| 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 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 Non-controlling Interest in a Consolidated
Subsidiary As of December 31, 2021, the
non-controlling interest was $ 1,549,023 69,861 1,479,162 69,861 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 Six Months Ended
December 31, December 31,
Net sales: 2021 2020 2021 2020
North America $ 1,284,850 $ 66,229,782 $ 4,456,048 $ 128,798,920
Caribbean and South America 2,375 17,500 2,375 17,500
Asia 534,364 296 707,226 608
Totals $ 1,821,589 $ 66,247,578 $ 5,165,649 $ 128,817,028
Long lived assets by geographic area
Long-lived assets, net (property and equipment and intangible assets): December 31, 2021 June 30, 2021
North America $ 1,541,039 $ 1,349,320
Asia 63,665 49,040
Totals $ 1,604,704 $ 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 December 31,
2021, 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 December 31, 2021 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
December
31, 2021 June
30, 2021
Accounts Receivable $ 1,223,226 $ 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 December 31, 2021, and June 30,
2021. Our contract liabilities are
as follows:
Schedule of contract liabilities
December
31, 2021 June
30, 2021
Undelivered products $ 530,551 $ 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 six months ended December 31, 2021. 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 six months ended December 31, 2021. 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 December 31, 2021, 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 $ 80,825 158,825 with
capitalized product development costs associated with complete technology for the three and six months ended December 31, 2021, respectively,
and $ 86,000 200,000 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 December 31, 2021, and June 30, 2021, capitalized product development costs in progress were $ 169,471 602,388 418,146 453,689 , and for the three
and six months ended December 31, 2020, we incurred $ 454,804 533,146 Research and Development Costs Costs associated with research
and development are expensed as incurred. Research and development costs were $ 1,107,139 1,151,732 2,129,041 2,130,124 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 no 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 $ 57,568 245,586 102,952 527,652 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 December 31, 2021, and June 30, 2021, we did no 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
Office equipment 5
Molds 3
Vehicles 5
Computers and software 5
Furniture and fixtures 7
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 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 December 31, 2021, 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 December 31, 2021, we have no material unrecognized tax benefits. We recorded an income tax benefit of $ 476,752 888,008 2,138,406 4,139,140 492,925 932,493 168,037 252,908 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 six months ended December 31, 2021, sales to
our two largest customers accounted for 50 19 of
our consolidated net sales, and 0 36 59 33 0 92 For
the six months ended December 31, 2021, 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 six months ended December 31, 2021, we purchased wireless data products from these manufacturers
in the amount of $ 4,981,572 ,
or 99 %
of total purchases, and had related accounts payable of $ 2,856,783
as of December 31, 2021. In the same period of 2020, we purchased
wireless data products from these manufacturers in the amount of $ 105,965,938 ,
or 99 %
of total purchases, and had related accounts payable of $ 62,966,217
as of December 31, 2020. 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. |
