Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2016 | Aug. 01, 2016 | Dec. 31, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | LANTRONIX INC | ||
Entity Central Index Key | 1,114,925 | ||
Document Type | 10-K | ||
Document Period End Date | Jun. 30, 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 Public Float | $ 7,400,000 | ||
Entity Common Stock, Shares Outstanding | 17,253,799 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 5,962 | $ 4,989 |
Accounts receivable (net of allowance for doubtful accounts of $37 and $45 at June 30, 2016 and 2015, respectively) | 3,164 | 2,658 |
Inventories, net | 6,584 | 9,503 |
Contract manufacturers' receivable | 369 | 369 |
Prepaid expenses and other current assets | 580 | 400 |
Total current assets | 16,659 | 17,919 |
Property and equipment, net | 1,569 | 1,471 |
Goodwill | 9,488 | 9,488 |
Other assets | 63 | 93 |
Total assets | 27,779 | 28,971 |
Current liabilities: | ||
Accounts payable | 2,721 | 3,633 |
Line of credit | 0 | 700 |
Accrued payroll and related expenses | 1,817 | 1,685 |
Warranty reserve | 138 | 163 |
Other current liabilities | 2,922 | 3,849 |
Total current liabilities | 7,598 | 10,030 |
Long-term capital lease obligations | 116 | 152 |
Other non-current liabilities | 347 | 80 |
Total liabilities | 8,061 | 10,262 |
Commitments and contingencies (Note 8) | ||
Stockholders' equity: | ||
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; none issued and outstanding | 0 | 0 |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 17,253,799 and 15,089,720 shares issued and outstanding at June 30, 2016 and 2015, respectively | 2 | 2 |
Additional paid-in capital | 209,297 | 206,326 |
Accumulated deficit | (189,952) | (187,990) |
Accumulated other comprehensive income | 371 | 371 |
Total stockholders' equity | 19,718 | 18,709 |
Total liabilities and stockholders' equity | $ 27,779 | $ 28,971 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Assets | ||
Allowance for Receivables | $ 37 | $ 45 |
Stockholders Equity | ||
Preferred Stock par value | $ 0.0001 | $ 0.0001 |
Preferred Stock Authorized | 5,000,000 | 5,000,000 |
Preferred Stock Issued | 0 | 0 |
Preferred Stock Outstanding | 0 | 0 |
Common Stock par value | $ 0.0001 | $ 0.0001 |
Common Stock Authorized | 100,000,000 | 100,000,000 |
Common Stock Issued | 17,253,799 | 15,089,720 |
Common Stock Outstanding | 17,253,799 | 15,089,720 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | ||
Income Statement [Abstract] | |||
Net revenue | [1] | $ 40,592 | $ 42,946 |
Cost of revenue | 21,214 | 22,648 | |
Gross profit | 19,378 | 20,298 | |
Operating expenses: | |||
Selling, general and administrative | 14,396 | 16,041 | |
Research and development | 6,910 | 6,923 | |
Total operating expenses | 21,306 | 22,964 | |
Loss from operations | (1,928) | (2,666) | |
Interest expense, net | (32) | (17) | |
Other income (expense), net | 61 | (30) | |
Loss before income taxes | (1,899) | (2,713) | |
Provision for income taxes | 63 | 58 | |
Net loss and comprehensive loss | $ (1,962) | $ (2,771) | |
Net loss per share (basic and diluted) | $ (0.13) | $ (0.19) | |
Weighted-average shares (basic and diluted) | 15,260,000 | 14,904,000 | |
Net revenue from related parties | $ 113 | $ 298 | |
[1] | Includes net revenue from related parties |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total |
Beginning balance, shares at Jun. 30, 2014 | 14,787,000 | ||||
Beginning balance, value at Jun. 30, 2014 | $ 1 | $ 205,013 | $ (185,219) | $ 371 | $ 20,166 |
Shares issued pursuant to stock awards, net - stock issued | 303,000 | ||||
Shares issued pursuant to stock awards, net value | $ 1 | 351 | 352 | ||
Minimum tax withholding paid on behalf of employees for restricted shares | (53) | (53) | |||
Share-based compensation | 1,015 | 1,015 | |||
Net loss | (2,771) | (2,771) | |||
Ending balance, shares at Jun. 30, 2015 | 15,090,000 | ||||
Ending balance, value at Jun. 30, 2015 | $ 2 | 206,326 | (187,990) | 371 | 18,709 |
Shares issued pursuant to stock awards, net - stock issued | 222,000 | ||||
Shares issued pursuant to stock awards, net value | 174 | 174 | |||
Shares issued pursuant to equity offering, shares | 1,942,000 | ||||
Shares issued pursuant to equity offering, value | 1,975 | 1,975 | |||
Minimum tax withholding paid on behalf of employees for restricted shares | (48) | (48) | |||
Share-based compensation | 870 | 870 | |||
Net loss | (1,962) | (1,962) | |||
Ending balance, shares at Jun. 30, 2016 | 17,254,000 | ||||
Ending balance, value at Jun. 30, 2016 | $ 2 | $ 209,297 | $ (189,952) | $ 371 | $ 19,718 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Operating activities | ||
Net loss | $ (1,962) | $ (2,771) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Share-based compensation | 870 | 1,015 |
Depreciation | 759 | 878 |
Provision for excess and obsolete inventories | 293 | 222 |
Loss (gain) on disposal of property and equipment | 7 | (2) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (506) | 973 |
Inventories | 2,626 | (1,321) |
Contract manufacturers' receivable | 0 | (10) |
Prepaid expenses and other current assets | (180) | 124 |
Other assets | 16 | 12 |
Accounts payable | (965) | (960) |
Accrued payroll and related expenses | 132 | (178) |
Warranty reserve | (25) | 13 |
Other liabilities | (905) | 365 |
Cash received related to tenant lease incentives | 53 | 0 |
Net cash provided by (used in) operating activities | 213 | (1,640) |
Investing activities | ||
Purchases of property and equipment, net | (570) | (577) |
Net cash used in investing activities | (570) | (577) |
Financing activities | ||
Minimum tax withholding paid on behalf of employees for restricted shares | (48) | (53) |
Proceeds from borrowings on line of credit | 2,100 | 1,000 |
Payment of borrowings on line of credit | (2,800) | (300) |
Net proceeds from issuances of common stock | 2,149 | 352 |
Payment of capital lease obligations | (71) | (57) |
Net cash provided by financing activities | 1,330 | 942 |
Increase (decrease) in cash and cash equivalents | 973 | (1,275) |
Cash and cash equivalents at beginning of year | 4,989 | 6,264 |
Cash and cash equivalents at end of year | 5,962 | 4,989 |
Supplemental disclosure of cash flow information | ||
Interest paid | 32 | 19 |
Income taxes paid | $ 32 | $ 39 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
1. Summary of Significant Accounting Policies | The Company Lantronix, Inc. (referred to in these consolidated financial statements as Lantronix, we, our, or us), is a global provider of secure data access and management solutions for Internet of Things (IoT) and information technology assets. Our mission is to be the leading supplier of IoT gateways that enable companies to dramatically simplify the creation, deployment, and management of IoT projects while providing secure access to data for applications and people. We were incorporated in California in 1989 and re-incorporated in Delaware in 2000. Basis of Presentation The consolidated financial statements include the accounts of Lantronix and our wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. At June 30, 2016, approximately $2.3 million of our tangible assets were located outside of the United States (U.S.), and were substantially comprised of inventory held at (i) our third-party logistics provider in Hong Kong and (ii) our contract manufacturers in China. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The industry in which we operate is characterized by rapid technological change. As a result, estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, sales returns and allowances, inventory reserves, goodwill valuation, deferred income tax asset valuation allowances, share-based compensation and warranty reserves. To the extent there are material differences between our estimates and actual results, future results of operations will be affected. Reclassifications Certain reclassifications have been made to the prior fiscal year financial information to conform to the current fiscal year presentation. Revenue Recognition We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectability is reasonably assured. For each of the fiscal years ended June 30, 2016 and 2015, approximately 99% of our net revenues came from sales of hardware products. The remaining 1% of our net revenues in each of these years was primarily attributable to professional engineering services and extended warranty services. We sell extended warranty services which extend the warranty period for an additional one to three years, depending upon the product. Warranty net revenue is deferred and recognized ratably over the warranty service period. When product revenue is recognized, we establish an estimated allowance for future product returns based on historical returns experience. We also record reductions of revenue for pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recognized, based on approved pricing adjustments and historical experience. Actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue. A significant portion of our sales are made to distributors under agreements which contain a limited right to return unsold products and price adjustment provisions. Given these provisions, we have concluded the price to these distributors is not fixed and determinable at the time we deliver products to them. Accordingly, revenue and the related cost of revenue from sales to these distributors is not recognized until the distributor resells the product. In addition, when the deferred revenue attributable to any distributor exceeds their receivable balance due to Lantronix at the balance sheet date, such excess is reclassified from net accounts receivable to a customer deposit and refunds liability, which is included in other current liabilities on the accompanying consolidated balance sheets. Multiple-Element Arrangements From time to time, we may enter into arrangements with customers that provide for multiple deliverables that generally include the sale of products, professional engineering services and other product qualification or certification services (collectively, the deliverables). Pursuant to the applicable accounting guidance, when multiple deliverables in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units that have stand-alone value at the inception of the contract based on a relative selling price hierarchy. We determine the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (VSOE), if available, third-party evidence (TPE), if VSOE is not available, and our best estimate of selling price, if neither VSOE nor TPE is available. We recognize the relative fair value of the deliverables as they are delivered assuming all other revenue recognition criteria are met. Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Our evaluation of the collectability of customer accounts receivable is based on various factors, including the length of time the receivables are past due, our history of bad debts and general industry conditions. Accounts that are deemed uncollectible are written off against the allowance for doubtful accounts. Concentration of Credit Risk Our accounts receivable are primarily derived from revenue earned from customers located throughout North America, Europe and Asia. We perform periodic credit evaluations of our customers financial condition and maintain allowances for potential credit losses. Credit losses have historically been within our expectations. We generally do not require collateral or other security from our customers. Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, accounts receivable, contract manufacturers receivable, accounts payable, accrued liabilities and long-term debt. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree to which the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1: Level 2: Level 3: The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. We do not have any assets or liabilities that were measured at fair value on a recurring basis, and during the years ended June 30, 2016 and June 30, 2015 we did not have any assets or liabilities that were measured at fair value on a non-recurring basis. We believe all of our financial instruments recorded values approximate their current fair values because of the nature and short duration of these instruments. The fair value of long-term debt approximates its carrying value because the related effective rates of interest approximate current market rates available to us for debt with similar terms and similar remaining maturities. Foreign Currency Remeasurement The functional currency for all our foreign subsidiaries is currently the U.S. dollar. Non-monetary and monetary foreign currency assets and liabilities are valued in U.S. dollars at historical and end-of-period exchange rates, respectively. Exchange gains and losses from foreign currency transactions and remeasurements are recognized in the consolidated statements of operations. Translation adjustments for foreign subsidiaries whose functional currency was previously the local currency are suspended in accumulated other comprehensive income. Accumulated Other Comprehensive Income Accumulated other comprehensive income is composed of accumulated translation adjustments as of June 30, 2016 and 2015. We did not have any other comprehensive income or losses during the fiscal years ended June 30, 2016 or 2015. Cash and Cash Equivalents Cash and cash equivalents consist of cash and short-term investments, with original maturities of 90 days or less. Inventories Inventories are stated at the lower of cost (on a first-in, first-out basis) or market. We provide reserves for excess and obsolete inventories determined primarily based upon estimates of future demand for our products. Shipping and handling costs are classified as a component of cost of revenue in the consolidated statements of operations. Inventory Sale and Purchase Transactions with Contract Manufacturers Under certain circumstances, we sell raw materials to our contract manufacturers and subsequently repurchase finished goods from the contract manufacturers which contain such raw materials. Net sales of raw materials to the contract manufacturers are recorded on the consolidated balance sheets as contract manufacturers receivables, and are eliminated from net revenue as we intend to repurchase the raw materials from the contract manufacturers in the form of finished goods. We have contractual arrangements with certain of our contract manufacturers that require us to purchase unused inventory that the contract manufacturer has purchased to fulfill our forecasted manufacturing demand. To the extent that inventory on-hand at one or more of these contract manufacturers exceeds our contractually reported forecasts, we record the amount we may be required to purchase as part of other current liabilities and inventories on the consolidated balance sheets. Property and Equipment Property and equipment are carried at cost. Depreciation is provided using the straight-line method over the assets estimated useful lives, generally ranging from three to five years. Depreciation and amortization of leasehold improvements are computed using the shorter of the remaining lease term or five years. Major renewals and betterments are capitalized, while replacements, maintenance and repairs, which do not improve or extend the estimated useful lives of the respective assets, are expensed as incurred. Capitalized Internal Use Software Costs We capitalize the costs of computer software developed or obtained for internal use. Capitalized computer software costs consist of purchased software licenses and implementation costs. Capitalized software costs are amortized on a straight-line basis over a period of three to five years. Goodwill Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired. We evaluate goodwill for impairment on an annual basis in our fiscal fourth quarter or more frequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount. We begin by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value. Based on that qualitative assessment, if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we conduct a two-step goodwill impairment test. The first step of the impairment test involves comparing the estimated fair value of our single reporting unit with its carrying value, including goodwill. We estimate the fair value of our reporting unit using a combination of the income and market approach. If the carrying value of the reporting unit exceeds its estimated fair value, we perform the second step of the goodwill impairment test which involves comparing the implied fair value of the reporting units goodwill with the carrying value of that goodwill. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. During the fourth quarter of fiscal 2016, using a combination of the income and market approaches of valuation, we performed the first step of the two-step goodwill impairment test described above. Such test resulted in an estimated fair value of our reporting unit in excess of our book value. Accordingly, we concluded that no goodwill impairment existed as of June 30, 2016. Income Taxes Income taxes are computed under the liability method. This method requires the recognition of deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. Financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that meets the more-likely-than-not threshold of being realized upon ultimate settlement with a taxing authority. We recognize potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. Share-Based Compensation We account for share-based compensation by expensing the estimated grant date fair value of our shared-based awards over the requisite service period. We record amortization of share-based compensation expense ratably over the requisite service period of the grant. We also estimate forfeitures based on historical experience in our calculation of share-based compensation expense. Net Income (Loss) Per Share Net income (loss) per share (basic) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the fiscal year. Net income (loss) per share (diluted) is calculated by adjusting the weighted average number of common shares outstanding, assuming any dilutive effects of outstanding share-based awards using the treasury stock method. Research and Development Costs Costs incurred in the research and development of new products and enhancements to existing products are expensed as incurred. Development costs of computer software to be sold, leased or otherwise marketed are subject to capitalization beginning when a products technological feasibility has been established and ending when a product is available for general release to customers. In most instances, we believe our current process for developing products is essentially completed concurrently with the establishment of technological feasibility and as a result, software development costs have been expensed as incurred. Warranty The standard warranty periods for our products typically 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. Although we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, use of materials or service delivery costs that differ from our estimates. Advertising Expenses Advertising costs are expensed in the period incurred. Segment Information We have one operating and reportable business segment. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard which superseded existing revenue recognition guidance under current U.S. GAAP. The 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. More recently, FASB has issued guidance clarifying certain topics such as (i) gross versus net revenue reporting, (ii) identifying performance obligations and licensing and (iii) accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer. 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 an accounting standard which requires 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 are 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. We do not expect adoption of this standard to have a material impact on our financial statements and related disclosures. In November 2015, FASB issued final guidance simplifying the balance sheet classification of deferred taxes. The 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 now only has 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 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 accounting 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. 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 | 12 Months Ended |
