Lantronix (LTRX) 10-Q 16 Feb 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2015	Jan. 31, 2016
Document And Entity Information
Entity Registrant Name	LANTRONIX INC
Entity Central Index Key	1,114,925
Document Type	10-Q
Document Period End Date	Dec. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--06-30
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		15,225,206
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,016

Unaudited Condensed Consolidate

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Current assets:
Cash and cash equivalents	$ 4,562	$ 4,989
Accounts receivable, net	2,343	2,658
Inventories, net	7,861	9,503
Contract manufacturers' receivable	482	369
Prepaid expenses and other current assets	615	400
Total current assets	15,863	17,919
Property and equipment, net	1,684	1,471
Goodwill	9,488	9,488
Other assets	56	93
Total assets	27,091	28,971
Current liabilities:
Accounts payable	2,575	3,633
Line of Credit	700	700
Accrued payroll and related expenses	1,655	1,685
Warranty reserve	142	163
Other current liabilities	3,575	3,849
Total current liabilities	8,647	10,030
Non-current liabilities:
Long-term capital lease obligations	150	152
Other non-current liabilities	310	80
Total liabilities	$ 9,107	$ 10,262
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock	$ 2	$ 2
Additional paid-in capital	206,860	206,326
Accumulated deficit	(189,249)	(187,990)
Accumulated other comprehensive income	371	371
Total stockholders' equity	17,984	18,709
Total liabilities and stockholders' equity	$ 27,091	$ 28,971

Unaudited Condensed Consolidat3

Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Income Statement [Abstract]
Net revenue (1)	[1]	$ 9,540	$ 10,735	$ 20,113	$ 22,271
Cost of revenue		4,951	5,565	10,457	11,502
Gross profit		4,589	5,170	9,656	10,769
Operating expenses:
Selling, general and administrative		3,814	3,992	7,539	8,067
Research and development		1,716	1,782	3,387	3,526
Total operating expenses		5,530	5,774	10,926	11,593
Loss from operations		(941)	(604)	(1,270)	(824)
Interest expense, net		(9)	(3)	(15)	(8)
Other income (expense), net		28	1	47	(20)
Loss before income taxes		(922)	(606)	(1,238)	(852)
Provision for income taxes		6	26	21	42
Net loss and comprehensive loss		$ (928)	$ (632)	$ (1,259)	$ (894)
Net loss per share (basic and diluted)		$ (0.06)	$ (0.04)	$ (0.08)	$ (0.06)
Weighted-average common shares (basic and diluted)		15,160	14,874	15,131	14,831
Net revenue from related parties		$ 45	$ 112	$ 113	$ 191
[1]	Includes net revenue from related parties.

Unaudited Condensed Consolidat4

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Operating activities
Net loss	$ (1,259)	$ (894)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation	485	520
Depreciation	423	463
Provision for excess and obsolete inventories	79	52
Changes in operating assets and liabilities:
Accounts receivable	315	997
Inventories	1,563	(944)
Contract manufacturers' receivable	(113)	(34)
Prepaid expenses and other current assets	(215)	(72)
Other assets	25	20
Accounts payable	(1,352)	(319)
Accrued payroll and related expenses	(30)	(169)
Warranty reserve	(21)	(39)
Other liabilities	(290)	(155)
Cash received related to tenant lease incentives	53	0
Net cash used in operating activities	(337)	(574)
Investing activities
Purchases of property and equipment	(103)	(363)
Net cash used in investing activities	(103)	(363)
Financing activities
Minimum tax withholding paid on behalf of employees for restricted shares	(46)	(53)
Proceeds from borrowing on line of credit	1,400	0
Payment on borrowings on line of credit	(1,400)	0
Net proceeds from issuances of common stock	95	158
Payment of capital lease obligations	(36)	(25)
Net cash provided by financing activities	13	80
Decrease in cash and cash equivalents	(427)	(857)
Cash and cash equivalents at beginning of period	4,989	6,264
Cash and cash equivalents at end of period	$ 4,562	$ 5,407

