Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2018 | Apr. 20, 2018 | |
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, 2018 | |
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 | 18,248,268 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
Unaudited Condensed Consolidate
Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 8,955 | $ 8,073 |
Accounts receivable, net | 3,834 | 3,432 |
Inventories, net | 7,378 | 6,959 |
Contract manufacturers' receivable | 721 | 476 |
Prepaid expenses and other current assets | 508 | 440 |
Total current assets | 21,396 | 19,380 |
Property and equipment, net | 1,058 | 1,218 |
Goodwill | 9,488 | 9,488 |
Other assets | 73 | 46 |
Total assets | 32,015 | 30,132 |
Current liabilities: | ||
Accounts payable | 4,173 | 2,717 |
Accrued payroll and related expenses | 2,125 | 3,084 |
Warranty reserve | 113 | 125 |
Other current liabilities | 3,406 | 3,063 |
Total current liabilities | 9,817 | 8,989 |
Long-term capital lease obligations | 11 | 59 |
Other non-current liabilities | 321 | 396 |
Total liabilities | 10,149 | 9,444 |
Commitments and contingencies (Note 7) | ||
Stockholders' equity: | ||
Common stock | 2 | 2 |
Additional paid-in capital | 211,800 | 210,550 |
Accumulated deficit | (190,307) | (190,235) |
Accumulated other comprehensive income | 371 | 371 |
Total stockholders' equity | 21,866 | 20,688 |
Total liabilities and stockholders' equity | $ 32,015 | $ 30,132 |
Unaudited Condensed Consolidat3
Unaudited Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Statement [Abstract] | ||||
Net revenue | $ 11,601 | $ 11,524 | $ 33,543 | $ 33,686 |
Cost of revenue | 5,017 | 5,126 | 15,051 | 15,776 |
Gross profit | 6,584 | 6,398 | 18,492 | 17,910 |
Operating expenses: | ||||
Selling, general and administrative | 4,241 | 4,414 | 12,400 | 12,129 |
Research and development | 1,964 | 2,126 | 6,059 | 5,944 |
Total operating expenses | 6,205 | 6,540 | 18,459 | 18,073 |
Income (loss) from operations | 379 | (142) | 33 | (163) |
Interest expense, net | (5) | (5) | (14) | (18) |
Other income (expense), net | (1) | 2 | 1 | 3 |
Income (loss) before income taxes | 373 | (145) | 20 | (178) |
Provision for income taxes | 29 | 17 | 92 | 47 |
Net income (loss) | $ 344 | $ (162) | $ (72) | $ (225) |
Net income (loss) per share (basic) | $ .02 | $ (.01) | $ 0 | $ (0.01) |
Net income (loss) per share (diluted) | $ .02 | $ (0.01) | $ 0 | $ (0.01) |
Weighted-average common shares (basic) | 18,210 | 17,522 | 18,050 | 17,374 |
Weighted-average common shares (diluted) | 19,118 | 17,522 | 18,050 | 17,374 |
Unaudited Condensed Consolidat4
Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating activities | ||
Net loss | $ (72) | $ (225) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Share-based compensation | 877 | 645 |
Depreciation and amortization | 336 | 455 |
Provision for excess and obsolete inventories | 162 | 74 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (402) | 337 |
Inventories | (581) | (1,154) |
Contract manufacturers' receivable | (245) | 55 |
Prepaid expenses and other current assets | (68) | 44 |
Other assets | (32) | 11 |
Accounts payable | 1,456 | (19) |
Accrued payroll and related expenses | (959) | 806 |
Warranty reserve | (12) | (22) |
Other liabilities | 265 | 457 |
Net cash provided by operating activities | 725 | 1,464 |
Investing activities | ||
Purchases of property and equipment | (171) | (144) |
Net cash used in investing activities | (171) | (144) |
Financing activities | ||
Tax withholding paid on behalf of employees for restricted shares | (145) | (144) |
Net proceeds from issuances of common stock | 518 | 300 |
Payment of capital lease obligations | (45) | (49) |
Net cash provided by financing activities | 328 | 107 |
Increase in cash and cash equivalents | 882 | 1,427 |
Cash and cash equivalents at beginning of period | 8,073 | 5,962 |
Cash and cash equivalents at end of period | $ 8,955 | $ 7,389 |
1. Summary of Significant Accou
1. Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | The Company Lantronix, Inc., which we refer to herein as the Company, Lantronix, we, our, or us, is a global provider of secure data access and management solutions for Internet of Things (“IoT”) assets. Our mission is to be the leading supplier of IoT solutions 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, 2017, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017, which was filed with the SEC on August 24, 2017. 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, 2018, the consolidated results of our operations for the three and nine months ended March 31, 2018 and our consolidated cash flows for the nine months ended March 31, 2018. All intercompany accounts and transactions have been eliminated. 