Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Mar. 31, 2015 | Apr. 24, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | LANTRONIX INC | |
Entity Central Index Key | 1114925 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -24 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 14,942,205 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2015 |
Unaudited_Condensed_Consolidat
Unaudited Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Jun. 30, 2014 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $5,598 | $6,264 |
Accounts receivable, net | 2,631 | 3,631 |
Contract manufacturers' receivable | 486 | 359 |
Inventories, net | 8,740 | 8,404 |
Prepaid expenses and other current assets | 493 | 524 |
Total current assets | 17,948 | 19,182 |
Property and equipment, net | 1,311 | 1,487 |
Goodwill | 9,488 | 9,488 |
Deferred tax assets | 400 | 400 |
Other assets | 95 | 125 |
Total assets | 29,242 | 30,682 |
Current liabilities: | ||
Accounts payable | 4,032 | 4,547 |
Accrued payroll and related expenses | 1,676 | 1,863 |
Warranty reserve | 111 | 150 |
Deferred tax liabilities | 400 | 400 |
Other current liabilities | 3,614 | 3,418 |
Total current liabilities | 9,833 | 10,378 |
Non-current liabilities: | ||
Long-term capital lease obligations | 8 | 7 |
Other non-current liabilities | 93 | 131 |
Total liabilities | 9,934 | 10,516 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Common stock | 1 | 1 |
Additional paid-in capital | 205,888 | 205,013 |
Accumulated deficit | -186,952 | -185,219 |
Accumulated other comprehensive income | 371 | 371 |
Total stockholders' equity | 19,308 | 20,166 |
Total liabilities and stockholders' equity | $29,242 | $30,682 |
Unaudited_Condensed_Consolidat1
Unaudited Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | ||||||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | ||||
Income Statement [Abstract] | ||||||||
Net revenue | $10,444 | [1] | $11,593 | [1] | $32,715 | [1] | $33,444 | [1] |
Cost of revenue | 5,735 | 5,694 | 17,237 | 16,718 | ||||
Gross profit | 4,709 | 5,899 | 15,478 | 16,726 | ||||
Operating expenses: | ||||||||
Selling, general and administrative | 3,914 | 4,248 | 11,981 | 12,258 | ||||
Research and development | 1,619 | 1,757 | 5,145 | 5,081 | ||||
Total operating expenses | 5,533 | 6,005 | 17,126 | 17,339 | ||||
Loss from operations | -824 | -106 | -1,648 | -613 | ||||
Interest expense, net | -4 | -6 | -12 | -22 | ||||
Other expense, net | -5 | -2 | -25 | -30 | ||||
Loss before income taxes | -833 | -114 | -1,685 | -665 | ||||
Provision for income taxes | 6 | 16 | 48 | 55 | ||||
Net loss and comprehensive loss | -839 | -130 | -1,733 | -720 | ||||
Net loss per share (basic and diluted) | ($0.06) | ($0.01) | ($0.12) | ($0.05) | ||||
Weighted-average common shares (basic and diluted) | 14,942,000 | 14,686,000 | 14,868,000 | 14,629,000 | ||||
Net revenue from related parties | $28 | $79 | $219 | $452 | ||||
[1] | Includes net revenue from related parties. |
Unaudited_Condensed_Consolidat2
Unaudited Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Operating activities | ||
Net loss | ($1,733) | ($720) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Share-based compensation | 770 | 662 |
Depreciation | 680 | 693 |
Provision for excess and obsolete inventories | 262 | 111 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,000 | -1,288 |
Contract manufacturers' receivable | -127 | 41 |
Inventories | -598 | 1,029 |
Prepaid expenses and other current assets | 31 | -39 |
Other assets | 17 | -30 |
Accounts payable | -514 | 1,182 |
Accrued payroll and related expenses | -187 | 356 |
Warranty reserve | -39 | -36 |
Other liabilities | 179 | -862 |
Net cash provided by (used in) operating activities | -259 | 1,099 |
Investing activities | ||
Purchases of property and equipment | -474 | -417 |
Net cash used in investing activities | -474 | -417 |
Financing activities | ||
Payment of term loan | 0 | -167 |
Net proceeds from issuances of common stock | 158 | 154 |
Minimum tax withholding paid on behalf of employees for restricted shares | -53 | 0 |
Payment of capital lease obligations | -38 | -35 |
Net cash provided by (used in) financing activities | 67 | -48 |
Increase (decrease) in cash and cash equivalents | -666 | 634 |
Cash and cash equivalents at beginning of period | 6,264 | 5,243 |
Cash and cash equivalents at end of period | $5,598 | $5,877 |
1_Basis_of_Presentation
1. Basis of Presentation | 9 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
1. Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of Lantronix, Inc. (referred to in these unaudited condensed consolidated financial statements as “Lantronix,” “we,” “us,” or “our”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2014, included in our Annual Report on Form 10-K filed with the SEC on August 22, 2014. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the consolidated financial position of Lantronix at March 31, 2015, the consolidated results of our operations for the three and nine months ended March 31, 2015 and our consolidated cash flows for the nine months ended March 31, 2015. All intercompany accounts and transactions have been eliminated. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year or any future interim periods. |
Recent Accounting Pronouncements | |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standard which will supersede existing revenue recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. In doing so, among other things, companies will generally need to use more judgment and make more estimates than under the current guidance. Currently, the accounting standard will be effective for Lantronix in the fiscal year beginning July 1, 2017. The standard may be adopted using a full retrospective or a modified retrospective (cumulative effect) method. Currently, early adoption is not permitted. In April 2015, the FASB issued a proposal to defer the effective date of the new standard by one year, but to permit companies to adopt one year earlier if they choose. We are currently evaluating this standard and have not yet selected a transition method nor have we determined the effect of the standard on our financial statements and related disclosures. | |
In August 2014, the FASB issued a new standard that will require management of an entity to assess, for each annual and interim period, if there is substantial doubt about the entity’s ability to continue as a going concern within one year of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood threshold of “probable” similar to the use of that term under current U.S. GAAP for loss contingencies. Certain disclosures will be required if conditions give rise to substantial doubt. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2016. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures. |
2_Supplemental_Financial_Infor
2. Supplemental Financial Information | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Supplemental Financial Information | |||||||||||||||||
2. Supplemental Financial Information | Inventories | ||||||||||||||||
Inventories are stated at the lower of cost (first-in, first-out) or market and consist of the following: | |||||||||||||||||
March 31, | June 30, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Finished goods | $ | 5,059 | $ | 5,162 | |||||||||||||
Raw materials | 2,292 | 1,890 | |||||||||||||||
Finished goods held by distributors | 1,261 | 1,242 | |||||||||||||||
Large scale integration chips * | 128 | 110 | |||||||||||||||
Inventories, net | $ | 8,740 | $ | 8,404 | |||||||||||||
* This item is sold individually and embedded into our products. | |||||||||||||||||
Other Liabilities | |||||||||||||||||
The following table presents details of our other liabilities: | |||||||||||||||||
March 31, | June 30, | ||||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Current | |||||||||||||||||
Customer deposits and refunds | $ | 924 | $ | 711 | |||||||||||||
Accrued raw materials purchases | 729 | 1,138 | |||||||||||||||
Deferred revenue | 599 | 128 | |||||||||||||||
Capital lease obligations | 25 | 47 | |||||||||||||||
Taxes payable | 235 | 235 | |||||||||||||||
Accrued operating expenses | 1,102 | 1,159 | |||||||||||||||
Total other current liabilities | $ | 3,614 | $ | 3,418 | |||||||||||||
Non-current | |||||||||||||||||
Deferred revenue | $ | 93 | $ | 91 | |||||||||||||
Deferred rent | – | 40 | |||||||||||||||
Total other non-current liabilities | $ | 93 | $ | 131 | |||||||||||||
Computation of Net Loss per Share | |||||||||||||||||
Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the applicable period. | |||||||||||||||||
The following table presents the computation of net loss per share: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net loss | $ | (839 | ) | $ | (130 | ) | $ | (1,733 | ) | $ | (720 | ) | |||||
Denominator: | |||||||||||||||||
Weighted-average common shares outstanding (basic and diluted) | 14,942 | 14,686 | 14,868 | 14,629 | |||||||||||||
Net loss per share (basic and diluted) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.12 | ) | $ | (0.05 | ) | |||||
The following table presents the common stock equivalents excluded from the diluted net loss per share calculation, because they were anti-dilutive for the periods presented. These excluded common stock equivalents could be dilutive in the future. | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
March 31, | March 13, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands) | |||||||||||||||||
Common stock equivalents | 1,700 | 930 | 1,653 | 1,696 | |||||||||||||
Supplemental Cash Flow Information | |||||||||||||||||
