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Item 9A. Controls and Procedures

2025-08-29 compared with 2024-09-09 · 767 added, 783 removed, 819 unchanged (65% of the section changed)

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Our management, with the participation of our Chief Executive Officer and

our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024 and have concluded

they were not effective as of June 30, 2024 due to the material weakness described below.

Despite the material weakness, management believes

that the Consolidated Financial Statements included in this Report fairly present, in all material respects, our financial position, results

of operations, and cash flows as of and for the period presented, in accordance with U.S.

our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered

by this Annual Report on Form 10-K.

Based on this evaluation, we have concluded that our disclosure controls and procedures were effective

as of June 30, 2025.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Our management is responsible for establishing and

maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability

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provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use, or disposition of our assets that could have a material effect on the Consolidated Financial Statements.

Because of its inherent limitations, a system

of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.

because of changing conditions, effectiveness of internal control over financial reporting may vary over time.

Under the supervision and with the participation of our management,

including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control

over financial reporting as of June 30, 2024 based on the guidelines established in the Internal Control—Integrated Framework (2013

framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

As disclosed in Part II, Item 9A in the Company’s Annual Report

on Form 10-K for the fiscal year ended June 30, 2023, management concluded that the Company’s internal control over financial reporting

was not effective as of June 30, 2023.

Management identified deficiencies in the design and implementation of information technology general

controls (“ITGCs”), constituting a material weakness, related to the Company’s information systems relevant to preparing

consolidated financial statements.

Specifically, management did not design and maintain user access controls to ensure appropriate segregation

of duties and to adequately restrict user access to financial applications and data.

During the fiscal year ended June 30, 2024, management implemented

a previously disclosed remediation plan to enhance the design of ITGCs related to user access and proper segregation of duties.

· Modifying user rights to significantly restrict access to certain key financial

applications and functionality.

· Implementing additional review and approval requirements within the financial

systems workflow.

· Creating new audit reports that require management review and approval of

changes made to key attributes within the financial application.

· Improving and maintaining documentation underlying ITGCs to promote knowledge

transfer upon personnel and function changes.

· Implementing an IT management review and testing plan to monitor user access,

specifically focusing on financial applications.

As of June 30, 2024, management has implemented the remedial actions

and controls described above concerning the material weakness.

Due to the timing of the design and implementation of our remediation efforts

during the fourth quarter of fiscal 2024, there has been insufficient time to demonstrate consistent execution of certain controls.

such, management is unable to conclude on the operating effectiveness of the implemented remediations and therefore concludes that internal

control over financial reporting was not effective as of June 30, 2024.

We expect to continue to execute, test, and assess the effectiveness

of these controls as we progress into fiscal 2025.

Because of its inherent limitations, a system of internal

control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.

Further, because of

changing conditions, effectiveness of internal control over financial reporting may vary over time.

Under the supervision and with the participation of our management, including

our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over

financial reporting as of June 30, 2025 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework)

issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on that evaluation, management

concluded that our internal control over financial reporting was effective as of June 30, 2025.

Baker Tilly US, LLP, the independent registered public accounting firm

that audited the financial statements included in this Annual Report on Form 10-K, has provided an attestation report on Lantronix’s

internal control over financial reporting.

As a result of the material weakness described above, their report includes an adverse audit

report on the effectiveness of internal control over financial reporting as of June 30, 2024.

that audited the financial statements included in this Annual Report on Form 10-K, has provided an attestation report on our internal

control over financial reporting, which is included herein.

Changes in Internal Controls over Financial Reporting

Except for the changes in connection with our remediation plan discussed

above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by

Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2024 that have materially affected, or

are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting

identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter

ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial

OTHER INFORMATION

3 , 2024, we entered into a Fourth Amendment to Third Amended and Restated Loan and Security

Agreement (the “Fourth Amendment”) with Silicon Valley Bank, pertaining to our existing term loan and revolving credit facility

(together, the “Senior Credit Facilities”), which amends that certain Third Amended and Restated Loan and Security Agreement,

dated as of August 2, 2021, as amended by the First Amendment to Third Amended and Restated Loan and Security Agreement, dated as of October

21, 2021, as amended by the Second Amendment to Third Amended and Restated Loan and Security Agreement, dated as of February 15, 2022,

as amended by the Third Amendment to Third Amended and Restated Loan and Security Agreement, dated as of September 7, 2022.

the Fourth Amendment, the maturity of our Senior Credit Facilities was extended from August 2, 2025 to August 2, 2026.

The foregoing

description of the Fourth Amendment is qualified in its entirety by the Fourth Amendment, a copy of which is filed as Exhibit 10.42 to

this Annual Report on Form 10-K and is incorporated herein by reference.

Insider Trading Arrangements

the year ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1

trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of

Regulation S-K.

During the quarter

ended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule

10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Portions of our definitive Proxy Statement on Schedule 14A relating

to our 2024 annual meeting of stockholders (“Proxy Statement”), which will be filed with the SEC within 120 days after the

end of the fiscal year covered by this Report, are incorporated by reference into Part III of this Report, as indicated below.

Portions of our definitive Proxy Statement on Schedule 14A relating to

our 2025 annual meeting of stockholders (“Proxy Statement”), which will be filed with the SEC within 120 days after the end

of the fiscal year covered by this Report, are incorporated by reference into Part III of this Report, as indicated below.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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this Report, which is incorporated herein by reference.

We have adopted a code of business conduct and ethics that applies

to all employees, including employees of our subsidiaries, as well as each member of our board of directors.

The code of business conduct

and ethics is available at our website at www.lantronix.com under the Investor Relations-Corporate Governance section.

We have adopted a code of business conduct and ethics that applies to all

employees, including employees of our subsidiaries, as well as each member of our board of directors.

The code of business conduct and

ethics is available at our website at www.lantronix.com under the Investor Relations-Corporate Governance section.

