Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2016 | Apr. 22, 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 | Mar. 31, 2016 | |
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 | Q3 | |
Document Fiscal Year Focus | 2,016 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 4,056 | $ 4,989 |
Accounts receivable, net | 3,131 | 2,658 |
Inventories, net | 7,275 | 9,503 |
Contract manufacturers' receivable | 321 | 369 |
Prepaid expenses and other current assets | 568 | 400 |
Total current assets | 15,351 | 17,919 |
Property and equipment, net | 1,593 | 1,471 |
Goodwill | 9,488 | 9,488 |
Other assets | 54 | 93 |
Total assets | 26,486 | 28,971 |
Current liabilities: | ||
Accounts payable | 2,527 | 3,633 |
Line of Credit | 700 | 700 |
Accrued payroll and related expenses | 1,435 | 1,685 |
Warranty reserve | 139 | 163 |
Other current liabilities | 3,513 | 3,849 |
Total current liabilities | 8,314 | 10,030 |
Non-current liabilities: | ||
Long-term capital lease obligations | 134 | 152 |
Other non-current liabilities | 324 | 80 |
Total liabilities | $ 8,772 | $ 10,262 |
Commitments and contingencies (Note 7) | ||
Stockholders' equity: | ||
Common stock | $ 2 | $ 2 |
Additional paid-in capital | 207,046 | 206,326 |
Accumulated deficit | (189,705) | (187,990) |
Accumulated other comprehensive income | 371 | 371 |
Total stockholders' equity | 17,714 | 18,709 |
Total liabilities and stockholders' equity | $ 26,486 | $ 28,971 |
Unaudited Condensed Consolidat3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | ||
Income Statement [Abstract] | |||||
Net revenue | $ 9,964 | [1] | $ 10,444 | $ 30,077 | $ 32,715 |
Cost of revenue | 5,186 | 5,735 | 15,643 | 17,237 | |
Gross profit | 4,778 | 4,709 | 14,434 | 15,478 | |
Operating expenses: | |||||
Selling, general and administrative | 3,469 | 3,914 | 11,008 | 11,981 | |
Research and development | 1,744 | 1,619 | 5,131 | 5,145 | |
Total operating expenses | 5,213 | 5,533 | 16,139 | 17,126 | |
Loss from operations | (435) | (824) | (1,705) | (1,648) | |
Interest expense, net | (8) | (4) | (23) | (12) | |
Other income (expense), net | 0 | (5) | 47 | (25) | |
Loss before income taxes | (443) | (833) | (1,681) | (1,685) | |
Provision for income taxes | 13 | 6 | 34 | 48 | |
Net loss | $ (456) | $ (839) | $ (1,715) | $ (1,733) | |
Net loss per share (basic and diluted) | $ (.03) | $ (.06) | $ (.11) | $ (.12) | |
Weighted-average common shares (basic and diluted) | 15,225 | 14,942 | 15,163 | 14,868 | |
Net revenue from related parties | $ 0 | $ 28 | $ 113 | $ 219 | |
[1] | Includes net revenue from related parties. |
Unaudited Condensed Consolidat4
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating activities | ||
Net loss | $ (1,715) | $ (1,733) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Share-based compensation | 671 | 770 |
Depreciation | 614 | 680 |
Provision for excess and obsolete inventories | 171 | 262 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (473) | 1,000 |
Inventories | 2,057 | (598) |
Contract manufacturers' receivable | 48 | (127) |
Prepaid expenses and other current assets | (168) | 31 |
Other assets | 23 | 17 |
Accounts payable | (1,121) | (514) |
Accrued payroll and related expenses | (250) | (187) |
Warranty reserve | (24) | (39) |
Other liabilities | (337) | 179 |
Cash received related to tenant lease incentives | 53 | 0 |
Net cash used in operating activities | (451) | (259) |
Investing activities | ||
Purchases of property and equipment | (478) | (474) |
Net cash used in investing activities | (478) | (474) |
Financing activities | ||
Minimum tax withholding paid on behalf of employees for restricted shares | (46) | (53) |
Proceeds from borrowing on line of credit | 2,100 | 0 |
Payment of borrowings on line of credit | (2,100) | 0 |
Net proceeds from issuances of common stock | 95 | 158 |
Payment of capital lease obligations | (53) | (38) |
Net cash provided by (used in) financing activities | (4) | 67 |
Decrease in cash and cash equivalents | (933) | (666) |
Cash and cash equivalents at beginning of period | 4,989 | 6,264 |
Cash and cash equivalents at end of period | $ 4,056 | $ 5,598 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2016 | |