The following table presents non-cash investing and financing transactions excluded from the unaudited condensed consolidated statements of cash flows: | |||||||||||||||||
Nine Months Ended | |||||||||||||||||
March 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Non-cash acquisition of property and equipment under capital leases | $ | 17 | $ | – | |||||||||||||
3_Warranty_Reserve
3. Warranty Reserve | 9 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Standard Product Warranty Disclosure [Abstract] | |||||||||
3. Warranty Reserve | The warranty periods for our products generally range from one to five years. We establish reserves for estimated product warranty costs at the time revenue is recognized based upon our historical warranty experience, and additionally, for any known product warranty issues. Our warranty obligation is affected by product failure rates, use of materials or service delivery costs that differ from our estimates. As a result, increases or decreases to warranty reserves could be required, which could impact our gross margins. | ||||||||
The following table presents details of our warranty reserve: | |||||||||
Nine Months Ended | Year Ended | ||||||||
March 31, | June 30, | ||||||||
2015 | 2014 | ||||||||
(In thousands) | |||||||||
Beginning balance | $ | 150 | $ | 193 | |||||
Charged to cost of revenues | 43 | 40 | |||||||
Usage | (82 | ) | (83 | ) | |||||
Ending balance | $ | 111 | $ | 150 | |||||
4_Bank_Line_of_Credit
4. Bank Line of Credit | 9 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
4. Bank Line of Credit | On September 30, 2014, we entered into an amendment (the “Amendment”) to our existing Loan and Security Agreement dated May 23, 2006 (as amended, the “Loan Agreement”) with Silicon Valley Bank (“SVB”). The Amendment provides, among other things, for (i) a renewal of our $4.0 million revolving line of credit with an extended maturity date of September 30, 2016 and (ii) a modification of the revolving credit line borrowing base formula to include a portion of our foreign accounts receivable to the borrowing base and increase the borrowing limit related to domestic accounts receivable. | ||||||||
The Loan Agreement provides for an interest rate per annum equal to the greater of the prime rate plus 0.75% or 4.0%, provided that we maintain a monthly quick ratio of 1.0 to 1.0 or greater. The quick ratio measures our ability to use our cash and cash equivalents maintained at SVB to extinguish or retire our current liabilities immediately. If this ratio is not met, the interest rate will become the greater of the prime rate plus 1.25% or 4.0%. We maintained a monthly quick ratio greater than 1.0 to 1.0 as of and during the three months ended March 31, 2015. | |||||||||
The Loan Agreement includes a covenant requiring us to maintain a certain Minimum Tangible Net Worth (“Minimum TNW”), which is currently required to be at least $6.0 million. This amount is subject to adjustment upward to the extent we raise additional equity or debt financing or achieve net income in future quarters. Our Actual Tangible Net Worth (“Actual TNW”) is calculated as total stockholders’ equity, less goodwill. If we continue to incur net losses, we may have difficulty satisfying the Minimum TNW financial covenant in the future, in which case we may be unable to borrow funds under the Loan Agreement and any amounts outstanding may need to be repaid immediately. | |||||||||
As of March 31, 2015, we had no borrowings outstanding on the revolving line of credit. | |||||||||
The following table sets forth the Minimum TNW compared to our Actual TNW: | |||||||||
March 31, | |||||||||
2015 | |||||||||
(In thousands) | |||||||||
Minimum TNW | $ | 6,000 | |||||||
Actual TNW | $ | 9,820 | |||||||
The following table presents the available borrowing capacity on the revolving line of credit and outstanding letters of credit. To date, we have not used any of the borrowing capacity under the revolving line of credit. | |||||||||
March 31, | June 30, | ||||||||
2015 | 2014 | ||||||||
(In thousands) | |||||||||
Available borrowing capacity | $ | 2,541 | $ | 1,721 | |||||
Outstanding letters of credit | $ | 755 | $ | 113 | |||||
In February 2015, we executed a letter of credit with SVB for $591,000 in connection with the purchase of raw materials from one of our contract manufacturers. We paid for the purchase of such materials in early April 2015. All other outstanding letters of credit at March 31, 2015 and June 30, 2014 were used as security deposits. | |||||||||
5_Stockholders_Equity
5. Stockholders' Equity | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Equity [Abstract] | |||||||||||||||||
5. Stockholders' Equity | Share-Based Plans | ||||||||||||||||