We intend to satisfy

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EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference

to our Proxy Statement.

The information required by this Item is incorporated by reference to our

Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference

to our Proxy Statement.

The information required by this Item is incorporated by reference to our

Proxy Statement.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference

to our Proxy Statement.

The information required by this Item is incorporated by reference to our

Proxy Statement.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference

to our Proxy Statement.

AND FINANCIAL STATEMENT SCHEDULES

The information required by this Item is incorporated by reference to our

Proxy Statement.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements

The following consolidated financial statements and related Report

of Independent Registered Public Accounting Firm are filed as part of this Report.

The following consolidated financial statements and related Report of Independent

Registered Public Accounting Firm are filed as part of this Report.

Report of Independent Registered Public Accounting Firm (PCAOB ID 23 )

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Incorporated by Reference

Exhibit Number

Exhibit Description

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2020 Performance Incentive Plan

Letter Agreement dated September 8, 2011 between Lantronix, Inc.

and Jeremy Whitaker

Amendment to Offer Letter between Lantronix, Inc.

and Jeremy Whitaker, dated as of November 13, 2012

Form of Fiscal 2025 Restricted Stock Unit Award Agreement under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Fiscal 2025 Performance Stock Unit Award Agreement (Financial Measure) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Fiscal 2025 Performance Stock Unit Award Agreement (Relative TSR) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Fiscal 2026 Restricted Stock Unit Award Agreement under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Fiscal 2026 Performance Stock Unit Award Agreement (Financial Measure) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Fiscal 2026 Performance Stock Unit Award Agreement (Relative TSR) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Inducement Restricted Stock Unit Agreement

Form of Inducement Performance Stock Unit Agreement (Relative TSR)

Form of Inducement Performance Stock Unit Agreement (Financial Measure)

Lantronix, Inc.

2013 Employee Stock Purchase Plan, as amended and restated

Intrinsyc Technologies Corporation Amended and Restated Incentive Stock Option Plan

Intrinsyc Technologies Corporation Restricted Share Unit Plan

2020 Non-Employee Director Compensation Policy

Non-Employee Director Compensation Policy, as revised August 8, 2022 to be effective November 8, 2022

Form of Indemnification Agreement entered into between Lantronix, Inc.

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Form of Executive Officer Retention Letter Agreement

Lantronix, Inc.

2013 Employee Stock Purchase Plan, as amended and restated

Offer Letter dated January 4, 2020, between Lantronix, Inc.

and Roger Holliday

Intrinsyc Technologies Corporation Amended and Restated Incentive Stock Option Plan

Intrinsyc Technologies Corporation Restricted Share Unit Plan

Third Amended and Restated Loan and Security Agreement with Silicon Valley Bank, dated August 2, 2021, by and between Lantronix, Inc., Lantronix Holding Company, Lantronix Canada ULC and Lantronix Technologies Canada (Taiwan) Ltd.

and Transition Networks, Inc.

Mezzanine Loan and Security Agreement, dated August 2, 2021, by and between Lantronix, Inc.

and SVB Innovation Credit Fund VIII, L.P.

2020 Non-Employee Director Compensation Policy

Non-Employee Director Compensation Policy, as revised August 8, 2022 to be effective November 8, 2022

Warrant to Purchase Common Stock issued to SVB Innovation Credit Fund VIII, L.P.

Warrant to Purchase Common Stock issued to Innovation Credit Fund VIII-A, L.P.

Offer Letter dated December 12, 2022 between Lantronix, Inc.

and Eric Bass

Employment agreement dated October 31, 2023 between Lantronix, Inc.

and Saleel Awsare

Letter Agreement dated September 14, 2024 between Lantronix, Inc.

and Brent Stringham

Amendment to Letter Agreement, dated as of January 6, 2025, between Brent Stringham and Lantronix, Inc.

Offer Letter dated February 23, 2024 between Lantronix, Inc.

and Kurt Hoff

Offer Letter dated April 2, 2024 between Lantronix, Inc.

and Mathi Gurusamy

Lease dated November 5, 2021 between Lantronix, Inc.

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and Jet 55 Property Owner LLC

First Amendment to Third and Restated Loan Security Agreement dated February 15, 2022, among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC and Lantronix Technologies Canada (Taiwan) Ltd.

Mezzanine Loan and Security Agreement, dated August 2, 2021, by and between Lantronix, Inc.

and SVB Innovation Credit Fund VIII, L.P.

Warrant to Purchase Common Stock issued to SVB Innovation Credit Fund VIII, L.P.

Warrant to Purchase Common Stock issued to Innovation Credit Fund VIII-A, L.P.

and Transition Networks, Inc.

Second Amendment to Third and Restated Loan Security Agreement dated February 15, 2022, among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC and Lantronix Technologies Canada (Taiwan) Ltd.

First Amendment to Third Amended and Restated Loan Security Agreement dated February 15, 2022, among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC and Lantronix Technologies Canada (Taiwan) Ltd.

and Transition Networks, Inc.

Second Amendment to Third Amended and Restated Loan Security Agreement dated February 15, 2022, among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC and Lantronix Technologies Canada (Taiwan) Ltd.

and Transition Networks, Inc.

Third Amendment to Third Amended and Restated Loan and Security Agreement dated September 7, 2022 among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada ULC and Lantronix Canada (Taiwan) Ltd., Transition Networks, Inc.

and Silicon Valley Bank

Offer Letter dated December 12, 2022 between Lantronix, Inc.

and Eric Bass

Fourth Amendment to Third Amended and Restated Loan and Security Agreement dated September 3, 2024 among Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC and Lantronix Technologies Canada (Taiwan) Ltd., Transition Networks, Inc., Uplogix, Inc.

and Silicon Valley Bank

Fourth Amended and Restated Loan and Security Agreement with Silicon Valley Bank, dated August 15, 2025, by and between Lantronix, Inc., Lantronix Holding Company, Lantronix Canada, ULC, Lantronix Technologies Canada (Taiwan) Ltd., Transition Networks, Inc., and Uplogix, Inc.

