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What changed in LANTRONIX INC's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of LANTRONIX INC's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+209 added−214 removedSource: 10-K (2025-08-29) vs 10-K (2024-09-09)

Top changes in LANTRONIX INC's 2025 10-K

209 paragraphs added · 214 removed · 161 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFor OEMs and System Integrators (“SI”) our platform offers multitenancy functionality for supporting a broad customer base while ensuring customer separation and data security. Over the Air (“OTA”) updates, streamlines the process of security patches, firmware upgrades and configuration changes, keeping devices up to date and secure.
Biggest changeOur platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale deployments. For OEMs and System Integrators (“SI”) our platform offers multitenancy functionality for supporting a broad customer base while ensuring customer separation and data security.
Awsare served as Senior Vice President and General Manager of the Enterprise and Mobile Division of Synaptics Incorporated, a developer of human interface hardware and software, from September to November 2023. Prior to that, Mr.
Mr. Awsare served as Senior Vice President and General Manager of the Enterprise and Mobile Division of Synaptics Incorporated, a developer of human interface hardware and software, from September to November 2023. Prior to that, Mr.
We implement marketing programs, tools and services, including displaying our products at industry-specific events, to generate sales leads and increase demand for our products. 4 Manufacturing Our manufacturing operations are currently conducted through five third-party contract manufacturers.
We implement marketing programs, tools, and services, including displaying our products at industry-specific events, to generate sales leads and increase demand for our products. 4 Manufacturing Our manufacturing operations are currently conducted through third-party contract manufacturers.
IoT System Solutions Our IoT Systems Solutions portfolio a wide range of fully functional standalone systems that provide routing, switching or gateway functionalities as well as telematics and media conversion.
IoT System Solutions Our IoT System Solutions portfolio includes a wide range of fully functional standalone systems that provide routing, switching or gateway functionalities as well as telematics and media conversion.
He also served as Senior Vice President of Worldwide Sales at Silicon Laboratories Inc. from July 2007 until November 2015.
He served as Senior Vice President of Worldwide Sales at Silicon Laboratories Inc. from July 2007 until November 2015.
We currently utilize Hana Microelectronics, primarily located in Thailand and China, Honortone, primarily located in China, and Tailyn and Info-Tek in Taiwan as our contract manufacturers for most of our products. In addition, we use Marvell Technology Inc., to manage the manufacture of our large-scale integration chips in Taiwan.
We currently utilize Hana Microelectronics, primarily located in Thailand and China, Honortone and In-Tech primarily located in China, and Tailyn, Info-Tek and Rubytech in Taiwan as our contract manufacturers for most of our products. In addition, we use Marvell Technology Inc., to manage the manufacture of our large-scale integration chips in Taiwan.
In addition to our production-ready edge computing solutions, we offer experienced multidisciplinary engineering services across complete aspects of IoT product development, including hardware, software, mechanical engineering, rapid prototyping, and quality assurance. Our specialized services also extend to camera, audio, and AI/ML development, ensuring our customers can bring cutting-edge products to market faster and with greater reliability.
In addition to our production-ready edge computing solutions, we offer experienced multidisciplinary engineering services across complete aspects of IoT product development, including hardware, software, mechanical engineering, rapid prototyping, and quality assurance. Our specialized services also extend to camera, audio, and AI/machine learning development, ensuring our customers can bring cutting-edge products to market faster and with greater reliability.
Resellers Our products are sold by industry-specific system integrators and VARs, who often obtain our products from our distributors. Additionally, our products are sold by direct market resellers such as CDW, ProVantage, and Amazon.com. Direct Sales We sell products directly to larger OEMs and end users. We also maintain an ecommerce site for direct sales.
Resellers Our products are sold by industry-specific system integrators and VARs, who often obtain our products from our distributors. Additionally, our products are sold by direct market resellers such as CDW, ProVantage, and Amazon.com. Direct Sales We sell products directly to larger OEMs and end users. We also maintain an e-commerce site for direct sales.
Our products are designed with customer needs in mind, offering pre-certified solutions across multiple regions, significantly reducing regulatory certification costs and expediting time-to-market for OEM customers. Additionally, Lantronix provides software tools that further accelerate development, empowering customers to quickly bring their products to market while enhancing their overall value proposition.
Our products are designed with customer needs in mind, offering pre-certified solutions across multiple regions, significantly reducing regulatory certification costs and expediting time-to-market for OEM customers. Additionally, we provide software tools that further accelerate development, empowering customers to quickly bring their products to market while enhancing their overall value proposition.
This approach allows us to address a broader spectrum of our customers’ operational needs, positioning Lantronix as a strategic partner rather than just a vendor. Our acquisitions and innovations have expanded our capabilities in key areas such as intelligent infrastructure and connected automotive solutions, driving deeper customer engagement and market penetration.
This approach allows us to address a broader spectrum of our customers’ operational needs, positioning Lantronix as a strategic partner rather than just a vendor. Our acquisitions and innovations have expanded our capabilities in key areas such as critical infrastructure and connected transportation solutions, driving deeper customer engagement and market penetration.
Our embedded IoT modules serve a wide range of applications, from industrial automation and automotive systems to smart city infrastructure, positioning us as a leading provider of flexible and scalable solutions in the growing IoT market.
Our embedded IoT solutions serve a wide range of applications, from industrial automation and transportation systems to smart city infrastructure, positioning us as a leading provider of flexible and scalable solutions in the growing IoT market.
References in this Report to “fiscal 2024” refer to the fiscal year ended June 30, 2024, and references to “fiscal 2023” refer to the fiscal year ended June 30, 2023. In addition, unless the context suggests otherwise, all references in this Report to the “Company,” “we,” “our” and “us,” refer to Lantronix, Inc. together with its subsidiaries.
References in this Report to “fiscal 2025” refer to the fiscal year ended June 30, 2025, and references to “fiscal 2024” refer to the fiscal year ended June 30, 2024. In addition, unless the context suggests otherwise, all references in this Report to the “Company,” “we,” “our” and “us,” refer to Lantronix, Inc. together with its subsidiaries.
Our Strategy We focus on three high-potential vertical markets - smart cities, automotive and infotainment, and enterprise. We position ourselves in these markets to deliver complete solutions encompassing our hardware, software, device management, and design services to meet the evolving needs of our customers and address each layer of the IoT stack.
Our Strategy We focus on three high-potential vertical markets - smart cities, enterprise and unmanned aerial systems (“UAS”) (drones). We position ourselves in these markets to deliver complete solutions encompassing our hardware, software, device management, and design services to meet the evolving needs of our customers and address each layer of the IoT stack.
Below are customer examples that highlight our impact: · Smart Cities: We are partnering with a Smart Grid customer that deploys their solutions to enhance grid resiliency and flexibility through intelligence at the edge. We supply this customer an entire solution than includes our edge compute and connectivity solutions as well as our design services.
Below are customer examples that highlight our impact: · Smart Cities: We are partnering with various Smart Grid customers that deploy their solutions to enhance grid resiliency and flexibility through intelligence at the edge. We supply customers an entire solution that includes our SmartLV compute and connectivity solutions as well as our design services.
He also served as President and Chief Operating Officer of Mobilogix, a startup company specializing in custom IoT solutions, from April 2016 to June 2018 and as Chief Executive Officer and President from June 2018 until Mobilogix’s acquisition by Telit in September 2022. KURT HOFF has served as our Vice President of Worldwide Sales since March 2024.
He also served as President and Chief Operating Officer of Mobilogix, a startup company specializing in custom IoT solutions, from April 2016 to June 2018 and as Chief Executive Officer and President from June 2018 until Mobilogix’s acquisition by Telit in September 2022. KURT HOFF has served as our Chief Revenue Officer since April 2025. Previously Mr.
Employees As of August 19, 2024, we had 373 total employees including 367 full time employees, none of whom is represented by a labor union.
Employees As of August 19, 2025, we had 352 total employees including 351 full time employees, none of whom is represented by a labor union.
Prior to his appointment at Lantronix, Mr. Hoff served as Vice President of Global Sales at MYTHIC AI, a venture-backed AI processor company, from May 2022 to December 2022. Previously, Mr.
Hoff served as our Vice President of Worldwide Sales since March 2024. Prior to joining Lantronix, Mr. Hoff served as Vice President of Global Sales at MYTHIC AI, a venture-backed AI processor company, from May 2022 to December 2022. Previously, Mr.
We have not experienced any labor problems resulting in a work stoppage and believe we have good relationships with our employees. 5 Customer and Geographic Concentrations We conduct our business globally and manage our sales teams by three geographic regions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific Japan (“APJ”).
We have not experienced any labor problems resulting in a work stoppage and believe we have good relationships with our employees. 5 Customer and Geographic Concentrations We conduct our business globally and manage our sales teams by three geographic regions: the Americas; EMEA; and APJ.
Our Advanced OOB (“AOOB”) product line includes console management, power management and IP-connected keyboard-video-mouse (commonly referred to as “IPKVM”) products that provide remote access to IT and networking infrastructure deployed in test labs, data centers, branch offices, remote sites and server rooms. Software and Engineering Services Our SaaS platform offers comprehensive single-pane-of-glass management for OOB and IoT deployments.
Our Advanced OOB product line includes console management, power management and IP-connected keyboard-video-mouse (commonly referred to as “IPKVM”) products that provide remote access to IT and networking infrastructure deployed in test labs, data centers, branch offices, remote sites and server rooms.
We leverage our deep engineering expertise and product development best practices to deliver high-quality, innovative products cost-effectively and on schedule. Our engineering services model is flexible, offering either turnkey product development or team augmentation to accelerate complex product development challenges, such as camera tuning, voice control, machine learning, AI, computer vision, augmented/virtual reality, and more.
Our engineering services model is flexible, offering either turnkey product development or team augmentation to accelerate complex product development challenges, such as camera tuning, voice control, machine learning, AI, computer vision, augmented/virtual reality, and more.
Our IoT Telematics products are pre-certified in a number of countries, significantly reducing its OEM customers’ regulatory certification costs and accelerating their time-to-market. 2 As Edge Computing deployment accelerates, Out-of-Band (OOB) Management allows for full comprehension and control of remote information technology (“IT”) infrastructure across a range of sensors (e.g., temperature, humidity, light, acceleration, open/close, etc.), providing status and alerting while enabling automation and remote control of devices, servers and end stations.
As Edge Computing deployment accelerates, Out-of-Band (OOB) Management allows for full comprehension and control of remote information technology (“IT”) infrastructure across a range of sensors (e.g., temperature, humidity, light, acceleration, open/close, etc.), providing status and alerting while enabling automation and remote control of devices, servers and end stations.
Its media converters and other customer premise equipment (“CPE”) assist customers in resolving challenges in the areas of bandwidth constraints, security risks and distance limitations as networks extend from local area to wide area networks and adapt to ever-increasing end-user demands.
Our media converters and other customer premise equipment assist customers in resolving challenges in the areas of bandwidth constraints, security risks and distance limitations as networks extend from local area to wide area networks and adapt to ever-increasing end-user demands. 2 Our smart tracking devices are designed to deliver robust data logging and positional tracking functionality and reliability for supply chain and logistics solutions.
Operations and General Manager of Audio & Voice Solutions of Nuvoton Technology Corporation, a Taiwan-based semiconductor company, from December 2008 to March 2012. JEREMY R. WHITAKER has served as our Chief Financial Officer since September 2011 and served as our interim Chief Executive Officer from June 2023 until Mr. Awsare’s appointment in November 2023. Mr.