Our share-based plans permit the granting of stock options (both incentive and nonqualified stock options), restricted stock units (“RSUs”), stock appreciation rights, non-vested stock, and performance shares to certain employees, directors and consultants. As of March 31, 2015, no stock appreciation rights, non-vested stock, or performance shares were outstanding. | |||||||||||||||||
Stock Option Awards | |||||||||||||||||
The following table presents a summary of stock option activity under all of our stock option plans during the nine months ended March 31, 2015: | |||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Number of | Exercise Price | ||||||||||||||||
Shares | per Share | ||||||||||||||||
(In thousands) | |||||||||||||||||
Balance of options outstanding at June 30, 2014 | 2,719 | $ | 2.35 | ||||||||||||||
Granted | 935 | 1.87 | |||||||||||||||
Forfeited | (24 | ) | 1.9 | ||||||||||||||
Expired | (74 | ) | 4.23 | ||||||||||||||
Exercised | (25 | ) | 1.4 | ||||||||||||||
Balance of options outstanding at March 31, 2015 | 3,531 | $ | 2.19 | ||||||||||||||
Restricted Stock Units | |||||||||||||||||
The following table presents a summary of activity with respect to RSUs during the nine months ended March 31, 2015: | |||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Grant - Date | |||||||||||||||||
Number of | Fair Value | ||||||||||||||||
Shares | per Share | ||||||||||||||||
(In thousands) | |||||||||||||||||
Balance of restricted stock units at June 30, 2014 | 61 | $ | 1.4 | ||||||||||||||
Granted | 28 | 1.98 | |||||||||||||||
Vested | (61 | ) | 1.4 | ||||||||||||||
Balance of restricted stock units at March 31, 2015 | 28 | $ | 1.98 | ||||||||||||||
Employee Stock Purchase Plan | |||||||||||||||||
Our 2013 Employee Stock Purchase Plan (the “ESPP”) is intended to provide employees with an opportunity to purchase our common stock through accumulated payroll deductions. Each of our employees (including officers) is eligible to participate in the ESPP, subject to certain limitations as defined in the ESPP plan document. | |||||||||||||||||
The following table presents a summary of activity under our ESPP during the nine months ended March 31, 2015: | |||||||||||||||||
Number of | |||||||||||||||||
Shares | |||||||||||||||||
(In thousands) | |||||||||||||||||
Shares available for issuance at June 30, 2014 | 1,126 | ||||||||||||||||
Issued | (97 | ) | |||||||||||||||
Shares available for issuance at March 31, 2015 | 1,029 | ||||||||||||||||
Share-Based Compensation Expense | |||||||||||||||||
The following table presents a summary of share-based compensation expense included in each functional line item on our unaudited condensed consolidated statements of operations: | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands) | |||||||||||||||||
Cost of revenues | $ | 17 | $ | 11 | $ | 53 | $ | 35 | |||||||||
Selling, general and administrative | 189 | 144 | 558 | 461 | |||||||||||||
Research and development | 44 | 54 | 159 | 166 | |||||||||||||
Total share-based compensation expense | $ | 250 | $ | 209 | $ | 770 | $ | 662 | |||||||||
The following table summarizes the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of March 31, 2015: | |||||||||||||||||
Remaining | Remaining | ||||||||||||||||
Unrecognized | Weighted | ||||||||||||||||
Compensation | Average Years | ||||||||||||||||
Cost | To Recognize | ||||||||||||||||
(In thousands) | |||||||||||||||||
Stock options | $ | 1,422 | 2.7 | ||||||||||||||
Restricted stock units | 17 | 0.3 | |||||||||||||||
Stock purchase rights under ESPP | 99 | 0.6 | |||||||||||||||
If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate, increase or cancel remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional share-based awards. | |||||||||||||||||
6_Income_Taxes
6. Income Taxes | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||
6. Income Taxes | We utilize the liability method of accounting for income taxes. The following table presents our effective tax rates based upon the income tax provision for the periods shown: | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Effective tax rate | 1% | 14% | 3% | 8% | |||||||||||||
The difference between our effective tax rates in the periods presented above and the federal statutory rate is primarily due to a tax benefit from our domestic losses being recorded with a full valuation allowance, as well as the effect of foreign earnings taxed at rates differing from the federal statutory rate. | |||||||||||||||||
We record net deferred tax assets to the extent that we believe these assets will more likely than not be realized. As a result of our cumulative losses and uncertainty of generating future taxable income, we have provided a full valuation allowance against our net deferred tax assets as of March 31, 2015 and June 30, 2014. |
7_Litigation_and_Contingencies