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 March 31, 2016 and the consolidated results of our operations for the three and nine months ended March 31, 2016 and our consolidated cash flows for the nine months ended March 31, 2016. 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, 2016 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 entitys 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 about the entitys ability to continue as a going concern. 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 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 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. In February 2016, FASB issued an accounting standard that revises lease accounting guidance. The standard requires lessees to put most leases on their balance sheets, but recognize expenses on their income statements in a manner similar to the previous guidance. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2019. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures. In March 2016, FASB issued guidance that changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (APIC), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. All of the guidance will be effective for Lantronix in the fiscal year beginning July 1, 2017. 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, 2016 | |
Supplemental Financial Information Details - Other Liabilities | |
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: March 31, June 30, 2016 2015 (In thousands) Finished goods $ 4,059 $ 6,044 Raw materials 2,076 2,122 Finished goods held by distributors 1,140 1,337 Inventories, net $ 7,275 $ 9,503 Other Liabilities The following table presents details of our other liabilities: March 31, June 30, 2016 2015 (In thousands) Current Customer deposits and refunds $ 700 $ 854 Accrued raw materials purchases 726 916 Deferred revenue 458 690 Capital lease obligations 64 62 Deferred rent 52 40 Taxes payable 254 247 Accrued operating expenses 1,259 1,040 Total other current liabilities $ 3,513 $ 3,849 Non-current Deferred revenue $ 98 $ 80 Deferred rent 226 Total other non-current liabilities $ 324 $ 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 Nine Months Ended March 31, March 31, 2016 2015 2016 2015 (In thousands, except per share data) Numerator: Net loss $ (456 ) $ (839 ) $ (1,715 ) $ (1,733 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 15,225 14,942 15,163 14,868 Net loss per share (basic and diluted) $ (0.03 ) $ (0.06 ) $ (0.11 ) $ (0.12 ) 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 31, 2016 2015 2016 2015 (In thousands) Common stock equivalents 3,696 1,700 3,630 1,653 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 cash payment and the share-based compensation charge were recorded in the three months ended December 31, 2015 and are included in selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations for the nine months ended March 31, 2016. Restructuring In February 2016, we initiated a strategic realignment plan to enable us to reallocate resources intended to optimize our sales and product development efforts. The realignment activities were substantially completed in the three months ended March 31, 2016, and consisted of severance, lease termination and other associated costs. These activities resulted in total charges of approximately $247,000, and are included in the applicable functional line items within the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2016. We expect all remaining obligations accrued as of March 31, 2016 to be substantially paid by June 30, 2016. 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, 2016 2015 (In thousands) Accrued property and equipment paid for in the subsequent period $ 15 $ Non-cash acquisition of property and equipment under capital leases $ 37 $ 17 Non-cash tenant improvements paid by landlord $ 190 $ |
3. Warranty Reserve
3. Warranty Reserve | 9 Months Ended |
Mar. 31, 2016 | |
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: Nine Months Ended Year Ended March 31, June 30, 2016 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 59 112 Usage (83 ) (99 ) Ending balance $ 139 $ 163 |
4. Bank Line of Credit
4. Bank Line of Credit | 9 Months Ended |
Mar. 31, 2016 | |
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 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%. At March 31, 2016, we did not meet the 1.0 or higher quick ratio. 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: March 31, 2016 (In thousands) Minimum TNW $ 6,000 Actual TNW $ 8,226 The following table presents certain information with respect to the Loan Agreement with SVB: March 31, June 30, 2016 2015 (In thousands) Outstanding borrowings on the line of credit $ 700 $ 700 Available borrowing capacity $ 1,844 $ 1,736 Outstanding letters of credit $ 51 $ 110 Our outstanding letters of credit were used as security deposits. |
5. Stockholders' Equity