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, 2018 are not necessarily indicative of the results to be expected for the full year or any future interim periods. Recent Accounting Pronouncements Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard that revises lease accounting guidance. Most prominent among the changes in the standard is the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under the existing guidance. The guidance requires entities to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. In November 2017, FASB proposed a practical expedient that would allow entities the option to apply the provisions of the new lease guidance at the effective date of adoption without adjusting the comparative periods presented. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2019. While we are continuing to assess the potential impacts of this standard, we currently expect the most significant impact on our financial statements will be the recognition of ROU assets and lease liabilities for our operating leases. We have not yet determined which practical expedients we intend to utilize in connection with adopting the new standard, nor have we determined any quantitative impacts on our financial statements. Revenue from Contracts with Customers In May 2014, FASB issued an accounting standard which superseded previous revenue recognition guidance under 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 previous guidance. 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). In previous periods we had disclosed that we expected to adopt the standard using the full retrospective method to restate each prior reporting period presented. As we have progressed with our evaluation of the potential impacts of adoption, we now anticipate adopting the standard using the cumulative catch-up transition method in the fiscal year beginning July 1, 2018. Under this method, prior reporting periods presented will not be restated. We currently anticipate the standard will have a material impact on our financial statements and disclosures. We believe the most significant impact of adopting 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 previous 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, predominantly at the time of shipment to these distributors. In addition, given certain requirements in the new standard regarding the presentation of estimated return assets and refund liabilities, we expect that adoption will result in an increase in our accounts receivable, net and decreases in our inventories, net and other current liabilities. As we continue to assess other potential impacts of the new standard, finalize our analyses pertaining to adoption, and evaluate changes to our accounting policies, internal controls and footnote disclosures, we may identify additional areas of impact and may revise our preliminary assessments and estimates. |
2. Supplemental Financial Infor
2. Supplemental Financial Information | 9 Months Ended |
Mar. 31, 2018 | |
Supplemental Financial Information Details - Equivalents | |
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, 2018 June 30, 2017 (In thousands) Finished goods $ 3,917 $ 4,191 Raw materials 2,139 1,694 Finished goods held by distributors 1,322 1,074 Inventories, net $ 7,378 $ 6,959 Other Liabilities The following table presents details of our other liabilities: March 31, 2018 June 30, 2017 (In thousands) Current Customer deposits and refunds $ 1,277 $ 1,119 Accrued raw materials purchases 389 484 Deferred revenue 316 196 Capital lease obligations 64 61 Taxes payable 307 275 Accrued operating expenses 1,053 928 Total other current liabilities $ 3,406 $ 3,063 Non-current Deferred rent $ 164 $ 200 Deferred revenue 157 196 Total other non-current liabilities $ 321 $ 396 Computation of Net Income (Loss) per Share Basic and diluted net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the applicable period. The following table presents the computation of net income (loss) per share: Three Months Ended March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands, except per share data) Numerator: Net income (loss) $ 344 $ (162 ) $ (72 ) $ (225 ) Denominator: Weighted-average common shares outstanding (basic) 18,210 17,522 18,050 17,374 Effect of dilutive securities: Stock awards 908 – – – Denominator for net income (loss) per share (diluted) 19,118 17,522 18,050 17,374 Net income (loss) per share (basic) $ 0.02 $ (0.01 ) $ (0.00 ) $ (0.01 ) Net income (loss) per share (diluted) $ 0.02 $ (0.01 ) $ (0.00 ) $ (0.01 ) The following table presents the common stock equivalents excluded from the diluted net income (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 