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies	6 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	The Company Lantronix, Inc. (the “Company,” “Lantronix,” “we,” “our,” or “us”) is a specialized networking company providing machine to machine (“M2M”) and Internet of Things (“IoT”) solutions. Our products deliver secure connectivity, device management and mobility for today's increasingly connected world. By networking and managing devices and machines that have never before been connected, we enable our customers to realize the possibilities of the IoT. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Lantronix 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, 2015, included in our Annual Report on Form 10-K filed with the SEC on August 21, 2015. 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 December 31, 2015 and the consolidated results of our operations for the three and six months ended December 31, 2015 and our consolidated cash flows for the six months ended December 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 six months ended December 31, 2015 are not necessarily indicative of the results to be expected for the full year or any future interim periods. Reclassifications Certain reclassifications have been made to the prior year financial information to conform to the current period presentation. 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. The standard permits the use of either a retrospective or cumulative effect transition method. In July 2015, FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for Lantronix in the fiscal year beginning July 1, 2018, with an option to adopt the standard for the fiscal year beginning July 1, 2017. We are currently evaluating this standard and have not yet selected a transition method or the effective date on which we plan to adopt the standard, nor have we determined the effect of the standard on our financial statements and related disclosures. In August 2014, 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. In July 2015, FASB issued final guidance that simplifies the subsequent measurement of inventory for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. For inventory within the scope of the new guidance, entities will be required to compare the cost of inventory t In November 2015, FASB issued final guidance simplifying the balance sheet classification of deferred taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction – that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. Lantronix has elected to adopt this guidance as of the fiscal quarter ended December 31, 2015. We have retrospectively applied this guidance to the accompanying unaudited condensed consolidated balance sheet as of June 30, 2015, which had the effect of increasing our working capital by $442,000 as compared to what was originally reported as of that date.

2. Supplemental Financial Infor

2. Supplemental Financial Information	6 Months Ended
	Dec. 31, 2015
Supplemental Financial Information Details - Computation Of Net Loss Per Share
Supplemental Financial Information	Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consist of the following: December 31, June 30, 2015 2015 (In thousands) Finished goods $ 4,650 $ 6,044 Raw materials 2,005 2,122 Finished goods held by distributors 1,206 1,337 Inventories, net $ 7,861 $ 9,503 Other Liabilities The following table presents details of our other liabilities: December 31, June 30, 2015 2015 (In thousands) Current Customer deposits and refunds $ 912 $ 854 Accrued raw materials purchases 657 916 Deferred revenue 484 690 Capital lease obligations 65 62 Deferred rent 52 40 Taxes payable 249 247 Accrued operating expenses 1,156 1,040 Total other current liabilities $ 3,575 $ 3,849 Non-current Deferred revenue $ 83 $ 80 Deferred rent 227 – Total other non-current liabilities $ 310 $ 80 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 Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands, except per share data) Numerator: Net loss $ (928 ) $ (632 ) $ (1,259 ) $ (894 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 15,160 14,874 15,131 14,831 Net loss per share (basic and diluted) $ (0.06 ) $ (0.04 ) $ (0.08 ) $ (0.06 ) 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 Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands) Common stock equivalents 3,857 1,672 3,774 1,632 Facility Lease The lease for our new corporate headquarters in Irvine, California, commenced in July 2015. The lease agreement provided for a tenant improvement allowance from the landlord of up to $243,000 for tenant improvements and other qualified expenses. In connection with this allowance, the landlord paid for approximately $190,000 in tenant improvements, and, in September 2015, reimbursed Lantronix for the remaining $53,000. Separation Agreement with Former Chief Executive Officer In December 2015, we entered into a separation and release agreement (the “Separation Agreement”) with Kurt F. Busch, our former President and Chief Executive Officer. The Separation Agreement provided for (i) release of all claims by Mr. Busch in favor of Lantronix; (ii) a cash payment to Mr. Busch of $271,000, which was paid in January 2016; and (iii) the acceleration of vesting of 50,000 restricted stock units, for which we recorded a net $52,000 share-based compensation charge. Both the $271,000 accrued obligation and the share-based compensation charge are included in selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended December 31, 2015. Supplemental Cash Flow Information The following table presents non-cash investing and financing transactions excluded from the unaudited condensed consolidated statements of cash flows: Six Months Ended December 31, 2015 2014 (In thousands) Accrued property and equipment paid for in the subsequent period $ 294 $ 38 Non-cash acquisition of property and equipment under capital leases $ 37 $ – Non-cash tenant improvements paid by landlord $ 190 $ –