Operations and General Manager of Audio & Voice Solutions of Nuvoton Technology Corporation, a Taiwan-based semiconductor company, from December 2008 to March 2012. BRENT STRINGHAM has served as our Chief Financial Officer since January 2025. Mr. Stringham joined Lantronix in 2012 and previously served as the Company’s interim Chief Financial Officer and Chief Accounting Officer since September 2024.
By focusing on these strategic priorities, we continue to strengthen our competitive position and attract new customers across a wide variety of applications.
By focusing on these strategic priorities, we continue to strengthen our competitive position and attract new customers across a wide variety of applications. Looking ahead, we plan to capitalize on market opportunities by further enhancing our product offerings, expanding geographically, and pursuing targeted acquisitions that align with our long-term growth objectives.
The following table presents the names, ages, and positions held by our executive officers as of the date of this Report: Name Age Position Saleel Awsare 59 President and Chief Executive Officer Jeremy R.
The following table presents the names, ages, and positions held by our executive officers as of the date of this Report: Name Age Position Saleel Awsare 60 President and Chief Executive Officer Brent Stringham 47 Chief Financial Officer Mathi Gurusamy 54 Chief Product and Strategy Officer Kurt Hoff 68 Chief Revenue Officer SALEEL AWSARE has served as our President and Chief Executive Officer, and as a member of our Board, since November 2023.
Our smart tracking devices are designed to deliver robust data logging and positional tracking functionality and reliability for supply chain and logistics solutions. Our telematics devices are designed to be flexible in the field while offering a variety of connectivity options to suit the customers’ needs across 4G, 5G and LTE cellular networks.
Our Industrial IoT devices are designed to be flexible in the field while offering a variety of connectivity options to suit customers’ needs across 4G, 5G and LTE cellular networks. These power-efficient products are designed to support communications across interfaces and industrial protocols for vehicle, fleet and asset tracking and equipment management.
Our platform enables customers to easily deploy, monitor, manage and automate across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device. Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale deployments.
Software and Engineering Services Our Software as a Service (“SaaS”) platform offers comprehensive single-pane-of-glass management for OOB and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device.
As the level of silicon integration continues to advance, our compute modules offer the capability to collect, analyze, and interpret digital information (e.g., Video, Audio or Sensor data) using specialized artificial intelligence (“AI”)/machine learning algorithms. Our latest SIP devices are designed to process multiple media streams using Computer Vision (CV) technology, enabling sophisticated edge analytics.
This enables our customers to process and analyze digital inputs such as video, audio, and sensor data, directly at the device level, reducing latency, enhancing security, and enabling real-time decision making. Our latest SIP devices are designed to process multiple media streams using Computer Vision (CV) technology, enabling sophisticated edge analytics.
These power-efficient products are designed to support communications across interfaces and industrial protocols for vehicle, fleet and asset tracking and management. Many of the products are offered with software tools intended to further accelerate Lantronix customers’ time-to-market and increase their value add.
Many of the products are offered with software tools intended to further accelerate our customers’ time-to-market and increase their value add. Our Industrial IoT products are pre-certified in a number of countries, significantly reducing our OEM customers’ regulatory certification costs and accelerating their time-to-market.
Whitaker also served as our Senior Director of Finance and Accounting from February 2006 to September 2010 and our Director of Finance and Accounting from August 2005 to February 2006. Prior to August 2005, Mr.
Prior to that, he served as our Senior Director of Finance and Corporate Controller beginning in February 2012. Previously, Mr.
Whitaker held vice president and director level finance and accounting positions with two publicly-traded companies and worked in the assurance practice at Ernst & Young LLP for six years. 6 MATHI GURUSAMY has served as our Chief Strategy Officer since May 2024. Prior to joining Lantronix, Mr.
Stringham was an Audit Manager at Ernst & Young LLP from 2000 to 2007. 6 MATHI GURUSAMY has served as our Chief Product and Strategy Officer since April 2025. Previously Mr. Gurusamy served as our Chief Strategy Officer since May 2024. Prior to joining Lantronix, Mr.
Additionally, we are focusing on opportunities with other Tier II & III original equipment manufacturers (“OEMs”) in the auto, truck, and motorcycle segments, further broadening our footprint in the mobility ecosystem. · Enterprise: In the financial sector, we provide solutions to a Tier 1 banking customer to enhance network resiliency using our Out-of-Band Management offerings.
This engagement underscores the ongoing value and scalability of our solutions within the growing smart city infrastructure market. · Enterprise: In the financial sector, we provide solutions to a Tier 1 banking customer to enhance network resiliency using our Out-of-Band Management offerings. Our hardware and software offerings provide secure alternative pathways for critical infrastructure, including servers, networks, and routers.
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ITEM 1. BUSINESS Overview Lantronix, Inc. is a global leader in compute and connectivity solutions, targeting high-growth industries such as Smart Cities, Automotive, and Enterprise markets. Our products and services empower companies to capitalize on the expanding internet of things (“IoT”) market by delivering customizable solutions that address each layer of the IoT stack.
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ITEM 1. BUSINESS Overview Lantronix Inc. (Nasdaq: LTRX) is a global leader in Edge AI and Industrial Internet of Things (“IoT”) solutions, delivering intelligent computing, secure connectivity, and remote management for mission-critical applications. Serving high-growth markets, including smart cities, enterprise information technology (“IT”), and commercial and defense unmanned systems, we enable customers to optimize operations and accelerate digital transformation.
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Our portfolio is organized into three primary product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Services. Each product line is designed to meet the demands of scalable, secure, and reliable IoT deployments.
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Our comprehensive portfolio of hardware, software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive edge in today’s artificial intelligence (“AI”)-driven world.
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This engagement underscores the ongoing value and scalability of our solutions within the growing smart city infrastructure market. · Automotive: Lantronix is driving innovation in the automotive sector with our edge computing solution, currently powering infotainment systems in volume production for a Turkish automotive manufacturer.
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We conduct our business globally and manage our sales teams by three geographic regions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific Japan (“APJ”). We organize our portfolio services and products into the following product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Engineering Services.
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Our relationship with this customer is expanding as we support the launch of a second vehicle, with plans for market entry into Germany and other European regions.
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These solutions not only bolster cybersecurity and tracking but also improve operational efficiency through enhanced automation, uptime, and resiliency. · Unmanned Aerial Systems (UAS): We are advancing the UAS market through our Qualcomm Dragonwing–based system-on-modules (“SoM”), purpose-built for industrial drone applications with particular focus on defense and security.
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Our hardware and software offerings provide secure alternative pathways for critical infrastructure, including servers, networks, and routers. These solutions not only bolster cybersecurity and tracking but also improve operational efficiency through enhanced automation, uptime, and resiliency. Our growth strategy centers on continuous innovation and strategic acquisitions designed to increase scale, broaden our scope, and enhance our value proposition.
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We are working with customers to deliver high-performance compute at the edge for flight control, video processing, and AI-enabled situational awareness. In parallel, we are pursuing opportunities with additional UAS manufacturers in industrial, inspection, and defense segments. 1 Our growth strategy centers on continuous innovation and strategic acquisitions designed to increase scale, broaden our scope, and enhance our value proposition.
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Looking ahead, we plan to capitalize on market opportunities by further enhancing our product offerings, expanding geographically, and pursuing targeted acquisitions that align with our long-term growth objectives. 1 Products and Solutions Embedded IoT Solutions Our portfolio of embedded products provides a comprehensive range of options, including Compute System-on-Module (“SOM”) and System-in-Package (“SIP”) solutions, complemented by wired and wireless network connectivity products.
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Products and Solutions Embedded IoT Solutions Our embedded product portfolio includes a broad range of Compute SoM and System-in-Package (“SiP”) solutions, together with wired and wireless connectivity products. As semiconductor technology continues to evolve and integrate more functionality, our compute modules now provide not only processing power but also the ability to run advanced AI and machine learning applications.
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Whitaker 54 Chief Financial Officer Mathi Gurusamy 53 Chief Strategy Officer Kurt Hoff 67 Vice President of Worldwide Sales SALEEL AWSARE has served as our President and Chief Executive Officer, and as a member of our Board, since November 2023.
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Over the Air (“OTA”) updates streamline the process of security patches, firmware upgrades and configuration changes, keeping devices up to date and secure. We leverage our deep engineering expertise and product development best practices to deliver high-quality, innovative products cost-effectively and on schedule.
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Whitaker returned to Lantronix after serving as Vice President, Corporate Controller at Mindspeed, a supplier of semiconductor solutions for network infrastructure, from January 2011 to September 2011. Mr. Whitaker previously served as our Vice President of Finance and Accounting from September 2010 to January 2011, where he was responsible for managing all worldwide finance and accounting functions. Mr.
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Stringham served as Controller at Iteris, Inc., a provider of software, hardware and services for smart mobility infrastructure management, from January 2009 to February 2012, and Netlist, Inc., a developer and manufacturer of computer memory subsystems, from March 2007 to January 2009. Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe identified a material weakness in our internal control related to ineffective information technology general controls which, if not remediated appropriately or timely, could result in loss of investor confidence and adversely impact our stock price. Internal controls related to the operation of technology systems are critical to maintaining adequate internal control over financial reporting.
Biggest changeIf we fail to maintain effective internal controls, we may conclude that our internal control over financial reporting is not effective, which could adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner. We have previously identified and remediated a material weakness in our internal control over financial reporting.
We continue to dedicate significant engineering resources to our management software platform, applications, and SaaS offerings. These product and service offerings are subject to significant additional risks that are not necessarily related to our hardware products.
We continue to dedicate engineering resources to our management software platform, applications, and SaaS offerings. These product and service offerings are subject to significant additional risks that are not necessarily related to our hardware products.
In an effort to combat inflation, a number of central banks around the world, including the U.S., raised interest rates and may continue to raise them in the future. Higher interest rates may hinder the economic growth in markets where we do business, and has and may continue to have negative impacts on the global economy.
In an effort to combat inflation, a number of central banks around the world, including the U.S., raised interest rates and may raise them in the future. Higher interest rates may hinder the economic growth in markets where we do business, and has and may continue to have negative impacts on the global economy.
Looking ahead at long-term needs, we may need to raise additional funds for a number of purposes, including, but not limited to: · to fund working capital requirements; · to update, enhance or expand the range of products we offer; · to refinance existing indebtedness; 17 · to increase our sales and marketing activities; · to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities; or · to acquire additional businesses We may seek additional capital from public or private offerings of our capital stock, borrowings under our existing or future credit lines or other sources.
Looking ahead at long-term needs, we may need to raise additional funds for a number of purposes, including, but not limited to: · to fund working capital requirements; · to update, enhance or expand the range of products we offer; · to refinance existing indebtedness; · to increase our sales and marketing activities; · to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities; or · to acquire additional businesses We may seek additional capital from public or private offerings of our capital stock, borrowings under our existing or future credit lines or other sources.
If a business interruption occurs, whether due to a natural disaster or otherwise, our business could be materially and adversely affected. 16 Risks Related to Liquidity and Capital Resources We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.
If a business interruption occurs, whether due to a natural disaster or otherwise, our business could be materially and adversely affected. Risks Related to Liquidity and Capital Resources We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.