March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands) Common stock equivalents 595 1,062 2,146 1,894 Severance and Related Charges From July 2017 through September 2017, we realigned certain resources throughout our organization, primarily to optimize our operations and engineering efforts. These activities resulted in total charges of approximately $527,000 recorded during the quarter ended September 30, 2017, which consisted primarily of severance costs, and to a lesser extent, termination costs related to our facility lease in Hong Kong. These charges are included in the applicable functional line items within the accompanying unaudited condensed consolidated statement of operations for the nine months ended March 31, 2018. The following table presents details of the liability we recorded related to these activities: Nine Months Ended March 31, 2018 (In thousands) Beginning balance $ – Charges 527 Payments (503 ) Other adjustments (21 ) Ending balance $ 3 During the three months ended March 31, 2018, we reversed approximately $21,000 of the liability for adjustments we made to the total charges previously estimated in the first fiscal quarter of 2018 primarily due to difference in the settlement of our facility lease in Hong Kong. The remaining liability balance is included in accrued payroll and related expenses in the accompanying unaudited condensed consolidated balance sheet at March 31, 2018. Supplemental Cash Flow Information The following table presents non-cash investing transactions excluded from the unaudited condensed consolidated statements of cash flows: Nine Months Ended March 31, 2018 2017 (In thousands) Accrued property and equipment paid for in the subsequent period $ – $ 17 |
3. Warranty Reserve
3. Warranty Reserve | 9 Months Ended |
Mar. 31, 2018 | |
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. The following table presents details of our warranty reserve: Nine Months Ended March 31, 2018 Year Ended June 30, 2017 (In thousands) Beginning balance $ 125 $ 138 Charged to cost of revenue 138 65 Usage (150 ) (78 ) Ending balance $ 113 $ 125 |
4. Bank Line of Credit
4. Bank Line of Credit | 9 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Bank Line of Credit | We are party to a Loan and Security Agreement (as amended, the “Loan Agreement”) with Silicon Valley Bank (“SVB”), which provides a $4,000,000 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 and our net accounts receivable to extinguish or retire our current liabilities. If this ratio is not met, the interest rate per annum will become the greater of the prime rate plus 1.25% or 4.25%. At March 31, 2018, we met the 1.0 to 1.0 or greater quick ratio requirement. The Loan Agreement also includes a covenant requiring us to maintain a certain Minimum Tangible Net Worth (“Minimum TNW”), currently required to be approximately $6,305,000. 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, 2018 (In thousands) Minimum TNW $ 6,305 Actual TNW $ 12,378 The following table presents certain information with respect to the Loan Agreement with SVB: March 31, 2018 June 30, 2017 (In thousands) Outstanding borrowings on the line of credit $ – $ – Available borrowing capacity $ 2,830 $ 2,812 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, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Stock Incentive Plans In November 2017, our stockholders approved an amendment to our Amended and Restated 2010 Stock Incentive Plan to increase the number of shares of common stock reserved for issuance under the plan by 2,000,000 shares. 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, 2018, 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, 2018 with respect to our stock options: Number of Shares Weighted- Average Exercise Price per Share (In thousands) Balance of options outstanding at June 30, 2017 $ 4,184 $ 1.78 Granted 929 2.15 Forfeited (177 ) 1.70 Expired (309 ) 3.70 Exercised (203 ) 1.67 Balance of options outstanding at March 31, 2018 $ 4,424 $ 1.73 Restricted Stock Units The following table presents a summary of activity during the nine months ended March 31, 2018 with respect to our RSUs: Number of Shares Weighted- Average Grant Date Fair Value per Share (In thousands) Balance of RSUs outstanding at June 30, 2017 300 $ 1.29 Granted 40 2.05 Vested (150 ) 1.29 Balance of RSUs outstanding at March 31, 2018 190 $ 1.45 Employee Stock Purchase Plan Our 2013 Employee Stock Purchase Plan (“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 our ESPP, subject to certain limitations as set forth in our ESPP. The following table presents a summary of activity under our ESPP during the nine months ended March 31, 2018: Number of Shares (In thousands) Shares available for issuance