Jun. 30, 2016 | |
Supplemental Financial Information | |
2. Supplemental Financial Information | Inventories The following table presents details of our inventories: June 30, 2016 2015 (In thousands) Finished goods $ 3,822 $ 6,044 Raw materials 1,653 2,122 Finished good held by distributors 1,109 1,337 Inventories, net $ 6,584 $ 9,503 Property and Equipment The following table presents details of property and equipment: June 30, 2016 2015 (In thousands) Computer, software and office equipment $ 3,298 $ 3,547 Furniture and fixtures 468 990 Production, development and warehouse equipment 3,724 3,595 Construction-in-progress* 509 282 Property and equipment, gross 7,999 8,414 Less accumulated depreciation (6,430 ) (6,943 ) Property and equipment, net $ 1,569 $ 1,471 ____________ * Includes $470,000 and $255,000 of capitalized software costs at June 30, 2016 and 2015, respectively. The following table presents details of property and equipment recorded in connection with capital lease obligations: June 30, 2016 2015 (In thousands) Property and equipment $ 266 $ 386 Less accumulated depreciation (71 ) (108 ) Total $ 195 $ 278 The amortization of property and equipment recorded in connection with capital lease obligations is included within depreciation expense recorded in the applicable functional line items on our consolidated statements of operations. Warranty Reserve The following table presents details of our warranty reserve: Years Ended June 30, 2016 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 91 112 Usage (116 ) (99 ) Ending balance $ 138 $ 163 Other Liabilities The following table presents details of our other liabilities: June 30, 2016 2015 (In thousands) Current Customer deposits and refunds $ 663 $ 854 Accrued raw materials purchases 582 916 Deferred revenue 427 690 Capital lease obligations 64 62 Taxes payable 275 247 Accrued operating expenses 911 1,080 Total other current liabilities $ 2,922 $ 3,849 Non-current Deferred rent $ 225 $ Deferred revenue 122 80 Total other non-current liabilities $ 347 $ 80 Advertising Expenses The following table presents details of our advertising expenses: Years Ended June 30, 2016 2015 (In thousands) Advertising expenses $ 173 $ 185 Computation of Net Loss per Share The following table presents the computation of net loss per share: Years Ended June 30, 2016 2015 (In thousands, except per share data) Numerator: Net loss and comprehensive loss $ (1,962 ) $ (2,771 ) Denominator: Weighted-average shares outstanding (basic and diluted) 15,260 14,904 Net loss per share (basic and diluted) $ (0.13 ) $ (0.19 ) 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. Years Ended June 30, 2016 2015 (In thousands) Common stock equivalents 3,450 2,323 Separation Agreement with Former President and 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 are included in selling, general and administrative expense in our consolidated statement of operations for the year ended June 30, 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 restructuring activities were substantially completed by June 30, 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 our consolidated statement of operations for the year ended June 30, 2016. Supplemental Cash Flow Information The following table presents non-cash investing and financing transactions excluded from the consolidated statements of cash flows: Years Ended June 30, 2016 2015 (In thousands) Accrued property and equipment paid for in the subsequent period $ 43 $ 46 Non-cash acquisition of property and equipment under capital leases $ 37 $ 217 Non-cash acquisition of property and equipment through non-monetary exchange $ 10 $ Non-cash tenant improvements paid by landlord $ 190 $ |
3. Bank Line of Credit
3. Bank Line of Credit | 12 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
3. 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%. At June 30, 2016, we met the 1.0 to 1.0 or greater quick ratio. The Loan Agreement includes a covenant requiring us to maintain a certain Minimum Tangible Net Worth (Minimum TNW), currently required to be at least $8.0 million, which was adjusted upward from the previous $6.0 million as a result of our sale of common stock in June 2016, as further discussed in Note 4. The Minimum TNW 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 presents the Minimum TNW compared to our Actual TNW: June 30, 2016 (In thousands) Minimum TNW $ 8,000 Actual TNW $ 10,230 The following table presents certain information with respect to the Loan Agreement with SVB: June 30, 2016 2015 (In thousands) Outstanding borrowings on the line of credit $ $ 700 Available borrowing capacity on the line of credit $ 2,620 $ 1,736 Outstanding letters of credit $ 51 $ 110 Our outstanding letters of credit at June 30, 2016 and 2015 were used as security deposits. |
4. Stockholders' Equity
4. Stockholders' Equity | 12 Months Ended |
Jun. 30, 2016 | |
Equity [Abstract] | |
4. Stockholders' Equity | Private Placement Sale of Common Stock On June 16, 2016, we entered into a common stock purchase agreement with Hale Capital Partners, LP (Hale Capital), pursuant to which we issued 1,941,748 shares of our common stock to Hale Capital at a price of $1.03 per share, which reflects the closing price of our common stock as of June 15, 2016, for an aggregate purchase price of $2.0 million. After legal fees, we received net proceeds of $1.975 million from the sale of these shares. The sale of the shares was not registered under the Securities Act of 1933, as amended (the Securities Act) in reliance on the exemption afforded by Section 4(a)(2) thereof and Rule 506(b) of Regulation D promulgated thereunder, as a transaction not involving a public offering. Stock Incentive Plans We have stock incentive plans in effect under which non-qualified and incentive stock options to purchase shares of Lantronix common stock (stock options) have been granted to employees, non-employees and board members. In addition, we have previously granted restricted common stock awards (non-vested shares) to employees and board members under these plans. Our current stock incentive program is governed by our Amended and Restated 2010 Stock Incentive Plan (the 2010 SIP). Shares reserved for issuance under this plan include rollover shares, which are any shares subject to equity compensation awards granted under our previous stock plan that expire or otherwise terminate without having been exercised in full or that are forfeited or repurchased by Lantronix by virtue of their failure to vest. A maximum of 2.1 million such shares are eligible for rollover. The 2010 SIP authorizes awards of stock options (both incentive and non-qualified), stock appreciation rights, non-vested shares, restricted stock units (RSUs) and performance shares. New shares are issued to satisfy stock option exercises and share issuances. As of June 30, 2016, approximately 2.6 million shares remain available for issuance under the 2010 SIP. The Compensation Committee of our board of directors determines eligibility, vesting schedules and exercise prices for options and shares granted under the plans. Stock option awards are generally granted with an exercise price equal to the market price of our common stock at the date of grant. Stock option awards generally have a contractual term of seven to ten years. Share-based awards generally vest and become exercisable over a one to four year service period. As of June 30, 2016, no stock appreciation rights, non-vested shares, or performance shares were outstanding. No income tax benefit was realized from activity in the share-based plans during the fiscal years ended June 30, 2016 and 2015. Stock Option Awards The fair value of each stock option grant is estimated on the grant date using the Black-Scholes-Merton (BSM) option-pricing formula. Expected volatilities are based on the historical volatility of our stock price. The expected term of options granted is estimated using the simplified method, as permitted by guidance issued by the Securities and Exchange Commission. We use the simplified method because we believe we are unable to rely on our limited historical exercise data or alternative information as a reasonable basis upon which to estimate the expected term of such options. The risk-free interest rate assumption is based on the U.S. Treasury interest rates appropriate for the expected term of our stock options. The following weighted-average assumptions were used to estimate the fair value of all of our stock option grants: Years Ended June 30, 2016 2015 Expected term (in years) 4.99 4.82 Expected volatility 67% 67% Risk-free interest rate 1.48% 1.63% Dividend yield 0.00% 0.00% The following table presents a summary of activity for all of our stock options: Weighted-Average Exercise Remaining Aggregate Number of Price Contractual Intrinsic Shares Per Share Term Value (In thousands) (In years) (In thousands) Balance outstanding at June 30, 2015 3,546 $ 2.19 Options granted 1,317 1.14 Options forfeited (453 ) 1.72 Options expired (804 ) 2.25 Options exercised Balance outstanding at June 30, 2016 3,606 $ 1.85 4.6 $ 39 Vested or expected to vest at June 30, 2016 3,355 $ 1.89 4.5 $ 32 Options exercisable at June 30, 2016 1,993 $ 2.30 3.4 $ The following table presents a summary of grant-date fair value and intrinsic value information for all of our stock options: Years Ended June 30, 2016 2015 (In thousands, except per share data) Weighted-average grant-date fair value per share $ 0.64 $ 1.04 Intrinsic value of options exercised $ $ 14 Restricted Stock Units The fair value of our RSUs is based on the closing market price of our common stock on the date of grant. The following table presents a summary of activity with respect to our RSUs during the fiscal year ended June 30, 2016: 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 520 1.12 Vested (88 ) 1.52 Balance of RSUs outstanding at June 30, 2016 460 $ 1.10 Employee Stock Purchase Plan We have an Employee Stock Purchase Plan (the ESPP), under which 1.3 million shares of our common stock were initially reserved for future issuance. 