Letter Agreement dated April 3, 2023, by and between Silicon Valley Bank, a Division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as receiver for Silicon Valley Bank, N.A.

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and Uplogix, Inc.

Employment agreement dated October 31, 2023 between Lantronix, Inc.

and Saleel Awsare

Change in Control Agreement between Lantronix, Inc.

and Jeremy Whitaker dated May 10, 202 4

Offer Letter dated February 23, 2024 between Lantronix, Inc.

and Kurt Hoff

Offer Letter dated April 2, 2024 between Lantronix, Inc.

and Mathi Gurusamy

Form of Restricted Stock Unit Award Agreement under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Performance Stock Unit Award Agreement (Financial Measure) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Performance Stock Unit Award Agreement (Relative TSR) under the Lantronix, Inc.

2020 Performance Incentive Plan

Form of Inducement Restricted Stock Unit Agreement

Form of Inducement Performance Stock Unit Agreement (Relative TSR)

Form of Inducement Performance Stock Unit Agreement (Financial Measure)

Cooperation Agreement, dated August 9, 2024, between Lantronix, Inc.

and 180 Degree Capital Corp .

and Silicon Valley Bank

Cooperation Agreement dated June 24, 2025, by and among Lantronix, Inc.

and Chain of Lakes Investment Fund, LLC, Haluk L.

Bayraktar and Emre Aciksoz

Lantronix, Inc.

Insider Trading Policy

Subsidiaries of Lantronix, Inc.

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Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Lantronix, Inc.

Policy Regarding the Recoupment of Certain Compensation Payments

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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President and Chief Executive Officer

September 9, 2024

August 29, 2025

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual

whose signature appears below hereby constitutes and appoints Jeremy Whitaker, acting individually, as his or her true and lawful attorney-in-fact

and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities,

to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and other documents in connection therewith,

with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every

act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he or she might or

could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his or her substitutes, may

lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities

Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities

whose signature appears below hereby constitutes and appoints Saleel Awsare and Brent Stringham, acting individually, as his or her true

and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place

and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and

other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power and

authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all

intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent,

or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange

Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities

and on the dates indicated:

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President, Chief Executive Officer and Director

September 9, 2024

August 29, 2025

Saleel Awsare

(Principal Executive Officer)

/s/ JEREMY WHITAKER

/s/ BRENT STRINGHAM

Chief Financial Officer

September 9, 2024

Jeremy Whitaker

August 29, 2025

Brent Stringham

(Principal Financial and Accounting Officer)

/s/ JASON COHENOUR

Director, Chairman of the Board

September 9, 2024

Jason Cohenour

/s/ PHILIP BRACE

September 9, 2024

/s/ PHU HOANG

September 9, 2024

/s/ HOSHI PRINTER

September 9, 2024

Director, Chairman of the Board

August 29, 2025

Hoshi Printer

/s/ CHRISTA STEELE

September 9, 2024

Christa Steele

/s/ JAMES AUKER

August 29, 2025

/s/ Sailesh Chittipeddi

August 29, 2025

Sailesh Chittipeddi

/s/ Narbeh Derhacobian

August 29, 2025

Narbeh Derhacobian

/s/ Kevin Palatnik

August 29, 2025

Kevin Palatnik

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the shareholders and the board of directors of Lantronix, Inc.:

Irvine, California

Opinions on the Financial Statements and Internal Control over Financial

We have audited the accompanying consolidated balance sheets of Lantronix,

and its subsidiaries (the Company) as of June 30, 2024 and 2023, the related consolidated statements of operations, stockholders'

equity and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements).

(the “Company”) as of June 30, 2025 and 2004, the related consolidated statements of operations, stockholders’ equity and

cash flows, for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

We also have audited the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established

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(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission

In our opinion, the consolidated financial statements present fairly,

in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its

cash flows for each of the years in the two-year period ended June 30, 2024 in conformity with accounting principles generally accepted

in the United States of America.

Also in our opinion, because of the effect of the material weakness described below on the achievement

of the objective of the control criteria, the Company has not maintained effective internal control over financial reporting as of June

30, 2024, based on the COSO criteria.

A material weakness is a deficiency, or a combination of deficiencies,

in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s

annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified

and included in management’s assessment.

Management has identified a material weakness associated with ineffective information technology

general controls (ITGCs) in the areas of user access controls over the information technology (IT) systems that supports the Company’s

financial reporting processes.

Automated and manual business process controls that are dependent on the affected ITGCs were also deemed

ineffective because they could have been adversely impacted to the extent that they rely upon information from the affected IT systems.

The material weakness referred to above is described in Management’s

Annual Report on Internal Control Over Financial Reporting included in Item 9A of this Annual Report on Form 10-K.

This material weakness

was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements,

and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion

on those consolidated financial statements.

In our opinion, the consolidated financial statements present fairly, in

all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash

flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the

United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial

reporting as of June 30, 2025, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by

Basis for Opinions

The Company’s management is responsible for these consolidated

financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness

of internal control over financial reporting, included in Item 9A of this Annual Report on Form 10-K.

The Company’s management is responsible for these consolidated financial

statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal

control over financial reporting, included in the accompanying Item 9A of this Annual Report on Form 10-K.

Our responsibility is to express

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in all material respects.

Our audits of the financial statements included performing

procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the

amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial

Our audit of internal control over financial reporting included obtaining an understanding of internal control over

financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating

effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we

considered necessary in the circumstances.

Our audits of the financial statements included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over

financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material

weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

audits also included performing such ’ necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process

designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly

reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts

and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's

assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over

financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with

the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below

is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to

the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions

on the critical audit matter or on the accounts or disclosures to which it relates.