at June 30, 2017 476 Shares issued (155 ) Shares available for issuance at March 31, 2018 321 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 March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands) Cost of revenue $ 14 $ 12 $ 40 $ 36 Selling, general and administrative 237 169 688 480 Research and development 44 43 149 129 Total share-based compensation expense $ 295 $ 224 $ 877 $ 645 The following table presents the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of March 31, 2018: Remaining Unrecognized Compensation Expense Remaining Weighted- Average Years To Recognize (In thousands) Stock options $ 1,762 2.7 RSUs 236 1.0 Stock purchase rights under ESPP 223 1.5 $ 2,221 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, 2018 | |
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 March 31, Nine Months Ended March 31, 2018 2017 2018 2017 Effective tax rate 8% 12% 460% 26% 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. Due to 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, 2018 and June 30, 2017. Tax Cuts and Jobs Act In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “2017 Act”), which changes existing U.S. tax law and includes various provisions that are expected to affect companies. Among other things, the 2017 Act (i) lowers U.S. corporate tax rates and implements a territorial tax system, (ii) generally reduces a company’s ability to utilize accumulated net operating losses and (iii) requires the calculation of a one-time transition tax on certain previously unrepatriated foreign earnings and profits (“E&P”) as part of the transition to the new territorial tax system. In addition, the 2017 Act impacts a company’s estimates of its deferred tax assets and liabilities. Pursuant to U.S. GAAP, changes in tax rates and tax laws are accounted for in the period of enactment, and the resulting effects are recorded as discrete components of the income tax provision related to continuing operations in the same period. We are in the process of evaluating the impact of the 2017 Act on our financial statements. Based on our initial assessments to date, we expect the one-time transition tax on certain foreign E&P to have a minimal impact on us as we anticipate that we will be able to utilize our existing net operating losses to substantially offset any taxes payable on foreign E&P. Additionally, we expect significant adjustments to our gross deferred tax assets and liabilities; however, we also expect to record a corresponding offset to our estimated full valuation allowance against our net deferred tax assets, which should result in minimal net effect to our provision for income taxes. Since Lantronix has a June 30 fiscal year-end, the lower U.S. corporate tax rate will be phased in, resulting in a U.S. statutory federal rate of approximately 28% for our fiscal year ending June 30, 2018, and 21% for subsequent fiscal years. In accordance with the SEC’s Staff Accounting Bulletin No. 118, we have not recorded any income tax effects of the 2017 Act in our financial statements (including any provisional amounts) because we do not yet have the necessary information available, prepared or analyzed in reasonable detail to complete the applicable accounting. We anticipate completing the analysis, and any resulting adjustments to our financial statements, by the end of our current fiscal year ending June 30, 2018. |
7. Commitments and Contingencie
7. Commitments and Contingencies | 9 Months Ended |
Mar. 31, 2018 | |
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, 2018 | |
Accounting Policies [Abstract] | |
The Company | The Company Lantronix, Inc., which we refer to herein as the Company, Lantronix, we, our, or us, is a global provider of secure data access and management solutions for Internet of Things (“IoT”) assets. Our mission is to be the leading supplier of IoT solutions 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, 2017, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017, which was filed with the SEC on August 24, 2017. 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, 2018, the consolidated results of our operations for the three and nine months ended March 31, 2018 and our consolidated cash flows for the nine months ended March 31, 2018. All intercompany accounts and transactions have been eliminated. 