What changed in this filing

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Item 1. Business

2023-09-12 compared with 2022-08-29 · 162 added, 197 removed, 122 unchanged (75% of the section changed)

Lantronix, Inc.

is a global Industrial and Enterprise IoT provider

of solutions that target diversified verticals ranging from Smart Cities, Utilities and Healthcare to Enterprise, Intelligent Transportation,

and Industrial Automation.

Building on a long history of connectivity and video processing competence, target applications include Video

Surveillance, Traffic management, Infotainment systems, Robotics, Edge Computing and Remote Environment Management (“REM”).

Our portfolio of services and products address each layer of the IoT

Stack including Collect, Connect, Compute, Control and Comprehend, enabling our customers to deploy successful IoT and REM solutions.

Our services and products deliver a holistic approach, addressing our customers’ needs by integrating a SaaS management platform

with custom application development layered on top of external and embedded hardware, enabling intelligent edge computing, secure communications

(wired, Wi-Fi, and cellular), location and positional tracking, and environmental sensing and reporting.

We organize our portfolio services and products into the following

product lines:

Embedded IoT Modules, IoT Systems Solutions, and Software and Engineering Services.

is a global Industrial and Enterprise internet of things

(“IoT”) provider of solutions that target high growth applications in specific verticals such as Smart Grid, Intelligent Transportation,

Smart Cities, and AI Data Centers.

Building on a long history of Networking and video processing competence, target applications include

Intelligent Substations infrastructure, Infotainment systems, and Video Surveillance, supplemented with a comprehensive Out of Band Management

(“OOB”) products offering for Cloud and Edge Computing.

We organize our portfolio of services into the following product lines:

Embedded IoT Modules, IoT Systems Solutions, and Software and Services.

We were incorporated in California in 1989 and reincorporated in Delaware

References in this Report to “fiscal 2022” refer to the

fiscal year ended June 30, 2022 and references to “fiscal 2021” refer to the fiscal year ended June 30, 2021.

unless the context suggests otherwise, all reference in this Report to the “Company,” “we,” and “us,”

refer to Lantronix, Inc.

References in this Report to “fiscal 2023” refer to the fiscal

year ended June 30, 2023 and references to “fiscal 2022” refer to the fiscal year ended June 30, 2022.

In addition, unless

the context suggests otherwise, all reference in this Report to the “Company,” “we,” and “us,” refer

to Lantronix, Inc.

together with its subsidiaries.

Today, more businesses are seeking to streamline their operations by

connecting their machines and electronic devices to the Internet, manage them remotely, and reduce costs.

The growth in the IoT and REM

markets are being driven by the growing importance of data, being able to act on that data, and the rapidly falling cost of sensors, connectivity,

Today, more businesses are seeking to streamline their operations by connecting

their Operational Technology (“OT”) Infrastructure equipment to the Internet, manage it remotely, and reduce costs.

in the IoT and OOB markets is being driven by the growing importance of data analytics, and the rapidly falling cost of sensors, connectivity,

compute, and storage.

While the promise is great, designing and deploying these projects is complex, costly and time-consuming.

Our offerings

are designed to help companies increase speed and reduce friction for their deployments through reduced complexity, decreased development

costs, and increased ease of management for web-scale applications and real-world solutions;

thus, driving customer value and success.

We are addressing the market opportunity by offering our customers turnkey solutions, leveraging the layers of the IoT Stack, such as

Collect, Connect, Compute, Control and Comprehend, through a combination of services, hardware and software enablement, accessible and

manageable through our SaaS platform.

We are executing a growth strategy that includes continuous innovation

complemented by strategic acquisitions to expand our ability to offer complete IoT and REM solutions with the intent of increasing our

scale and broadening our scope so that we can increase our value proposition to our customers.

We believe this strategy will allow us

to address a larger portion of our customers’ operational needs and engage with customers as a strategic "total solution"

We believe this will strengthen our position in the market as our customers come to us for a wider variety of applications.

Recent Acquisitions

On January 16, 2020 we acquired Intrinsyc Technologies Corporation

(“Intrinsyc”).

This acquisition provided additional and complementary edge computing with embedded product design and application

development capabilities, crucial to the development of intelligent Compute functionality for advanced customer implementations.