A company’s internal control over financial reporting is a process designed

to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external

purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those

policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit

preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of

the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable

assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could

have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting

may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk

that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit

matters or on the accounts or disclosures to which they relate.

INVENTORIES – EXCESS AND OBSOLETE RESERVE

Critical Audit Matter Description

As described in Note 1 to the consolidated financial

statements, inventories are stated at the lower of cost or net realizable value and the Company’s consolidated inventories balance

was approximately $27.7 million at June 30, 2024, net of reserves.

The Company provides for reserves for excess and obsolete inventories

primarily based upon estimates of future demand of products, the age of the inventory, and considering contractual supplier protection

provisions and distributor stock rotation privileges.

We identified the auditing of management’s lower of

cost or net realizable value determination for excess or obsolete inventories as a critical audit matter.

procedures to audit management’s lower of cost or net realizable value determination for excess or obsolete inventories was especially

challenging and highly judgmental because of (i) Inherent estimation uncertainty relating to assumptions used by management in

the inventory reserve model which involved a high degree of subjectivity, (ii) the uncertainties

in determining demand for aging inventory and (iii) future market conditions .

As described in Note 1 to the consolidated financial statements, inventories

are stated at the lower of cost or net realizable value and the Company’s consolidated inventories balance was approximately $26.3

million at June 30, 2025, net of reserves.

The Company excess and obsolete inventories is based on an estimate of the future sales demand

for their products within a specified time horizon, which is generally 12 to 24 months.

In addition, specific reserve estimates are recorded

to cover risks for end-of-life products, inventory located at their contract manufacturers and warranty replacement stock.

We identified the auditing of management’s lower of cost or net realizable

value determination for excess or obsolete inventories as a critical audit matter.

The procedures to audit management’s lower

of cost or net realizable value determination for excess or obsolete inventories was especially challenging and highly judgmental because

of (i) inherent estimation uncertainty relating to assumptions used by management in the inventory reserve model which involved a

high degree of subjectivity, (ii) the uncertainties in determining demand for aging inventory and (iii) future market conditions.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical

audit matter included:

§ Obtaining an understanding and evaluating the design of the controls over the determination

The primary procedures we performed to address this critical audit matter

- Obtaining an understanding, evaluating the design and testing the effectiveness of controls relating to the controls over the determination

of the lower of cost or net realizable value for excess and obsolete inventories.

§ Reviewing manufacturer contracts for contractual supplier protection provisions .

§ Testing the completeness and accuracy of the underlying data used in management’s reserve

calculation .

§ Evaluating the reasonableness of management’s assumptions relating to future demand of

products by performing a retrospective review of the prior year assumptions to actual activity.

§ Evaluating the appropriateness and consistency of management’s methods and assumptions

used in developing estimates around forecasted sales and expected stock rotation privileges .

- Testing the completeness and accuracy of the underlying data used in management’s reserve calculation.

- Evaluating the reasonableness of management’s assumptions relating to future demand of products by performing a retrospective

review of the prior year assumptions to actual activity.

- Evaluating the appropriateness and consistency of management’s methods and assumptions used in developing estimates around forecasted

sales and expected stock rotation privileges.

ACQUISTION OF NETCOMM – VALUATION OF CUSTOMER RELATIONSHIPS

Critical Audit Matter Description

As described in Note 3 to the consolidated financial statements, on December

23, 2024, the Company completed the acquisition of Netcomm Wireless Pty Ltd (NetComm) for total consideration transferred of $6,458,000.

The Company accounted for the NetComm acquisition as a business combination and, accordingly, allocated the purchase price to the assets

acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition.

Of the identifiable intangible

assets acquired, $1,587,600 was allocated to customer relationships.

The excess of the purchase consideration over the fair value of identifiable

assets acquired and liabilities assumed was recorded as goodwill.

We identified an input into the fair value determination of the customer

relationships for the business combination as a critical audit matter due to the significant judgment required in estimating base revenue

of the acquired entity.

There was a high degree of auditor judgment, effort and subjectivity in applying audit procedures in evaluating

the significant assumption relating to the forecasted base revenue.

How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter

- Obtaining an understanding, evaluating the design and testing the effectiveness of controls relating to the acquisition accounting,

specifically controls over management’s base revenue assumption used in the valuation of customer relationships.

- When assessing the reasonableness of assumption related to forecasted base revenue, we evaluated whether the assumption used was appropriate

from a market participant’s standpoint.

This included evaluation against industry forecasts and the current performance of the NetComm

/s/ Baker Tilly US, LLP

We have served as the Company’s auditors

Irvine, California

September 9, 2024

We have served as the Company’s auditor since 2011.

Chicago, Illinois

August 29, 2025

LANTRONIX, INC.

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Loss before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net loss and comprehensive loss

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Weighted-average common shares - basic and diluted

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

LANTRONIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

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$ ( 218,505 )

Shares issued pursuant to stock awards, net

Tax withholding paid on behalf of employees for restricted shares

Shares issued pursuant to stock

Tax withholding paid on behalf

of employees for restricted shares

Share-based compensation

Balance at June 30, 2024

Shares issued pursuant to stock awards, net

Tax withholding paid on behalf of employees for restricted shares

$ ( 223,021 )

Shares issued pursuant to stock

Tax withholding paid on behalf

of employees for restricted shares

Share-based compensation

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$ ( 234,394 )

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

LANTRONIX, INC.

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Earnout consideration paid

Net proceeds from issuance of debt

Payment of borrowings on term loan

Net proceeds from borrowing on line of credit

Payment of borrowings on line of credit

Payment of lease liabilities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

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Income taxes paid

See accompanying notes to consolidated financial

See accompanying notes to consolidated financial statements.

LANTRONIX, INC.