If any of these occur, our business, financial condition or results of operations could be adversely affected. 20 General Risk Factors High interest rates may negatively impact our results of operations and financing costs. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies.
If any of these occur, our business, financial condition or results of operations could be adversely affected. General Risk Factors High interest rates may negatively impact our results of operations and financing costs. Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies.
Increasing scrutiny and evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders regarding environmental, social and governance practices and disclosures may adversely affect our reputation, adversely impact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community or enforcement authorities or otherwise adversely impact our business and results of operations.
Evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders regarding environmental, social and governance practices and disclosures may adversely affect our reputation, adversely impact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community or enforcement authorities or otherwise adversely impact our business and results of operations.
As a smaller company, we may not have resources to meet the evolving ESG-related expectations of an investment community. Current or future litigation, including related to intellectual property, could adversely affect us. We are subject to a wide range of claims and lawsuits in the course of our business.
As a smaller company, we may not have resources to meet the evolving ESG-related expectations of the investment community. Current or future litigation, including related to intellectual property, could adversely affect us. We are subject to a wide range of claims and lawsuits in the course of our business.
In addition, new revisions to our products could cause our customers to alter the timing of their purchases, by either accelerating or delaying purchases, which could result in fluctuations of our net revenue from quarter to quarter. 11 We depend on distributors for a majority of our sales and to complete order fulfillment.
In addition, new revisions to our products could cause our customers to alter the timing of their purchases, by either accelerating or delaying purchases, which could result in fluctuations of our net revenue from quarter to quarter. We depend on distributors for a majority of our sales and to complete order fulfillment.
In the future, China and other countries including the U.S. are expected to adopt further environmental compliance programs. In order to comply with these regulations, we may need to redesign our products to use different components, which may be more expensive, if they are available at all.
In the future, China and other countries including the U.S. may adopt further environmental compliance programs. In order to comply with these regulations, we may need to redesign our products to use different components, which may be more expensive, if they are available at all.
In addition, if our operating results in future fiscal quarters were to fall below the expectations of equity analysts and investors, the market price of our common stock would likely fall. 21 The market price of our common stock may be volatile based on a number of factors, many of which are not under our control.
In addition, if our operating results in future fiscal quarters were to fall below the expectations of equity analysts and investors, the market price of our common stock would likely fall. The market price of our common stock may be volatile based on a number of factors, many of which are not under our control.
Our business could be harmed if the financial health of these distributors impairs their performance and we are unable to secure alternate distributors. Our ability to sustain and grow our business depends in part on the success of our distributors and resellers. A substantial part of our revenues is generated through sales by distributors and resellers.
Our business could be harmed if the financial health of these distributors impairs their performance and we are unable to secure alternate distributors. 11 Our ability to sustain and grow our business depends in part on the success of our distributors and resellers. A substantial part of our revenues is generated through sales by distributors and resellers.
Under the GDPR and the U.K.’s version of the GDPR, information transfers from the European Union and the U.K. to the U.S. are generally prohibited unless certain measures are followed. The 2018 California Consumer Privacy Act and California Privacy Rights Act of 2020 provide individuals similar rights with respect to the processing of their personal data.
Under the GDPR and the U.K.’s version of the GDPR, information transfers from the European Union and the U.K. to the U.S. are generally prohibited unless certain measures are followed. 14 The 2018 California Consumer Privacy Act and California Privacy Rights Act of 2020 provide individuals similar rights with respect to the processing of their personal data.
There have been several recent, highly publicized cases in which organizations of various types and sizes have reported the unauthorized disclosure of customer or other confidential information, as well as cyberattacks involving the dissemination, theft and destruction of corporate information, intellectual property, cash or other valuable assets.
There have been several highly publicized cases in which organizations of various types and sizes have reported the unauthorized disclosure of customer or other confidential information, as well as cyberattacks involving the dissemination, theft and destruction of corporate information, intellectual property, cash or other valuable assets.
Failure to comply with the aforementioned regulations could also affect our decision to sell our products in international jurisdictions, which could have a material adverse effect on our revenues and profitability. 19 Our failure to comply effectively with the requirements of applicable environmental legislation and regulation could have a material adverse effect on our revenues and profitability.
Failure to comply with the aforementioned regulations could also affect our decision to sell our products in international jurisdictions, which could have a material adverse effect on our revenues and profitability. Our failure to comply effectively with the requirements of applicable environmental legislation and regulation could have a material adverse effect on our revenues and profitability.
In addition, if we are unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available on favorable terms, if at all. We may need additional capital and it may not be available on acceptable terms, or at all.
In addition, if we are unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available on favorable terms, if at all. 17 We may need additional capital and it may not be available on acceptable terms, or at all.
In addition, the Nasdaq Capital Market often experiences price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of companies listed on the Nasdaq Capital Market. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the Nasdaq Capital Market often experiences price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of companies listed on the Nasdaq Capital Market. 22 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We cannot predict whether, and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed.
We cannot predict whether, and to what extent, there may be changes to international trade agreements or whether additional quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed.
For example, in March 2023, Silicon Valley Bank (“SVB”), Signature Bank Corp. and Silvergate Capital Corp. each failed and was taken into receivership by the FDIC. At that time, we maintained deposits amounting to approximately 85% of our total cash at SVB.
For example, in March 2023, Silicon Valley Bank (“SVB”), Signature Bank Corp. and Silvergate Capital Corp. each failed and were taken into receivership by the FDIC. At that time, we maintained deposits amounting to approximately 85% of our total cash at SVB.
The secure processing, maintenance and transmission of the information that we collect and store on our systems is critical to our operations and implementing security measures designed to prevent, detect, mitigate or correct these or other cybersecurity threats involves significant costs.
The secure processing, maintenance and transmission of the information that we collect and store on our systems is critical to our operations and implementing security measures designed to prevent, detect, mitigate or correct these or other cybersecurity threats involve significant costs.
Rising interest rates may lead customers to decrease or delay spending on products and projects, including on products that we sell, which may have a material adverse effect on our business, financial condition and results of operations.
High interest rates may lead customers to decrease or delay spending on products and projects, including on products that we sell, which may have a material adverse effect on our business, financial condition and results of operations.
We therefore believe that quarter to quarter comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future operating or financial performance or the future performance of the market price of our common stock.
We therefore believe that quarter to quarter comparisons of our operating results are not a good indication of our future performance, and investors should not rely on them to predict our future operating or financial performance or the future performance of the market price of our common stock.
In addition, the impact of the COVID-19 pandemic or other possible pandemics subject us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition, including the following: · significant volatility or decreases in the demand for our products or extended sales cycles; · changes in customer behavior and preferences, as customers may experience financial difficulties and/or may delay orders or reduce their spending; · adverse impacts on our ability to distribute or deliver our products or services, as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers; · further disruptions in our contract manufacturers’ ability to manufacture our products, as some contract manufacturers and suppliers of materials used in the production of our products are, or may be, located in areas more severely impacted by COVID-19 or another possible pandemic, which has limited and could further limit, our ability to obtain sufficient materials to produce and manufacture our products; and · volatility in the availability of raw materials and components that our contract manufacturers purchase and volatility in raw material and other input costs.
In addition, the impact of possible pandemics subjects us to various risks and uncertainties that could materially adversely affect our business, results of operations and financial condition, including the following: · significant volatility or decreases in the demand for our products or extended sales cycles; · changes in customer behavior and preferences, as customers may experience financial difficulties and/or may delay orders or reduce their spending; · adverse impacts on our ability to distribute or deliver our products or services, as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers; · further disruptions in our contract manufacturers’ ability to manufacture our products, as some contract manufacturers and suppliers of materials used in the production of our products are, or may be, located in areas more severely impacted by a possible pandemic, which has in the past limited and could in the future limit, our ability to obtain sufficient materials to produce and manufacture our products; and · volatility in the availability of raw materials and components that our contract manufacturers purchase and volatility in raw material and other input costs.
The COVID-19 pandemic or another pandemic or similar outbreak has had, and may in the future have, an adverse impact on the economy, our business and the businesses of our suppliers, and our results of operations and financial condition. For example, the COVID-19 pandemic resulted in industry events, trade shows and business travel being suspended, cancelled and/or significantly curtailed.
Pandemics or similar outbreaks have had, and may in the future have, an adverse impact on the economy, our business and the businesses of our suppliers, and our results of operations and financial condition. For example, the COVID-19 pandemic resulted in industry events, trade shows and business travel being suspended, cancelled and/or significantly curtailed.
While we were able to regain full access to our deposits with SVB and have taken steps to diversify our banking relationships since then, our loan agreement with SVB currently requires us to hold 50% of our company-wide cash balances at SVB.
While we were able to regain full access to our deposits with SVB and have taken steps to diversify our banking relationships since then, our loan agreement with SVB currently requires us to hold 75% of our US cash balances at SVB.
Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.
Increased global information technology security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data.
In addition, our loan agreement with SVB currently requires us to hold 50% of our company-wide cash balances at SVB, which may limit our ability to manage our cash holdings effectively. Risks Related to International Operations Rising concern regarding international tariffs could materially and adversely affect our business and results of operations.
In addition, our loan agreement with SVB currently requires us to hold 75% of our US cash balances at SVB, which may limit our ability to manage our cash holdings effectively. 18 Risks Related to International Operations Rising concern regarding international tariffs could materially and adversely affect our business and results of operations.
Responding to any infringement claim, regardless of its validity, could: · be time-consuming, costly and/or result in litigation; · divert management’s time and attention from developing our business; · require us to pay monetary damages, including treble damages if we are held to have willfully infringed; · require us to enter into royalty and licensing agreements that we would not normally find acceptable; · require us to stop selling or to redesign certain of our products; or · require us to satisfy indemnification obligations to our customers.
The results of litigation are inherently uncertain, and adverse outcomes are possible. 20 Responding to any infringement claim, regardless of its validity, could: · be time-consuming, costly and/or result in litigation; · divert management’s time and attention from developing our business; · require us to pay monetary damages, including treble damages if we are held to have willfully infringed; · require us to enter into royalty and licensing agreements that we would not normally find acceptable; · require us to stop selling or to redesign certain of our products; or · require us to satisfy indemnification obligations to our customers.
We depend on the resale of products through distributor accounts for a substantial majority of our worldwide net revenue. In addition, sales through our top five distributors accounted for approximately 29% of our net revenue in fiscal 2024.
We depend on the resale of products through distributor accounts for a substantial majority of our worldwide net revenue. In addition, sales through our top five distributors accounted for approximately 37% of our net revenue in fiscal 2025.
We may pursue acquisitions, strategic partnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share in our current markets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships with distributors, OEMs and ODMs.
We have in the past and may in the future pursue acquisitions, strategic partnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share in our current markets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships with distributors, OEMs and original design manufacturers.
In addition, current macroeconomic conditions caused turmoil in the banking sector since the failure of SVB. A failure to timely access our cash on deposit with SVB or other banks could require the scaling back of our operations and production, negatively affect our credit, and prevent us from fulfilling contractual obligations.
In addition, macroeconomic conditions have caused turmoil in the banking sector in the past and may do so again in the future. A failure to timely access our cash on deposit with SVB or other banks could require the scaling back of our operations and production, negatively affect our credit, and prevent us from fulfilling contractual obligations.
If we are unable to remediate the material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
If we, or our independent registered public accounting firm identify one or more additional material weaknesses, or, if we are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
There is increasing scrutiny and evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders on environmental, social and governance (“ESG”) practices and disclosures, including those related to environmental stewardship, climate change, diversity, equity and inclusion, forced labor, racial justice, and workplace conduct.