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. The ESPP is implemented by consecutive, overlapping offering periods lasting 24 months (an Offering Period), with a new Offering Period commencing on the first trading day on or after May 16 and November 16 of each year. Common stock may be purchased under the ESPP every six months (a Purchase Period), at a price not less than 85% of the lesser of the fair market value of our common stock on the (i) the first trading day of each Offering Period or (ii) the last trading day of each Purchase Period. To the extent the fair market value of our common stock on the enrollment date of a new Offering Period is lower than the fair market value of our common stock on the enrollment date of the immediately preceding Offering Period, then all participants in the immediately preceding Offering Period will be automatically withdrawn from such Offering Period immediately after the exercise of their options on the exercise date immediately preceding the new Offering Period and automatically re-enrolled in the new Offering Period as of the first day thereof. Generally, a participant in the ESPP may withdraw from an Offering Period at any time without affecting his or her eligibility to participate in future Offering Periods and may increase or decrease the rate of their payroll deductions during an Offering Period. The per share fair value of stock purchase rights granted in connection with the ESPP was estimated using the following weighted-average assumptions: Years Ended June 30, 2016 2015 Expected term (in years) 1.25 1.25 Expected volatility 62% 57% Risk-free interest rate 0.62% 0.32% Dividend yield 0.00% 0.00% The following table presents a summary of activity under our ESPP during the fiscal year ended June 30, 2016: Year Ended June 30, 2016 (In thousands, except per share data) Shares available for issuance at June 30, 2015 906 Shares issued (170 ) Shares available for issuance at June 30, 2016 736 Weighted-average purchase price per share $ 1.02 Intrinsic value of ESPP shares on purchase date $ 39 In accordance with the terms of our ESPP, the purchase price of 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 consolidated statements of operations: Years Ended June 30, 2016 2015 (In thousands) Cost of revenues $ 63 $ 69 Selling, general and administrative 632 745 Research and development 175 201 Total share-based compensation expense $ 870 $ 1,015 The following table summarizes the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of June 30, 2016: Remaining Unrecognized Compensation Cost Remaining Weighted-Average Years to Recognize (In thousands) Stock options $ 1,074 2.8 Restricted stock units 407 2.4 Stock purchase rights under ESPP 190 1.6 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. |
5. 401(k) Plan
5. 401(k) Plan | 12 Months Ended |
Jun. 30, 2016 | |
Compensation and Retirement Disclosure [Abstract] | |
5. 401(k) Plan | We have a savings plan (the Plan) which is qualified under Section 401(k) of the Internal Revenue Code. Eligible employees may elect to make contributions to the Plan through salary deferrals up to 100% of their base pay, subject to limitations. In October 2014, we reinstated a limited matching contribution. We made approximately $112,000 and $84,000 in matching contributions to participants in the Plan during the fiscal years ended June 30, 2016 and 2015, respectively. In addition, we have the ability to make discretionary profit sharing contributions, subject to limitations. During the fiscal years ended June 30, 2016 and 2015, we made no such contributions to the Plan. |
6. Litigation
6. Litigation | 12 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
6. Litigation | From time to time, we are subject to other legal proceedings and claims in the ordinary course of business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, prospects, financial position, operating results or cash flows. |
7. Income Taxes
7. Income Taxes | 12 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
7. Income Taxes | The income tax provision consists of the following components: Years Ended June 30, 2016 2015 (In thousands) Current: Federal $ $ 2 State 2 3 Foreign 61 53 63 58 Deferred: Federal State Provision for income taxes $ 63 $ 58 The following table presents U.S. and foreign income (loss) before income taxes: Years Ended June 30, 2016 2015 (In thousands) United States $ (2,021 ) $ (2,569 ) Foreign 122 (144 ) Loss before income taxes $ (1,899 ) $ (2,713 ) The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows: Years Ended June 30, 2016 2015 (In thousands) Deferred tax assets: Tax losses and credits $ 31,005 $ 31,097 Reserves not currently deductible 2,763 2,780 Deferred compensation 398 593 Inventory capitalization 1,126 1,007 Marketing rights 175 263 Depreciation 430 453 Other 216 185 Gross deferred tax assets 36,113 36,378 Valuation allowance (35,850 ) (35,994 ) Deferred tax assets, net 263 384 Deferred tax liabilities: State taxes (263 ) (384 ) Deferred tax liabilities (263 ) (384 ) Net deferred tax assets (liabilities) $ $ We have recorded a valuation allowance against our net deferred tax assets. The valuation allowance was established due to uncertainties surrounding the realization of the deferred tax assets. The following table presents a reconciliation of the income tax provision to taxes computed at the U.S. federal statutory rate: Years Ended June 30, 2016 2015 (In thousands) Statutory federal provision (benefit) for income taxes $ (646 ) $ (923 ) Increase (decrease) resulting from: State taxes, net of federal benefit (38 ) (56 ) Change in tax rate 15 569 Stock options 250 1,986 Permanent differences 10 15 Change in valuation allowance (133 ) (1,909 ) Deferred compensation 185 209 Foreign tax rate variances 19 102 Other 401 65 Provision for income taxes $ 63 $ 58 Due to the change of ownership provision of the Tax Reform Act of 1986, utilization of our net operating loss (NOL) carryforwards and tax credit carryforwards may be subject to an annual limitation against taxable income in future periods. As a result of the annual limitation, a portion of these carryforwards may expire before ultimately becoming available to reduce future income tax liabilities. The following table summarizes our NOLs: June 30, 2016 (In thousands) Federal $ 88,394 State $ 27,140 Our NOL carryovers for federal income tax purposes begin to expire in the fiscal year ending June 30, 2021. Our NOL carryovers for state income tax purposes began to expire in the fiscal year ended June 30, 2013. Deferred income taxes were not provided on undistributed earnings of certain foreign subsidiaries because such undistributed earnings are expected to be reinvested indefinitely. The following table summarizes our liability for uncertain tax positions for the fiscal year ended June 30, 2016 (in thousands): Balance as of June 30, 2015 $ 6,700 Change in balances related to uncertain tax positions (100 ) Balance as of June 30, 2016 $ 6,600 At June 30, 2016, we had $6.6 million of gross unrecognized tax benefits. Of the total unrecognized benefits at June 30, 2016, $6.6 million was recorded as a reduction to deferred tax assets, which caused a corresponding reduction in our valuation allowance of $6.6 million. To the extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the recognition would reduce the effective tax rate. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. During the fiscal years ended June 30, 2016 and 2015 we recorded an immaterial expense for interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2016, we had approximately $169,000 of accrued interest and penalties related to uncertain tax positions. At June 30, 2016, our fiscal 2013 through 2016 tax years remain open to examination by the federal taxing jurisdiction and our fiscal 2012 through 2016 tax years remain open to examination by the state taxing jurisdictions. However, we have NOLs beginning in fiscal 2001 which would cause the statute of limitations to remain open for the year in which the NOL was incurred. Our fiscal 2009 through fiscal 2016 tax years remain open to examination by foreign taxing authorities. We do not anticipate that the amount of unrecognized tax benefits as of June 30, 2016 will significantly increase or decrease within the next 12 months. |
8. Commitments and Contingencie
8. Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
8. Commitments and Contingencies | Leases We lease office equipment and office and warehouse facilities under non-cancelable capital and operating leases. We currently lease approximately 27,000 square feet of office space for our corporate headquarters in Irvine, California. The lease for this facility commenced in July 2015, and is for a term of 65 months. 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. The following schedule represents minimum lease payments for all non-cancelable operating and capital leases as of June 30, 2016: Capital Operating Years Ending June 30, Leases Leases Total (In thousands) 2017 $ 72 $ 684 $ 756 2018 65 569 634 2019 53 549 602 2020 4 549 553 2021 255 255 Total 194 $ 2,606 $ 2,800 Amounts representing interest (14 ) Present value of net minimum lease payments 180 Less: capital lease obligations, short-term portion (included in other current liabilities) 64 Capital lease obligations, long-term portion $ 116 The following table presents rent expense: Years Ended June 30, 2016 2015 (In thousands) Rent expense $ 738 $ 757 |
9. Significant Geographic, Prod
9. Significant Geographic, Product Line, Customer and Supplier Information | 12 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