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Company and Significant Accounting Policies

Lantronix, Inc., which we refer to herein as the

Company, Lantronix, we, our, or us, is a global leader in compute and connectivity solutions, targeting high-growth industries such as

Smart Cities, Automotive, and Enterprise markets.

Our products and services empower companies to capitalize on the expanding internet

of things (“IoT”) market by delivering customizable solutions that address each layer of the IoT stack.

We were incorporated in California

in 1989 and re-incorporated in Delaware in 2000.

Lantronix, Inc., which we refer to herein as the Company, Lantronix, we,

our, or us, is a global leader in Edge AI and Industrial IoT solutions, delivering intelligent computing, secure connectivity, and remote

management for mission-critical applications.

Serving high-growth markets, including smart cities, enterprise IT, and commercial and defense

unmanned systems, we enable customers to optimize operations and accelerate digital transformation.

Our comprehensive portfolio of hardware,

software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band

network management.

By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive

edge in today’s AI-driven world.

We were incorporated in California in 1989 and re-incorporated in Delaware

Basis of Presentation

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As a result, estimates made in preparing the consolidated financial statements include revenue recognition, the allowance for

doubtful accounts, business combinations, inventory valuation, goodwill valuation, deferred income tax asset valuation allowances, share-based

compensation, restructuring charges and warranty reserves.

To the extent there are material differences between our estimates and actual

results, future results of operations will be affected.

doubtful accounts, business combinations, inventory valuation, goodwill valuation, deferred income tax asset valuation allowances, restructuring

charges and warranty reserves.

To the extent there are material differences between our estimates and actual results, future results of

operations will be affected.

Revenue Recognition

Refer to Note 2 below for a discussion of our significant

accounting policy over revenue recognition.

Accounts Receivable and Allowance for Credit

Accounts receivable are stated at the amount we expect to collect,

which is net of an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments.

Refer to Note 2 below for a discussion of our significant accounting

policy over revenue recognition.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable are stated at the amount we expect to collect, which

is net of an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments.

Our evaluation of the collectability of customer accounts receivable is based on various factors.

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The inputs are unobservable in the market and significant to the instrument’s valuation.

The hierarchy noted above requires us to minimize the use of unobservable

inputs and to use observable market data, if available, when determining fair value.

Other than earnout consideration liabilities (see

Note 3 ), during the fiscal years ended June 30, 2024 and 2023 we did not have any assets or liabilities that were measured at fair

value on a recurring basis.

As of June 30, 2024 we do not have any assets or liabilities that were measured at fair value on a non-recurring

We believe all of our financial instruments’ recorded values

approximate their current fair values because of the nature and short duration of these instruments.

During the fiscal years ended June 30, 2025 and 2024 we did not have

any assets or liabilities that were measured at fair value on a recurring basis.

As of June 30, 2025 we do not have any assets or liabilities

that were measured at fair value on a non-recurring basis.

We believe all of our financial instruments’ recorded values approximate

their current fair values because of the nature and short duration of these instruments.

Foreign Currency Remeasurement

The functional currency for all our foreign subsidiaries is currently

The functional currency for all our foreign subsidiaries is currently the

Non-monetary and monetary foreign currency assets and liabilities are valued in U.S.

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Cash and Cash Equivalents

Cash and cash equivalents consist of cash and

short-term investments, with original maturities of 90 days or less.

Inventories are stated at the lower of cost or net realizable value,

cost being determined on a weighted-average cost basis that approximates the first-in, first-out method.

We provide reserves for excess

and obsolete inventories determined primarily based upon estimates of future demand for our products.

Cash and cash equivalents consist of cash and short-term

investments, with original maturities of 90 days or less.

Inventories are stated at the lower of cost or net realizable value, cost

being determined on a weighted-average cost basis that approximates the first-in, first-out method.

We provide reserves for excess and

obsolete inventories determined primarily based upon estimates of future demand for our products.

Inventory Sale and Purchase Transactions with Contract Manufacturers

Under certain circumstances, we sell raw materials to our contract

manufacturers and subsequently repurchase finished goods from the contract manufacturers which contain such raw materials.

raw materials to the contract manufacturers are recorded on the consolidated balance sheets as contract manufacturers’ receivables

and are eliminated from net revenue as we intend to repurchase the raw materials from the contract manufacturers in the form of finished

Under certain circumstances, we sell raw materials to our contract manufacturers

and subsequently repurchase finished goods from the contract manufacturers which contain such raw materials.

Net sales of raw materials

to the contract manufacturers are recorded on the consolidated balance sheets as contract manufacturers’ receivables and are eliminated

from net revenue as we intend to repurchase the raw materials from the contract manufacturers in the form of finished goods.

We have contractual arrangements with certain of our contract manufacturers

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Property and equipment are carried at cost.

Depreciation is provided

using the straight-line method over the assets’ estimated useful lives, generally ranging from three to five years.

and amortization of leasehold improvements are computed using the shorter of the remaining lease term or five years.

Major renewals and

betterments are capitalized, while replacements, maintenance and repairs, which do not improve or extend the estimated useful lives of

the respective assets, are expensed as incurred.

Depreciation is provided using

the straight-line method over the assets’ estimated useful lives, generally ranging from three to five years.

Depreciation and amortization

of leasehold improvements are computed using the shorter of the remaining lease term or five years.

Major renewals and betterments are

capitalized, while replacements, maintenance and repairs, which do not improve or extend the estimated useful lives of the respective

assets, are expensed as incurred.

Business Combinations

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separately from the business combination and are expensed as incurred.

Goodwill is recorded as the difference, if any, between the aggregate

consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired.

We evaluate goodwill

for impairment on an annual basis as of the last day of our fiscal fourth quarter or more frequently if we believe indicators of impairment

exist that would more likely than not reduce the fair value of our single reporting unit below its carrying amount.

We begin by assessing

qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its

carrying value.