We may become subject to increased scrutiny and evolving expectations from investors, customers, lawmakers, regulators, and other stakeholders on environmental, social and governance (“ESG”) practices and disclosures, including those related to environmental stewardship, climate change, diversity, equity and inclusion, forced labor, racial justice, and workplace conduct.
In addition, our products use components that have been in the past and may in the future be subject to market shortages and substantial price fluctuations, whether due to the COVID-19 pandemic or a future pandemic or epidemic, the war between Ukraine and Russia, conflict in the Middle East, hostilities in the Red Sea, recent tensions between China and Taiwan or otherwise.
In addition, our products use components that have been in the past and may in the future be subject to market shortages and substantial price fluctuations, whether due to a pandemic or epidemic, the war between Ukraine and Russia, conflict in the Middle East, hostilities in the Red Sea, tensions between China and Taiwan, increased tariffs and changes in U.S. trade policies or otherwise.
Our ability to sustain and grow our business depends on our ability to develop, market, scale, and sell new products. Certain of our products are sold into mature markets that are characterized by a trend of declining demand.
Certain of our products are sold into mature markets, which could limit our ability to continue to generate revenue from these products. Our ability to sustain and grow our business depends on our ability to develop, market, scale, and sell new products. Certain of our products are sold into mature markets that are characterized by a trend of declining demand.
Regulators have imposed, and likely will continue to impose, ESG-related rules and guidance, which may conflict with one another and impose additional costs on us or expose us to new or additional risks.
Regulators have imposed in the past, and may impose in the future, ESG-related rules and guidance, which may conflict with one another and impose additional costs on us or expose us to new or additional risks.
The terms of our Senior Credit Facilities may restrict our financial and operational flexibility and, in certain cases, our ability to operate.
The terms of our amended and restated credit facility may restrict our financial and operational flexibility and, in certain cases, our ability to operate.
The duration and extent of a future pandemic’s or other similar outbreak’s effect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted at this time.
The duration and extent of a future pandemics or other similar outbreak’s effect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted at this time. The adverse impact of a possible future pandemic or similar outbreak on our business, results of operations and financial condition may be material.
As disclosed in Part II, Item 9A, during fiscal 2023, management identified a material weakness related to the design and implementation of information technology general controls related to the Company’s information systems that are relevant to the preparation of consolidated financial statements.
As disclosed in Part II, Item 9A of our Annual Report on Form 10-K for the year ended June 30, 2024, during fiscal 2023, management identified a material weakness related to the design and implementation of information technology general controls related to the Company’s information systems that are relevant to the preparation of consolidated financial statements.
If these activities are suspended, cancelled and/or significantly curtailed in the future, whether due to surges of COVID-19 or other possible pandemics and similar outbreaks, our sales may be negatively impacted in the future.
If these activities are suspended, cancelled and/or significantly curtailed in the future, whether due to a possible pandemic and similar outbreak, our sales may be negatively impacted in the future.
The terms of our existing term loan and revolving credit facility restrict, among other things, our ability to incur liens, incur indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate and enter into certain speculative hedging arrangements.
The terms of our amended and restated credit facility restrict, among other things, our ability to incur liens or indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate and enter into certain transactions with our affiliates.
If we are unable to attract, retain or motivate key senior management and technical personnel, it could materially harm our business. Our financial performance depends substantially on the performance of our executive officers and of key engineers, marketing and sales employees. We are particularly dependent upon our technical personnel, due to the specialized technical nature of our business.
Our financial performance depends substantially on the performance of our executive officers and of key engineers, marketing and sales employees. We are particularly dependent upon our technical personnel, due to the specialized technical nature of our business.
Relying on third-party logistics providers could increase the risk of the following: failing to receive accurate and timely inventory data, theft or poor physical security of our inventory, inventory damage, ineffective internal controls over inventory processes or other similar business risks out of our immediate control. 13 Risks Related to Technology, Cybersecurity and Intellectual Property Cybersecurity breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.
Relying on third-party logistics providers could increase the risk of the following: failing to receive accurate and timely inventory data, theft or poor physical security of our inventory, inventory damage, ineffective internal controls over inventory processes or other similar business risks out of our immediate control.
In addition, our operations and those of our suppliers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, cybersecurity breaches, IT systems failure, terrorist attacks and other events beyond our control, including the effects of climate change.
Natural disasters in other parts of the world on which our operations are reliant also could have material adverse impacts on our business. 16 In addition, our operations and those of our suppliers are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, cybersecurity breaches, IT systems failure, terrorist attacks and other events beyond our control, including the effects of climate change.
If we are required to substantially discount our inventory or are unable to sell our inventory in a timely manner, we would be required to increase our inventory reserves or write off obsolete inventory and our operating results could be substantially harmed. 12 Our failure to compete successfully in our highly competitive market could result in reduced prices and loss of market share.
If we are required to substantially discount our inventory or are unable to sell our inventory in a timely manner, we would be required to increase our inventory reserves or write off obsolete inventory and our operating results could be substantially harmed.
Despite available security measures and other precautions, the infrastructure and transmission methods used by our products and services may be vulnerable to interception, attack or other disruptive problems.
Despite available security measures and other precautions, the infrastructure and transmission methods used by our products and services may be vulnerable to interception, attack or other disruptive problems. Additionally, some of our products include capabilities to support AI which may further increase our products susceptibility or perceived susceptibility of security risks.
The market in which we operate is intensely competitive, subject to rapid technological advances and highly sensitive to evolving industry standards. The market can also be affected significantly by new product and technology introductions and marketing and pricing activities of industry participants. Our products compete directly with products produced by a number of our competitors.
The market can also be affected significantly by new product and technology introductions and marketing and pricing activities of industry participants. Our products compete directly with products produced by a number of our competitors.
In addition, our customers may not follow their normal purchasing patterns or temporarily cease purchasing from us due to impacts to their businesses in the region, creating unexpected fluctuations or decreases in our revenues and profitability. Natural disasters in other parts of the world on which our operations are reliant also could have material adverse impacts on our business.
In addition, our customers may not follow their normal purchasing patterns or temporarily cease purchasing from us due to impacts to their businesses in the region, creating unexpected fluctuations or decreases in our revenues and profitability.
The effect of a pandemic or major public health concern such as the COVID-19 pandemic could result in material adverse effects on our business, financial position, results of operations and cash flows.
We have and may in the future incur substantial expenses, risk material delays or encounter other unexpected issues in connection with this transition or future transitions. The effect of a pandemic or major public health concern, such as the COVID-19 pandemic, could result in material adverse effects on our business, financial position, results of operations and cash flows.
Furthermore, imposition of tariffs may result in local sourcing initiatives, or other developments that make it more difficult to sell our products in foreign countries, which would negatively impact our business and operating results. 18 We face risks associated with our international operations that could impair our ability to grow our revenues abroad as well as our overall financial condition.
Furthermore, imposition of tariffs or other developments may result in our implementing local or alternative sourcing initiatives that make it more difficult to sell our products in foreign countries, which would negatively impact our business and operating results.
Failure to meet Privacy and Data Protection Law requirements could result in significant civil penalties (including fines up to 4% of annual worldwide revenue under the GDPR) as well as criminal penalties. Privacy and data protection law requirements also confer a private right of action in some countries, including under the GDPR.
Markets in the Asia Pacific region have also recently adopted GDPR-like legislation, including China’s new Personal Information Protection Law. Failure to meet Privacy and Data Protection Law requirements could result in significant civil penalties (including fines up to 4% of annual worldwide revenue under the GDPR) as well as criminal penalties.
If unauthorized access is obtained to the personal and/or proprietary data we collect and store, our products become subject to cybersecurity breaches, or if public perception is that they are vulnerable to cyberattacks, our reputation and business could suffer.
Any unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business. 13 If unauthorized access is obtained to the personal and/or proprietary data we collect and store, our products become subject to cybersecurity breaches, or if public perception is that they are vulnerable to cyberattacks, our reputation and business could suffer.
Our failure to comply effectively with regulatory laws pertaining to our foreign operations could have a material adverse effect on our revenues and profitability. We are required to comply with U.S. government export regulations in the sale of our products to foreign customers, including requirements to properly classify and screen our products against a denied parties list prior to shipment.
We are required to comply with U.S. government export regulations in the sale of our products to foreign customers, including requirements to properly classify and screen our products against a denied parties list prior to shipment. We are also required to comply with the provisions of the FCPA and all other anti-corruption laws, such as the U.K.
Violations of the FCPA or other similar laws could trigger sanctions, including ineligibility for U.S. government insurance and financing, as well as large fines.
Anti-Bribery Act, of all other countries in which we do business, directly or indirectly, including compliance with the anti-bribery prohibitions and the accounting and recordkeeping requirements of these laws. Violations of the FCPA or other similar laws could trigger sanctions, including ineligibility for U.S. government insurance and financing, as well as large fines.
Acquisitions, partnerships or joint ventures may also result in the loss of key personnel and the dilution of existing stockholders to the extent we are required to issue equity securities. In addition, acquisitions, partnerships or joint ventures require significant managerial attention, which may be diverted from our other operations.
Our previous acquisitions have required, and any future acquisition, partnership, joint venture or investment may also require, that we pay significant cash, issue equity and/or incur substantial debt. Acquisitions, partnerships or joint ventures may also result in the loss of key personnel and the dilution of existing stockholders to the extent we are required to issue equity securities.
Present and future competitors may be able to identify new markets, adapt new technologies, develop and commercialize products more quickly and gain market acceptance of products with greater success. As a result of these competitive factors, we may fail to meet our business objectives and our business, financial condition and operating results could be materially and adversely affected.
Present and future competitors may be able to identify new markets, adapt new technologies, develop and commercialize products more quickly and gain market acceptance of products with greater success.
Any of these third parties might make a claim of infringement against us. The results of litigation are inherently uncertain, and adverse outcomes are possible.
Any of these third parties might make a claim of infringement against us.
We believe that our future growth is dependent in part upon our ability to increase sales in international markets.
We face risks associated with our international operations that could impair our ability to grow our revenues abroad as well as our overall financial condition. We believe that our future growth is dependent in part upon our ability to increase sales in international markets.
These types of security incidents could also lead to lawsuits, regulatory investigations and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring. 14 Failure to comply with data privacy laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.
Failure to comply with data privacy laws and regulations could have a materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.
In addition, many of our products are certified as meeting various industry quality and/or compatibility standards. Failure to obtain these certifications or approvals, or delays in receiving any needed certifications or approvals, could impact our ability to compete effectively or at all in these markets and could have an adverse impact on our revenues.
Failure to obtain these certifications or approvals, or delays in receiving any needed certifications or approvals, could impact our ability to compete effectively or at all in these markets and could have an adverse impact on our revenues. 19 Our failure to comply effectively with regulatory laws pertaining to our foreign operations could have a material adverse effect on our revenues and profitability.
Acquisitions, strategic partnerships, joint ventures or investments may impair our capital and equity resources, divert our management’s attention or otherwise negatively impact our operating results.
As a result of these competitive factors, we may fail to meet our business objectives and our business, financial condition and operating results could be materially and adversely affected. 12 Acquisitions, strategic partnerships, joint ventures or investments may impair our capital and equity resources, divert our management’s attention or otherwise negatively impact our operating results.
