nine months ended March 31, 2016, respectively, and an increase in income tax payable of $250,168 and $341,912
for the three and nine months ended March 31, 2016, respectively. Net Loss
per Share Attributable to Common Stockholders Basic
net loss per share is calculated by dividing the net loss by the weighted-average number of common shares that were outstanding
for the period, without consideration for potential common shares. Diluted net loss per share is calculated by dividing the net
loss 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, 2016, sales
to our three largest customers accounted for 68%, 14%, and 13% of our consolidated net sales and 45%, 46%, and 1% of our accounts
receivable balance, as of March 31, 2016. In the same period in 2015, sales to our two largest customers accounted for 63% and
13% of our consolidated net sales and 79% and 11% of our accounts receivable balance as of March 31, 2015. No other customers
accounted for more than ten percent of total net sales for the nine months ended March 31, 2016 and 2015 and no other customers
accounted for more than ten percent of total accounts receivable for the nine months ended March 31, 2016 and 2015. For
the nine months ended March 31, 2016, 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, 2016, we purchased wireless
data products from this manufacturer in the amount of $38,325,448, or 99% of total purchases, and had related accounts payable
of $11,837,603 as of March 31, 2016. For the nine months ended March 31, 2015, we purchased wireless data products from one manufacturing
company in the amount of $22,691,229, or 78% of total purchases, and had related accounts payable of $6,392,081 as of March 31,
2015. 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
Issued Accounting Pronouncements In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2014-09, Revenue from Contracts with Customers. This amendment addresses revenue from contracts with customers, which clarifies
existing accounting literature relating to how and when a company recognizes revenue. Under the update, a company will recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods and services. ASU 2015-14 delayed the effective date of this update to annual
reporting periods beginning after December 15, 2017, and the amendment is to be applied retrospectively or the cumulative effect
as of the date of adoption. Management is currently evaluating the impact ASU 2014-09 will have on the consolidated financial
statements and related disclosures. In
August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to Continue as a Going Concern.
This ASU introduces an explicit requirement for management to assess if there is substantial doubt about an entitys ability
to continue as a going concern, and to provide related footnote disclosures in certain circumstances. In connection with each
annual and interim period, management must assess if there is substantial doubt about an entitys ability to continue as
a going concern within one year after the issuance date. Disclosures are required if conditions give rise to substantial doubt.
ASU 2014-15 is effective for all entities in the first annual period ending after December 15, 2016. Management does not believe
the potential effects of this ASU on the consolidated financial statements will be material. In
April 2015, the FASB issued ASU 2015-03, InterestImputation of Interest: Simplifying the Presentation of Debt Issuance
Costs. The update requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will
include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and
represents a change in accounting principle. ASU 2015-15 was issued subsequently to permit costs associated with a line of credit
arrangement to be presented as assets and amortized ratably over the term of the arrangement. These updates will be effective
for the Company on July 1, 2016. Management does not believe that these updates will materially impact the Companys consolidated
financial statements. In
July 2015, the FASB issued ASU 2015-11, InventorySimplifying the Measurement of Inventory. ASU 2015-11 requires inventory
to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net
realizable value is defined as the estimated selling prices in the ordinary course of business, less reasonably predictable
costs of completion, disposal and transportation. ASU 2015-11 is effective for the Company beginning on July 1, 2017 and
is applied prospectively. Early adoption is permitted. The Company is currently evaluating the impact that this guidance will
have on its consolidated financial statements and disclosure. In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02), which modified lease accounting
for both lessees and lessors to increase transparency and comparability by recognizing lease assets and lease liabilities by lessees
for those leases classified as operating leases under previous accounting standards and disclosing key information about leasing
arrangements. ASU 2016-02 will be effective for the Company beginning in the first quarter of fiscal 2020 and early adoption is
permitted. The Company is currently evaluating the impact of adopting the new lease standard on its consolidated financial statements. |