3. Warranty Reserve

3. Warranty Reserve	6 Months Ended
	Dec. 31, 2015
Standard Product Warranty Disclosure [Abstract]
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: Six Months Ended Year Ended December 31, June 30, 2015 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 15 112 Usage (36 ) (99 ) Ending balance $ 142 $ 163

4. Bank Line of Credit

4. Bank Line of Credit	6 Months Ended
	Dec. 31, 2015
Debt Disclosure [Abstract]
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%. 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. The following table sets forth the Minimum TNW compared to our Actual TNW: December 31, 2015 (In thousands) Minimum TNW $ 6,000 Actual TNW $ 8,496 The following table presents certain information with respect to the Loan Agreement with SVB: December 31, June 30, 2015 2015 (In thousands) Outstanding borrowings on the line of credit $ 700 $ 700 Available borrowing capacity $ 1,626 $ 1,736 Outstanding letters of credit $ 51 $ 110 Our outstanding letters of credit were used as security deposits.

5. Stockholders' Equity

5. Stockholders' Equity	6 Months Ended
	Dec. 31, 2015
Equity [Abstract]
Stockholders' Equity	Share-Based Plans Our stock incentive 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 December 31, 2015, no stock appreciation rights, non-vested stock, or performance shares were outstanding. Stock Option Awards In December 2015, in accordance with his employment offer letter, our new Chief Executive Officer, Jeffrey Benck, was granted the following stock options pursuant to our Amended and Restated 2010 Stock Incentive Plan: (a) an option to purchase 150,000 shares of Lantronix common stock that vest according to the following schedule: 25% of the options shall vest on September 1, 2017 and the remaining options shall vest ratably each month thereafter for a period of 36 months; and (b) an option to purchase 150,000 shares of Lantronix common stock that vest according to the following schedule: 25% of the options shall vest on September 1, 2018 and the remaining options shall vest ratably each month thereafter for a period of 36 months. The following table presents a summary of stock option activity under all of our stock option plans: Weighted Average Number of Exercise Price Shares per Share (In thousands) Balance of options outstanding at June 30, 2015 3,546 $ 2.19 Granted 924 1.26 Forfeited (327 ) 1.76 Expired (56 ) 2.51 Exercised – – Balance of options outstanding at December 31, 2015 4,087 $ 2.01 Restricted Stock Units The following table presents a summary of activity with respect to our RSUs: Weighted Average Grant - Date Number of Fair Value Shares per Share (In thousands) Balance of RSUs outstanding at June 30, 2015 28 $ 1.98 Granted 70 1.28 Vested (78 ) 1.58 Balance of RSUs outstanding at December 31, 2015 20 $ 1.10 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: Number of Shares (In thousands) Shares available for issuance at June 30, 2015 906 Reserved for issuance – Issued (93 ) Shares available for issuance at December 31, 2015 813 In accordance with the terms of our ESPP, the purchase price of the 93,000 shares that were issued on November 13, 2015 was adjusted to $1.02 per share, which represents 85% of the closing market price of our common stock on that date. 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 Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands) Cost of revenues $ 20 $ 16 $ 38 $ 36 Selling, general and administrative 182 195 353 369 Research and development 50 54 94 115 Total share-based compensation expense $ 252 $ 265 $ 485 $ 520 The following table summarizes the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of December 31, 2015: Remaining Remaining Unrecognized Weighted Compensation Average Years Cost To Recognize (In thousands) Stock options $ 1,229 3.3 Restricted stock units 19 0.9 Stock purchase rights under ESPP 164 1.9 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	6 Months Ended
	Dec. 31, 2015
Income Tax Disclosure [Abstract]
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 Six Months Ended December 31, December 31, 2015 2014 2015 2014 Effective tax rate 1% 4% 2% 5% 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 December 31, 2015 and June 30, 2015.