The current political landscape has introduced significant uncertainty with respect to future trade regulations and existing international trade agreements, as shown by the U.S.-initiated renegotiation of the North America Free Trade Agreement, Brexit in Europe, and the current war between Ukraine and Russia.
The current political landscape has introduced significant uncertainty with respect to future trade regulations and existing international trade agreements, as shown by the new or increased tariffs imposed by the U.S. on many countries.
Further, we are currently and may in the future be required to maintain specified financial ratios, including pursuant to a maximum leverage ratio, a minimum fixed charge coverage ratio or a minimum liquidity test.
Further, we are currently and may in the future be required to maintain specified financial ratios, including pursuant to a minimum interest coverage ratio, and to satisfy a minimum liquidity test. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and there can be no assurance that we will meet those tests.
There is also the possibility of federal privacy legislation and increased enforcement by the Federal Trade Commission under its power to regulate unfair and deceptive trade practices. Markets in the Asia Pacific region have also recently adopted GDPR-like legislation, including China’s new Personal Information Protection Law.
Multiple states in the U.S. have enacted such privacy laws, and data privacy laws are scheduled to become effective in several others in 2026. There is also the possibility of federal privacy legislation and increased enforcement by the Federal Trade Commission under its power to regulate unfair and deceptive trade practices.
These capital, equity and managerial commitments may impair the operation of our business.
In addition, acquisitions, partnerships or joint ventures require significant managerial attention, which may be diverted from our other operations. These capital, equity and managerial commitments may impair the operation of our business.
For instance, we acquired Maestro, Intrinsyc, the Transition Networks and Net2Edge businesses of Communication Systems, Inc., and Uplogix, Inc. in calendar years 2019, 2020, 2021 and 2022, respectively. Our previous acquisitions have required, and any future acquisition, partnership, joint venture or investment may also require, that we pay significant cash, issue equity and/or incur substantial debt.
For instance, we acquired Maestro, Intrinsyc, the Transition Networks and Net2Edge businesses of Communication Systems, Inc., Uplogix, Inc. (“Uplogix”), and Netcomm Wireless Pty Ltd (“Netcomm”) in calendar years 2019, 2020, 2021, 2022 and 2024, respectively.
The costs we would incur to address and fix these incidents could significantly increase our expenses.
The costs we would incur to address and fix these incidents could significantly increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and increased legal liability, including in some cases contractual costs related to customer notification and fraud monitoring.
Our ability to meet those financial ratios and tests can be affected by events beyond our control, and there can be no assurance that we will meet those tests. Pursuant to our amended credit agreement and the related loan and security agreement, we have pledged substantially all of our assets to our senior lender, SVB.
Pursuant to our amended credit facility, we have pledged substantially all of our assets to our senior lender, SVB.
Removed
From time to time, we may transition the manufacturing of certain products from one contract manufacturer to another. When we do this, we may incur substantial expenses, risk material delays or encounter other unexpected issues.
Added
From time to time, we may transition the manufacturing of certain products from one contract manufacturer to another. For example, in connection to the recently increased tariffs proposed to be imposed by the U.S. against China, we continue to transition our remaining manufacturing out of China.
Removed
The adverse impact of the COVID-19 pandemic or another pandemic or similar outbreak on our business, results of operations and financial condition have been, could continue to be, and may in the future be material. Certain of our products are sold into mature markets, which could limit our ability to continue to generate revenue from these products.
Added
Our failure to compete successfully in our highly competitive market could result in reduced prices and loss of market share. The market in which we operate is intensely competitive, subject to rapid technological advances and highly sensitive to evolving industry standards.
Removed
Any unauthorized access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business.
Added
Risks Related to Technology, Cybersecurity and Intellectual Property Cybersecurity breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.
Removed
In addition to California, Colorado, Virginia, Utah and Connecticut previously enacted comprehensive privacy legislation, and in 2023 and 2024, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, New Jersey, New Hampshire, Oregon, Rhode Island, Tennessee and Texas enacted such laws.
Added
In addition, such threats could be introduced as a result of our customers and business partners incorporating the output of an AI tool that includes a threat, such as introducing malicious code by incorporating AI generated source code.
Removed
This uncertainty includes the possibility of imposing tariffs or penalties on products manufactured outside the U.S., including the U.S. government’s increased tariffs on a range of products from China and subsequent tariffs imposed by the U.S. as well as tariffs imposed by trading partners on U.S. goods, the potential for increased trade barriers between the U.K. and the European Union, and export controls or other retaliatory actions against, or restrictions on doing business with Russia, as well as any resulting disruption, instability or volatility in the global markets and industries resulting from such conflict.
Added
Privacy and data protection law requirements also confer a private right of action in some countries, including under the GDPR.
Removed
The institution of trade tariffs both globally and between the U.S. and China specifically, carries the risk of negatively affecting the overall economic conditions of both China and the U.S., which could have a negative impact on us.
Added
Issues related to the responsible use of AI may result in reputational, competitive and financial harm and liability. We offer products that include capabilities to support AI deployment and we expect this part of our business to grow.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

5 edited+2 added−2 removed7 unchanged
Biggest changeOur cybersecurity risk management program includes: · risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader IT environment; · evaluations of our readiness to assess, respond and, as applicable, recover from potential cybersecurity incidents; · periodic tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes, technologies and incident response plan; · the use of external service providers, where appropriate, to assess, test, or otherwise assist with the aspects of our security controls; · cybersecurity training to educate our employees, consultants and other users about their individual responsibilities regarding our IT systems and data; · weekly briefings on cybersecurity incidents, threats, and related matters; · a third-party risk management process for service providers, suppliers and vendors who have access to our critical systems and information; and · cybersecurity risk insurance that provides protection against certain potential costs and losses arising from a cybersecurity incident.
Biggest changeOur cybersecurity risk management program includes: · risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader IT environment; · evaluations of our readiness to assess, respond and, as applicable, recover from potential cybersecurity incidents; · periodic tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes, technologies and incident response plan; · the use of external service providers, where appropriate, to assess, test, or otherwise assist with the aspects of our security controls; · cybersecurity training to educate our employees, consultants and other users about their individual responsibilities regarding our IT systems and data; · weekly briefings on cybersecurity incidents, threats, and related matters; · a third-party risk management process for service providers, suppliers and vendors who have access to our critical systems and information; and · cybersecurity risk insurance that provides protection against certain potential costs and losses arising from a cybersecurity incident. 23 As of the date of this report, we do not believe that known risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that we are aware of, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
While the Board reviews and oversees the Company’s information security efforts, our executive officers, including our Chief Financial Officer, Vice President of Business Operations, and Vice President of Business Affairs are responsible for the day-to-day management of cybersecurity risk and the design and implementation of policies, processes and procedures to identify and mitigate this risk.
While the Board reviews and oversees the Company’s information security efforts, our Director of IT, under the oversight of our executive officers, is responsible for the day-to-day management of cybersecurity risk and the design and implementation of policies, processes and procedures to identify and mitigate this risk.
Our Director of IT, in coordination with the executive officers named above, is responsible for assessing and managing material risks from cybersecurity threats, as well as managing and responding to material cybersecurity incidents if any occur.
Our Director of IT, in coordination with the executive officers, is responsible for assessing and managing material risks from cybersecurity threats, as well as managing and responding to material cybersecurity incidents if any occur. Our Director of IT has over 28 years of experience in various information technology roles, which includes over 10 years of management of cybersecurity matters.
We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein. 22 We leverage guidance from the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”), which provides an outline of enterprise security processes and controls, to inform the design and assessment of our cybersecurity risk management program.
We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information systems or any information residing therein.
The weekly briefings are focused on our cybersecurity risks and activities, including cybersecurity incidents and responses, cybersecurity systems testing, third-party activities and related topics. In the event threats and incidents are identified as potentially significant, the Chief Financial Officer, Vice President of Business Operations or Vice President of Business Affairs will promptly report to our Board.
Our Director of IT provides weekly briefings to the Chief Financial Officer, General Counsel and other members of our cross-functional incident response team. The weekly briefings are focused on our cybersecurity risks and activities, including cybersecurity incidents and responses, cybersecurity systems testing, third-party activities and related topics.
Removed
As of the date of this report, we do not believe that known risks from cybersecurity threats, including as a result of any previous cybersecurity incidents that we are aware of, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
Added
We leverage guidance from the National Institute of Standards and Technology Cybersecurity Framework (“NIST CSF”), which provides an outline of enterprise security processes and controls, to inform the design and assessment of our cybersecurity risk management program.
Removed
Our Director of IT has over 27 years of experience in various information technology roles, which includes over 10 years of management of cybersecurity matters. 23 Our Director of IT provides weekly briefings to the Chief Financial Officer, Vice President of Business Operations, Vice President of Business Affairs and other members of our cross-functional incident response team.
Added
In the event that threats and incidents are identified as potentially significant, the Chief Financial Officer and General Counsel promptly report to our Board.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeEngineering, sales, and marketing 7,500 Hyderabad, India Engineering and design 18,000 Illmenau, Germany Engineering, operations, sales, and marketing 7,500 Taipei City, Taiwan Engineering, sales, and marketing 5,500 We believe our existing facilities are adequate to meet our needs. If additional space is needed in the future, we believe that suitable space will be available on commercially reasonable terms.
Biggest changeOperations; warehouse and administration 66,000 Vancouver, British Columbia, Canada Engineering, operations and marketing 8,500 Hyderabad, India Engineering and design 18,000 Taipei City, Taiwan Engineering, sales and marketing 5,500 We believe our existing facilities are adequate to meet our needs. If additional space is needed in the future, we believe that suitable space will be available on commercially reasonable terms.
ITEM 2. PROPERTIES The following table presents details regarding our leased facilities: Locations Primary Use Approximate Square Footage Irvine, California, U.S.A. Corporate headquarters; sales and marketing, research and development, operations, and administration 14,000 Plymouth, Minnesota, U.S.A. Operations, warehousing, and administration 66,000 Vancouver, British Columbia, Canada Engineering, operations, and marketing 8,500 Austin, Texas, U.S.A.
ITEM 2. PROPERTIES The following table presents details regarding our leased facilities: Locations Primary Use Approximate Square Footage Irvine, California, U.S.A. Corporate headquarters; sales and marketing, research and development, operations and administration 12,000 Plymouth, Minnesota, U.S.A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−1 removed1 unchanged
Biggest changeAny future decision to declare or pay dividends will be made by the Board in its sole discretion and will depend upon our financial condition, operating results, capital requirements and other factors that the Board deems appropriate at the time of its decision.
Biggest changeAny future decision to declare or pay dividends will be made by the Board in its sole discretion and will depend upon our financial condition, operating results, capital requirements and other factors that the Board deems appropriate at the time of its decision. Issuer Repurchases We did not repurchase any shares of our common stock during fiscal 2025. ITEM 6.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock is traded on the Nasdaq Capital Market under the symbol “LTRX.” The number of holders of record of our common stock as of August 30, 2024 was approximately 27.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock is traded on the Nasdaq Capital Market under the symbol “LTRX.” The number of holders of record of our common stock as of August 22, 2025 was approximately 24.