Based on that qualitative assessment, if we conclude that it is more likely than not that the fair value of our single

reporting unit is less than its carrying value, we conduct a quantitative goodwill impairment test, which involves comparing the estimated

fair value of our single reporting unit with its carrying value, including goodwill.

We estimate the fair value of our single reporting

unit using a combination of the income and market approach.

If the carrying value of the reporting unit exceeds its estimated fair value,

we recognize an impairment loss for the difference.

During the fourth quarter of the fiscal year ended June 30, 2024, we

performed a qualitative assessment of whether goodwill impairment existed and did not determine that it was more likely than not that

the fair value of our single reporting unit was less than its carrying amount.

Goodwill is recorded as the difference, if any, between the aggregate consideration

paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired.

We evaluate goodwill for impairment

on an annual basis as of May 31, or more frequently if we believe indicators of impairment exist that would more likely than not reduce

the fair value of our single reporting unit below its carrying amount.

We begin by assessing qualitative factors to determine whether

it is more likely than not that the fair value of our single reporting unit is less than its carrying value.

Based on that qualitative

assessment, if we conclude that it is more likely than not that the fair value of our single reporting unit is less than its carrying

value, we conduct a quantitative goodwill impairment test, which involves comparing the estimated fair value of our single reporting unit

with its carrying value, including goodwill.

We estimate the fair value of our single reporting unit using a combination of the income

and market approach.

If the carrying value of the reporting unit exceeds its estimated fair value, we recognize an impairment loss for

the difference.

We performed our annual goodwill impairment test as of May 31, 2025, using

a quantitative assessment for our single reporting unit.

The fair value of the reporting unit was estimated using a combination of the

income approach (discounted cash flow method) and the market approach (guideline public companies and guideline transactions methods).

Key assumptions included revenue growth, EBITDA margins, a long-term growth rate, and a discount rate.

These assumptions reflect management’s

best estimates of future financial performance, current market conditions, and a market participant perspective.

The results of the impairment

test indicated that the estimated fair value exceeded the carrying amount and therefore no impairment of goodwill was recognized for the

year ended June 30, 2025.

Intangible Assets

Included within “intangible assets, net” at June 30, 2025

are customer lists, developed technology, tradenames, and other intangible assets acquired in connection with various business combinations.

Such capitalized costs and intangible assets are being amortized over a period of one to five years.

are customer relationships, developed technology, trademarks and trade names, and other intangible assets acquired in connection with

various business combinations.

Such capitalized costs and intangible assets are being amortized over a period of one to fourteen years.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets, including intangible

assets, whenever events or changes in circumstances indicate that the carrying amount of long-lived assets within an asset group may not

be recoverable.

We estimate the future cash flows, undiscounted and without interest charges, expected to be generated by the assets from

its use over its remaining useful life and eventual disposition.

If the sum of the expected undiscounted future cash flows is less than

the carrying amount of those assets, we estimate the fair value of the asset group and recognize an impairment loss based on the excess

of the carrying amount over the fair value of the assets.

We assess the impairment of long-lived assets, including intangible assets,

whenever events or changes in circumstances indicate that the carrying amount of long-lived assets within an asset group may not be recoverable.

We estimate the future cash flows, undiscounted and without interest charges, expected to be generated by the assets from its use over

its remaining useful life and eventual disposition.

If the sum of the expected undiscounted future cash flows is less than the carrying

amount of those assets, we estimate the fair value of the asset group and recognize an impairment loss based on the excess of the carrying

amount over the fair value of the assets.

Income taxes are computed under the liability method.

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Share-Based Compensation

We account for share-based compensation by expensing

the estimated grant date fair value of our shared-based awards ratably over the requisite service period.

We recognize the impact of forfeitures on our

share-based compensation expense as such forfeitures occur.

Previously recognized expense is reversed for the portion of awards forfeited

prior to vesting.

We account for share-based compensation by expensing the estimated grant

date fair value of our shared-based awards ratably over the requisite service period.

The fair value of our restricted stock units is based on the closing market

price of our common stock on the date of grant.

The fair value of our performance stock units is estimated as of the grant

date based upon the expected achievement of the performance metrics specified in the grant and the closing market price of our common

stock on the date of grant.

To the extent a grant of performance stock units contains a market condition, the grant date fair value is

estimated using a Monte Carlo simulation, which incorporates estimates of the potential outcomes of the market condition on the grant

date fair value of each award.

We recognize the impact of forfeitures on our share-based compensation

expense as such forfeitures occur.

Previously recognized expense is reversed for the portion of awards forfeited prior to vesting.

Net Income (Loss) Per Share

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Research and Development Costs

Costs incurred in the research and development of new products and

enhancements to existing products are expensed as incurred.

Development costs of computer software to be sold, leased or otherwise marketed

are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product

is available for general release to customers.

In most instances, we believe our current process for developing products is essentially

completed concurrently with the establishment of technological feasibility and thus, software development costs have been expensed as

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.

If actual return rates and/or replacement

costs differ significantly from our estimates, adjustments to recognize additional warranty expense in cost of revenue may be required

in future periods.

Costs incurred in the research and development of new products and enhancements

to existing products are expensed as incurred.

Development costs of computer software to be sold, leased or otherwise marketed are subject

to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available

for general release to customers.

In most instances, we believe our current process for developing products is essentially completed concurrently

with the establishment of technological feasibility and thus, software development costs have been expensed as incurred.

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.

If actual return rates and/or replacement costs differ

significantly from our estimates, adjustments to recognize additional warranty expense in cost of revenue may be required in future periods.

Restructuring Charges

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the present value of lease payments over the lease term at the lease commencement date.

To determine the present value of lease payments,

we use the implicit interest rate, if it is readily determinable or estimable.

To the extent that we are unable to utilize an interest

rate implicit in the lease, we generally use our collateralized incremental borrowing rate based on the information available at the lease

commencement date, including lease term, in determining the present value of lease payments.