7. Commitments and Contingencie

7. Commitments and Contingencies	6 Months Ended
	Dec. 31, 2015
Commitments and Contingencies Disclosure [Abstract]
Commitments 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. Related Party Transactions

8. Related Party Transactions	6 Months Ended
	Dec. 31, 2015
Related Party Transactions [Abstract]
8. Related Party Transactions	In December 2015, we were informed that our largest stockholder and Lantronix director, Bernhard Bruscha, had sold his investment in Barix AG (“Barix”). Barix is an international customer of Lantronix, for which we have historically reported net revenues as a related party transaction. While we anticipate continuing to sell to Barix, such revenues in subsequent periods will no longer be classified as net revenue from related parties.

9. Subsequent Events

9. Subsequent Events	6 Months Ended
	Dec. 31, 2015
Subsequent Events [Abstract]
9. Subsequent Events	In February 2016, we initiated a strategic realignment plan to enable us to reallocate resources intended to optimize our sales and product development efforts. We expect the realignment activities to result in total pre-tax charges ranging from approximately $200,000 to $300,000, consisting of severance, lease termination and other associated costs. These activities, and the related charges, are expected to be substantially completed and incurred, respectively, during the fiscal quarter ending March 31, 2016.

1. Summary of Significant Acc14

1. Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Dec. 31, 2015
Accounting Policies [Abstract]
The Company	The Company Lantronix, Inc. (the “Company,” “Lantronix,” “we,” “our,” or “us”) is a specialized networking company providing machine to machine (“M2M”) and Internet of Things (“IoT”) solutions. Our products deliver secure connectivity, device management and mobility for today's increasingly connected world. By networking and managing devices and machines that have never before been connected, we enable our customers to realize the possibilities of the IoT.
Basis of Presentation	Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Lantronix 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, 2015, included in our Annual Report on Form 10-K filed with the SEC on August 21, 2015. 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 December 31, 2015 and the consolidated results of our operations for the three and six months ended December 31, 2015 and our consolidated cash flows for the six months ended December 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 six months ended December 31, 2015 are not necessarily indicative of the results to be expected for the full year or any future interim periods.
Reclassifications	Reclassifications Certain reclassifications have been made to the prior year financial information to conform to the current period presentation.
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. The standard permits the use of either a retrospective or cumulative effect transition method. In July 2015, FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for Lantronix in the fiscal year beginning July 1, 2018, with an option to adopt the standard for the fiscal year beginning July 1, 2017. We are currently evaluating this standard and have not yet selected a transition method or the effective date on which we plan to adopt the standard, nor have we determined the effect of the standard on our financial statements and related disclosures. In August 2014, 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. In July 2015, FASB issued final guidance that simplifies the subsequent measurement of inventory for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. For inventory within the scope of the new guidance, entities will be required to compare the cost of inventory t In November 2015, FASB issued final guidance simplifying the balance sheet classification of deferred taxes. The new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. As a result, each jurisdiction will now only have one net noncurrent deferred tax asset or liability. The guidance does not change the existing requirement that only permits offsetting within a jurisdiction – that is, companies are still prohibited from offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. Lantronix has elected to adopt this guidance as of the fiscal quarter ended December 31, 2015. We have retrospectively applied this guidance to the accompanying unaudited condensed consolidated balance sheet as of June 30, 2015, which had the effect of increasing our working capital by $442,000 as compared to what was originally reported as of that date.