5. Stockholders' Equity | 9 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | Stock Incentive 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 March 31, 2016, no stock appreciation rights, non-vested stock, or performance shares were outstanding. Stock Options The following table presents a summary of activity during the nine months ended March 31, 2016 with respect to our stock options: Number of Shares Weighted Average Exercise Price per Share (In thousands) Balance of options outstanding at June 30, 2015 3,546 $ 2.19 Granted 924 1.26 Forfeited (420 ) 1.73 Expired (712 ) 2.28 Exercised Balance of options outstanding at March 31, 2016 3,338 $ 1.97 Restricted Stock Units The following table presents a summary of activity during the nine months ended March 31, 2016 with respect to our RSUs: Number of Shares Weighted Average Grant - Date Fair Value 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 March 31, 2016 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 at the end of a specified purchase period. Each of our employees (including officers) is eligible to participate in the ESPP, subject to certain limitations as set forth in the ESPP. The following table presents a summary of activity under our ESPP during the nine months ended March 31, 2016: Number of Shares (In thousands) Shares available for issuance at June 30, 2015 906 Reserved for issuance Issued (93 ) Shares available for issuance at March 31, 2016 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 Nine Months Ended March 31, March 31, 2016 2015 2016 2015 (In thousands) Cost of revenues $ 14 $ 17 $ 52 $ 53 Selling, general and administrative 131 189 484 558 Research and development 41 44 135 159 Total share-based compensation expense $ 186 $ 250 $ 671 $ 770 The following table summarizes the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of March 31, 2016: Remaining Unrecognized Compensation Cost Remaining Weighted Average Years To Recognize (In thousands) Stock options $ 1,026 3.2 Restricted stock units 14 0.6 Stock purchase rights under ESPP 125 1.7 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, 2016 | |
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 Nine Months Ended March 31, March 31, 2016 2015 2016 2015 Effective tax rate 3 % 1 % 2 % 3 % 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, 2016 and June 30, 2015. |
7. Commitments and Contingencie
7. Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2016 | |
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. However, legal proceedings and claims are inherently uncertain, and there can be no assurance that existing or future legal matters arising in the ordinary course of business or otherwise will not have a material adverse effect on our business in the future. |
8. Related Party Transactions
8. Related Party Transactions | 9 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
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 continue to sell to Barix, subsequent to December 2015, such revenues are no longer classified as net revenue from related parties. |
1. Summary of Significant Acc13
1. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2016 | |
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 March 31, 2016 and the consolidated results of our operations for the three and nine months ended March 31, 2016 and our consolidated cash flows for the nine months ended March 31, 2016. 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, 2016 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 entitys 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 about the entitys ability to continue as a going concern. 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 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 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. In February 2016, FASB issued an accounting standard that revises lease accounting guidance. The standard requires lessees to put most leases on their balance sheets, but recognize expenses on their income statements in a manner similar to the previous guidance. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2019. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures. In March 2016, FASB issued guidance that changes how companies account for certain aspects of share-based payments to employees. Among other things, under the new guidance companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (APIC), but will instead record such items as income tax expense or benefit in the income statement, and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. All of the guidance will be effective for Lantronix in the fiscal year beginning July 1, 2017. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures. |
2. Supplemental Financial Inf14
2. Supplemental Financial Information (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Supplemental Financial Information Details - Other Liabilities | |
Schedule of Inventory | March 31, June 30, 2016 2015 (In thousands) Finished goods $ 4,059 $ 6,044 Raw materials 2,076 2,122 Finished goods held by distributors 1,140 1,337 Inventories, net $ 7,275 $ 9,503 |
Schedule of Other Liabilities | March 31, June 30, 2016 2015 (In thousands) Current Customer deposits and refunds $ 700 $ 854 Accrued raw materials purchases 726 916 Deferred revenue 458 690 Capital lease obligations 64 62 Deferred rent 52 40 Taxes payable 254 247 Accrued operating expenses 1,259 1,040 Total other current liabilities $ 3,513 $ 3,849 Non-current Deferred revenue $ 98 $ 80 Deferred rent 226 Total other non-current liabilities $ 324 $ 80 |