7. Litigation and Contingencies | 9 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
7. Litigation and Contingencies | From time to time, we are subject to legal proceedings and claims in the ordinary course of business. We are not currently aware of any such legal proceedings or claims that are expected to have, individually or in the aggregate, a material adverse effect on our business, prospects, financial position, operating results or cash flows. |
8_Facility_Lease
8. Facility Lease | 9 Months Ended | ||||||
Mar. 31, 2015 | |||||||
Leases [Abstract] | |||||||
8. Facility Lease | On January 16, 2015, we entered into a building lease agreement (the “Lease”) with the Irvine Company, LLC (the “Landlord”). Pursuant to the Lease, we will lease approximately 27,000 square feet of office space for our corporate headquarters in Irvine, California. The Lease shall commence on the date which is the earlier to occur of: (a) the date we take possession of the premises following the completion of certain tenant improvements to the premises, but not earlier than March 1, 2015, or (b) the date we commence our regular business activities on the premises. We currently expect to take possession of the premises, and commence our regular business activities, sometime in June 2015. | ||||||
The Landlord is obligated to provide a tenant improvement allowance of up to $242,600 for tenant improvements, as defined by the Lease. The term of the Lease will be 65 months from the commencement date. The aggregate basic rent payable under the Lease during the 65-month term is currently expected to be paid as follows: | |||||||
Fiscal year ending June 30, | |||||||
(In thousands) | |||||||
2015 | $ | 37 | |||||
2016 | 444 | ||||||
2017 | 463 | ||||||
2018 | 486 | ||||||
2019 | 505 | ||||||
Thereafter | 713 | ||||||
$ | 2,648 | ||||||
Our existing lease with the Landlord shall terminate effective as of the day preceding the commencement date of the Lease, with no early termination fee. |
1_Basis_of_Presentation_Polici
1. Basis of Presentation (Policies) | 9 Months Ended |
Mar. 31, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited condensed consolidated financial statements of Lantronix, Inc. (referred to in these unaudited condensed consolidated financial statements as “Lantronix,” “we,” “us,” or “our”) have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2014, included in our Annual Report on Form 10-K filed with the SEC on August 22, 2014. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the consolidated financial position of Lantronix at March 31, 2015, the consolidated results of our operations for the three and nine months ended March 31, 2015 and our consolidated cash flows for the nine months ended March 31, 2015. All intercompany accounts and transactions have been eliminated. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended March 31, 2015 are not necessarily indicative of the results to be expected for the full year or any future interim periods. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standard which will supersede existing revenue recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. In doing so, among other things, companies will generally need to use more judgment and make more estimates than under the current guidance. Currently, the accounting standard will be effective for Lantronix in the fiscal year beginning July 1, 2017. The standard may be adopted using a full retrospective or a modified retrospective (cumulative effect) method. Currently, early adoption is not permitted. In April 2015, the FASB issued a proposal to defer the effective date of the new standard by one year, but to permit companies to adopt one year earlier if they choose. We are currently evaluating this standard and have not yet selected a transition method nor have we determined the effect of the standard on our financial statements and related disclosures. | |
In August 2014, the FASB issued a new standard that will require management of an entity to assess, for each annual and interim period, if there is substantial doubt about the entity’s ability to continue as a going concern within one year of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood threshold of “probable” similar to the use of that term under current U.S. GAAP for loss contingencies. Certain disclosures will be required if conditions give rise to substantial doubt. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2016. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures. |
2_Supplemental_Financial_Infor1
2. Supplemental Financial Information (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Supplemental Financial Information | |||||||||||||||||
Schedule of Inventory | March 31, | June 30, | |||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Finished goods | $ | 5,059 | $ | 5,162 | |||||||||||||
