Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2017 | Apr. 21, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | LANTRONIX INC | |
Entity Central Index Key | 1,114,925 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 17,586,884 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 7,389 | $ 5,962 |
Accounts receivable, net | 2,827 | 3,164 |
Inventories, net | 7,664 | 6,584 |
Contract manufacturers' receivable | 314 | 369 |
Prepaid expenses and other current assets | 536 | 580 |
Total current assets | 18,730 | 16,659 |
Property and equipment, net | 1,278 | 1,569 |
Goodwill | 9,488 | 9,488 |
Other assets | 49 | 63 |
Total assets | 29,545 | 27,779 |
Current liabilities: | ||
Accounts payable | 2,719 | 2,721 |
Accrued payroll and related expenses | 2,623 | 1,817 |
Warranty reserve | 116 | 138 |
Other current liabilities | 3,344 | 2,922 |
Total current liabilities | 8,802 | 7,598 |
Long-term capital lease obligations | 71 | 116 |
Other non-current liabilities | 378 | 347 |
Total liabilities | 9,251 | 8,061 |
Commitments and contingencies (Note 7) | ||
Stockholders' equity: | ||
Common stock | 2 | 2 |
Additional paid-in capital | 210,104 | 209,297 |
Accumulated deficit | (190,183) | (189,952) |
Accumulated other comprehensive income | 371 | 371 |
Total stockholders' equity | 20,294 | 19,718 |
Total liabilities and stockholders' equity | $ 29,545 | $ 27,779 |
Unaudited Condensed Consolidat3
Unaudited Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | ||
Income Statement [Abstract] | |||||
Net revenue | [1] | $ 11,524 | $ 9,964 | $ 33,686 | $ 30,077 |
Cost of revenue | 5,126 | 5,186 | 15,776 | 15,643 | |
Gross profit | 6,398 | 4,778 | 17,910 | 14,434 | |
Operating expenses: | |||||
Selling, general and administrative | 4,414 | 3,469 | 12,129 | 11,008 | |
Research and development | 2,126 | 1,744 | 5,944 | 5,131 | |
Total operating expenses | 6,540 | 5,213 | 18,073 | 16,139 | |
Loss from operations | (142) | (435) | (163) | (1,705) | |
Interest expense, net | (5) | (8) | (18) | (23) | |
Other income, net | 2 | 0 | 3 | 47 | |
Loss before income taxes | (145) | (443) | (178) | (1,681) | |
Provision for income taxes | 17 | 13 | 47 | 34 | |
Net loss | $ (162) | $ (456) | $ (225) | $ (1,715) | |
Net loss per share (basic and diluted) | $ (.01) | $ (.03) | $ (.01) | $ (.11) | |
Weighted-average common shares (basic and diluted) | 17,522,000 | 15,225,000 | 17,374,000 | 15,163,000 | |
Net revenue from related parties | $ 0 | $ 0 | $ 0 | $ 113 | |
[1] | Includes net revenue from related parties |
Unaudited Condensed Consolidat4
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net loss | $ (225) | $ (1,715) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Share-based compensation | 645 | 671 |
Depreciation | 455 | 614 |
Provision for excess and obsolete inventories | 74 | 171 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 337 | (473) |
Inventories | (1,154) | 2,057 |
Contract manufacturers' receivable | 55 | 48 |
Prepaid expenses and other current assets | 44 | (168) |
Other assets | 11 | 23 |
Accounts payable | (19) | (1,121) |
Accrued payroll and related expenses | 806 | (250) |
Warranty reserve | (22) | (24) |
Other liabilities | 457 | (337) |
Cash received related to tenant lease incentives | 0 | 53 |
Net cash provided by (used in) operating activities | 1,464 | (451) |
Investing activities | ||
Purchases of property and equipment | (144) | (478) |
Net cash used in investing activities | (144) | (478) |
Financing activities | ||
Tax withholding paid on behalf of employees for restricted shares | (144) | (46) |
Proceeds from borrowings on line of credit | 0 | 2,100 |
Payment of borrowings on line of credit | 0 | (2,100) |
Net proceeds from issuances of common stock | 300 | 95 |
Payment of capital lease obligations | (49) | (53) |
Net cash provided by (used in) financing activities | 107 | (4) |
Increase (decrease) in cash and cash equivalents | 1,427 | (933) |
Cash and cash equivalents at beginning of period | 5,962 | 4,989 |
Cash and cash equivalents at end of period | $ 7,389 | $ 4,056 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | The Company Lantronix, Inc. (the “Company,” “Lantronix,” “we,” “our,” or “us”) is a global provider of secure data access and management for Internet of Things (“IoT”) and information technology assets. Our mission is to be the leading provider 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. Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Lantronix have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2016, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which was filed with the SEC on August 24, 2016. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the consolidated financial position of Lantronix at March 31, 2017, the consolidated results of our operations for the three and nine months ended March 31, 2017 and our consolidated cash flows for the nine months ended March 31, 2017. All intercompany accounts and transactions have been eliminated. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year or any future interim periods. Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value. Companies will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The guidance will be effective for Lantronix for the fiscal year beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently considering the effective date on which we plan to adopt this guidance. 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 historically, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. Lantronix adopted this guidance early for the fiscal year beginning July 1, 2016. In connection with the adoption, we have elected to recognize the impact of forfeitures on our share-based compensation expense as such forfeitures occur. Accordingly, as of July 1, 2016, we recorded a cumulative effect adjustment of approximately $6,000 to increase APIC and accumulated deficit. Going forward, we do not expect the adoption of this guidance to have a material effect on our financial statements. 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 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 entity’s ability to continue as a going concern within one year of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood threshold of “probable” similar to the use of that term under current U.S. GAAP for loss contingencies. Certain disclosures are required if conditions give rise to substantial doubt about the entity’s ability to continue as a going concern. The standard became effective for Lantronix for the fiscal year beginning July 1, 2016. The adoption of this standard did not have a material impact on our financial statements and related disclosures. Revenue from Contracts with Customers In May 2014, FASB issued an accounting standard which superseded existing revenue recognition guidance under current U.S. GAAP. The standard is a comprehensive 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. 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 permits two methods of adoption: (i) retrospectively to each prior reporting period presented (the full retrospective method), or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2018, with an option to adopt the standard in the fiscal year beginning July 1, 2017. We are currently considering the effective date on which we plan to adopt the standard. We currently anticipate the standard will have a material impact on our financial statements and disclosures. We continue to make progress in assessing all potential impacts of the standard, including any impacts of recently issued amendments. We currently believe the most significant impact of the standard relates to our accounting for sales made to distributors under agreements which contain a limited right to return unsold products and price adjustment provisions. Under the existing revenue guidance, we have historically concluded that the price to these distributors is not fixed and determinable at the time we deliver products to them. Accordingly, revenue from sales to these distributors has not historically been recognized until the distributor resells the product. By contrast, under the new standard, we expect to recognize revenue, including estimates for applicable variable consideration, predominately at the time of shipment to these distributors. |
2. Supplemental Financial Infor
2. Supplemental Financial Information | 9 Months Ended |
Mar. 31, 2017 | |
Supplemental Financial Information | |
Supplemental Financial Information | Inventories Inventories are stated at the lower of cost (first-in, first-out) or net realizable value and consist of the following: March 31, June 30, 2017 2016 (In thousands) Finished goods $ 4,471 $ 3,822 Raw materials 2,064 1,653 Finished goods held by distributors 1,129 1,109 Inventories, net $ 7,664 $ 6,584 Other Liabilities The following table presents details of our other liabilities: March 31, June 30, 2017 2016 (In thousands) Current Customer deposits and refunds $ 1,051 $ 663 Accrued raw materials purchases 599 582 Deferred revenue 179 427 Capital lease obligations 60 64 Taxes payable 280 275 Accrued operating expenses 1,175 911 Total other current liabilities $ 3,344 $ 2,922 Non-current Deferred rent $ 206 $ 225 Deferred revenue 172 122 Total other non-current liabilities $ 378 $ 347 Computation of Net Loss per Share Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the applicable period. The following table presents the computation of net loss per share: Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands, except per share data) Numerator: Net loss $ (162 ) $ (456 ) $ (225 ) $ (1,715 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 17,522 15,225 17,374 15,163 Net loss per share (basic and diluted) $ (0.01 ) $ (0.03 ) $ (0.01 ) $ (0.11 ) The following table presents the common stock equivalents excluded from the diluted net loss per share calculation, because they were anti-dilutive for the periods presented. These excluded common stock equivalents could be dilutive in the future. Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands) Common stock equivalents 1,062 3,696 1,894 3,630 Restructuring In January 2017, we initiated a restructuring plan with respect to our European sales team. The restructuring activities were substantially completed in the three months ended March 31, 2017, and the related expenses consisted primarily of severance costs, facility lease termination costs and other associated costs. These activities resulted in total charges of approximately $246,000, and are included in selling, general and administrative expense within the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended March 31, 2017. The following table presents details of the liability we recorded related to the restructuring plan: Nine Months Ended March 31, 2017 (In thousands) Beginning balance $ – Charges 246 Payments – Ending balance $ 246 Supplemental Cash Flow Information The following table presents non-cash investing and financing transactions excluded from the unaudited condensed consolidated statements of cash flows: Nine Months Ended March 31, 2017 2016 (In thousands) Accrued property and equipment paid for in the subsequent period $ 17 $ 15 Non-cash acquisition of property and equipment under capital leases $ – $ 37 Non-cash tenant improvements paid by landlord $ – $ 190 |
3. Warranty Reserve
3. Warranty Reserve | 9 Months Ended |
Mar. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Warranty Reserve | The standard warranty periods we provide 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 for any known or anticipated product warranty issues. Our warranty obligations are impacted by a number of factors, including historical warranty costs, actual product failure rates, service delivery costs, and the use of materials. If our actual results are different from our assumptions, increases or decreases to warranty reserves could be required, which could impact our cost of revenue and gross margins. The following table presents details of our warranty reserve: Nine Months Ended Year Ended March 31, June 30, 2017 2016 (In thousands) Beginning balance $ 138 $ 163 Charged to cost of revenue 34 91 Usage (56 ) (116 ) Ending balance $ 116 $ 138 |
4. Bank Line of Credit
4. Bank Line of Credit | 9 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Bank Line of Credit | We have entered into a Loan and Security Agreement (as amended, the “Loan Agreement”) with Silicon Valley Bank (“SVB”), which provides a $4.0 million revolving line of credit, based on qualified accounts receivable. The Loan Agreement has a maturity date of September 30, 2018. The Loan Agreement provides for an interest rate per annum equal to the greater of the prime rate plus 0.75% or 4.25%, 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 4.25%. At March 31, 2017, we met the 1.0 to 1.0 or greater quick ratio. The Loan Agreement also includes a covenant requiring us to maintain a certain Minimum Tangible Net Worth (“Minimum TNW”), currently required to be approximately $6.0 million. 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. The following table presents the Minimum TNW compared to our Actual TNW: March 31, 2017 (In thousands) Minimum TNW $ 6,021 Actual TNW $ 10,806 The following table presents certain information with respect to the Loan Agreement with SVB: March 31, June 30, 2017 2016 (In thousands) Outstanding borrowings on the line of credit $ – $ – Available borrowing capacity $ 2,778 $ 2,620 Outstanding letters of credit $ 51 $ 51 Our outstanding letters of credit are used as security deposits. |
5. Stockholders' Equity
5. Stockholders' Equity | 9 Months Ended |
Mar. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Stock Incentive Plans Our stock incentive plans permit the granting of stock options (both incentive and nonqualified stock options), restricted stock units (“RSUs”), stock appreciation rights, non-vested stock, and performance shares to certain employees, directors and consultants. As of March 31, 2017, no stock appreciation rights, non-vested stock, or performance shares were outstanding. Stock Options The following table presents a summary of activity during the nine months ended March 31, 2017 with respect to our stock options: Weighted- Average Number of Exercise Price Shares per Share (In thousands) Balance of options outstanding at June 30, 2016 3,606 $ 1.85 Granted 864 1.61 Forfeited (45 ) 1.42 Expired (74 ) 4.22 Exercised (99 ) 1.85 Balance of options outstanding at March 31, 2017 4,252 $ 1.77 Restricted Stock Units The following table presents a summary of activity during the nine months ended March 31, 2017 with respect to our RSUs: Weighted- Average Grant Date Number of Fair Value Shares per Share (In thousands) Balance of RSUs outstanding at June 30, 2016 460 $ 1.10 Granted 85 1.81 Vested (198 ) 1.10 Cancelled / forfeited – – Balance of RSUs outstanding at March 31, 2017 347 $ 1.27 During the nine months ended March 31, 2017, a total of 187,500 RSUs vested pursuant to a RSU grant made in April 2016 to Jeffrey Benck, our chief executive officer. In connection with the vesting of these RSUs, we issued approximately 112,000 shares of our common stock to Mr. Benck, and withheld the remaining approximately 76,000 shares for purposes of employee payroll taxes. Employee Stock Purchase Plan Our 2013 Employee Stock Purchase Plan (the “ESPP”) is intended to provide employees with an opportunity to purchase our common stock through accumulated payroll deductions at the end of a specified purchase period. Each of our employees (including officers) is eligible to participate in the ESPP, subject to certain limitations as set forth in the ESPP. The following table presents a summary of activity under our ESPP during the nine months ended March 31, 2017: Number of Shares (In thousands) Shares available for issuance at June 30, 2016 736 Shares issued (113 ) Shares available for issuance at March 31, 2017 623 Share-Based Compensation Expense The following table presents a summary of share-based compensation expense included in each functional line item on our unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands) Cost of revenue $ 12 $ 14 $ 36 $ 52 Selling, general and administrative 169 131 480 484 Research and development 43 41 129 135 Total share-based compensation expense $ 224 $ 186 $ 645 $ 671 The following table presents the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of March 31, 2017: Remaining Remaining Unrecognized Weighted- Compensation Average Years Expense To Recognize (In thousands) Stock options $ 1,395 3.0 RSUs 408 2.8 Stock purchase rights under ESPP 128 1.1 If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate, increase or cancel remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that we grant additional share-based awards. |
6. Income Taxes
6. Income Taxes | 9 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | We utilize the liability method of accounting for income taxes. The following table presents our effective tax rates based upon our provision for income taxes for the periods shown: Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 Effective tax rate 12% 3% 26% 2% The difference between our effective tax rates in the periods presented above and the federal statutory rate is primarily due to a tax benefit from our domestic losses being recorded with a full valuation allowance, as well as the effect of foreign earnings taxed at rates differing from the federal statutory rate. We record net deferred tax assets to the extent we believe it is more likely than not that these assets will be realized. As a result of our cumulative losses and uncertainty of generating future taxable income, we have provided a full valuation allowance against our net deferred tax assets as of March 31, 2017 and June 30, 2016. |
7. Commitments and Contingencie
7. Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | From time to time, we are involved in various legal proceedings and claims arising in the ordinary course of our business. Although the results of legal proceedings and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not, individually or in the aggregate, have a material adverse effect on our business, operating results, financial condition or cash flows. However, regardless of the outcome, litigation can have an adverse impact on us because of legal costs, diversion of management time and resources, and other factors. |
1. Summary of Significant Acc12
1. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
The Company | The Company Lantronix, Inc. (the “Company,” “Lantronix,” “we,” “our,” or “us”) is a global provider of secure data access and management for Internet of Things (“IoT”) and information technology assets. Our mission is to be the leading provider 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. |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of Lantronix have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2016, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2016, which was filed with the SEC on August 24, 2016. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that in the opinion of management, are necessary to present fairly the consolidated financial position of Lantronix at March 31, 2017, the consolidated results of our operations for the three and nine months ended March 31, 2017 and our consolidated cash flows for the nine months ended March 31, 2017. All intercompany accounts and transactions have been eliminated. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year or any future interim periods. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (“FASB”) issued guidance to simplify the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, a goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value. Companies will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. The guidance will be effective for Lantronix for the fiscal year beginning July 1, 2020. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently considering the effective date on which we plan to adopt this guidance. 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 historically, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. Lantronix adopted this guidance early for the fiscal year beginning July 1, 2016. In connection with the adoption, we have elected to recognize the impact of forfeitures on our share-based compensation expense as such forfeitures occur. Accordingly, as of July 1, 2016, we recorded a cumulative effect adjustment of approximately $6,000 to increase APIC and accumulated deficit. Going forward, we do not expect the adoption of this guidance to have a material effect on our financial statements. 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 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 entity’s ability to continue as a going concern within one year of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood threshold of “probable” similar to the use of that term under current U.S. GAAP for loss contingencies. Certain disclosures are required if conditions give rise to substantial doubt about the entity’s ability to continue as a going concern. The standard became effective for Lantronix for the fiscal year beginning July 1, 2016. The adoption of this standard did not have a material impact on our financial statements and related disclosures. Revenue from Contracts with Customers In May 2014, FASB issued an accounting standard which superseded existing revenue recognition guidance under current U.S. GAAP. The standard is a comprehensive 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. 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 permits two methods of adoption: (i) retrospectively to each prior reporting period presented (the full retrospective method), or (ii) retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application (the cumulative catch-up transition method). We currently anticipate adopting the standard using the full retrospective method to restate each prior reporting period presented. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2018, with an option to adopt the standard in the fiscal year beginning July 1, 2017. We are currently considering the effective date on which we plan to adopt the standard. We currently anticipate the standard will have a material impact on our financial statements and disclosures. We continue to make progress in assessing all potential impacts of the standard, including any impacts of recently issued amendments. We currently believe the most significant impact of the standard relates to our accounting for sales made to distributors under agreements which contain a limited right to return unsold products and price adjustment provisions. Under the existing revenue guidance, we have historically concluded that the price to these distributors is not fixed and determinable at the time we deliver products to them. Accordingly, revenue from sales to these distributors has not historically been recognized until the distributor resells the product. By contrast, under the new standard, we expect to recognize revenue, including estimates for applicable variable consideration, predominately at the time of shipment to these distributors. |
2. Supplemental Financial Inf13
2. Supplemental Financial Information (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Supplemental Financial Information | |
Schedule of Inventory | March 31, June 30, 2017 2016 (In thousands) Finished goods $ 4,471 $ 3,822 Raw materials 2,064 1,653 Finished goods held by distributors 1,129 1,109 Inventories, net $ 7,664 $ 6,584 |
Schedule of Other Liabilities | March 31, June 30, 2017 2016 (In thousands) Current Customer deposits and refunds $ 1,051 $ 663 Accrued raw materials purchases 599 582 Deferred revenue 179 427 Capital lease obligations 60 64 Taxes payable 280 275 Accrued operating expenses 1,175 911 Total other current liabilities $ 3,344 $ 2,922 Non-current Deferred rent $ 206 $ 225 Deferred revenue 172 122 Total other non-current liabilities $ 378 $ 347 |
Schedule of Computation of Net Loss per Share | Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands, except per share data) Numerator: Net loss $ (162 ) $ (456 ) $ (225 ) $ (1,715 ) Denominator: Weighted-average common shares outstanding (basic and diluted) 17,522 15,225 17,374 15,163 Net loss per share (basic and diluted) $ (0.01 ) $ (0.03 ) $ (0.01 ) $ (0.11 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands) Common stock equivalents 1,062 3,696 1,894 3,630 |
Schedule of restructuring | Nine Months Ended March 31, 2017 (In thousands) Beginning balance $ – Charges 246 Payments – Ending balance $ 246 |