2. Supplemental Financial Inf15

2. Supplemental Financial Information (Tables)	6 Months Ended
	Dec. 31, 2015
Supplemental Financial Information Details - Computation Of Net Loss Per Share
Schedule of Inventory	December 31, June 30, 2015 2015 (In thousands) Finished goods $ 4,650 $ 6,044 Raw materials 2,005 2,122 Finished goods held by distributors 1,206 1,337 Inventories, net $ 7,861 $ 9,503
Schedule of Other Liabilities	December 31, June 30, 2015 2015 (In thousands) Current Customer deposits and refunds $ 912 $ 854 Accrued raw materials purchases 657 916 Deferred revenue 484 690 Capital lease obligations 65 62 Deferred rent 52 40 Taxes payable 249 247 Accrued operating expenses 1,156 1,040 Total other current liabilities $ 3,575 $ 3,849 Non-current Deferred revenue $ 83 $ 80 Deferred rent 227 – Total other non-current liabilities $ 310 $ 80
Schedule of Computation of Net Loss per Share	Three Months Ended Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands, except per share data) Numerator: Net loss $ (928 ) $ (632 ) $ (1,259 ) $ (894 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 15,160 14,874 15,131 14,831 Net loss per share (basic and diluted) $ (0.06 ) $ (0.04 ) $ (0.08 ) $ (0.06 )
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share	Three Months Ended Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands) Common stock equivalents 3,857 1,672 3,774 1,632
Schedule of non-cash investing and financing transactions	Six Months Ended December 31, 2015 2014 (In thousands) Accrued property and equipment paid for in the subsequent period $ 294 $ 38 Non-cash acquisition of property and equipment under capital leases $ 37 $ – Non-cash tenant improvements paid by landlord $ 190 $ –

3. Warranty Reserve (Tables)

3. Warranty Reserve (Tables)	6 Months Ended
	Dec. 31, 2015
Standard Product Warranty Disclosure [Abstract]
Warranty reserve	Six Months Ended Year Ended December 31, June 30, 2015 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 15 112 Usage (36 ) (99 ) Ending balance $ 142 $ 163

4. Bank Line of Credit and Debt

4. Bank Line of Credit and Debt (Tables)	6 Months Ended
	Dec. 31, 2015
Debt Disclosure [Abstract]
Schedule of Minimum Tangible Net Worth	December 31, 2015 (In thousands) Minimum TNW $ 6,000 Actual TNW $ 8,496
Outstanding balances of loans	December 31, June 30, 2015 2015 (In thousands) Outstanding borrowings on the line of credit $ 700 $ 700 Available borrowing capacity $ 1,626 $ 1,736 Outstanding letters of credit $ 51 $ 110

5. Stockholders Equity (Tables)

5. Stockholders Equity (Tables)	6 Months Ended
	Dec. 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, 2015 3,546 $ 2.19 Granted 924 1.26 Forfeited (327 ) 1.76 Expired (56 ) 2.51 Exercised – – Balance of options outstanding at December 31, 2015 4,087 $ 2.01
Schedule of share-based compensation expense	Three Months Ended Six Months Ended December 31, December 31, 2015 2014 2015 2014 (In thousands) Cost of revenues $ 20 $ 16 $ 38 $ 36 Selling, general and administrative 182 195 353 369 Research and development 50 54 94 115 Total share-based compensation expense $ 252 $ 265 $ 485 $ 520
Schedule of unrecognized compensation costs	Remaining Remaining Unrecognized Weighted Compensation Average Years Cost To Recognize (In thousands) Stock options $ 1,229 3.3 Restricted stock units 19 0.9 Stock purchase rights under ESPP 164 1.9
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 RSUs outstanding at June 30, 2015 28 $ 1.98 Granted 70 1.28 Vested (78 ) 1.58 Balance of RSUs outstanding at December 31, 2015 20 $ 1.10
ESPP [Member]
Summary of other than options activity	Number of Shares (In thousands) Shares available for issuance at June 30, 2015 906 Reserved for issuance – Issued (93 ) Shares available for issuance at December 31, 2015 813