On August 2, 2021 we acquired the Transition Networks and Net2 Edge

businesses (the “TN Companies”) from Communication Systems, Inc.

The TN Companies provide us with complementary IoT connectivity

products and capabilities, including switching, power over ethernet and media conversion and adapter products.

These acquisitions allow us to offer more value to our customers and

substantially increase the markets that we serve.

Designing and deploying these projects is complex, costly and time-consuming.

Our products are

designed to help companies increase speed and reduce the complexity of their deployments by offering our customers customizable solutions,

that address each layer of the IoT Stack, such as Collect, Connect, Compute, Control and Comprehend.

We are executing on a growth strategy that includes continuous innovation

supplemented by strategic acquisitions with the intent of increasing our scale and broadening our scope so that we can increase our value

proposition to customers.

We believe this strategy will allow us to address a larger portion of our customers’ operational needs

and engage with them as a strategic partner.

This strategy is starting to bear fruits as we continue to strengthen our position in the

market and more customers come to us for a wider variety of applications.

Products and Solutions

Embedded IoT Modules

This portfolio of embedded products provides a variety of solutions

including Compute System-on-Module (SOM) or System-in-Package (SIP) solutions supplemented with wired and wireless network Connectivity

As the level of silicon integration continues to grow, the compute modules also provide the ability to Collect digital information

(Video, Audio or Sensors) and analyze/comprehend the data streams based on specific AI/ML algorithms.

The new implementations of SIP devices

can process multiple media streams with CV (Computer Vision) technology and the modules can be Controlled remotely via ConsoleFlow™,

Lantronix’s Cloud SaaS platform.

Our IoT compute products typically are embedded into a customer product, enabling advanced application

functionality at the edge.

Our compute products are normally embedded into new designs.

These products include application processing

that delivers compute to meet customer needs for data transformation, computer vision, machine learning, augmented / virtual reality,

audio / video aggregation and distribution, and custom applications at the edge.

Many of the products are offered with software tools

intended to further accelerate our customers’ time-to-market and increase their value add.

Most of our IoT embedded products are

pre-certified in a number of countries thereby significantly reducing our OEM customers’ regulatory certification costs and accelerating

their time to market

This portfolio of embedded products provides a variety of options including

Compute System-on-Module (“SOM”) or System-in-Package (“SIP”) solutions supplemented with wired and wireless network

Connectivity products.

As the level of silicon integration continues to grow, the compute modules also provide the ability to Collect

digital information (Video, Audio or Sensors) and analyze/comprehend the data streams based on specific AI/ML algorithms.

The new implementations

of SIP devices can process multiple media streams with CV (Computer Vision) technology and the modules can be Controlled remotely via

ConsoleFlow™, Lantronix’s Cloud SaaS platform.

Our IoT compute products typically are embedded into a customer new product

design, enabling advanced application functionality at the edge.

These products include application processing that delivers compute to

meet customer needs for data transformation, computer vision, machine learning, augmented / virtual reality, audio / video aggregation

and distribution, and custom applications at the edge.

Many of the products are offered with software tools intended to further accelerate

our customers’ time-to-market and increase their value add.

Most of our IoT embedded products are pre-certified in a number of countries

thereby significantly reducing our original equipment manufacturer (“OEM”) customers’ regulatory certification costs

and accelerating their time-to-market.

The following product families are included in our Embedded IoT Solutions

product line:

XPort®, XPort® Pro, WiPort®, System on Module (“SoM”), Single Board Computer (“SBC”),

Development Kits, MicroM110, xPico®, xPico® Wi-Fi, NICS, Optical SFPs, PremierWave® EN, and PremierWave® XC.

Open-Q SOMs and SIPs, XPort®, XPort® Pro, WiPort®, Development Kits, xPico®, xPico® Wi-Fi, NICS, Optical

SFPs, PremierWave® EN, and PremierWave® XC.

IoT System Solutions

The IoT Systems Solutions portfolio consists of fully functional standalone

systems that provider routing, switching or gateway functionalities as well as Telematics and media conversion.

systems that provide routing, switching or gateway functionalities as well as Telematics and media conversion.