Raw materials | 2,292 | 1,890 | |||||||||||||||
Finished goods held by distributors | 1,261 | 1,242 | |||||||||||||||
Large scale integration chips * | 128 | 110 | |||||||||||||||
Inventories, net | $ | 8,740 | $ | 8,404 | |||||||||||||
Schedule of Other Liabilities | March 31, | June 30, | |||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Current | |||||||||||||||||
Customer deposits and refunds | $ | 924 | $ | 711 | |||||||||||||
Accrued raw materials purchases | 729 | 1,138 | |||||||||||||||
Deferred revenue | 599 | 128 | |||||||||||||||
Capital lease obligations | 25 | 47 | |||||||||||||||
Taxes payable | 235 | 235 | |||||||||||||||
Accrued operating expenses | 1,102 | 1,159 | |||||||||||||||
Total other current liabilities | $ | 3,614 | $ | 3,418 | |||||||||||||
Non-current | |||||||||||||||||
Deferred revenue | $ | 93 | $ | 91 | |||||||||||||
Deferred rent | – | 40 | |||||||||||||||
Total other non-current liabilities | $ | 93 | $ | 131 | |||||||||||||
Schedule of Computation of Net Loss per Share | Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands, except per share data) | |||||||||||||||||
Numerator: | |||||||||||||||||
Net loss | $ | (839 | ) | $ | (130 | ) | $ | (1,733 | ) | $ | (720 | ) | |||||
Denominator: | |||||||||||||||||
Weighted-average common shares outstanding (basic and diluted) | 14,942 | 14,686 | 14,868 | 14,629 | |||||||||||||
Net loss per share (basic and diluted) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.12 | ) | $ | (0.05 | ) | |||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 13, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands) | |||||||||||||||||
Common stock equivalents | 1,700 | 930 | 1,653 | 1,696 | |||||||||||||
Schedule of non-cash investing and financing transactions | Nine Months Ended | ||||||||||||||||
March 31, | |||||||||||||||||
2015 | 2014 | ||||||||||||||||
(In thousands) | |||||||||||||||||
Non-cash acquisition of property and equipment under capital leases | $ | 17 | $ | – |
3_Warranty_Reserve_Tables
3. Warranty Reserve (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Standard Product Warranty Disclosure [Abstract] | |||||||||
Warranty reserve | Nine Months Ended | Year Ended | |||||||
March 31, | June 30, | ||||||||
2015 | 2014 | ||||||||
(In thousands) | |||||||||
Beginning balance | $ | 150 | $ | 193 | |||||
Charged to cost of revenues | 43 | 40 | |||||||
Usage | (82 | ) | (83 | ) | |||||
Ending balance | $ | 111 | $ | 150 |
4_Bank_Line_of_Credit_and_Debt
4. Bank Line of Credit and Debt (Tables) | 9 Months Ended | ||||||||
Mar. 31, 2015 | |||||||||
Debt Disclosure [Abstract] | |||||||||
Schedule of Minimum Tangible Net Worth | March 31, | ||||||||
2015 | |||||||||
(In thousands) | |||||||||
Minimum TNW | $ | 6,000 | |||||||
Actual TNW | $ | 9,820 | |||||||
Outstanding balances of loans | March 31, | June 30, | |||||||
2015 | 2014 | ||||||||
(In thousands) | |||||||||
Available borrowing capacity | $ | 2,541 | $ | 1,721 | |||||
Outstanding letters of credit | $ | 755 | $ | 113 |
5_Stockholders_Equity_Tables
5. Stockholders Equity (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Summary of stock option activity | Weighted | ||||||||||||||||
Average | |||||||||||||||||
Number of | Exercise Price | ||||||||||||||||
Shares | per Share | ||||||||||||||||
(In thousands) | |||||||||||||||||
Balance of options outstanding at June 30, 2014 | 2,719 | $ | 2.35 | ||||||||||||||
Granted | 935 | 1.87 | |||||||||||||||
Forfeited | (24 | ) | 1.9 | ||||||||||||||
Expired | (74 | ) | 4.23 | ||||||||||||||
Exercised | (25 | ) | 1.4 | ||||||||||||||
Balance of options outstanding at March 31, 2015 | 3,531 | $ | 2.19 | ||||||||||||||
Schedule of share-based compensation expense | Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
(In thousands) | |||||||||||||||||
Cost of revenues | $ | 17 | $ | 11 | $ | 53 | $ | 35 | |||||||||
Selling, general and administrative | 189 | 144 | 558 | 461 | |||||||||||||
Research and development | 44 | 54 | 159 | 166 | |||||||||||||
Total share-based compensation expense | $ | 250 | $ | 209 | $ | 770 | $ | 662 | |||||||||
Schedule of unrecognized compensation costs | Remaining | Remaining | |||||||||||||||
Unrecognized | Weighted | ||||||||||||||||
Compensation | Average Years | ||||||||||||||||
Cost | To Recognize | ||||||||||||||||
(In thousands) | |||||||||||||||||
Stock options | $ | 1,422 | 2.7 | ||||||||||||||
Restricted stock units | 17 | 0.3 | |||||||||||||||
Stock purchase rights under ESPP | 99 | 0.6 | |||||||||||||||
Restricted Stock Units (RSUs) [Member] | |||||||||||||||||
Summary of other than options activity | Weighted | ||||||||||||||||
Average | |||||||||||||||||
Grant - Date | |||||||||||||||||
Number of | Fair Value | ||||||||||||||||