6. Income Taxes (Tables)

6. Income Taxes (Tables)	6 Months Ended
	Dec. 31, 2015
Income Taxes Tables
Effective tax rate	Three Months Ended Six Months Ended December 31, December 31, 2015 2014 2015 2014 Effective tax rate 1% 4% 2% 5%

2. Supplemental Financial Inf20

2. Supplemental Financial Information (Details - Inventories) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Supplemental Financial Information Details - Computation Of Net Loss Per Share
Finished goods	$ 4,650	$ 6,044
Raw materials	2,005	2,122
Finished goods held by distributors	1,206	1,337
Inventories, net	$ 7,861	$ 9,503

2. Supplemental Financial Inf21

2. Supplemental Financial Information (Details - Other liabilities) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Current
Customer deposits and refunds	$ 912	$ 854
Accrued raw materials purchases	657	916
Deferred revenue	484	690
Capital lease obligations	65	62
Deferred rent	52	40
Taxes payable	249	247
Accrued operating expenses	1,156	1,040
Total other current liabilities	3,575	3,849
Non-current
Deferred revenue	83	80
Deferred rent	227	0
Total other non-current liabilities	$ 310	$ 80

2. Supplemental Financial Inf22

2. Supplemental Financial Information (Details - Computation of Net Loss per Share) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Numerator:
Net loss	$ (928)	$ (632)	$ (1,259)	$ (894)
Denominator:
Weighted-average shares outstanding (basic and diluted)	15,160	14,874	15,131	14,831
Net loss per share (basic and diluted)	$ (0.06)	$ (0.04)	$ (0.08)	$ (0.06)

2. Supplemental Financial Inf23

2. Supplemental Financial Information (Details - Common Stock Equivalents) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Supplemental Financial Information Details - Computation Of Net Loss Per Share
Common stock equivalents	3,857	1,672	3,774	1,632

2. Supplemental Financial Inf24

2. Supplemental Financial Information (Details - Supplemental Cash Flow Information) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Supplemental Cash Flow Information [Abstract]
Accrued property and equipment paid for in the subsequent period	$ 294	$ 38
Non-cash acquisition of property and equipment under capital leases	37	0
Non-cash tenant improvements paid by landlord	$ 190	$ 0

2. Supplemental Cash Flow Infor

2. Supplemental Cash Flow Information (Details Narrative) $ in Thousands	6 Months Ended
	Dec. 31, 2015USD ($)shares
Tenant Improvement Allowance	$ 243
Kurt Busch [Member]
Separation and release payment	$ 271
RSU's vested | shares	50,000
Share-based compensation for RSU's	$ 52

3. Warranty Reserve (Details)

3. Warranty Reserve (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Dec. 31, 2015	Jun. 30, 2015
Standard Product Warranty Disclosure [Abstract]
Beginning balance	$ 163	$ 150
Charged to cost of revenues	15	112
Usage	(36)	(99)
Ending balance	$ 142	$ 163

4. Bank Line of Credit and De27

4. Bank Line of Credit and Debt (Details - TNW) $ in Thousands	Dec. 31, 2015USD ($)
Line of Credit Facility [Abstract]
Minimum TNW	$ 6,000
Actual TNW	$ 8,496

4. Bank Line of Credit (Details

4. Bank Line of Credit (Details - Available Borrowing Capacity) - USD ($) $ in Thousands	Dec. 31, 2015	Jun. 30, 2015
Line of Credit Facility [Abstract]
Outstanding borrowings on the line of credit	$ 700	$ 700
Available borrowing capacity	1,626	1,736
Outstanding letters of credit	$ 51	$ 110

4. Bank Line of Credit and De29

4. Bank Line of Credit and Debt (Details Narrative) $ in Thousands	6 Months Ended
	Dec. 31, 2015USD ($)
Line of Credit Facility [Abstract]
Revolving Line description	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.
Maximum borrowing amount	$ 4,000
Maturity date	Sep. 30, 2016
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. If this ratio is not met, the interest rate will become the greater of the prime rate plus 1.25% or 4.0%.