Schedule of Computation of Net Loss per Share | Three Months Ended Nine Months Ended March 31, March 31, 2016 2015 2016 2015 (In thousands, except per share data) Numerator: Net loss $ (456 ) $ (839 ) $ (1,715 ) $ (1,733 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 15,225 14,942 15,163 14,868 Net loss per share (basic and diluted) $ (0.03 ) $ (0.06 ) $ (0.11 ) $ (0.12 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Three Months Ended Nine Months Ended March 31, March 31, 2016 2015 2016 2015 (In thousands) Common stock equivalents 3,696 1,700 3,630 1,653 |
Schedule of non-cash investing and financing transactions | Nine Months Ended March 31, 2016 2015 (In thousands) Accrued property and equipment paid for in the subsequent period $ 15 $ Non-cash acquisition of property and equipment under capital leases $ 37 $ 17 Non-cash tenant improvements paid by landlord $ 190 $ |
3. Warranty Reserve (Tables)
3. Warranty Reserve (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Standard Product Warranty Disclosure [Abstract] | |
Warranty reserve | Nine Months Ended Year Ended March 31, June 30, 2016 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 59 112 Usage (83 ) (99 ) Ending balance $ 139 $ 163 |
4. Bank Line of Credit and Debt
4. Bank Line of Credit and Debt (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Minimum Tangible Net Worth | March 31, 2016 (In thousands) Minimum TNW $ 6,000 Actual TNW $ 8,226 |
Outstanding balances of loans | March 31, June 30, 2016 2015 (In thousands) Outstanding borrowings on the line of credit $ 700 $ 700 Available borrowing capacity $ 1,844 $ 1,736 Outstanding letters of credit $ 51 $ 110 |
5. Stockholders Equity (Tables)
5. Stockholders Equity (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Summary of stock option activity | Number of Shares Weighted Average Exercise Price per Share (In thousands) Balance of options outstanding at June 30, 2015 3,546 $ 2.19 Granted 924 1.26 Forfeited (420 ) 1.73 Expired (712 ) 2.28 Exercised Balance of options outstanding at March 31, 2016 3,338 $ 1.97 |
Schedule of share-based compensation expense | Three Months Ended Nine Months Ended March 31, March 31, 2016 2015 2016 2015 (In thousands) Cost of revenues $ 14 $ 17 $ 52 $ 53 Selling, general and administrative 131 189 484 558 Research and development 41 44 135 159 Total share-based compensation expense $ 186 $ 250 $ 671 $ 770 |
Schedule of unrecognized compensation costs | Remaining Unrecognized Compensation Cost Remaining Weighted Average Years To Recognize (In thousands) Stock options $ 1,026 3.2 Restricted stock units 14 0.6 Stock purchase rights under ESPP 125 1.7 |
Restricted Stock Units (RSUs) [Member] | |
Summary of other than options activity | Number of Shares Weighted Average Grant - Date Fair Value 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 March 31, 2016 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 March 31, 2016 813 |
6. Income Taxes (Tables)
6. Income Taxes (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Income Taxes Tables | |
Effective tax rate | Three Months Ended Nine Months Ended March 31, March 31, 2016 2015 2016 2015 Effective tax rate 3 % 1 % 2 % 3 % |
1. Summary of Significant Acc19
1. Summary of Significant Accounting Policies (Details Narrative) $ in Thousands | 9 Months Ended |
Mar. 31, 2016USD ($) | |
Accounting Policies [Abstract] | |
Increase in working capital | $ 442,000 |
2. Supplemental Financial Inf20
2. Supplemental Financial Information (Details - Inventories) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Supplemental Financial Information Details - Other Liabilities | ||
Finished goods | $ 4,059 | $ 6,044 |
Raw materials | 2,076 | 2,122 |
Finished goods held by distributors | 1,140 | 1,337 |
Inventories, net | $ 7,275 | $ 9,503 |
2. Supplemental Financial Inf21
2. Supplemental Financial Information (Details - Other liabilities) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Current | ||
Customer deposits and refunds | $ 700 | $ 854 |
Accrued raw materials purchases | 726 | 916 |
Deferred revenue | 458 | 690 |
Capital lease obligations | 64 | 62 |
Deferred rent | 52 | 40 |
Taxes payable | 254 | 247 |
Accrued operating expenses | 1,259 | 1,040 |
Total other current liabilities | 3,513 | 3,849 |
Non-current | ||
Deferred revenue | 98 | 80 |
Deferred rent | 226 | 0 |
Total other non-current liabilities | $ 324 | $ 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 | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Numerator: | ||||
Net loss | $ (456) | $ (839) | $ (1,715) | $ (1,733) |
Denominator: | ||||