Shares | per Share | ||||||||||||||||
(In thousands) | |||||||||||||||||
Balance of restricted stock units at June 30, 2014 | 61 | $ | 1.4 | ||||||||||||||
Granted | 28 | 1.98 | |||||||||||||||
Vested | (61 | ) | 1.4 | ||||||||||||||
Balance of restricted stock units at March 31, 2015 | 28 | $ | 1.98 | ||||||||||||||
ESPP [Member] | |||||||||||||||||
Summary of other than options activity | Number of | ||||||||||||||||
Shares | |||||||||||||||||
(In thousands) | |||||||||||||||||
Shares available for issuance at June 30, 2014 | 1,126 | ||||||||||||||||
Issued | (97 | ) | |||||||||||||||
Shares available for issuance at March 31, 2015 | 1,029 |
6_Income_Taxes_Tables
6. Income Taxes (Tables) | 9 Months Ended | ||||||||||||||||
Mar. 31, 2015 | |||||||||||||||||
Income Taxes Tables | |||||||||||||||||
Effective tax rate | Three Months Ended | Nine Months Ended | |||||||||||||||
March 31, | March 31, | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Effective tax rate | 1% | 14% | 3% | 8% |
8_Facility_Lease_Tables
8. Facility Lease (Tables) | 9 Months Ended | ||||||
Mar. 31, 2015 | |||||||
Leases [Abstract] | |||||||
Schedule of minimum lease payments | On January 16, 2015, we entered into a building lease agreement (the “Lease”) with the Irvine Company, LLC (the “Landlord”). Pursuant to the Lease, we will lease approximately 27,000 square feet of office space for our corporate headquarters in Irvine, California. The Lease shall commence on the date which is the earlier to occur of: (a) the date we take possession of the premises following the completion of certain tenant improvements to the premises, but not earlier than March 1, 2015, or (b) the date we commence our regular business activities on the premises. We currently expect to take possession of the premises, and commence our regular business activities, sometime in June 2015. | ||||||
The Landlord is obligated to provide a tenant improvement allowance of up to $242,600 for tenant improvements, as defined by the Lease. The term of the Lease will be 65 months from the commencement date. The aggregate basic rent payable under the Lease during the 65-month term is currently expected to be paid as follows: | |||||||
Fiscal year ending June 30, | |||||||
(In thousands) | |||||||
2015 | $ | 37 | |||||
2016 | 444 | ||||||
2017 | 463 | ||||||
2018 | 486 | ||||||
2019 | 505 | ||||||
Thereafter | 713 | ||||||
$ | 2,648 | ||||||
Our existing lease with the Landlord shall terminate effective as of the day preceding the commencement date of the Lease, with no early termination fee. |
2_Supplemental_Financial_Infor2
2. Supplemental Financial Information (Details - Inventories) (USD $) | Mar. 31, 2015 | Jun. 30, 2014 | ||
In Thousands, unless otherwise specified | ||||
Inventories, net | $8,740 | $8,404 | ||
Finished Goods | ||||
Inventories, net | 5,059 | 5,162 | ||
Raw Materials | ||||
Inventories, net | 2,292 | 1,890 | ||
Finished Goods Held By Distributors | ||||
Inventories, net | 1,261 | 1,242 | ||
Large Scale Integration Chips | ||||
Inventories, net | $128 | [1] | $110 | [1] |
[1] | This item is sold individually and embedded into our products. |
2_Supplemental_Financial_Infor3
2. Supplemental Financial Information (Details - Other liabilities) (USD $) | Mar. 31, 2015 | Jun. 30, 2014 |
In Thousands, unless otherwise specified | ||
Current | ||
Customer deposits and refunds | $924 | $711 |
Accrued raw materials purchases | 729 | 1,138 |
Deferred revenue | 599 | 128 |
Capital lease obligations | 25 | 47 |
Taxes payable | 235 | 235 |
Other accrued liabilities | 1,102 | 1,159 |
Total other current liabilities | 3,614 | 3,418 |
Non-current | ||
Deferred revenue | 93 | 91 |
Deferred rent | 0 | 40 |
Total other non-current liabilities | $93 | $131 |
2_Supplemental_Financial_Infor4
2. Supplemental Financial Information (Details - Computation of Net Loss per Share) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 |
Numerator: | ||||
Net loss | ($839) | ($130) | ($1,733) | ($720) |
Denominator: | ||||
Weighted-average shares outstanding (basic and diluted) | 14,942,000 | 14,686,000 | 14,868,000 | 14,629,000 |
Net loss per share (basic and diluted) | ($0.06) | ($0.01) | ($0.12) | ($0.05) |
2_Supplemental_Financial_Infor5
2. Supplemental Financial Information (Details - Common Stock Equivalents) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 |
Supplemental Financial Information | ||||
Common stock equivalents | 1,700 | 930 | 1,653 | 1,696 |
2_Supplemental_Financial_Infor6
2. Supplemental Financial Information (Details - Supplemental Cash Flow Information) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Supplemental Financial Information | ||
Accrued property and equipment paid for in the subsequent period | $17 | $0 |
3_Warranty_Reserve_Details