These products include

wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing secure network

connectivity, power for IoT end devices through Power over Ethernet (PoE), application hosting, protocol conversion, media conversion,

secure access for distributed IoT deployments and many other functions.

Most of our IoT System products are pre-certified in a number

of countries thereby significantly reducing our original equipment manufacturer (“OEM”) customers’ regulatory certification

costs and accelerating their time to market.

Our PoE products support remote devices such as cameras and wireless

access points by passing electrical power along with data on Ethernet cabling, eliminating the need for traditional AC/DC electrical power

in hard-to-reach locations.

connectivity, power for IoT end devices through Power over Ethernet (“PoE”), application hosting, protocol conversion, media

conversion, secure access for distributed IoT deployments and many other functions.

Most of our IoT System products are pre-certified

in a number of countries thereby significantly reducing our original equipment manufacturer (“OEM”) customers’ regulatory

certification costs and accelerating their time-to-market.

Our PoE products support remote devices such as cameras and wireless access

points by passing electrical power along with data on Ethernet cabling, eliminating the need for traditional AC/DC electrical power in

hard-to-reach locations.

As more cities move to implement smart city technology, a major component will be solutions designed to protect

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reducing our OEM customers’ regulatory certification costs and accelerating their time-to-market.

As Edge Computing deployment accelerates, REM allows for full comprehension

and control of a remote IT infrastructure, across a range of sensors (temperature, humidity, light, acceleration, open / close, etc.)

providing status and alerting, automation, and remote control of devices and end stations.

REM designs may be part of an out of band (“OOB”)

or in band network design.

OOB is a technique that uses a dedicated management network to access critical infrastructure components to

ensure production independent management connectivity.

REM allows organizations to effectively monitor, manage, and control their enterprise

IT equipment and facilities (environments), either in or out of band, optimizing their IT support resources.

Our REM product line includes out-of-band management, console management,

As Edge Computing deployment accelerates, OOB Management allows for

full comprehension and control of a remote IT infrastructure, across a range of sensors (e.g., temperature, humidity, light,

acceleration, open / close, etc.) providing status and alerting, enabling automation, and remote control of devices, servers, and

end stations.

OOB is a technique that uses a dedicated management network to access critical infrastructure components and ensure

production independent connectivity.

Remote Management allows organizations to effectively monitor and control their enterprise IT

equipment and facilities (environments), either in or out of band, optimizing their IT support resources.

Our AOOB (“Advanced OOB”) product line includes console management,

power management, and IP connected keyboard-video-mouse (commonly referred to as “IPKVM”) products that provide remote access

to IT and networking infrastructure deployed in test labs, data centers, branch offices, remote sites, and server rooms.

following product families are included in IoT System Solutions product line:

EDS, EDS-MD, xPress™, xDirect®, E21x, E22x, G52x,

X30x, Bolero4x, FOX3-4G, FOX4, SGX™, SLB ™ , SLC ™ 8000, Spider ™ , UDS, EMG ™ .

S40 and Power over Ethernet Switches.

In addition, we offer

non-PoE Network Switches and Media Converters.

The following product families are included in IoT System Solutions product

EDS, EDS-MD, xPress™, xDirect®, E21x, E22x, G52x, X30x, Bolero4x, FOX3-4G, FOX4, SGX™, SLB ™ , SLC ™ 8000,

Spider ™ , UDS, EMG ™ , S40 and PoE Switches.

In addition, we offer non-PoE Network Switches and Media Converters.

Software and Engineering Services

Our SaaS platform provides single pane of glass management for REM

and IoT deployments.

Our platform enables customers to easily deploy, monitor, manage, and automate across their global deployments, all

from a single platform login, virtually connected as though directly on each device.

Our SaaS platform provides single pane of glass management for REM and

IoT deployments.

Our platform enables customers to easily deploy, monitor, manage, and automate across their global deployments, all from

a single platform login, virtually connected as though directly on each device.

Our platform eliminates the need to have 24/7 personnel

on site and makes it easy to see and drill into an issue quickly, even in large scale deployments.

OEMs and SIs can leverage our platform multitenancy functionality for

supporting a wide customer base while ensuring customer separation.

Over the Air (“OTA”) updates make it easy to ensure the

latest security patches, firmware, and configurations are deployed and functional.