9. Significant Geographic, Product Line, Customer and Supplier Information | The following table presents our sales within geographic regions as a percentage of net revenue: Years Ended June 30, 2016 2015 Americas 51% 54% Europe, Middle East, and Africa 32% 30% Asia Pacific Japan 17% 16% Total 100% 100% The following table presents sales to significant countries as a percentage of net revenue: Years Ended June 30, 2016 2015 U.S. and Canada 50% 54% Germany 17% 17% United Kingdom 9% 9% Japan 8% 8% Customers The following table presents sales to our significant customers as a percentage of net revenue: Years Ended June 30, 2016 2015 Top five customers (1)(2) 50% 50% Ingram Micro 20% 21% Arrow 11% * * Less than 10% (1) Includes Ingram Micro and Arrow (2) All top five customers are distributors, who are part of our product distribution system No other customer represented more than 10% of our annual net revenue during these fiscal years. Related Party Transactions Net revenue from related parties represented less than 1% of our total net revenues for the fiscal years ended June 30, 2016 and 2015. We have historically reported net revenues from two international customers, Lynx IT-Systeme GmbH (Lynx) and Barix AG (Barix), as related party transactions due to common ownership by our largest stockholder and Lantronix director, Bernhard Bruscha. Beginning on February 1, 2014, we no longer sell our products directly to Lynx; however, Lynx continues to purchase our products from independent third party distributors and such sales are not included in our net revenue from related parties. In December 2015, we were informed that Mr. Bruscha had sold his investment in Barix. While we continue to sell to Barix, subsequent to December 2015, such revenues are no longer classified as net revenue from related parties. Suppliers We do not own or operate a manufacturing facility. All of our products are manufactured by third-party contract manufacturers and foundries located primarily in Asia. We have several single-sourced supplier relationships, either because alternative sources are not available or because the relationship is advantageous to us. If these suppliers are unable to provide a timely and reliable supply of components, we could experience manufacturing delays that could adversely affect our consolidated results of operations. |
1. Summary of Significant Acc16
1. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The consolidated financial statements include the accounts of Lantronix and our wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. At June 30, 2016, approximately $2.3 million of our tangible assets were located outside of the United States (U.S.), and were substantially comprised of inventory held at (i) our third-party logistics provider in Hong Kong and (ii) our contract manufacturers in China. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The industry in which we operate is characterized by rapid technological change. As a result, estimates made in preparing the consolidated financial statements include the allowance for doubtful accounts, sales returns and allowances, inventory reserves, goodwill valuation, deferred income tax asset valuation allowances, share-based compensation and warranty reserves. To the extent there are material differences between our estimates and actual results, future results of operations will be affected. |
Reclassifications | Reclassifications Certain reclassifications have been made to the prior fiscal year financial information to conform to the current fiscal year presentation. |
Revenue Recognition | Revenue Recognition We recognize revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price to the buyer is fixed or determinable; and collectability is reasonably assured. For each of the fiscal years ended June 30, 2016 and 2015, approximately 99% of our net revenues came from sales of hardware products. The remaining 1% of our net revenues in each of these years was primarily attributable to professional engineering services and extended warranty services. We sell extended warranty services which extend the warranty period for an additional one to three years, depending upon the product. Warranty net revenue is deferred and recognized ratably over the warranty service period. When product revenue is recognized, we establish an estimated allowance for future product returns based on historical returns experience. We also record reductions of revenue for pricing adjustments, such as competitive pricing programs and rebates, in the same period that the related revenue is recognized, based on approved pricing adjustments and historical experience. Actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue. A significant portion of our sales are made to distributors under agreements which contain a limited right to return unsold products and price adjustment provisions. Given these provisions, we have concluded the price to these distributors is not fixed and determinable at the time we deliver products to them. Accordingly, revenue and the related cost of revenue from sales to these distributors is not recognized until the distributor resells the product. In addition, when the deferred revenue attributable to any distributor exceeds their receivable balance due to Lantronix at the balance sheet date, such excess is reclassified from net accounts receivable to a customer deposit and refunds liability, which is included in other current liabilities on the accompanying consolidated balance sheets. Multiple-Element Arrangements From time to time, we may enter into arrangements with customers that provide for multiple deliverables that generally include the sale of products, professional engineering services and other product qualification or certification services (collectively, the deliverables). Pursuant to the applicable accounting guidance, when multiple deliverables in an arrangement are separated into different units of accounting, the arrangement consideration is allocated to the identified separate units that have stand-alone value at the inception of the contract based on a relative selling price hierarchy. We determine the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (VSOE), if available, third-party evidence (TPE), if VSOE is not available, and our best estimate of selling price, if neither VSOE nor TPE is available. We recognize the relative fair value of the deliverables as they are delivered assuming all other revenue recognition criteria are met. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Our evaluation of the collectability of customer accounts receivable is based on various factors, including the length of time the receivables are past due, our history of bad debts and general industry conditions. Accounts that are deemed uncollectible are written off against the allowance for doubtful accounts. |
Concentration of Credit Risk | Concentration of Credit Risk Our accounts receivable are primarily derived from revenue earned from customers located throughout North America, Europe and Asia. We perform periodic credit evaluations of our customers financial condition and maintain allowances for potential credit losses. Credit losses have historically been within our expectations. We generally do not require collateral or other security from our customers. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Our financial instruments consist principally of cash and cash equivalents, accounts receivable, contract manufacturers receivable, accounts payable, accrued liabilities and long-term debt. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree to which the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows: Level 1: Level 2: Level 3: The hierarchy noted above requires us to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. We do not have any assets or liabilities that were measured at fair value on a recurring basis, and during the years ended June 30, 2016 and June 30, 2015 we did not have any assets or liabilities that were measured at fair value on a non-recurring basis. We believe all of our financial instruments recorded values approximate their current fair values because of the nature and short duration of these instruments. The fair value of long-term debt approximates its carrying value because the related effective rates of interest approximate current market rates available to us for debt with similar terms and similar remaining maturities. |
Foreign Currency Remeasurement | Foreign Currency Remeasurement The functional currency for all our foreign subsidiaries is currently the U.S. dollar. Non-monetary and monetary foreign currency assets and liabilities are valued in U.S. dollars at historical and end-of-period exchange rates, respectively. Exchange gains and losses from foreign currency transactions and remeasurements are recognized in the consolidated statements of operations. Translation adjustments for foreign subsidiaries whose functional currency was previously the local currency are suspended in accumulated other comprehensive income. |
Accumulated Other Comprehensive Income | Accumulated Other Comprehensive Income Accumulated other comprehensive income is composed of accumulated translation adjustments as of June 30, 2016 and 2015. We did not have any other comprehensive income or losses during the fiscal years ended June 30, 2016 or 2015. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of cash and short-term investments, with original maturities of 90 days or less. |
Inventories | Inventories Inventories are stated at the lower of cost (on a first-in, first-out basis) or market. We provide reserves for excess and obsolete inventories determined primarily based upon estimates of future demand for our products. Shipping and handling costs are classified as a component of cost of revenue in the consolidated statements of operations. |
Inventory Sale and Purchase Transactions with Contract Manufacturers | Inventory Sale and Purchase Transactions with Contract Manufacturers Under certain circumstances, we sell raw materials to our contract manufacturers and subsequently repurchase finished goods from the contract manufacturers which contain such raw materials. Net sales of raw materials to the contract manufacturers are recorded on the consolidated balance sheets as contract manufacturers receivables, and are eliminated from net revenue as we intend to repurchase the raw materials from the contract manufacturers in the form of finished goods. We have contractual arrangements with certain of our contract manufacturers that require us to purchase unused inventory that the contract manufacturer has purchased to fulfill our forecasted manufacturing demand. To the extent that inventory on-hand at one or more of these contract manufacturers exceeds our contractually reported forecasts, we record the amount we may be required to purchase as part of other current liabilities and inventories on the consolidated balance sheets. |