3. Warranty Reserve (Details) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Jun. 30, 2014 |
Standard Product Warranty Disclosure [Abstract] | ||
Beginning balance | $150 | $193 |
Charged to cost of revenues | 43 | 40 |
Usage | -82 | -83 |
Ending balance | $111 | $150 |
4_Bank_Line_of_Credit_and_Debt1
4. Bank Line of Credit and Debt (Details - TNW) (USD $) | Mar. 31, 2015 |
In Thousands, unless otherwise specified | |
Line of Credit Facility [Abstract] | |
Minimum TNW | $6,000 |
Actual TNW | $9,820 |
4_Bank_Line_of_Credit_Details_
4. Bank Line of Credit (Details - Available Borrowing Capacity) (USD $) | Mar. 31, 2015 | Jun. 30, 2014 |
In Thousands, unless otherwise specified | ||
Line of Credit Facility [Abstract] | ||
Available borrowing capacity under the revolving line | $2,541 | $1,721 |
Outstanding letters of credit | $755 | $113 |
4_Bank_Line_of_Credit_and_Debt2
4. Bank Line of Credit and Debt (Details Narrative) (USD $) | 9 Months Ended |
Mar. 31, 2015 | |
Line of Credit Facility [Abstract] | |
Revolving Line description | On September 30, 2014, we entered into an amendment (the BAmendmentB) to our existing Loan and Security Agreement dated May 23, 2006 (the BLoan AgreementB) with Silicon Valley Bank (BSVBB). The Amendment provides, among other things, for (i) a renewal of our $4.0 million revolving line of credit with an extended maturity date of September 30, 2016 and (ii) a modification of the revolving credit line borrowing base formula in the Loan Agreement to include a portion of our foreign accounts receivable to the borrowing base and increase the borrowing limit related to domestic accounts receivable. |
Maximum borrowing amount | $4,000,000 |
Maturity date | 30-Sep-16 |
Interest rate description | The Loan Agreement provides for an interest rate per annum equal to the greater of the prime rate plus 0.75% or 4.0%, provided that we maintain a monthly quick ratio of 1.0 to 1.0 or greater. |
5_Stockholders_Equity_Details_
5. Stockholders' Equity (Details - Stock Option Awards) (Options, USD $) | 9 Months Ended |
Mar. 31, 2015 | |
Options | |
Number of shares | |
Number of Shares Options Outstanding, Beginning | 2,719,000 |
Number of Shares Options Granted | 935,000 |
Number of Shares Options Forfeited | -24,000 |
Number of Shares Options Expired | -74,000 |
Number of Shares Options Exercised | -25,000 |
Number of Shares Options Outstanding, Ending | 3,531,000 |
Weighted Average Exercise Price per share | |
Exercise Price Outstanding, Beginning | $2.35 |
Exercise Price Granted | $1.87 |
Exercise Price Forfeited | $1.90 |
Exercise Price Expired | $4.23 |
Exercise Price Exercised | $1.40 |
Exercise Price Outstanding, Ending | $2.19 |
5_Stockholders_Equity_Details_1
5. Stockholders' Equity (Details - RSUs) (Restricted Stock Units (RSUs) [Member]) | 9 Months Ended |
Mar. 31, 2015 | |
Restricted Stock Units (RSUs) [Member] | |
Number of shares | |
Beginning balance RSU's | 61,000 |
Granted | 28,000 |
Vested | -61,000 |
Ending balance RSU's | 28,000 |
5_Stockholders_Equity_Details_2
5. Stockholders' Equity (Details - Employee Stock Purchase Plan) (ESPP [Member]) | 9 Months Ended |
Mar. 31, 2015 | |
ESPP [Member] | |
Number of shares | |
Shares available for issuance at beginning of period | 1,126,000 |
Shares issued | -97,000 |
Shares available for issuance at end of period | 1,029,000 |
5_Stockholders_Equity_Details_3
5. Stockholders' Equity (Details - Share-Based Compensation Expense) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 |
Total share-based compensation | $250 | $209 | $770 | $662 |
Cost of revenues | ||||
Total share-based compensation | 17 | 11 | 53 | 35 |
Selling, general and administrative | ||||
Total share-based compensation | 189 | 144 | 558 | 461 |
Research and development | ||||
Total share-based compensation | $44 | $54 | $159 | $166 |
5_Stockholders_Equity_Details_4
5. Stockholders' Equity (Details - Unrecognized compensation expense) (USD $) | 9 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 |
Options | |
Unrecognized compensation cost | $1,422 |
Remaining weighted average years to recognize | 2 years 8 months 12 days |
Restricted Stock Units (RSUs) [Member] | |
Unrecognized compensation cost | 17 |
Remaining weighted average years to recognize | 3 months 18 days |
ESPP [Member] | |
Unrecognized compensation cost | $99 |
Remaining weighted average years to recognize | 7 months 6 days |
6_Income_Taxes_Details
6. Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | |
Income Taxes Details | ||||
Effective tax rate | 1.00% | 14.00% | 3.00% | 8.00% |
8_Facility_Lease_Details
8. Facility Lease (Details) (USD $) | Mar. 31, 2015 |
In Thousands, unless otherwise specified | |
Leases [Abstract] | |
2015 | $37 |
2016 | 444 |
2017 | 463 |
2018 | 486 |
2019 | 505 |
Thereafter | 713 |
Total lease payable | $2,648 |