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, 2018 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 Leases In February 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard that revises lease accounting guidance. Most prominent among the changes in the standard is the recognition of right-of-use (“ROU”) assets and lease liabilities by lessees for those leases classified as operating leases under the existing guidance. The guidance requires entities to recognize and measure leases existing at, or entered into after, the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. In November 2017, FASB proposed a practical expedient that would allow entities the option to apply the provisions of the new lease guidance at the effective date of adoption without adjusting the comparative periods presented. The standard will be effective for Lantronix in the fiscal year beginning July 1, 2019. While we are continuing to assess the potential impacts of this standard, we currently expect the most significant impact on our financial statements will be the recognition of ROU assets and lease liabilities for our operating leases. We have not yet determined which practical expedients we intend to utilize in connection with adopting the new standard, nor have we determined any quantitative impacts on our financial statements. Revenue from Contracts with Customers In May 2014, FASB issued an accounting standard which superseded previous revenue recognition guidance under 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 previous guidance. 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). In previous periods we had disclosed that we expected to adopt the standard using the full retrospective method to restate each prior reporting period presented. As we have progressed with our evaluation of the potential impacts of adoption, we now anticipate adopting the standard using the cumulative catch-up transition method in the fiscal year beginning July 1, 2018. Under this method, prior reporting periods presented will not be restated. We currently anticipate the standard will have a material impact on our financial statements and disclosures. We believe the most significant impact of adopting 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 previous 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, predominantly at the time of shipment to these distributors. In addition, given certain requirements in the new standard regarding the presentation of estimated return assets and refund liabilities, we expect that adoption will result in an increase in our accounts receivable, net and decreases in our inventories, net and other current liabilities. As we continue to assess other potential impacts of the new standard, finalize our analyses pertaining to adoption, and evaluate changes to our accounting policies, internal controls and footnote disclosures, we may identify additional areas of impact and may revise our preliminary assessments and estimates. |
2. Supplemental Financial Inf13
2. Supplemental Financial Information (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Supplemental Financial Information Details - Equivalents | |
Schedule of Inventory | March 31, 2018 June 30, 2017 (In thousands) Finished goods $ 3,917 $ 4,191 Raw materials 2,139 1,694 Finished goods held by distributors 1,322 1,074 Inventories, net $ 7,378 $ 6,959 |
Schedule of Other Liabilities | March 31, 2018 June 30, 2017 (In thousands) Current Customer deposits and refunds $ 1,277 $ 1,119 Accrued raw materials purchases 389 484 Deferred revenue 316 196 Capital lease obligations 64 61 Taxes payable 307 275 Accrued operating expenses 1,053 928 Total other current liabilities $ 3,406 $ 3,063 Non-current Deferred rent $ 164 $ 200 Deferred revenue 157 196 Total other non-current liabilities $ 321 $ 396 |
Schedule of Computation of Net Income (Loss) per Share | Three Months Ended March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands, except per share data) Numerator: Net income (loss) $ 344 $ (162 ) $ (72 ) $ (225 ) Denominator: Weighted-average common shares outstanding (basic) 18,210 17,522 18,050 17,374 Effect of dilutive securities: Stock awards 908 – – – Denominator for net income (loss) per share (diluted) 19,118 17,522 18,050 17,374 Net income (loss) per share (basic) $ 0.02 $ (0.01 ) $ (0.00 ) $ (0.01 ) Net income (loss) per share (diluted) $ 0.02 $ (0.01 ) $ (0.00 ) $ (0.01 ) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Three Months Ended March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands) Common stock equivalents 595 1,062 2,146 1,894 |
Schedule of severance and related charges | Nine Months Ended March 31, 2018 (In thousands) Beginning balance $ – Charges 527 Payments (503 ) Other adjustments (21 ) Ending balance $ 3 |
Schedule of Supplemental Cash Flow Information | Nine Months Ended March 31, 2018 2017 (In thousands) Accrued property and equipment paid for in the subsequent period $ – $ 17 |
3. Warranty Reserve (Tables)
3. Warranty Reserve (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Product Warranties Disclosures [Abstract] | |