5. Stockholders' Equity (Detail

5. Stockholders' Equity (Details - Stock Option Awards) - Options shares in Thousands	6 Months Ended
	Dec. 31, 2015$ / sharesshares
Number of shares (in thousands)
Number of Shares Options Outstanding, Beginning | shares	3,546
Number of Shares Options Granted | shares	924
Number of Shares Options Forfeited | shares	(327)
Number of Shares Options Expired | shares	(56)
Number of Shares Options Exercised | shares	0
Number of Shares Options Outstanding, Ending | shares	4,087
Weighted Average Exercise Price per share
Exercise Price Outstanding, Beginning | $ / shares	$ 2.19
Exercise Price Granted | $ / shares	1.26
Exercise Price Forfeited | $ / shares	1.76
Exercise Price Expired | $ / shares	$ 2.51
Exercise Price Exercised | $ / shares
Exercise Price Outstanding, Ending | $ / shares	$ 2.01

5. Stockholders' Equity (Deta31

5. Stockholders' Equity (Details - RSUs) - Restricted Stock Units (RSUs) [Member] shares in Thousands	6 Months Ended
	Dec. 31, 2015$ / sharesshares
Number of shares (in thousands)
Beginning balance RSU's | shares	28
Granted | shares	70
Vested | shares	(78)
Ending balance RSU's | shares	20
Weighted Average Grant Date Fair Value Per Share Abstract
RSU Shares Weighted-Average Grant-Date Fair Value per Share, beginning | $ / shares	$ 1.98
RSU Shares Granted, Weighted-Average Grant-Date Fair Value per Share | $ / shares	1.28
RSU Shares Vested, Weighted-Average Grant-Date Fair Value per Share | $ / shares	1.58
RSU Shares Weighted-Average Grant-Date Fair Value per Share, ending | $ / shares	$ 1.10

5. Stockholders' Equity (Deta32

5. Stockholders' Equity (Details - Employee Stock Purchase Plan) - ESPP [Member] shares in Thousands	6 Months Ended
	Dec. 31, 2015shares
Shares available for issuance at beginning of period	906
Shares reserved for issuance	0
Shares issued	(93)
Shares available for issuance at end of period	813

5. Stockholders' Equity (Deta33

5. Stockholders' Equity (Details - Share-Based Compensation Expense) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Total share-based compensation	$ 252	$ 265	$ 485	$ 520
Cost of revenues
Total share-based compensation	20	16	38	36
Selling, general and administrative
Total share-based compensation	182	195	353	369
Research and development
Total share-based compensation	$ 50	$ 54	$ 94	$ 115

5. Stockholders' Equity (Deta34

5. Stockholders' Equity (Details - Unrecognized compensation expense) $ in Thousands	6 Months Ended
	Dec. 31, 2015USD ($)
Options
Unrecognized compensation cost	$ 1,229
Remaining weighted average years to recognize	3 years 3 months 18 days
Restricted Stock Units (RSUs) [Member]
Unrecognized compensation cost	$ 19
Remaining weighted average years to recognize	10 months 24 days
ESPP [Member]
Unrecognized compensation cost	$ 164
Remaining weighted average years to recognize	1 year 10 months 24 days

5. Stockholders' Equity (Deta35

5. Stockholders' Equity (Details Narrative) shares in Thousands	6 Months Ended
	Dec. 31, 2015shares
Chief Executive Officer [Member] | September 1, 2017
Stock options granted	150
Vesting initial date	Sep. 1, 2017
Chief Executive Officer [Member] | September 1, 2018
Stock options granted	150
Vesting initial date	Sep. 1, 2018
Options
Stock options granted	924

6. Income Taxes (Details)

6. Income Taxes (Details)	3 Months Ended		6 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014
Income Taxes Details
Effective tax rate	1.00%	4.00%	2.00%	5.00%