Schedule of Supplemental Cash Flow Information | Nine Months Ended March 31, 2017 2016 (In thousands) Accrued property and equipment paid for in the subsequent period $ 17 $ 15 Non-cash acquisition of property and equipment under capital leases $ – $ 37 Non-cash tenant improvements paid by landlord $ – $ 190 |
3. Warranty Reserve (Tables)
3. Warranty Reserve (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Product Warranties Disclosures [Abstract] | |
Schedule of warranty reserve | Nine Months Ended Year Ended March 31, June 30, 2017 2016 (In thousands) Beginning balance $ 138 $ 163 Charged to cost of revenue 34 91 Usage (56 ) (116 ) Ending balance $ 116 $ 138 |
4. Bank Line of Credit (Tables)
4. Bank Line of Credit (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Minimum Tangible Net Worth | March 31, 2017 (In thousands) Minimum TNW $ 6,021 Actual TNW $ 10,806 |
Availability under the Line of Credit | March 31, June 30, 2017 2016 (In thousands) Outstanding borrowings on the line of credit $ – $ – Available borrowing capacity $ 2,778 $ 2,620 Outstanding letters of credit $ 51 $ 51 |
5. Stockholders' Equity (Tables
5. Stockholders' Equity (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Schedule of share-based compensation expense | Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 (In thousands) Cost of revenue $ 12 $ 14 $ 36 $ 52 Selling, general and administrative 169 131 480 484 Research and development 43 41 129 135 Total share-based compensation expense $ 224 $ 186 $ 645 $ 671 |
Schedule of unrecognized share-based compensation expense | Remaining Remaining Unrecognized Weighted- Compensation Average Years Expense To Recognize (In thousands) Stock options $ 1,395 3.0 RSUs 408 2.8 Stock purchase rights under ESPP 128 1.1 |
Stock Options [Member] | |
Summary of stock option activity | Weighted- Average Number of Exercise Price Shares per Share (In thousands) Balance of options outstanding at June 30, 2016 3,606 $ 1.85 Granted 864 1.61 Forfeited (45 ) 1.42 Expired (74 ) 4.22 Exercised (99 ) 1.85 Balance of options outstanding at March 31, 2017 4,252 $ 1.77 |
Restricted Stock Units (RSUs) [Member] | |
Summary of other-than-option activity | Weighted- Average Grant Date Number of Fair Value Shares per Share (In thousands) Balance of RSUs outstanding at June 30, 2016 460 $ 1.10 Granted 85 1.81 Vested (198 ) 1.10 Cancelled / forfeited – – Balance of RSUs outstanding at March 31, 2017 347 $ 1.27 |
ESPP [Member] | |
Summary of other-than-option activity | Number of Shares (In thousands) Shares available for issuance at June 30, 2016 736 Shares issued (113 ) Shares available for issuance at March 31, 2017 623 |
6. Income Taxes (Tables)
6. Income Taxes (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate | Three Months Ended Nine Months Ended March 31, March 31, 2017 2016 2017 2016 Effective tax rate 12% 3% 26% 2% |
2. Supplemental Financial Inf18
2. Supplemental Financial Information (Details - Inventories) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Supplemental Financial Information | ||
Finished goods | $ 4,471 | $ 3,822 |
Raw materials | 2,064 | 1,653 |
Finished goods held by distributors | 1,129 | 1,109 |
Inventories, net | $ 7,664 | $ 6,584 |
2. Supplemental Financial Inf19
2. Supplemental Financial Information (Details - Other liabilities) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Current | ||
Customer deposits and refunds | $ 1,051 | $ 663 |
Accrued raw materials purchases | 599 | 582 |
Deferred revenue | 179 | 427 |
Capital lease obligations | 60 | 64 |
Taxes payable | 280 | 275 |
Other accrued liabilities | 1,175 | 911 |
Total other current liabilities | 3,344 | 2,922 |
Non-current | ||
Deferred rent | 206 | 225 |
Deferred revenue | 172 | 122 |
Total other non-current liabilities | $ 378 | $ 347 |
2. Supplemental Financial Inf20
2. Supplemental Financial Information (Details - Net Loss per Share) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator: | ||||
Net loss | $ (162) | $ (456) | $ (225) | $ (1,715) |
Denominator: | ||||
Weighted-average common shares outstanding (basic and diluted) | 17,522,000 | 15,225,000 | 17,374,000 | 15,163,000 |
Effect of dilutive securities: | ||||
Net loss per share (basic and diluted) | $ (.01) | $ (.03) | $ (.01) | $ (.11) |
2. Supplemental Financial Inf21
2. Supplemental Financial Information (Details - Equivalents) - shares | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Supplemental Financial Information | ||||
Common stock equivalents | 1,062,000 | 3,696,000 | 1,894,000 | 3,630,000 |
2. Supplemental Financial Inf22
2. Supplemental Financial Information (Details - Non-cash acquisition) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Supplemental Cash Flow Information | ||
Accrued property and equipment paid for in the subsequent period | $ 17 | $ 15 |
Non-cash acquisition of property and equipment under capital leases | 0 | 37 |