Schedule of warranty reserve | Nine Months Ended March 31, 2018 Year Ended June 30, 2017 (In thousands) Beginning balance $ 125 $ 138 Charged to cost of revenue 138 65 Usage (150 ) (78 ) Ending balance $ 113 $ 125 |
4. Bank Line of Credit (Tables)
4. Bank Line of Credit (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Minimum Tangible Net Worth | March 31, 2018 (In thousands) Minimum TNW $ 6,305 Actual TNW $ 12,378 |
Availability under the Line of Credit | March 31, 2018 June 30, 2017 (In thousands) Outstanding borrowings on the line of credit $ – $ – Available borrowing capacity $ 2,830 $ 2,812 Outstanding letters of credit $ 51 $ 51 |
5. Stockholders' Equity (Tables
5. Stockholders' Equity (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Schedule of share-based compensation expense | Three Months Ended March 31, Nine Months Ended March 31, 2018 2017 2018 2017 (In thousands) Cost of revenue $ 14 $ 12 $ 40 $ 36 Selling, general and administrative 237 169 688 480 Research and development 44 43 149 129 Total share-based compensation expense $ 295 $ 224 $ 877 $ 645 |
Schedule of unrecognized share-based compensation expense | Remaining Unrecognized Compensation Expense Remaining Weighted- Average Years To Recognize (In thousands) Stock options $ 1,762 2.7 RSUs 236 1.0 Stock purchase rights under ESPP 223 1.5 $ 2,221 |
Stock Options [Member] | |
Summary of stock option activity | Number of Shares Weighted- Average Exercise Price per Share (In thousands) Balance of options outstanding at June 30, 2017 $ 4,184 $ 1.78 Granted 929 2.15 Forfeited (177 ) 1.70 Expired (309 ) 3.70 Exercised (203 ) 1.67 Balance of options outstanding at March 31, 2018 $ 4,424 $ 1.73 |
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, 2017 300 $ 1.29 Granted 40 2.05 Vested (150 ) 1.29 Balance of RSUs outstanding at March 31, 2018 190 $ 1.45 |
ESPP [Member] | |
Summary of other-than-option activity | Number of Shares (In thousands) Shares available for issuance at June 30, 2017 476 Shares issued (155 ) Shares available for issuance at March 31, 2018 321 |
6. Income Taxes (Tables)
6. Income Taxes (Tables) | 9 Months Ended |
Mar. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Effective Income Tax Rate | Three Months Ended March 31, Nine Months Ended March 31, 2018 2017 2018 2017 Effective tax rate 8% 12% 460% 26% |
2. Supplemental Financial Inf18
2. Supplemental Financial Information (Details - Inventories) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
Supplemental Financial Information Details - Equivalents | ||
Finished goods | $ 3,917 | $ 4,191 |
Raw materials | 2,139 | 1,694 |
Finished goods held by distributors | 1,322 | 1,074 |
Inventories, net | $ 7,378 | $ 6,959 |
2. Supplemental Financial Inf19
2. Supplemental Financial Information (Details - Other liabilities) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
Current | ||
Customer deposits and refunds | $ 1,277 | $ 1,119 |
Accrued raw materials purchases | 389 | 484 |
Deferred revenue | 316 | 196 |
Capital lease obligations | 64 | 61 |
Taxes payable | 307 | 275 |
Acccrued operating expenses | 1,053 | 928 |
Total other current liabilities | 3,406 | 3,063 |
Non-current | ||
Deferred rent | 164 | 200 |
Deferred revenue | 157 | 196 |
Total other non-current liabilities | $ 321 | $ 396 |
2. Supplemental Financial Inf20
2. Supplemental Financial Information (Details - Net Loss per Share) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Numerator: | ||||
Net income (loss) | $ 344 | $ (162) | $ (72) | $ (225) |
Denominator: | ||||
Weighted-average common shares outstanding (basic) | 18,210 | 17,522 | 18,050 | 17,374 |
Effect of dilutive securities: | ||||
Stock awards | 908 | 0 | 0 | 0 |
Denominator for net income (loss) per share (diluted) | 19,118 | 17,522 | 18,050 | 17,374 |
Net income (loss) per share (basic) | $ .02 | $ (.01) | $ 0 | $ (0.01) |
Net income (loss) per share (diluted) | $ .02 | $ (0.01) | $ 0 | $ (0.01) |
2. Supplemental Financial Inf21
2. Supplemental Financial Information (Details - Equivalents) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Supplemental Financial Information Details - Equivalents | ||||
Common stock equivalents | 595 | 1,062 | 2,146 | 1,894 |
2. Supplemental Financial Inf22
2. Supplemental Financial Information (Details- Severance and related charges) $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Supplemental Financial Information Details - Equivalents | |
Beginning balance | $ 0 |
Charges | 527 |
Payments | (503) |
Other adjustments | (21) |
Ending balance | $ 3 |
2. Supplemental Financial Inf23
2. Supplemental Financial Information (Details- Supplemental Cash Flow Info) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Supplemental Financial Information Details - Equivalents | ||