Property and Equipment | Property and Equipment Property and equipment are carried at cost. Depreciation is provided using the straight-line method over the assets estimated useful lives, generally ranging from three to five years. Depreciation and amortization of leasehold improvements are computed using the shorter of the remaining lease term or five years. Major renewals and betterments are capitalized, while replacements, maintenance and repairs, which do not improve or extend the estimated useful lives of the respective assets, are expensed as incurred. |
Capitalized Internal Use Software Costs | Capitalized Internal Use Software Costs We capitalize the costs of computer software developed or obtained for internal use. Capitalized computer software costs consist of purchased software licenses and implementation costs. Capitalized software costs are amortized on a straight-line basis over a period of three to five years. |
Goodwill | Goodwill Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired. We evaluate goodwill for impairment on an annual basis in our fiscal fourth quarter or more frequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount. We begin by assessing qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value. Based on that qualitative assessment, if we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we conduct a two-step goodwill impairment test. The first step of the impairment test involves comparing the estimated fair value of our single reporting unit with its carrying value, including goodwill. We estimate the fair value of our reporting unit using a combination of the income and market approach. If the carrying value of the reporting unit exceeds its estimated fair value, we perform the second step of the goodwill impairment test which involves comparing the implied fair value of the reporting units goodwill with the carrying value of that goodwill. The amount by which the carrying value of the goodwill exceeds its implied fair value, if any, is recognized as an impairment loss. During the fourth quarter of fiscal 2016, using a combination of the income and market approaches of valuation, we performed the first step of the two-step goodwill impairment test described above. Such test resulted in an estimated fair value of our reporting unit in excess of our book value. Accordingly, we concluded that no goodwill impairment existed as of June 30, 2016. |
Income Taxes | Income Taxes Income taxes are computed under the liability method. This method requires the recognition of deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. Financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that meets the more-likely-than-not threshold of being realized upon ultimate settlement with a taxing authority. We recognize potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. |
Share-Based Compensation | Share-Based Compensation We account for share-based compensation by expensing the estimated grant date fair value of our shared-based awards over the requisite service period. We record amortization of share-based compensation expense ratably over the requisite service period of the grant. We also estimate forfeitures based on historical experience in our calculation of share-based compensation expense. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Net income (loss) per share (basic) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the fiscal year. Net income (loss) per share (diluted) is calculated by adjusting the weighted average number of common shares outstanding, assuming any dilutive effects of outstanding share-based awards using the treasury stock method. |
Research and Development Costs | Research and Development Costs Costs incurred in the research and development of new products and enhancements to existing products are expensed as incurred. Development costs of computer software to be sold, leased or otherwise marketed are subject to capitalization beginning when a products technological feasibility has been established and ending when a product is available for general release to customers. In most instances, we believe our current process for developing products is essentially completed concurrently with the establishment of technological feasibility and as a result, software development costs have been expensed as incurred. |
Warranty | Warranty The standard warranty periods for our products typically 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. Although we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates, use of materials or service delivery costs that differ from our estimates. |
Advertising Expenses | Advertising Expenses Advertising costs are expensed in the period incurred. |
Segment Information | Segment Information We have one operating and reportable business segment. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard which superseded existing revenue recognition guidance under current U.S. GAAP. The 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. More recently, FASB has issued guidance clarifying certain topics such as (i) gross versus net revenue reporting, (ii) identifying performance obligations and licensing and (iii) accounting for shipping and handling fees and costs and accounting for consideration given by a vendor to a customer. 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 an accounting standard which requires 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 are 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. We do not expect adoption of this standard to have a material impact on our financial statements and related disclosures. In November 2015, FASB issued final guidance simplifying the balance sheet classification of deferred taxes. The 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 now only has 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 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 accounting 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. 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 Inf17
2. Supplemental Financial Information (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Supplemental Financial Information | |
Schedule of Inventory | June 30, 2016 2015 (In thousands) Finished goods $ 3,822 $ 6,044 Raw materials 1,653 2,122 Finished good held by distributors 1,109 1,337 Inventories, net $ 6,584 $ 9,503 |
Schedule of Property and Equipment | June 30, 2016 2015 (In thousands) Computer, software and office equipment $ 3,298 $ 3,547 Furniture and fixtures 468 990 Production, development and warehouse equipment 3,724 3,595 Construction-in-progress* 509 282 Property and equipment, gross 7,999 8,414 Less accumulated depreciation (6,430 ) (6,943 ) Property and equipment, net $ 1,569 $ 1,471 ____________ * Includes $470,000 and $255,000 of capitalized software costs at June 30, 2016 and 2015, respectively. |
Schedule of Capital Leased Assets | June 30, 2016 2015 (In thousands) Property and equipment $ 266 $ 386 Less accumulated depreciation (71 ) (108 ) Total $ 195 $ 278 |
Schedule of Warranty Reserve | Years Ended June 30, 2016 2015 (In thousands) Beginning balance $ 163 $ 150 Charged to cost of revenues 91 112 Usage (116 ) (99 ) Ending balance $ 138 $ 163 |
Schedule of Other Liabilities | June 30, 2016 2015 (In thousands) Current Customer deposits and refunds $ 663 $ 854 Accrued raw materials purchases 582 916 Deferred revenue 427 690 Capital lease obligations 64 62 Taxes payable 275 247 Accrued operating expenses 911 1,080 Total other current liabilities $ 2,922 $ 3,849 Non-current Deferred rent $ 225 $ Deferred revenue 122 80 Total other non-current liabilities $ 347 $ 80 |
Schedule of Advertising Expenses | Years Ended June 30, 2016 2015 (In thousands) Advertising expenses $ 173 $ 185 |
Schedule of Computation of Net Loss per Share | Years Ended June 30, 2016 2015 (In thousands, except per share data) Numerator: Net loss and comprehensive loss $ (1,962 ) $ (2,771 ) Denominator: Weighted-average shares outstanding (basic and diluted) 15,260 14,904 Net loss per share (basic and diluted) $ (0.13 ) $ (0.19 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Years Ended June 30, 2016 2015 (In thousands) Common stock equivalents 3,450 2,323 |
Schedule of Supplemental Cash Flow Information | Years Ended June 30, 2016 2015 (In thousands) Accrued property and equipment paid for in the subsequent period $ 43 $ 46 Non-cash acquisition of property and equipment under capital leases $ 37 $ 217 Non-cash acquisition of property and equipment through non-monetary exchange $ 10 $ Non-cash tenant improvements paid by landlord $ 190 $ |
3. Bank Line of Credit (Tables)
3. Bank Line of Credit (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Minimum Tangible Net Worth | June 30, 2016 (In thousands) Minimum TNW $ 8,000 Actual TNW $ 10,230 |
Availability under the Line of Credit | June 30, 2016 2015 (In thousands) Outstanding borrowings on the line of credit $ $ 700 Available borrowing capacity on the line of credit $ 2,620 $ 1,736 Outstanding letters of credit $ 51 $ 110 |
4. Stockholders' Equity (Tables
4. Stockholders' Equity (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Schedule of share-based compensation expense by functional line item | Years Ended June 30, 2016 2015 (In thousands) Cost of revenues $ 63 $ 69 Selling, general and administrative 632 745 Research and development 175 201 Total share-based compensation expense $ 870 $ 1,015 |
Schedule of unrecognized share-based compensation expense | Remaining Unrecognized Compensation Cost Remaining Weighted-Average Years to Recognize (In thousands) Stock options $ 1,074 2.8 Restricted stock units 407 2.4 Stock purchase rights under ESPP 190 1.6 |
Stock Options [Member] | |
Schedule of Stock Options Valuation Assumptions | Years Ended June 30, 2016 2015 Expected term (in years) 4.99 4.82 Expected volatility 67% 67% Risk-free interest rate 1.48% 1.63% Dividend yield 0.00% 0.00% |
Summary of stock option activity | Weighted-Average Exercise Remaining Aggregate Number of Price Contractual Intrinsic Shares Per Share Term Value (In thousands) (In years) (In thousands) Balance outstanding at June 30, 2015 3,546 $ 2.19 Options granted 1,317 1.14 Options forfeited (453 ) 1.72 Options expired (804 ) 2.25 Options exercised Balance outstandingat June 30, 2016 3,606 $ 1.85 4.6 $ 39 Vested or expected to vest at June 30, 2016 3,355 $ 1.89 4.5 $ 32 Options exercisable at June 30, 2016 1,993 $ 2.30 3.4 $ |