We leverage our engineering expertise and product development best

practices to deliver high quality, innovative products, cost-effectively and on time.

Our engineering services flexible business model allows for choosing

turnkey product development or team augmentation for accelerating complex areas of product development such as;

camera development and

tuning, voice control, machine learning, artificial intelligence, computer vision, augmented / virtual reality, mechanical and radio-frequency

OEMs and System Integrators (“SI”) can leverage our platform

multitenancy functionality for supporting a wide customer base while ensuring customer separation.

Over the Air (“OTA”) updates

make it easy to ensure the latest security patches, firmware, and configurations are deployed and functional.

We leverage our engineering expertise and product development best practices

to deliver high quality, innovative products, cost-effectively and on time.

Our engineering services flexible business model allows for choosing turnkey

product development or team augmentation for accelerating complex areas of product development such as;

camera development and tuning,

voice control, machine learning, artificial intelligence, computer vision, augmented / virtual reality, mechanical and radio-frequency

design, thermal and power optimization, or in any specific area a customer needs assistance.

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product line:

Engineering Services, ConsoleFlow™, Level Services and J-Integra.

Engineering Services, ConsoleFlow™, Control Center and Level Services.

Net Revenue by Product Line

We have one operating and reportable business segment.

our net revenue by product line is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

A summary of our

net revenue by product line is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

included in Part II, Item 7 of this Report, which is incorporated herein by reference.

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incorporated herein by reference.

Our embedded IoT solutions are typically designed into products by

OEMs, original design manufacturers (“ODMs”) and contract manufacturers.

OEMs design and sell products under their own brand

that are either manufactured by the OEM in-house or by third-party contract manufacturers.

ODMs design and manufacture products for third

parties, which then sell those products under the third parties’ brands.

The design cycles using our embedded solutions typically

range from nine to 24 months and can generate revenue for the entire life cycle of an end user’s product.

Our embedded IoT solutions are typically designed into products by OEMs,

original design manufacturers (“ODMs”) and contract manufacturers.

OEMs design and sell products under their own brand that

are either manufactured by the OEM in-house or by third-party contract manufacturers.

ODMs design and manufacture products for third parties,

which then sell those products under the third parties’ brands.

The design cycles using our embedded solutions typically range from

nine to 24 months and can generate revenue for the entire life cycle of an end user’s product.

Our IoT System Solutions are typically sold to end users through value

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A majority of our sales are made through distributors.

resell our products to a wide variety of resellers and end customers including OEMs, ODMs, value-added resellers (“VARs”),

systems integrators, consumers, online retailers, IT resellers, corporate customers and government entities.

Distributors resell

our products to a wide variety of resellers and end customers including OEMs, ODMs, value-added resellers (“VARs”), systems

integrators, consumers, online retailers, IT resellers, corporate customers and government entities.

Our products are sold by industry-specific system integrators and VARs,

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and Amazon.com.

To a lesser extent, we sell products directly to larger OEMs and end

To a lesser extent, we sell products directly to larger OEMs and end users.

We also maintain an ecommerce site for direct sales.

Sales and Marketing

We sell our products primarily through an internal sales force, which

includes regional sales managers, inside sales personnel and field applications engineers in major regions throughout the world.

team manages our relationships with our partners and end users, identifies and develops new sales opportunities and increases penetration

at existing accounts.

We implement marketing programs, tools and services, including displaying our products at industry-specific events,

to generate sales leads and increase demand for our products.

We sell our products primarily through an internal sales force, which includes

regional sales managers, inside sales personnel and field applications engineers in major regions throughout the world.

This team manages

our relationships with our partners and end users, identifies and develops new sales opportunities and increases penetration at existing

We implement marketing programs, tools and services, including displaying our products at industry-specific events, to generate

sales leads and increase demand for our products.

Manufacturing

Our manufacturing operations are primarily conducted through four third-party

Our manufacturing operations are primarily conducted through five third-party

contract manufacturers.

We currently utilize Hana Microelectronics, primarily located in Thailand and China, Honortone, primarily located

in China, Ruby Tech in Taiwan, and Tailyn in China as our contract manufacturers for most of our products.