Accrued property and equipment paid for in the subsequent period | $ 0 | $ 17 |
3. Warranty Reserve (Details -
3. Warranty Reserve (Details - Warranty reserve) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Mar. 31, 2018 | Jun. 30, 2017 | |
Product Warranties Disclosures [Abstract] | ||
Beginning balance | $ 125 | $ 138 |
Charged to cost of revenue | 138 | 65 |
Usage | (150) | (78) |
Ending balance | $ 113 | $ 125 |
4. Bank Line of Credit (Details
4. Bank Line of Credit (Details - TNW) $ in Thousands | Mar. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
Minimum TNW | $ 6,305 |
Actual TNW | $ 12,378 |
4. Bank Line of Credit (Detai26
4. Bank Line of Credit (Details - Credit Line) - USD ($) $ in Thousands | Mar. 31, 2018 | Jun. 30, 2017 |
Debt Disclosure [Abstract] | ||
Outstanding borrowings on the line of credit | $ 0 | $ 0 |
Available borrowing capacity | 2,830 | 2,812 |
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, 2018USD ($) | |
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. 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, 2018, we met the 1.0 to 1.0 or greater quick ratio requirement. |
Minimum TNW | $ 6,305 |
5. Stockholders Equity (Details
5. Stockholders Equity (Details - Option activity) - Stock Options [Member] shares in Thousands | 9 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Number of shares | |
Number of Shares Options Outstanding, Beginning | shares | 4,184 |
Number of Shares Options Granted | shares | 929 |
Number of Shares Options Forfeited | shares | (177) |
Number of Shares Options Expired | shares | (309) |
Number of Shares Options Exercised | shares | (203) |
Number of Shares Options Outstanding, Ending | shares | 4,424 |
Weighted Average Exercise Price per share | |
Exercise Price Outstanding, Beginning | $ / shares | $ 1.78 |
Exercise Price Granted | $ / shares | 2.15 |
Exercise Price Forfeited | $ / shares | 1.70 |
Exercise Price Expired | $ / shares | 3.70 |
Exercise Price Exercised | $ / shares | 1.67 |
Exercise Price Outstanding, Ending | $ / shares | $ 1.73 |
5. Stockholders Equity (Detai29
5. Stockholders Equity (Details - RSU activity) - Restricted Stock Units (RSUs) [Member] shares in Thousands | 9 Months Ended |
Mar. 31, 2018$ / sharesshares | |
Number of RSU's Shares | |
Balance of RSU's, beginning | shares | 300 |
Granted | shares | 40 |
Vested | shares | (150) |
Balance of RSU's, ending | shares | 190 |
Weighted Average Grant Date Fair Value per share | |
RSU Shares Weighted-Average Grant-Date Fair Value per Share, beginning | $ / shares | $ 1.29 |
RSU Shares Granted, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 2.05 |
RSU Shares Vested, Weighted-Average Grant-Date Fair Value per Share | $ / shares | 1.29 |
RSU Shares Weighted-Average Grant-Date Fair Value per Share, ending | $ / shares | $ 1.45 |
5. Stockholders Equity (Detai30
5. Stockholders Equity (Details - ESPP activity) - ESPP [Member] shares in Thousands | 9 Months Ended |
Mar. 31, 2018shares | |
Shares available for issuance at beginning of period | 476 |
Shares issued | (155) |
Shares available for issuance at end of period | 321 |
5. Stockholders Equity (Detai31
5. Stockholders Equity (Details - Share based compensation) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Total share-based compensation | $ 295 | $ 224 | $ 877 | $ 645 |
Cost of revenue [Member] | ||||
Total share-based compensation | 14 | 12 | 40 | 36 |
Selling, general and administrative [Member] | ||||
Total share-based compensation | 237 | 169 | 688 | 480 |
Research and development [Member] | ||||
Total share-based compensation | $ 44 | $ 43 | $ 149 | $ 129 |
5. Stockholders Equity (Detai32
5. Stockholders Equity (Details - Unrecognized expense) $ in Thousands | 9 Months Ended |
Mar. 31, 2018USD ($) | |
Unrecognized share-based compensation expense | $ 2,221 |
Stock Options [Member] | |
Unrecognized share-based compensation expense | $ 1,762 |
Weighted average years to recognize | 2 years 8 months 12 days |
Restricted Stock Units (RSUs) [Member] | |
Unrecognized share-based compensation expense | $ 236 |
Weighted average years to recognize | 1 year |
ESPP [Member] | |
Unrecognized share-based compensation expense | $ 223 |
Weighted average years to recognize | 1 year 6 months |
5. Stockholders Equity (Detai33
5. Stockholders Equity (Details Narrative) | Mar. 31, 2018shares |
Equity [Abstract] | |
Common stock reserved for issuance | 2,000,000 |
6. Income Taxes (Details - Effe
6. Income Taxes (Details - Effective tax rate) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2018 | Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||||
Effective tax rate | 8.00% | 12.00% | 460.00% | 26.00% |