Removed
Issuer Repurchases We did not repurchase any shares of our common stock during the fourth quarter of fiscal 2024. ITEM 6. RESERVED

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

8 edited+1 added−0 removed6 unchanged
Biggest changeAdditionally, statements concerning future matters such as our expected earnings, revenues, expenses and financial condition, our expectations with respect to the development of new products, expectations regarding the impact of the COVID-19 pandemic or similar outbreaks, and other statements regarding matters that are not historical are forward-looking statements.
Biggest changeAdditionally, statements concerning future matters such as our expected earnings, revenues, expenses and financial condition, our expectations with respect to the development of new products, and other statements regarding matters that are not historical are forward-looking statements. We have based our forward-looking statements on management’s current expectations and projections about trends affecting our business and industry and other future events.
We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of The Nasdaq Capital Market.
We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of The Nasdaq Stock Market LLC.
Form 10-K Summary 42 i CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K for the fiscal year ended June 30, 2024, or this Report, contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties.
Form 10-K Summary 44 i CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K for the fiscal year ended June 30, 2025, or this Report, contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties.
Item 6. Reserved 24 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 35 Item 8. Financial Statements and Supplementary Data 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 Item 9A. Controls and Procedures 36 Item 9B.
Item 6. Reserved 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 36 Item 8. Financial Statements and Supplementary Data 3 6 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 36 Item 9A. Controls and Procedures 37 Item 9B.
Other Information 37 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 37 PART III Item 10. Directors, Executive Officers and Corporate Governance 38 Item 11. Executive Compensation 38 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 38 Item 13. Certain Relationships and Related Transactions and Director Independence 38 Item 14.
Other Information 38 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 3 8 PART III Item 10. Directors, Executive Officers and Corporate Governance 3 9 Item 11. Executive Compensation 3 9 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 3 9 Item 13.
You should read this Report in its entirety, together with the documents that we file as exhibits to this Report, with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements we make speak only as of the date on which they are made.
You should read this Report in its entirety, together with the documents that we file as exhibits to this Report, with the understanding that our future results may be materially different from what we currently expect and should not place undue reliance on the forward-looking statements contained in this Report.
We have based our forward-looking statements on management’s current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.
Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy.
Principal Accountant Fees and Services 38 PART IV Item 15. Exhibits and Financial Statement Schedules 39 Item 16.
Certain Relationships and Related Transactions and Director Independence 3 9 Item 14. Principal Accountant Fees and Services 3 9 PART IV Item 15. Exhibits and Financial Statement Schedules 40 Item 16.
Added
The forward-looking statements we make speak only as of the date on which they are made.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

44 edited+19 added−33 removed46 unchanged
Biggest changeSelling, General and Administrative Selling, general and administrative expenses consists of personnel-related expenses including salaries and commissions, share-based compensation, facility expenses, information technology, advertising and marketing expenses and professional legal and accounting fees. 31 The following table presents our selling, general and administrative expenses: Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Personnel-related expenses $ 21,316 $ 19,453 $ 1,863 9.6% Professional fees and outside services 5,037 6,064 (1,027 ) (16.9% ) Advertising and marketing 2,346 2,136 210 9.8% Facilities and insurance 2,754 2,538 216 8.5% Share-based compensation 6,248 4,546 1,702 37.4% Depreciation 1,393 1,022 371 36.3% Other 1,112 1,189 (77 ) (6.5% ) Selling, general and administrative $ 40,206 25.1% $ 36,948 28.2% $ 3,258 8.8% Selling, general and administrative expenses increased primarily due to higher personnel-related expenses arising from merit increases and variable and share-based compensation related to the Company’s improved financial performance in fiscal 2024.
Biggest changeSelling, General and Administrative Selling, general and administrative expenses consist of personnel-related expenses including salaries and commissions, share-based compensation, facility expenses, information technology, advertising and marketing expenses and professional legal and accounting fees. 31 The following table presents our selling, general and administrative expenses: Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Personnel-related expenses $ 20,387 $ 21,316 $ (929 ) (4.4% ) Professional fees and outside services 4,878 5,037 (159 ) (3.2% ) Advertising and marketing 2,239 2,346 (107 ) (4.6% ) Facilities and insurance 1,794 2,754 (960 ) (34.9% ) Share-based compensation 4,424 6,248 (1,824 ) (29.2% ) Depreciation 1,360 1,393 (33 ) (2.4% ) Other 1,164 1,112 52 4.7% Selling, general and administrative $ 36,246 29.5% $ 40,206 25.1% $ (3,960 ) (9.8% ) Selling, general and administrative expenses decreased primarily due to (i) reduced share-based compensation costs based on the value of new and outstanding awards, (ii) lower spending on various sales conferences, IT infrastructure and related facilities costs, and (iii) lower personnel-related expenses resulting from less variable compensation and restructuring activities during the current fiscal year.
Performance obligations for T&M contracts qualify for the "Right to Invoice" practical expedient within the revenue guidance. Under this practical expedient, we may recognize revenue, over time, in the amount to which we have a right to invoice. In addition, we are not required to estimate variable consideration upon inception of the contract and reassess the estimate each reporting period.
Performance obligations for T&M contracts qualify for the “Right to Invoice” practical expedient within the revenue guidance. Under this practical expedient, we may recognize revenue, over time, in the amount to which we have a right to invoice. In addition, we are not required to estimate variable consideration upon inception of the contract and reassess the estimate each reporting period.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (this “Report”).
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis in conjunction with our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (this “Report”).
The differences between our effective tax rate and the federal statutory rate in fiscal 2024 and fiscal 2023 were also impacted by the effect of our domestic losses recorded without a tax benefit, as well as the effect of certain state and foreign earnings taxed at rates differing from the federal statutory rate.
The differences between our effective tax rate and the federal statutory rate in fiscal 2025 and 2024 were also impacted by the effect of our domestic losses recorded without a tax benefit, as well as the effect of certain state and foreign earnings taxed at rates differing from the federal statutory rate.
Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of this Report. Please also see “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Report.
Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” included in Part I, Item 1A of this Report. Please also see “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Report. Overview Lantronix Inc.
Aside from a net deferred tax liability of $179,000 and $146,000 that we recorded as of June 30, 2024 and 2023, respectively, based on our cumulative losses and uncertainty of generating future taxable income, we provided a full valuation allowance against our net deferred tax assets at June 30, 2024 and 2023.
Aside from a net deferred tax liability of $172,000 and $179,000 that we recorded as of June 30, 2025 and 2024, respectively, based on our cumulative losses and uncertainty of generating future taxable income, we provided a full valuation allowance against our net deferred tax assets at June 30, 2025 and 2024.
These assets are generally amortized on a straight-line basis over their estimated useful lives and resulted in charges of $5,314,000 and $5,804,000 during fiscal 2024 and 2023, respectively. Interest Expense, Net For fiscal 2024 and 2023, we incurred net interest expense from interest incurred on borrowings on our credit facilities. We also earn interest on our domestic cash balances.
These assets are generally amortized on a straight-line basis over their estimated useful lives and resulted in charges of $3,951,000 and $5,314,000 during fiscal 2025 and 2024, respectively. Interest Expense, Net For fiscal 2025 and 2024, we incurred net interest expense from interest incurred on borrowings on our credit facilities. We also earn interest on our domestic cash balances.
Financing Activities Net cash used in financing activities during fiscal 2024 resulted primarily from $2,853,000 of principal payments on the Senior Credit Facilities as well as $1,027,000 tax withholdings paid on behalf of employees for restricted shares. Additionally, we used cash of $1,262,000 to pay the contingent consideration earned related to the Uplogix acquisition.
Net cash used in financing activities during fiscal 2024 resulted primarily from $2,853,000 of principal payments on our term debt as well as $1,027,000 tax withholdings paid on behalf of employees for restricted shares. Additionally, we used cash of $1,262,000 to pay the contingent consideration earned related to the Uplogix acquisition.
We are subject to a variable amount of interest on the principal balance of our Senior Credit Facilities and could be adversely impacted by rising interest rates in the future.
We are subject to a variable amount of interest on the principal balance of our borrowings and could be adversely impacted by rising interest rates in the future.
There can be no guarantee that we would be able to obtain any needed alternate financing on acceptable terms, or at all, or that such a financing would not result in a default under the Loan Agreement (as defined in Note 5 of Notes to Consolidated Financial Statements, including in Part II, Item 8 of this Report).
There can be no guarantee that we would be able to obtain any needed alternate financing on acceptable terms, or at all, or that such a financing would not result in a default under the current borrowing agreement. Refer to Note 5 of Notes to Consolidated Financial Statements, including in Part II, Item 8 of this Report, for additional information.
Cost of revenue consists primarily of the cost of raw material components, subcontract labor assembly by contract manufacturers, freight costs, personnel-related expenses, manufacturing overhead, inventory reserves for excess and obsolete products or raw materials, warranty costs, royalties and share-based compensation.
Cost of revenue consists primarily of the cost of raw material components, subcontract labor assembly from contract manufacturers, direct and indirect personnel expenses related to professional services, manufacturing overhead, inventory reserves for excess and obsolete products or raw materials, warranty costs, royalties and share-based compensation.
We regularly evaluate our estimates and assumptions related to revenue recognition, sales returns and allowances, inventory valuation, restructuring charges, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets, share-based compensation, litigation and other contingencies.
We regularly evaluate our estimates and assumptions related to revenue recognition, sales returns and allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets.
References to “fiscal 2024” refer to the fiscal year ended June 30, 2024 and references to “fiscal 2023” refer to the fiscal year ended June 30, 2023. 25 Products and Solutions We organize our portfolio services and products into three product lines: Embedded IoT Solutions, IoT System Solutions, and Software & Services.
References to “fiscal 2025” refer to the fiscal year ended June 30, 2025 and references to “fiscal 2024” refer to the fiscal year ended June 30, 2024. 25 Products and Solutions We organize our portfolio services and products into the following product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Engineering Services.
Provision for Income Taxes The following table presents our provision for income taxes: Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Provision for income taxes $ 745 0.5% $ 748 0.6% $ (3 ) (0.4% ) The following table presents our effective tax rate based upon our provision for income taxes: Years Ended June 30, 2024 2023 Effective tax rate 19.8% 9.1% 33 We utilize the liability method of accounting for income taxes.
Provision for Income Taxes The following table presents our provision for income taxes: Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Provision for (benefit from) income taxes $ (239 ) (0.2% ) $ 745 0.5% $ (984 ) (132.1% ) 33 The following table presents our effective tax rate based upon our provision for income taxes: Years Ended June 30, 2025 2024 Effective tax rate 2.1% (19.8% ) We utilize the liability method of accounting for income taxes.
These contracts generally include performance obligations in which control is transferred over time because the customer either simultaneously receives and consumes the benefits provided or our performance on the contract creates or enhances an asset that the customer controls.
A portion of our revenues are derived from engineering and related consulting service contracts with customers. These contracts generally include performance obligations in which control is transferred over time because the customer either simultaneously receives and consumes the benefits provided or our performance on the contract creates or enhances an asset that the customer controls.
Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our results of operations. 27 Restructuring Charges We recognize costs and related liabilities for restructuring activities when they are incurred.
Although we make every effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our results of operations.
These costs were mainly comprised of banking, legal and other professional fees. Amortization of Intangible Assets We acquired certain intangible assets through our recent acquisitions, which we recorded at fair-value as of the acquisition dates.
Acquisition-Related Costs During fiscal 2025 we incurred approximately $371,000 of costs primarily in connection with the acquisition of Netcomm. These costs were mainly comprised of banking, legal and other professional fees. Amortization of Intangible Assets We acquired certain intangible assets through our recent acquisitions, which we recorded at fair-value as of the acquisition dates.