Summary of option grant-date fair value and intrinsic value information | Years Ended June 30, 2016 2015 (In thousands, except per share data) Weighted-average grant-date fair value per share $ 0.64 $ 1.04 Intrinsic value of options exercised $ $ 14 |
Restricted Stock Units (RSUs) [Member] | |
Summary of other-than-option 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 520 1.12 Vested (88 ) 1.52 Balance of RSUs outstanding at June 30, 2016 460 $ 1.10 |
ESPP [Member] | |
Schedule of Stock Options Valuation Assumptions | Years Ended June 30, 2016 2015 Expected term (in years) 1.25 1.25 Expected volatility 62% 57% Risk-free interest rate 0.62% 0.32% Dividend yield 0.00% 0.00% |
Summary of other-than-option activity | Year Ended June 30, 2016 (In thousands, except per share data) Shares available for issuance at June 30, 2015 906 Shares issued (170 ) Shares available for issuance at June 30, 2016 736 Weighted-average purchase price per share $ 1.02 Intrinsic value of ESPP shares on purchase date $ 39 |
7. Income Taxes (Tables)
7. Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense | Years Ended June 30, 2016 2015 (In thousands) Current: Federal $ $ 2 State 2 3 Foreign 61 53 63 58 Deferred: Federal State Provision for income taxes $ 63 $ 58 |
Schedule of Income before Income Tax, Domestic and Foreign | Years Ended June 30, 2016 2015 (In thousands) United States $ (2,021 ) $ (2,569 ) Foreign 122 (144 ) Loss before income taxes $ (1,899 ) $ (2,713 ) |
Schedule of Deferred Tax Assets and Liabilities | Years Ended June 30, 2016 2015 (In thousands) Deferred tax assets: Tax losses and credits $ 31,005 $ 31,097 Reserves not currently deductible 2,763 2,780 Deferred compensation 398 593 Inventory capitalization 1,126 1,007 Marketing rights 175 263 Depreciation 430 453 Other 216 185 Gross deferred tax assets 36,113 36,378 Valuation allowance (35,850 ) (35,994 ) Deferred tax assets, net 263 384 Deferred tax liabilities: State taxes (263 ) (384 ) Deferred tax liabilities (263 ) (384 ) Net deferred tax assets (liabilities) $ $ |
Schedule of Effective Income Tax Reconciliation | Years Ended June 30, 2016 2015 (In thousands) Statutory federal provision (benefit) for income taxes $ (646 ) $ (923 ) Increase (decrease) resulting from: State taxes, net of federal benefit (38 ) (56 ) Change in tax rate 15 569 Stock options 250 1,986 Permanent differences 10 15 Change in valuation allowance (133 ) (1,909 ) Deferred compensation 185 209 Foreign tax rate variances 19 102 Other 401 65 Provision for income taxes $ 63 $ 58 |
Summary of Operating Loss Carryforwards | June 30, 2016 (In thousands) Federal $ 88,394 State $ 27,140 |
Summary of uncertain tax position | Balance as of June 30, 2015 $ 6,700 Change in balances related to uncertain tax positions (100 ) Balance as of June 30, 2016 $ 6,600 |
8. Commitments and Contingenc21
8. Commitments and Contingencies (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Minimum Lease Payments | Capital Operating Years Ending June 30, Leases Leases Total (In thousands) 2017 $ 72 $ 684 $ 756 2018 65 569 634 2019 53 549 602 2020 4 549 553 2021 255 255 Total 194 $ 2,606 $ 2,800 Amounts representing interest (14 ) Present value of net minimum lease payments 180 Less: capital lease obligations, short-term portion (included in other current liabilities) 64 Capital lease obligations, long-term portion $ 116 |
Schedule of Rent Expense | Years Ended June 30, 2016 2015 (In thousands) Rent expense $ 738 $ 757 |
9. Significant Geographic, Pr22
9. Significant Geographic, Product Line, Customer and Supplier Information (Tables) | 12 Months Ended |
Jun. 30, 2016 | |
Segment Reporting [Abstract] | |
Schedule of Revenue by Geographic Area | Years Ended June 30, 2016 2015 Americas 51% 54% Europe, Middle East, and Africa 32% 30% Asia Pacific Japan 17% 16% Total 100% 100% |
Schedule of Significant countries as a percentage of net revenue | Years Ended June 30, 2016 2015 U.S. and Canada 50% 54% Germany 17% 17% United Kingdom 9% 9% Japan 8% 8% |
Schedule of Revenue by Major Customers | Years Ended June 30, 2016 2015 Top five customers (1)(2) 50% 50% Ingram Micro 20% 21% Arrow 11% * |
2. Supplemental Financial Inf23
2. Supplemental Financial Information (Details - Inventories) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Supplemental Financial Information | ||
Finished goods | $ 3,822 | $ 6,044 |
Raw materials | 1,653 | 2,122 |
Finished goods held by distributors | 1,109 | 1,337 |
Inventories, net | $ 6,584 | $ 9,503 |
2. Supplemental Financial Inf24
2. Supplemental Financial Information (Details - Property and Equipment) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Property and equipment, gross | $ 7,999 | $ 8,414 |
Less accumulated depreciation | (6,430) | (6,943) |
Property and equipment, net | 1,569 | 1,471 |
Computer, software and office equipment [Member] | ||
Property and equipment, gross | 3,298 | 3,547 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 468 | 990 |
Production, development and warehouse equipment [Member] | ||
Property and equipment, gross | 3,724 | 3,595 |
Construction in Progress [Member] | ||
Property and equipment, gross | 509 | 282 |
Capitalized software costs | $ 470 | $ 285 |
2. Supplemental Financial Inf25
2. Supplemental Financial Information (Details - Capital lease obligations) - Capital lease obligations [Member] - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Property and equipment under capital leases | $ 266 | $ 386 |
Less accumulated depreciation | (71) | (108) |
Property and equipment under capital leases, net | $ 195 | $ 278 |
2. Supplemental Financial Inf26
2. Supplemental Financial Information (Details - Warranty reserve) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Supplemental Financial Information | ||
Beginning balance | $ 163 | $ 150 |
Charged to cost of revenues | 91 | 112 |
Usage | (116) | (99) |
Ending balance | $ 138 | $ 163 |
2. Supplemental Financial Inf27
2. Supplemental Financial Information (Details - Other liabilities) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Current | ||
Customer deposits and refunds | $ 663 | $ 854 |
Accrued raw materials purchases | 582 | 916 |
Deferred revenue | 427 | 690 |
Capital lease obligations | 64 | 62 |
Taxes payable | 275 | 247 |
Other accrued liabilities | 911 | 1,080 |
Total other current liabilities | 2,922 | 3,849 |
Non-current | ||
Deferred rent | 225 | 0 |
Deferred revenue | 122 | 80 |
Total other non-current liabilities | $ 347 | $ 80 |
2. Supplemental Financial Inf28
2. Supplemental Financial Information (Details - Advertising expense) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Supplemental Financial Information | ||
Advertising expenses | $ 173 | $ 185 |
2. Supplemental Financial Inf29
2. Supplemental Financial Information (Details - Net Loss per Share) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Numerator: | ||
Net loss and comprehensive loss | $ (1,962) | $ (2,771) |
Denominator: | ||
Weighted-average shares outstanding (basic and diluted) | 15,260,000 | 14,904,000 |
Net loss per share (basic and diluted) | $ (0.13) | $ (0.19) |
2. Supplemental Financial Inf30
2. Supplemental Financial Information (Details - Equivalents) - shares | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Supplemental Financial Information | ||
Common stock equivalents | 3,450,000 | 2,323,000 |
2. Supplemental Financial Inf31
2. Supplemental Financial Information (Details - Non-cash acquisition) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Supplemental Cash Flow Information | ||
Accrued property and equipment paid for in the subsequent period | $ 43 | $ 46 |
Non-cash acquisition of property and equipment under capital leases | 37 | 217 |
Non-cash acquisition of property and equipment through non-monetary exchange | 10 | 0 |
Non-cash tenant improvements paid by landlord | $ 190 | $ 0 |
2. Supplemental Financial Inf32
2. Supplemental Financial Information (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Selling, general and administrative expenses | $ 14,396 | $ 16,041 |
Restructuring charges | 247 | |
Kurt F. Busch [Member] | Separation Agreement [Member] | ||
Selling, general and administrative expenses | 271 | |
Kurt F. Busch [Member] | Share Based Compensation [Member] | ||
Selling, general and administrative expenses | $ 52 | |
Stock units vested | 50,000 |
3. Bank Line of Credit (Details
3. Bank Line of Credit (Details - TNW) $ in Thousands | Jun. 30, 2016USD ($) |
Debt Disclosure [Abstract] | |
Minimum TNW | $ 8,000 |
Actual TNW | $ 10,230 |
3. Bank Line of Credit (Detai34
3. Bank Line of Credit (Details - Credit Line) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Debt Disclosure [Abstract] | ||
Outstanding borrowings on the line of credit | $ 0 | $ 700 |
Available borrowing capacity | 2,620 | 1,736 |
Outstanding letters of credit | $ 51 | $ 110 |
3. Bank Line of Credit and Debt
3. Bank Line of Credit and Debt (Details Narrative) | 12 Months Ended |
Jun. 30, 2016USD ($) | |
Debt Disclosure [Abstract] | |
Revolving Line | $4.0 million maximum revolving line |
Credit line maximum borrowing amount | $ 4,000,000 |
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. 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 June 30, 2016, we met the 1.0 to 1.0 or greater quick ratio. |
4. Stockholders Equity (Details
4. Stockholders Equity (Details - Option assumptions) - Stock Options [Member] | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Expected term (in years) | 4 years 11 months 27 days | 4 years 9 months 26 days |
Expected volatility | 67.00% | 67.00% |
Risk-free interest rate | 1.48% | 1.63% |
Dividend yield | 0.00% | 0.00% |
4. Stockholders Equity (Detai37
4. Stockholders Equity (Details - Option activity) - Stock Options [Member] $ / shares in Units, $ in Thousands | 12 Months Ended |
Jun. 30, 2016USD ($)$ / sharesshares | |
Number of shares | |
Number of Shares Options Outstanding, Beginning | shares | 3,546,000 |
Number of Shares Options Granted | shares | 1,317,000 |