Operating and finance lease ROU assets are

recognized net of any lease prepayments and incentives.

Operating lease expense is recognized on a straight-line basis over the lease

Finance lease expense is recognized based on the effective-interest method over the lease term.

For leases that we acquire in acquisition transactions, we generally

elect not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease

term of 12 months or less.

Refer to Note 9 below for additional information regarding our

We do not separate lease and nonlease components

of contracts.

To determine the present value of lease payments, we use the implicit interest rate, if it is readily determinable or estimable.

To the extent that we are unable to utilize an interest rate implicit in the lease, we generally use our collateralized incremental borrowing

rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease

Operating and finance lease ROU assets are recognized net of any lease prepayments and incentives.

Operating lease expense

is recognized on a straight-line basis over the lease term.

Finance lease expense is recognized based on the effective-interest method

over the lease term.

For leases that we acquire in acquisition transactions, we generally elect

not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease term of

12 months or less.

Refer to Note 9 below for additional information regarding our leases.

Advertising Expenses

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and $ 237,000 for the fiscal years ended June 30, 2025 and 2024, respectively.

The costs are included in selling, general and

administrative expenses in the consolidated statements of operations.

The costs are included in selling, general and administrative

expenses in the consolidated statements of operations.

Segment Information

We have one operating and reportable business segment:

Operating segments are defined as components of an enterprise for which

separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), who is our Chief Executive

Officer, in deciding how to allocate resources and assess our financial and operational performance.

Our CODM evaluates our financial

information, such as revenue, gross profit and net income (loss), and resources, and assesses the performance of these resources on a

consolidated and aggregated basis.

As a result, we have determined that our business operates in a single operating segment:

the development,

marketing, and sale of industrial and enterprise IoT products and services.

Our chief executive officer was identified as our chief operating

decision-maker (CODM), and reviews financial information presented on a consolidated basis for the purpose of allocating resources and

evaluating financial performance.

Recent Accounting Pronouncements

Credit Losses

In July 2025, the Financial Accounting Standards Board (“FASB”)

issued a final Accounting Standards Update (“ASU”) amending Accounting Standards Codification (“ASC”) 326, Financial

Instruments – Credit Losses, to allow all entities to elect a practical expedient when determining the expected credit losses on

trade accounts receivable.

The practical expedient allows companies to assume that the current conditions as of the balance sheet date

will remain unchanged through the remaining life of the asset.

The standard will be effective for Lantronix beginning with our interim

financial statements for the fiscal year ending June 30, 2027.

The impact of adopting this guidance is not expected to have a material

effect on our consolidated financial statements.

Income Tax Disclosures

In December 2023, the Financial Accounting Standards Board (“FASB”)

issued a final standard on improvements to income tax disclosures.

The new standard requires disaggregated information about a company’s

effective tax rate reconciliation and information on income taxes paid.

The standard will be effective for Lantronix beginning with our

annual financial statements for the fiscal year ending June 30, 2026.

We have not yet determined the impact of adopting this guidance

on our financial statements.

In December 2023, the FASB issued a final standard on improvements to income

tax disclosures.

The new standard requires disaggregated information about a company’s effective tax rate reconciliation and information

on income taxes paid.

The standard will be effective for Lantronix beginning with our annual financial statements for the fiscal year

ending June 30, 2026.

The impact of adopting this guidance is not expected to be material to our consolidated financial position and results

of operations, since it requires only enhancements to existing income tax disclosures in the footnotes to our consolidated financial statements.

Segment Disclosures

In November 2023, the FASB issued a new Accounting Standards Update

(“ASU”) requiring incremental disclosures related to a public company’s reportable segments.

The new guidance was issued

primarily to provide financial statement users with more disaggregated expense information about a company’s reportable segments.

The guidance does not change the definition of a segment, the method for determining segments, or the criteria for aggregating operating

segments into reportable segments.

The guidance is effective for Lantronix on a retrospective basis beginning with our annual financial

statements for the fiscal year ending June 30, 2025.

We are evaluating this guidance and currently do not anticipate its adoption to materially

impact our financial statements.

Current Expected Credit Losses

In June 2016, the FASB issued an ASU requiring financial assets measured

at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from

the amortized cost basis.

The ASU eliminates the threshold for initial recognition in current U.S.

GAAP and reflects an entity’s

current estimate of all expected credit losses.

The measurement of expected credit losses is based on historical experience, current conditions,

and reasonable and supportable forecasts that affect the collectability of the financial assets.

The ASU became effective for Lantronix

at the beginning of our first quarter of fiscal year 2024.

The adoption of this guidance did not have a material effect on our consolidated

financial statements.

Revenue is recognized upon the transfer of control

of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those

products or services.

In November 2023, the FASB issued an ASU requiring incremental disclosures

related to a public company’s reportable segments.

The new guidance was issued primarily to provide financial statement users with

more disaggregated expense information about a company’s reportable segments.

The guidance does not change the definition of a segment,

the method for determining segments, or the criteria for aggregating operating segments into reportable segments.

The guidance became

effective for Lantronix on a retrospective basis beginning with our annual financial statements for the fiscal year ended June 30, 2025.

The adoption of this guidance did not have a material effect on our consolidated financial statements.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, which will require disclosure,

in the notes to financial statements, of specified information about certain costs and expenses, including disclosure of amounts for (i)

purchases of inventory, (ii) employee compensation, (iii) depreciation and (iv) intangible asset amortization, included in each relevant

expense caption.

In January 2025, the FASB issued ASU 2025-01, which clarified the effective date of ASU 2024-03.

The standard will be

effective for our annual financial statements beginning in the fiscal year ending June 30, 2028.

We are currently evaluating the impact

of this accounting standard on our financial statement presentation and its related disclosures.

Revenue is recognized upon the transfer of control of promised products

or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.