We also record reductions of revenue for pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recognized, based primarily on approved pricing adjustments and our historical experience.
We also record reductions of revenue for pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recognized, based primarily on approved pricing adjustments and our historical experience. Actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue.
Our Software and Services product lines include: Engineering Services, Percepxion™, ConsoleFlow™, Control Center and Level Services. Recent Accounting Pronouncements Refer to Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporated herein by reference, for a discussion of recent accounting pronouncements.
Recent Accounting Pronouncements Refer to Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporated herein by reference, for a discussion of recent accounting pronouncements.
Some factors that we consider important in the qualitative assessment which could trigger a goodwill impairment review include: · significant underperformance relative to historical or projected future operating results; · significant changes in the manner of our use of the acquired assets or the strategy for our overall business; · significant negative industry or economic trends; · a significant decline in our stock price for a sustained period; and · a significant change in our market capitalization relative to our book value. 28 Based on our qualitative assessment, if we conclude that it is more likely than not that the fair value of our single reporting unit is less than its carrying value, we conduct a quantitative goodwill impairment test, which involves comparing the estimated fair value of our single reporting unit with its carrying value, including goodwill.
Some factors that we consider important in the qualitative assessment which could trigger a goodwill impairment review include: · significant underperformance relative to historical or projected future operating results; · significant changes in the manner of our use of the acquired assets or the strategy for our overall business; · significant negative industry or economic trends; · a significant decline in our stock price for a sustained period; and · a significant change in our market capitalization relative to our book value.
Cash Flows The following table presents the major components of the consolidated statements of cash flows: Years Ended June 30, Increase 2024 2023 (Decrease) (In thousands) Net cash provided by operating activities $ 18,623 $ 237 $ 18,386 Net cash used in investing activities (1,479 ) (7,323 ) (5,844 ) Net cash (used in) provided by financing activities (4,359 ) 3,317 (7,676 ) Operating Activities Cash provided by operating activities during fiscal 2024 increased compared to fiscal 2023.
Cash Flows The following table presents the major components of the consolidated statements of cash flows: Years Ended June 30, 2025 2024 Decrease (In thousands) Net cash provided by operating activities $ 7,285 $ 18,623 $ (11,338 ) Net cash used in investing activities (6,963 ) (1,479 ) $ (5,484 ) Net cash used in financing activities (6,461 ) (4,359 ) $ (2,102 ) Operating Activities Cash provided by operating activities during fiscal 2025 decreased compared to fiscal 2024.
Goodwill Impairment Testing We evaluate goodwill for impairment on an annual basis on the last day of our fourth fiscal quarter or more frequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount.
Goodwill Impairment Testing We evaluate goodwill for impairment on an annual basis on May 31, or more frequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount. 28 We begin our evaluation of goodwill for impairment by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value.
If our actual financial results are not consistent with our assumptions and judgments used in estimating the fair value of our reporting unit, we may be exposed to goodwill impairment losses. During the fourth quarter of fiscal 2024, we made a qualitative assessment of whether goodwill impairment existed.
If our actual financial results are not consistent with our assumptions and judgments used in estimating the fair value of our reporting unit, we may be exposed to goodwill impairment losses. We performed our annual goodwill impairment test as of May 31, 2025, using a quantitative assessment for our single reporting unit.
Inventory Valuation We value inventories at the lower of cost (on a first-in, first-out basis) or net realizable value, whereby we make estimates regarding the market value of our inventories, including an assessment of excess and obsolete inventories.
Changes to performance obligations that we identify, or the estimated selling prices pertaining to a contract, could materially impact the amounts of earned and unearned revenue that we record. 27 Inventory Valuation We value inventories at the lower of cost (on a first-in, first-out basis) or net realizable value, whereby we make estimates regarding the market value of our inventories, including an assessment of excess and obsolete inventories.
We apply the following five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligation is satisfied.
We apply the following five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligation is satisfied. 26 A significant portion of our products are sold to distributors under agreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted for as variable consideration when estimating the amount of revenue to recognize.
These increases were partially offset by decreases in sales of our network switches in the Americas region. Software & Services Net revenue decreased primarily due to a year over year decline in our engineering services in the EMEA region as two of our large design services projects transitioned from the design phase to full production during fiscal 2024.
Software & Services Net revenue decreased primarily due to lower engineering services revenue in the EMEA region as two of our large design services projects transitioned in the prior year from the design phase to full production.
We conduct our business globally and manage our sales teams by three geographic regions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific Japan (“APJ”).
We conduct our business globally and manage our sales teams by three geographic regions: the Americas; EMEA; and APJ.
The increase in net revenue was driven by an 81.7% increase in net revenue in our IoT System Solutions product line partially offset by a decrease of 26.2% in net revenues in our Embedded IoT Solutions product line and a decrease of 11.3% in net revenues in our Software & Services product line.
The decrease in net revenue was driven by a 34.2% decrease in net revenue in our IoT System Solutions product line, as well as decreases in net revenue in our Embedded IoT Solutions product line of 1.2% and our Software and Services product line of 12.5%.
The following table presents our gross profit: Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Gross profit $ 64,354 40.1% $ 56,264 42.9% $ 8,090 14.4% Gross profit as a percent of revenue (referred to as “gross margin”) decreased primarily due to a change in product mix and increased logistics and overhead costs related to our smart grid customer that grew to 26% of our net revenue during fiscal 2024.
The following table presents our gross profit: Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Gross profit $ 51,699 42.1% $ 64,354 40.1% $ (12,655 ) (19.7% ) Gross profit as a percentage of revenue (referred to as “gross margin”) increased primarily as a result of lower overhead costs and our product sales mix.
Since our assessment of the qualitative factors did not result in a determination that it was more likely than not that the fair value of our single reporting unit is less than its carrying value, we were not required to perform the quantitative goodwill impairment test.
Based on our qualitative assessment, if we conclude that it is more likely than not that the fair value of our single reporting unit is less than its carrying value, we conduct a quantitative goodwill impairment test, which involves comparing the estimated fair value of our single reporting unit with its carrying value, including goodwill.
Liquidity and Capital Resources Liquidity The following table presents our working capital and cash and cash equivalents: June 30, 2024 2023 Change (In thousands) Working capital $ 58,794 $ 50,163 $ 8,631 Cash and cash equivalents $ 26,237 $ 13,452 $ 12,785 Our principal sources of cash and liquidity include our existing cash and cash equivalents, borrowings and amounts available under our existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), and cash generated from operations.
Liquidity and Capital Resources Liquidity The following table presents our working capital and cash and cash equivalents: June 30, 2025 2024 Change (In thousands) Working capital $ 46,971 $ 58,794 $ (11,823 ) Cash and cash equivalents $ 20,098 $ 26,237 $ (6,139 ) Our principal sources of cash and liquidity include our existing cash and cash equivalents, borrowings and amounts available under our existing bank borrowing agreement, and cash generated from operations.
We consider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.
Valuation of Deferred Income Taxes We have recorded a valuation allowance to reduce our net deferred tax assets to zero, primarily due to historical net operating losses (“NOLs”) and uncertainty of generating future taxable income. We consider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.
We believe that our current cash holdings and net cash flows from operations are sufficient to satisfy our current obligations for the foreseeable future, and, assuming continued access to the undrawn amounts available under our Senior Credit Facilities, these combined sources will be sufficient to fund our material requirements for working capital, capital expenditures and other financial commitments for at least the next 12 months and beyond.
We believe that our current cash holdings, net cash provided by operating activities, and expected availability under our bank borrowing agreement will be sufficient to fund our material requirements for working capital, capital expenditures and other financial commitments for at least the next 12 months and beyond.
This was mostly driven by a reduction in deposits previously received related to shipments under a customer contract. Investing Activities Net cash used in investing activities for fiscal 2024 consisted of purchases of equipment amounting to $1,479,000, primarily for research and development and certain business analysis tools.
We also paid for property and equipment totaling $505,000, primarily for tooling at our contract manufacturers as well as certain research and development projects. Net cash used in investing activities for fiscal 2024 consisted of purchases of equipment amounting to $1,479,000, primarily for research and development and certain business analysis tools.
Net cash provided by financing activities during fiscal 2023 resulted primarily from $7,000,000 in gross proceeds received from our Senior Credit Facilities with SVB partially offset by payments of $3,994,000 on the term loan as well as tax withholdings paid of $821,000 on behalf of employees for restricted shares.
Financing Activities Net cash used in financing activities during fiscal 2025 resulted primarily from principal payments of $4,512,000 on our term debt, as well as tax withholdings paid on behalf of employees for restricted shares of $2,093,000.
We record net deferred tax assets to the extent we believe these assets are more likely than not to be realized.
Additionally, in fiscal 2025, we reversed a portion of our liability for uncertain tax positions as a result of the dissolution of one of our foreign subsidiaries. We record net deferred tax assets to the extent we believe these assets are more likely than not to be realized.
Net Revenue The following tables present our net revenue by product lines and by geographic region: Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Embedded IoT Solutions $ 46,953 29.3% $ 63,636 48.6% $ (16,683 ) (26.2% ) IoT System Solutions 104,450 65.1% 57,496 43.8% 46,954 81.7% Software & Services 8,924 5.6% 10,057 7.7% (1,133 ) (11.3% ) $ 160,327 100.0% $ 131,189 100.1% $ 29,138 22.2% Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Americas $ 78,203 48.8% $ 78,557 59.9% $ (354 ) (0.5% ) EMEA 64,025 39.9% 23,286 17.7% 40,739 175.0% APJ 18,099 11.3% 29,346 22.4% (11,247 ) (38.3% ) $ 160,327 100.0% $ 131,189 100.0% $ 29,138 22.2% 30 Embedded IoT Solutions Net revenue decreased primarily due to lower unit sales of our embedded compute product line in the Americas and APJ regions as a result of two large design wins that reached end-of-life at the end of fiscal 2023.
Net Revenue The following tables present our net revenue by product lines and by geographic region: Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Embedded IoT Solutions $ 46,380 37.7% $ 46,953 29.3% $ (573 ) (1.2% ) IoT System Solutions 68,735 55.9% 104,450 65.1% (35,715 ) (34.2% ) Software & Services 7,808 6.4% 8,924 5.6% (1,116 ) (12.5% ) $ 122,923 100.0% $ 160,327 100.0% $ (37,404 ) (23.3% ) Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Americas $ 70,126 57.0% $ 78,203 48.8% $ (8,077 ) (10.3% ) EMEA 30,898 25.1% 64,025 39.9% (33,127 ) (51.7% ) APJ 21,899 17.9% 18,099 11.3% 3,800 21.0% $ 122,923 100.0% $ 160,327 100.0% $ (37,404 ) (23.3% ) Embedded IoT Solutions Net revenue decreased primarily due to lower unit sales in some of our legacy embedded ethernet connectivity products across all regions and lower volume sales of our network interface cards in the Americas and APJ regions.