Non-cash tenant improvements paid by landlord | $ 0 | $ 190 |
3. Warranty Reserve (Details -
3. Warranty Reserve (Details - Warranty reserve) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Mar. 31, 2017 | Jun. 30, 2016 | |
Product Warranties Disclosures [Abstract] | ||
Beginning balance | $ 138 | $ 163 |
Charged to cost of revenue | 34 | 91 |
Usage | (56) | (116) |
Ending balance | $ 116 | $ 138 |
4. Bank Line of Credit (Details
4. Bank Line of Credit (Details - TNW) $ in Thousands | Mar. 31, 2017USD ($) |
Debt Disclosure [Abstract] | |
Minimum TNW | $ 6,021 |
Actual TNW | $ 10,806 |
4. Bank Line of Credit (Detai25
4. Bank Line of Credit (Details - Credit Line) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Debt Disclosure [Abstract] | ||
Outstanding borrowings on the line of credit | $ 0 | $ 0 |
Available borrowing capacity | 2,778 | 2,620 |
Outstanding letters of credit | $ 51 | $ 51 |
4. Bank Line of Credit and Debt
4. Bank Line of Credit and Debt (Details Narrative) $ in Thousands | 9 Months Ended |
Mar. 31, 2017USD ($) | |
Debt Disclosure [Abstract] | |
Revolving Line | $4.0 million maximum revolving line |
Credit line maximum borrowing amount | $ 4,000 |
Maturity date | Sep. 30, 2018 |
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 4.25%, provided that we maintain a monthly quick ratio of 1.0 to 1.0 or greater. |
5. Stockholders Equity (Details
5. Stockholders Equity (Details - Option activity) - Stock Options [Member] | 9 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of shares | |
Number of Shares Options Outstanding, Beginning | shares | 3,606,000 |
Number of Shares Options Granted | shares | 864,000 |
Number of Shares Options Forfeited | shares | (45,000) |
Number of Shares Options Expired | shares | (74,000) |
Number of Shares Options Exercised | shares | (99,000) |
Number of Shares Options Outstanding, Ending | shares | 4,252,000 |
Weighted Average Exercise Price per share | |
Exercise Price Outstanding, Beginning | $ / shares | $ 1.85 |
Exercise Price Granted | $ / shares | 1.61 |
Exercise Price Forfeited | $ / shares | 1.42 |
Exercise Price Expired | $ / shares | 4.22 |
Exercise Price Exercised | $ / shares | 1.85 |
Exercise Price Outstanding, Ending | $ / shares | $ 1.77 |
5. Stockholders Equity (Detai28
5. Stockholders Equity (Details - RSU activity) - Restricted Stock Units (RSUs) [Member] | 9 Months Ended |
Mar. 31, 2017$ / sharesshares | |
Number of RSU's Shares | |
Balance of RSU's, beginning | shares | 460,000 |
Granted | shares | 85,000 |
Vested | shares | (198,000) |
Balance of RSU's, ending | shares | 347,000 |
Weighted Average Grant Date Fair Value per share | |
RSU Shares Weighted-Average Grant-Date Fair Value per Share, beginning | $ / shares | $ 1.10 |
RSU Shares Granted, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 1.81 |
RSU Shares Vested, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 1.10 |
RSU Shares Weighted-Average Grant-Date Fair Value per Share, ending | $ / shares | $ 1.27 |
5. Stockholders Equity (Detai29
5. Stockholders Equity (Details - ESPP activity) - ESPP [Member] | 9 Months Ended |
Mar. 31, 2017shares | |
Shares available for issuance at beginning of period | 736,000 |
Shares issued | (113,000) |
Shares available for issuance at end of period | 623,000 |
5. Stockholders Equity (Detai30
5. Stockholders Equity (Details - Share based compensation) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Total share-based compensation | $ 224 | $ 186 | $ 645 | $ 671 |
Cost of revenues [Member] | ||||
Total share-based compensation | 12 | 14 | 36 | 52 |
Selling, general and administrative [Member] | ||||
Total share-based compensation | 169 | 131 | 480 | 484 |
Research and development [Member] | ||||
Total share-based compensation | $ 43 | $ 41 | $ 129 | $ 135 |
5. Stockholders Equity (Detai31
5. Stockholders Equity (Details - Unrecognized expense) $ in Thousands | 9 Months Ended |
Mar. 31, 2017USD ($) | |
Stock Options [Member] | |
Unrecognized share-based compensation expense | $ 1,395 |
Weighted average years to recognize | 3 years |
Restricted Stock Units (RSUs) [Member] | |
Unrecognized share-based compensation expense | $ 408 |
Weighted average years to recognize | 2 years 9 months 18 days |
ESPP [Member] | |
Unrecognized share-based compensation expense | $ 128 |
Weighted average years to recognize | 1 year 1 month 6 days |
5. Stockholders' Equity (Detail
5. Stockholders' Equity (Details Narrative) | 9 Months Ended |
Mar. 31, 2017shares | |
Jeffrey Benck [Member] | |
RSU's vested | 187,500 |
Shares retained for payroll tax withholding | 112,000 |
Restricted Stock Units (RSUs) [Member] | |
RSU's vested | 198,000 |
Restricted Stock Units (RSUs) [Member] | Jeffrey Benck [Member] | |
Shares retained for payroll tax withholding | 76,000 |
6. Income Taxes (Details - Effe
6. Income Taxes (Details - Effective tax rate) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 12.00% | 3.00% | 26.00% | 2.00% |