In addition, we use Inphi Corporation

to manage Taiwan Semiconductor Manufacturing Company, Ltd., a third-party foundry located in Taiwan, which manufactures our large-scale

integration chips.

We manufacture certain products with final assembly in the U.S.

in China, Ruby Tech and Info-Tek in Taiwan, and Tailyn in China as our contract manufacturers for most of our products.

In addition, we

use Marvell Technology Inc., to manage the manufacture of our large-scale integration chips in Taiwan.

We manufacture certain products

with final assembly in the U.S.

to meet trade compliance requirements.

Our contract manufacturers source raw materials, components

and integrated circuits, in accordance with our specifications and forecasts, and perform printed circuit board assembly, final assembly,

Our contract manufacturers source raw materials, components and

integrated circuits, in accordance with our specifications and forecasts, and perform printed circuit board assembly, final assembly,

functional testing and quality control.

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Research and Development

Our research and development efforts are focused on the development

of hardware and software technology to differentiate our products and enhance our competitive position in the markets we serve.

research and development is primarily performed in-house and supplemented with outsourced resources.

Our research and development efforts are focused on the development of

hardware and software technology to differentiate our products and enhance our competitive position in the markets we serve.

Product research

and development is primarily performed in-house and supplemented with outsourced resources.

Our industry is highly competitive and characterized by rapid technological

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Intellectual Property Rights

We believe that a considerable portion of our value resides in our

intellectual property.

We have developed proprietary methodologies, tools, processes and software in connection with delivering our products

and services.

We protect our intellectual property through a combination of patents, copyrights, trademarks, trade secrets, licenses,

non-disclosure agreements and contractual provisions.

We enter into a non-disclosure and confidentiality agreement with each of our employees,

consultants and third parties that have access to our proprietary technology.

Pursuant to assignment of inventions agreements, all of

our employees and consultants assign to us all intellectual property rights for the relevant inventions created in connection with their

employment or contract with us.

We believe that a considerable portion of our value resides in our intellectual

We have developed proprietary methodologies, tools, processes and software in connection with delivering our products and services.

We protect our intellectual property through a combination of patents, copyrights, trademarks, trade secrets, licenses, non-disclosure

agreements and contractual provisions.

We enter into a non-disclosure and confidentiality agreement with each of our employees, consultants

and third parties that have access to our proprietary technology.

Pursuant to assignment of inventions agreements, all of our employees

and consultants assign to us all intellectual property rights for the relevant inventions created in connection with their employment

or contract with us.

We currently hold U.S.

and international patents covering various aspects of our products, with additional

patent applications pending.

and international patents covering various aspects of our products, with additional patent

applications pending.

and Foreign Government Regulation

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export restrictions.

As of August 16, 2022, we had 348 total employees including 335 full

time employees, none of whom is represented by a labor union.

We have not experienced any labor problems resulting in a work stoppage

and believe we have good relationships with our employees.

As of August 18, 2023, we had 370 total employees including 357 full time

employees, none of whom is represented by a labor union.

We have not experienced any labor problems resulting in a work stoppage and believe

we have good relationships with our employees.

Customer and Geographic Concentrations

We conduct our business globally and manage our sales teams by three

geographic regions:

We conduct our business globally and manage our sales teams by three geographic

the Americas;

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and Asia Pacific Japan (“APJ”).

discussion of sales to our significant customers and related parties, sales within geographic regions as a percentage of net revenue and

sales to significant countries as a percentage of net revenue is set forth in Note 11 of Notes to Consolidated Financial Statements included

in Part II, Item 8 of this Report, which is incorporated herein by reference.

of sales to our significant customers and related parties, sales within geographic regions as a percentage of net revenue and sales to

significant countries as a percentage of net revenue is set forth in Note 11 of Notes to Consolidated Financial Statements included in

Part II, Item 8 of this Report, which is incorporated herein by reference.

A discussion of factors potentially affecting our customer

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Executive officers serve at the discretion of our board of directors.

There are no family relationships between any of our directors or executive officers.

The following table presents the names, ages, and

positions held by our executive officers as of the date of this Report:

President and Chief Executive Officer

Chief Financial Officer

are no family relationships between any of our directors or executive officers.