Weighted-average shares outstanding (basic and diluted) | 15,225 | 14,942 | 15,163 | 14,868 |
Net loss per share (basic and diluted) | $ (.03) | $ (.06) | $ (.11) | $ (.12) |
2. Supplemental Financial Inf23
2. Supplemental Financial Information (Details - Common Stock Equivalents) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Supplemental Financial Information Details - Other Liabilities | ||||
Common stock equivalents | 3,696 | 1,700 | 3,630 | 1,653 |
2. Supplemental Financial Inf24
2. Supplemental Financial Information (Details - Supplemental Cash Flow Information) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Supplemental Cash Flow Information [Abstract] | ||
Accrued property and equipment paid for in the subsequent period | $ 15 | $ 0 |
Non-cash acquisition of property and equipment under capital leases | 37 | 17 |
Non-cash tenant improvements paid by landlord | $ 190 | $ 0 |
2. Supplemental Cash Flow Infor
2. Supplemental Cash Flow Information (Details Narrative) shares in Thousands, $ in Thousands | 9 Months Ended |
Mar. 31, 2016USD ($)shares | |
Restructuring costs | $ 247 |
Kurt Busch [Member] | |
Separation and release payment | $ 271 |
RSU's vested | shares | 50 |
Share-based compensation for RSU's | $ 52 |
3. Warranty Reserve (Details)
3. Warranty Reserve (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Jun. 30, 2015 | |
Standard Product Warranty Disclosure [Abstract] | ||
Beginning balance | $ 163 | $ 150 |
Charged to cost of revenues | 59 | 112 |
Usage | (83) | (99) |
Ending balance | $ 139 | $ 163 |
4. Bank Line of Credit and De27
4. Bank Line of Credit and Debt (Details - TNW) $ in Thousands | Mar. 31, 2016USD ($) |
Line of Credit Facility [Abstract] | |
Minimum TNW | $ 6,000 |
Actual TNW | $ 8,226 |
4. Bank Line of Credit (Details
4. Bank Line of Credit (Details - Available Borrowing Capacity) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Line of Credit Facility [Abstract] | ||
Outstanding borrowings on the line of credit | $ 700 | $ 700 |
Available borrowing capacity | 1,844 | 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 | 9 Months Ended |
Mar. 31, 2016USD ($) | |
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 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%. At March 31, 2016, we did not meet the 1.0 or higher quick ratio. |
Minimum Tangible Net Worth required | $ 6,000 |
5. Stockholders' Equity (Detail
5. Stockholders' Equity (Details - Stock Option Awards) - Options shares in Thousands | 9 Months Ended |
Mar. 31, 2016$ / 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 | (420) |
Number of Shares Options Expired | shares | (712) |
Number of Shares Options Exercised | shares | 0 |
Number of Shares Options Outstanding, Ending | shares | 3,338 |
Weighted Average Exercise Price per share | |
Exercise Price Outstanding, Beginning | $ / shares | $ 2.19 |
Exercise Price Granted | $ / shares | 1.26 |
Exercise Price Forfeited | $ / shares | 1.73 |
Exercise Price Expired | $ / shares | $ 2.28 |
Exercise Price Exercised | $ / shares | |
Exercise Price Outstanding, Ending | $ / shares | $ 1.97 |
5. Stockholders' Equity (Deta31
5. Stockholders' Equity (Details - RSUs) - Restricted Stock Units (RSUs) [Member] shares in Thousands | 9 Months Ended |
Mar. 31, 2016$ / 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 | 9 Months Ended |
Mar. 31, 2016shares | |
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 | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Total share-based compensation | $ 186 | $ 250 | $ 671 | $ 770 |
Cost of revenues | ||||
Total share-based compensation | 14 | 17 | 52 | 53 |
Selling, general and administrative | ||||
Total share-based compensation | 131 | 189 | 484 | 558 |
Research and development | ||||
Total share-based compensation | $ 41 | $ 44 | $ 135 | $ 159 |
5. Stockholders' Equity (Deta34
5. Stockholders' Equity (Details - Unrecognized compensation expense) $ in Thousands | 9 Months Ended |
Mar. 31, 2016USD ($) | |
Options | |
Unrecognized compensation cost | $ 1,026 |
Remaining weighted average years to recognize | 3 years 2 months 12 days |
Restricted Stock Units (RSUs) [Member] | |
Unrecognized compensation cost | $ 14 |
Remaining weighted average years to recognize | 7 months 6 days |
ESPP [Member] | |
Unrecognized compensation cost | $ 125 |
Remaining weighted average years to recognize | 1 year 8 months 12 days |
5. Stockholders' Equity (Deta35
5. Stockholders' Equity (Details Narrative) - ESPP Member shares in Thousands | 9 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Common stock shares issued | shares | 93 |
Weighted average purchase price per share | $ / shares | $ 1.02 |
Closing market price percentage | 85.00% |
6. Income Taxes (Details)
6. Income Taxes (Details) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Income Taxes Details | ||||
Effective tax rate | 3.00% | 1.00% | 2.00% | 3.00% |