The following table presents our research and development expenses: Years Ended June 30, % of Net % of Net Change 2024 Revenue 2023 Revenue $ % (In thousands, except percentages) Personnel-related expenses $ 14,022 $ 12,535 $ 1,487 11.9% Facilities 2,523 2,664 (141 ) (5.3% ) Outside services 505 773 (268 ) (34.7% ) Product certifications 462 1,067 (605 ) (56.7% ) Share-based compensation 1,852 1,504 348 23.1% Other 918 1,082 (164 ) (15.2% ) Research and development $ 20,282 12.7% $ 19,625 15.0% $ 657 3.3% Research and development expenses increased primarily due to higher personnel-related costs resulting from merit increases and variable and share-based compensation costs related to our improved financial performance in fiscal 2024.
The following table presents our research and development expenses: Years Ended June 30, % of Net % of Net Change 2025 Revenue 2024 Revenue $ % (In thousands, except percentages) Personnel-related expenses $ 12,164 $ 14,022 $ (1,858 ) (13.3% ) Facilities 2,597 2,523 74 2.9% Outside services 636 505 131 25.9% Product certifications 499 462 37 8.0% Share-based compensation 1,522 1,852 (330 ) (17.8% ) Other 1,179 918 261 28.4% Research and development $ 18,597 15.1% $ 20,282 12.7% $ (1,685 ) (8.3% ) Research and development expenses decreased primarily due to (i) lower personnel-related expenses in our engineering groups resulting from restructuring activities during the current fiscal year and (ii) reduced share-based compensation costs based on the value of new and outstanding awards.
We may incur additional restructuring, severance and related charges in future periods as we continue to identify cost savings and synergies related to our acquisitions and general business operations. Acquisition-Related Costs During fiscal 2023 we incurred approximately $315,000 of costs primarily in connection with the acquisition of Uplogix, Inc. (“Uplogix”).
In addition, during fiscal 2025 we downsized the usage of certain sites, resulting in a charge of approximately $379,000, which is included in the total restructuring charges above. We may incur additional restructuring, severance and related charges in future periods as we continue to identify cost savings and efficiencies related to our business.
Significant management judgment is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. These significant judgments may include future expected revenue, expenses, capital expenditures and other costs, discount rates and whether or not alternative uses are available for impacted long-lived assets.
These significant judgments may include future expected revenue, expenses, capital expenditures and other costs, discount rates and whether or not alternative uses are available for impacted long-lived assets. 29 Results of Operations - Fiscal Years Ended June 30, 2025 and 2024 Summary For fiscal 2025, our net revenue decreased by $37,404,000, or 23.3%, compared to fiscal 2024.
There can be no assurance that we will be able to raise any such capital on terms acceptable to us, if at all. Bank Loan Agreements Refer to Note 5 of Notes to Consolidated Financial Statements, included in Part II, Item 8 of this Report, which is incorporated herein by reference, for a discussion of our loan agreements.
Refer to Note 3 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporated herein by reference, for additional discussion regarding the acquisition.
In fiscal 2023, we used a significant amount of cash in the build-up of our inventories and decreases in our accounts payable and accrued liabilities. For fiscal 2024, our net loss included $16,740,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $6,399,000.
For fiscal 2025, our net loss included $12,306,000 of non-cash charges, while the changes in operating assets and liabilities provided net cash of $6,352,000. Accounts receivable decreased by $6,187,000, or 19.8%, from June 30, 2024 to June 30, 2025.
The decrease in net loss was driven primarily by increased revenues, partially offset by an increase in operating expenses of 6.8% and a decrease in gross profit as a percentage of revenue from 42.9% in fiscal 2023 to 40.1% in fiscal 2024.
We had a net loss of $11,373,000 for fiscal 2025, compared to a net loss of $4,516,000 for fiscal 2024. The increase in net loss was primarily driven by the decrease in revenues partially offset by a reduction in operating expenses of $4,516,000 for fiscal 2025 compared to fiscal 2024.
These increases were partially offset by (i) a reduction in headcount and (ii) a decrease in product certification expenses and outsourced development resources. 32 Restructuring, Severance and Related Charges During fiscal 2024 and 2023, we incurred charges of approximately $1,423,000 and $693,000, respectively, related to headcount reductions and restructuring of certain non-essential operations.
These decreases were partially offset by (i) higher facilities-related equipment and software costs, (ii) increased costs for third party contract labor, which are included in the “outside services” category in the table above, and (iii) increased spending on certain prototype and materials costs, which are included in the “other” category in the table above. 32 Restructuring, Severance and Related Charges During fiscal 2025 and 2024, we incurred restructuring, severance and related charges of $3,535,000 and $1,423,000, respectively, due to various headcount reduction efforts during these years.
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Overview Lantronix, Inc. is a global leader in compute and connectivity solutions, targeting high-growth industries such as Smart Cities, Automotive, and Enterprise markets. Our products and services empower companies to capitalize on the expanding internet of things (“IoT”) market by delivering customizable solutions that address each layer of the IoT stack.
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(Nasdaq: LTRX) is a global leader in Edge AI and Industrial IoT solutions, delivering intelligent computing, secure connectivity, and remote management for mission-critical applications. Serving high-growth markets, including smart cities, enterprise IT, and commercial and defense unmanned systems, we enable customers to optimize operations and accelerate digital transformation.
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Refer to “Products and Solutions” included in Part I, Item 1 of this Report, which is incorporated herein by reference, for further discussion. Our Embedded IoT Solutions product lines include Open-Q System on Modules and System in Packages, XPort®, XPort® Pro, Development Kits, xPico®, xPico® Wi-Fi, NICS and Optical SFPs.
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Our comprehensive portfolio of hardware, software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive edge in today’s AI-driven world.
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Our IoT System Solutions product lines include LM83X, LM80, SLC ™ 8000, Spider ™ , EMG ™ , UDS, EDS, EDS-MD, xPress™, xDirect®, E21x, E22x, G52x, X30x, Bolero4x, FOX3-4G, FOX4, SGX™ and Power over Ethernet (“PoE”) Switches. In addition, Lantronix offers non-PoE Network Switches and Media Converters.
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Refer to “Products and Solutions” included in Part I, Item 1 of this Report, which is incorporated herein by reference, for further discussion. Recent Developments Acquisition In December 2024, we finalized the acquisition of Netcomm Wireless Pty Ltd (“Netcomm”), a subsidiary of DZS Inc., for $6,458,000 in cash. Netcomm operated an enterprise IoT business.
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A significant portion of our products are sold to distributors under agreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted for as variable consideration when estimating the amount of revenue to recognize.
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The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance our connectivity solutions in areas such as critical infrastructure, asset monitoring and telecommunications.
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Actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue. 26 A portion of our revenues are derived from engineering and related consulting service contracts with customers.
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The fair value of the reporting unit was estimated using a combination of the income approach (discounted cash flow method) and the market approach (guideline public companies and guideline transactions methods). Key assumptions included revenue growth, EBITDA margins, a long-term growth rate, and a discount rate.
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Changes to performance obligations that we identify, or the estimated selling prices pertaining to a contract, could materially impact the amounts of earned and unearned revenue that we record.
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These assumptions reflect management’s best estimates of future financial performance, current market conditions, and a market participant perspective. The results of the impairment test indicated that the estimated fair value exceeded the carrying amount by approximately 9%. No impairment of goodwill was recognized for the year ended June 30, 2025.
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Our restructuring charges are primarily comprised of employee separation costs, asset impairments and contract exit costs. Employee separation costs include one-time termination benefits that are recognized as a liability at estimated fair value, at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period.
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Significant management judgment is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation.
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Ongoing termination benefits are recognized as a liability at estimated fair value when the amount of such benefits are probable and reasonably estimable. Contract exit costs include contract termination fees and right-of-use asset impairments recognized on the date that we have vacated the premises or ceased use of the leased facilities.
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These decreases were largely offset by higher unit sales of our embedded compute product line driven by a video conferencing customer in the APJ region. 30 IoT System Solutions The decrease in net revenue was substantially driven by our custom solution to our European smart energy grid customer.
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A liability for contract termination fees is recognized in the period in which we terminate the contract. Restructuring accruals are based upon management estimates at the time they are recorded and can change depending upon changes in facts and circumstances subsequent to the date the original liability is recorded.
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In fiscal 2024, this customer represented just over 25% of our net revenue. By comparison, in fiscal 2025, we recognized approximately $11 million from this customer in the first half of the year.
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If actual results differ, or if management determines revised estimates are necessary, we may record additional liabilities or reverse a portion or existing liabilities. Valuation of Deferred Income Taxes We have recorded a valuation allowance to reduce our net deferred tax assets to zero, primarily due to historical net operating losses (“NOLs”) and uncertainty of generating future taxable income.
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Separately, compared to the prior year, we experienced (i) decreased unit sales of our network switches in the Americas region, and (ii) decreased unit sales of our OOB products across all regions, as revenues from these products can be dependent on project-based capital spending.
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We begin our evaluation of goodwill for impairment by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value.
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These decreases were partially offset by higher unit sales of (i) our gateways, routers, and modems products, which was largely driven by contributions from our Netcomm acquisition, and (ii) our telematic gateways in the Americas region.
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Share-Based Compensation We record share-based compensation in our consolidated statements of operations as an expense, based on the estimated grant date fair value of our share-based awards, with the fair values amortized to expense over the requisite service period.
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We also saw a moderate decrease in our extended warranty services in the Americas region, primarily related to lower service volumes in our OOB products. Gross Profit Gross profit represents net revenue less cost of revenue.
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Our share-based awards are currently comprised of restricted stock units, performance stock units, common stock options, and common stock purchase rights granted under our 2013 Employee Stock Purchase Plan (“ESPP”).
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We currently expect that gross margin will fluctuate in the future, from period-to-period, based on changes in our product mix, average selling prices, and average manufacturing costs.
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The fair value of our restricted stock units is based on the closing market price of our common stock on the date of grant. 29 The fair value of our performance stock units is estimated as of the grant date based upon the expected achievement of the performance metrics specified in the grant and the closing market price of our common stock on the date of grant.
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The most significant of these actions occurred in January 2025, in which we reduced our headcount by approximately 12% worldwide, primarily in the U.S. and India. The severance and related charges resulting from this action totaled approximately $1,400,000.
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To the extent a grant of performance share units contains a market condition, the grant date fair value is estimated using a Monte Carlo simulation, which incorporates estimates of the potential outcomes of the market condition on the grant date fair value of each award.
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There can be no assurance that we will be able to raise any such capital on terms acceptable to us, if at all.
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The fair value of our common stock options and ESPP common stock purchase rights is generally estimated on the grant date using the Black-Scholes-Merton (“BSM”) valuation model.
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Cash from operations increased in the prior fiscal year due to (i) reduction of our inventories and higher net revenues and (ii) the receipt of customer deposits. In the current fiscal year, we made payments against previously accrued variable compensation balances, as discussed further below.
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The determination of the fair value of share-based awards utilizing the BSM model is affected by our stock price and various assumptions, including the expected term, expected volatility, risk-free interest rate and expected dividend yields. The expected term of stock options granted is based on our recent historical exercise data.
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The decrease was primarily due to lower net revenue levels in the current fiscal year, as well as the timing of payments from certain customers.
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The expected volatility is based on the historical volatility of our stock price. The risk-free interest rate assumption is based on the U.S. Treasury interest rates appropriate for the expected term of our stock options and common stock purchase rights.
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Accounts payable increased by $2,912,000, or 28.1%, from June 30, 2024 to June 30, 2025 primarily due to the timing of inventory receipts and payments made to our vendors. 35 Accrued payroll and related expenses decreased by $2,365,000 or 40.5% from June 30, 2024 to June 30, 2025.

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