The following table presents the names, ages, and positions

held by our executive officers as of the date of this Report:

Interim Chief Executive Officer and Chief Financial Officer

Vice President of Engineering

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Vice President of Worldwide Sales

PICKLE has served as our President and Chief Executive Officer,

and as a member of our Board, since April 2019.

Before joining Lantronix, Mr.

Pickle served as President and Chief Operating Officer of

Microsemi Corporation, a leading provider of semiconductor and system solutions, from November 2013 until Microsemi was acquired by Microchip

Technology Inc.

Prior to his position as President and Chief Operating Officer, he served Microsemi as Executive Vice President,

leading business operations of the company’s Integrated Circuits group, where he played an integral role in the planning, developing,

and execution of Microsemi’s leading edge IC solutions for communications, industrial, aerospace, and defense/security markets.

WHITAKER has served as our Chief Financial Officer since

September 2011.

Whitaker returned to Lantronix after serving as Vice President, Corporate Controller at Mindspeed from January 2011

to September 2011.

Whitaker previously served as our Vice President of Finance and Accounting from September 2010 to January 2011,

where he was responsible for managing all worldwide finance and accounting functions.

Whitaker also served as our Senior Director

of Finance and Accounting from February 2006 to September 2010 and our Director of Finance and Accounting from August 2005 to February

Prior to August 2005, Mr.

Whitaker held vice president and director level finance and accounting positions with two publicly-traded

companies and worked in the assurance practice at Ernst & Young LLP for six years.

HAKAM joined Lantronix in August of 2018 and serves as

our Vice President of Engineering.

WHITAKER has served as our interim Chief Executive Officer

since June 2023 and our Chief Financial Officer since September 2011.

Whitaker returned to Lantronix after serving as Vice President,

Corporate Controller at Mindspeed, a supplier of semiconductor solutions for network infrastructure, from January 2011 to September 2011.

Whitaker previously served as our Vice President of Finance and Accounting from September 2010 to January 2011, where he was responsible

for managing all worldwide finance and accounting functions.

Whitaker also served as our Senior Director of Finance and Accounting

from February 2006 to September 2010 and our Director of Finance and Accounting from August 2005 to February 2006.

Prior to August 2005,

Whitaker held vice president and director level finance and accounting positions with two publicly-traded companies and worked in

the assurance practice at Ernst & Young LLP for six years.

ERIC BASS has served as our Vice President

of Engineering since January 2023.

Prior to joining Lantronix, Mr.

Hakam served as the interim Senior Vice President of International

Operations at Viewstream, Inc., a provider of videos and marketing content to technology companies, from September 2016 to July 2018,

where he was instrumental in planning and expanding the company’s global media strategy.

Before joining Viewstream, Mr.

founder and Senior Vice President of Engineering and Product Management of SwitchRay Inc., a global provider of communication service

platforms for global telecom carriers, from 2012 until its acquisition by 46 Labs in September 2016.

He previously spent 20+ years at

a number of large companies such as Motorola and Kyocera Wireless in various engineering leadership roles, and has also been the founder

of two technology companies (including SwitchRay Inc.) in the networking and telecom segment.

Hakam has been a professor at National

University in San Diego, teaching undergraduate and graduate courses in program and project management, international management, six

sigma and statistical process control.

Bass held the position of Director of Strategic Programs at Intrinsix

Corp., a provider of electronics and custom integrated circuit design engineering solutions and services, from January 2019 to January

Previously, Mr.

Bass served in multiple roles at Microsemi Corporation, a provider of semiconductor solutions differentiated by

power, security, reliability and performance, from November 2011 to August 2018, culminating with his role as Vice President of Research

& Development Voice Circuit and Power-over-Ethernet Divisions from August 2017 to August 2018, and at Zarlink Semiconductor, a provider

of mixed-signal chip technologies for a broad range of communications and medical applications, from January 2001 until Zarlink was acquired

by Microsemi in November 2011.

ROGER HOLLIDAY joined Lantronix in January 2020 and serves as our Vice

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Holliday served in various product marketing, applications and sales management roles

at Linfinity Microelectronics until its acquisition by Microsemi in 1999.

at Linfinity Microelectronics, a manufacturer of standard linear and mixed signal integrated circuits, until Linfinity’s acquisition

by Microsemi in 1999.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business