Number of Shares Options Forfeited | shares | (453,000) |
Number of Shares Options Expired | shares | (804,000) |
Number of Shares Options Exercised | shares | 0 |
Number of Shares Options Outstanding, Ending | shares | 3,606,000 |
Number of Shares Options Vested or expected to vest at end of period | shares | 3,355,000 |
Number of Shares Options Options exercisable at end of period | shares | 1,993,000 |
Weighted Average Exercise Price per share | |
Exercise Price Outstanding, Beginning | $ / shares | $ 2.19 |
Exercise Price Granted | $ / shares | 1.14 |
Exercise Price Forfeited | $ / shares | 1.72 |
Exercise Price Expired | $ / shares | 2.25 |
Exercise Price Exercised | $ / shares | |
Exercise Price Outstanding, Ending | $ / shares | 1.85 |
Exercise Price Vested or expected to vest at end of period | $ / shares | 1.89 |
Exercise Price Options exercisable at end of period | $ / shares | $ 2.30 |
Weighted Average Remaining Contractual Life (in years) Outstanding, Ending | 4 years 7 months 6 days |
Weighted Average Remaining Contractual Life (in years), Options vested or expected to vest | 4 years 6 months |
Weighted Average Remaining Contractual Life (in years) Exercisable | 3 years 4 months 24 days |
Aggregate Intrinsic Value Outstanding, Ending | $ | $ 39 |
Aggregate Intrinsic Value, Options vested or expected to vest | $ | 32 |
Aggregate Intrinsic Value Exercisable | $ |
4. Stockholders Equity (Detai38
4. Stockholders Equity (Details - Other option information) - Stock Options [Member] - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Weighted-average grant-date fair value per share | $ 0.64 | $ 1.04 |
Intrinsic value of options exercised | $ 14 |
4. Stockholders Equity (Detai39
4. Stockholders Equity (Details - RSU activity) - Restricted Stock Units (RSUs) [Member] | 12 Months Ended |
Jun. 30, 2016$ / sharesshares | |
Number of RSU's Shares | |
Balance of RSU's, beginning | shares | 28,000 |
Granted | shares | 520,000 |
Vested | shares | (88,000) |
Balance of RSU's, ending | shares | 460,000 |
Weighted Average Grant Date Fair Value per share | |
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 | 1.12 |
RSU Shares Vested, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 1.52 |
RSU Shares Weighted-Average Grant-Date Fair Value per Share, ending | $ / shares | $ 1.10 |
4. Stockholders Equity (Detai40
4. Stockholders Equity (Details - ESPP Assumptions) - ESPP [Member] | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Expected term (in years) | 1 year 3 months | 1 year 3 months |
Expected volatility | 62.00% | 57.00% |
Risk-free interest rate | 0.62% | 0.32% |
Dividend yield | 0.00% | 0.00% |
4. Stockholders Equity (Detai41
4. Stockholders Equity (Details - ESPP activity) - ESPP [Member] $ / shares in Units, $ in Thousands | 12 Months Ended |
Jun. 30, 2016USD ($)$ / sharesshares | |
Shares available for issuance at beginning of year | 906,000 |
Shares issued | (170,000) |
Shares available for future issuance at end of year | 736,000 |
Weighted average purchase price per share | $ / shares | $ 1.02 |
Intrinsic value of ESPP shares on purchase date | $ | $ 39 |
4. Stockholders Equity (Detai42
4. Stockholders Equity (Details - Share based compensation) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Total share-based compensation | $ 870 | $ 1,015 |
Cost of revenues [Member] | ||
Total share-based compensation | 63 | 69 |
Selling, general and administrative [Member] | ||
Total share-based compensation | 632 | 745 |
Research and development [Member] | ||
Total share-based compensation | $ 175 | $ 201 |
4. Stockholders Equity (Detai43
4. Stockholders Equity (Details - Unrecognized expense) $ in Thousands | 12 Months Ended |
Jun. 30, 2016USD ($) | |
Stock Options [Member] | |
Unrecognized share-based compensation expense | $ 1,074 |
Weighted average years to recognize | 2 years 9 months 18 days |
Restricted Stock Units (RSUs) [Member] | |
Unrecognized share-based compensation expense | $ 407 |
Weighted average years to recognize | 2 years 4 months 24 days |
ESPP [Member] | |
Unrecognized share-based compensation expense | $ 190 |
Weighted average years to recognize | 1 year 7 months 6 days |
4. Stockholders' Equity (Detail
4. Stockholders' Equity (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Stock sold new, value | $ 1,975 | |
Proceeds from sale of stock, net | $ 2,149 | $ 352 |
2010 SIP [Member] | ||
Shares available for issuance under stock incentive plans | 2,600,000 | |
ESPP [Member] | ||
Shares available for issuance under stock incentive plans | 1,300,000 | |
Hale Capital Partners, LP [Member] | ||
Stock sold new, shares | 1,941,748 | |
Stock sold new, value | $ 2,000 | |
Proceeds from sale of stock, net | $ 1,975 |
5. 401(k) Plan (Details Narrati
5. 401(k) Plan (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Compensation and Retirement Disclosure [Abstract] | ||
Contributions made by Company | $ 112 | $ 84 |
7. Income Taxes (Details - Inco
7. Income Taxes (Details - Income tax provision) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Current: | ||
Federal | $ 0 | $ 2 |
State | 2 | 3 |
Foreign | 61 | 53 |
Total Current taxes | 63 | 58 |
Deferred: | ||
Federal | 0 | 0 |
State | 0 | 0 |
Total Deferred Taxes | 0 | 0 |
Provision for income taxes | $ 63 | $ 58 |
7. Income Taxes (Details - US a
7. Income Taxes (Details - US and foreign income) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||
United States | $ (2,021) | $ (2,569) |
Foreign | 122 | (144) |
Loss before income taxes | $ (1,899) | $ (2,713) |
7. Income Taxes (Details - Defe
7. Income Taxes (Details - Deferred tax assets) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Deferred tax assets: | ||
Tax losses and credits | $ 31,005 | $ 31,097 |
Reserves not currently deductible | 2,763 | 2,780 |
Deferred compensation | 398 | 593 |
Inventory capitalization | 1,126 | 1,007 |
Marketing rights | 175 | 263 |
Depreciation | 430 | 453 |
Other | 216 | 185 |
Gross deferred tax assets | 36,113 | 36,378 |
Valuation allowance | (35,850) | (35,994) |
Deferred tax assets, net | 263 | 384 |
Deferred tax liabilities: | ||
State taxes | (263) | (384) |
Deferred tax liabilities | (263) | (384) |
Net deferred tax assets (liabilities) | $ 0 | $ 0 |
7. Income Taxes (Details - Reco
7. Income Taxes (Details - Reconciliation) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||
Statutory federal provision (benefit) for income taxes | $ (646) | $ (923) |
Increase (decrease) resulting from: | ||
State taxes, net of federal benefit | (38) | (56) |
Change in tax rate | 15 | 569 |
Stock options | 250 | 1,986 |
Permanent differences | 10 | 15 |
Change in valuation allowance | (133) | (1,909) |
Deferred compensation | 185 | 209 |
Foreign tax rate variances | 19 | 102 |
Other | 401 | 65 |
Provision for income taxes | $ 63 | $ 58 |
7. Income Taxes (Details - NOL'
7. Income Taxes (Details - NOL's) $ in Thousands | Jun. 30, 2016USD ($) |
Income Tax Disclosure [Abstract] | |
Federal | $ 88,394 |
State | $ 27,140 |
7. Income Taxes (Details - Unce
7. Income Taxes (Details - Uncertain tax positions) $ in Thousands | 12 Months Ended |
Jun. 30, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Balance, beginning | $ 6,700 |
Change in balances related to uncertain tax positions | (100) |
Balance, ending | $ 6,600 |
7. Income Taxes (Details Narrat
7. Income Taxes (Details Narrative) $ in Thousands | Jun. 30, 2016USD ($) |
Income Tax Disclosure [Abstract] | |
Accrued interest and penalties related to uncertain tax positions | $ 169 |
8. Commitments and Contingenc53
8. Commitments and Contingencies (Details - Capital lease) - USD ($) $ in Thousands | Jun. 30, 2016 | Jun. 30, 2015 |
Capital Leases | ||
2,017 | $ 72 | |
2,018 | 65 | |
2,019 | 53 | |
2,020 | 4 | |
2,021 | 0 | |
Total | 194 | |
Amounts representing interest | (14) | |
Present value of net minimum lease payments | 180 | |
Less: capital lease obligations, short-term portion (included in other current liabilities) | 64 | |
Capital lease obligations, long-term portion | 116 | $ 152 |
Operating Leases | ||
2,017 | 684 | |
2,018 | 569 | |
2,019 | 549 | |
2,020 | 549 | |
2,021 | 255 | |
Total | 2,606 | |
Total lease payments 2017 | 756 | |
Total lease payments 2018 | 634 | |
Total lease payments 2019 | 602 | |
Total lease payments 2020 | 553 | |
Total lease payments 2021 | 255 | |
Total lease payments | $ 2,800 |
8. Commitments and Contingenc54
8. Commitments and Contingencies (Details - rent expense) - USD ($) $ in Thousands | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 738 | $ 757 |
9. Significant Geographic, Cust
9. Significant Geographic, Customer and Supplier Information (Details - Geographic) - Sales Revenue, Net [Member] | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
America [Member] | ||
Geographic regions, net revenue percentage | 51.00% | 54.00% |
Euprope, Middle East, Africa [Member] | ||
Geographic regions, net revenue percentage | 32.00% | 30.00% |
Asia Pacific Japan [Member] | ||
Geographic regions, net revenue percentage | 17.00% | 16.00% |
9. Significant Geographic, Cu56
9. Significant Geographic, Customer and Supplier Information (Details - by country) - Sales Revenue, Net [Member] | 12 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
U.S. and Canada [Member] | ||
Significant countries, net revenue percentage | 50.00% | 54.00% |
GERMANY [Member] | ||
Significant countries, net revenue percentage | 17.00% | 17.00% |
UNITED KINGDOM [Member] | ||
Significant countries, net revenue percentage | 9.00% | 9.00% |
JAPAN [Member] | ||
Significant countries, net revenue percentage | 8.00% | 8.00% |
9. Significant Geographic, Cu57
9. Significant Geographic, Customer and Supplier Information (Details - Significant customers) - Sales Revenue, Net [Member] | 12 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | |||
Top five customers [Member] | ||||
Significant customers, net revenue percentage | [1],[2] | 50.00% | 50.00% | |
Ingram Micro [Member] | ||||
Significant customers, net revenue percentage | 20.00% | 21.00% | ||
Arrow [Member] | ||||
Significant customers, net revenue percentage | 11.00% | 0.00% | [3] | |
[1] | All top five customers are distributors, who are part of our product distribution system. | |||
[2] | Includes Ingram Micro and Arrow | |||
[3] | Less than 10% |