We apply the following five-step approach in determining the amount and timing of revenue to be recognized:

(i) identifying

the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction

price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when

the performance obligation is satisfied.

On occasion we enter into contracts that can include various combinations of products and services,

which are generally capable of being distinct and accounted for as separate performance obligations.

Revenue is recognized net of (i) any taxes collected

from customers, which are subsequently remitted to governmental authorities and (ii) shipping and handling costs collected from customers.

Most of our product revenue is recognized as a

distinct single performance obligation when products are tendered to a carrier for delivery, which represents the point in time that our

customer obtains control of the promised products.

A smaller portion of our product revenue is recognized when our customer receives delivery

(i) identifying the contract

with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating

the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligations

are satisfied.

On occasion we enter into contracts that can include various combinations of products and services, which are generally

capable of being distinct and accounted for as separate performance obligations.

Revenue is recognized exclusive of (i) any taxes collected from customers,

which are subsequently remitted to governmental authorities and (ii) shipping and handling costs collected from customers.

Most of our product revenue is recognized as a distinct single performance

obligation when products are tendered to a carrier for delivery, which represents the point in time that our customer obtains control

of the promised products.

A significant portion of our products are sold

to distributors under agreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both

of which are accounted for as variable consideration when estimating the amount of revenue to recognize.

We base our estimates for returns

and price adjustments primarily on historical experience;

however, we also consider contractual allowances, approved pricing adjustments

and other known or anticipated returns and price adjustments in a given period.

Such estimates are generally made at the time of shipment

to the customer and updated at the end of each reporting period as additional information becomes available and only to the extent that

it is probable that a significant reversal of any incremental revenue will not occur.

Our estimates of accrued variable consideration

are included in other current liabilities in the accompanying consolidated balance sheets.

Revenues from our extended warranty, technical

support, and maintenance services are generally recognized ratably over the applicable service period.

Revenues from sales of our software-as-a-service

(“SaaS”) solutions are recognized ratably over the applicable service period as well.

We prepay sales commissions related to certain of these contracts,

which are incremental costs of obtaining the contract.

We capitalize these costs and expense them ratably on a straight-line basis over

the life of the contract.

A smaller portion of our product revenue is recognized when our customer receives delivery of the promised products.

A significant portion of our products are sold to distributors under agreements

which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted for as variable

consideration when estimating the amount of revenue to recognize.

We base our estimates for returns and price adjustments primarily on

historical experience;

however, we also consider contractual allowances, approved pricing adjustments and other known or anticipated returns

and price adjustments in a given period.

Such estimates are generally made at the time of shipment to the customer and updated at the

end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant

reversal of any incremental revenue will not occur.

Our estimates of accrued variable consideration are included in other current liabilities

in the accompanying consolidated balance sheets.

Revenues from our extended warranty, technical support, and maintenance

services are generally recognized ratably over the applicable service period.

Although not significant to date, revenues from sales of

our software-as-a-service (“SaaS”) solutions are recognized ratably over the applicable service period as well.

We prepay sales commissions related to certain of these contracts, which

are incremental costs of obtaining the contract.

We capitalize these costs and expense them ratably on a straight-line basis over the

life of the contract.

At June 30, 2025, prepaid sales commissions included in prepaid expenses and other current assets totaled $ 404,000

and included in other assets totaled $ 134,000 .

At June 30, 2024, prepaid sales commissions included in prepaid expenses and other current assets totaled $ 194,000 and included

in other assets totaled $ 190,000 .

Engineering Services

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of our performance completed to date.

We recognize revenue on fixed price contracts, over time, using an

input method based on the proportion of our actual costs incurred (generally labor hours expended) to the total costs expected to complete

the contract performance obligation.

We recognize revenue on fixed price contracts, over time, using an input

method based on the proportion of our actual costs incurred (generally labor hours expended) to the total costs expected to complete the

contract performance obligation.

We have determined that this method best represents the transfer of services as the proportion closely

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Multiple Performance Obligations

From time to time, we may enter into contracts with customers that

include promises to transfer multiple deliverables that may include sales of products, professional engineering services and other product

qualification or certification services.

Determining whether the deliverables in such arrangements are considered distinct performance

obligations that should be accounted for separately versus together often requires judgment.

We consider performance obligations to be

distinct when the customer can benefit from the promised good or service on its own or by combining it with other resources readily available

and when the promised good or service is separately identifiable from other promised goods or services in the contract.

In such arrangements,

we allocate revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone

selling price for each performance obligation.

From time to time, we may enter into contracts with customers that include

promises to transfer multiple deliverables that may include sales of products, professional engineering services and other product qualification

or certification services.

Determining whether the deliverables in such arrangements are considered distinct performance obligations that

should be accounted for separately versus together often requires judgment.

We consider performance obligations to be distinct when the

customer can benefit from the promised good or service on its own or by combining it with other resources readily available and when the

promised good or service is separately identifiable from other promised goods or services in the contract.

In such arrangements, we allocate

revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone selling price

for each performance obligation.

Net Revenue by Product Line and Geographic Region

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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, application hosting, protocol conversion, media conversion,

secure access for distributed IoT deployments and many other functions.

Our Software & Services products can be classified as either

(i) our SaaS platform, which 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, (ii) engineering services, which is a flexible business

model that allows customers to select from turnkey product development or team augmentation for accelerating complex areas of product

development or (iii) extended warranty, support and maintenance.

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

geographic regions:

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.

Our Software & Services products

can be classified as either (i) our SaaS platform, which 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, (ii) engineering services,

which is a flexible business model that allows customers to select from turnkey product development or team augmentation for accelerating

complex areas of product development or (iii) extended warranty, support and maintenance.

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

the Americas;

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and Asia Pacific Japan (“APJ”).

The following tables present our net revenue by product line and by

geographic region.

Net revenues by geographic region are generally based on the “bill-to” location of our customers:

The following tables present our net revenue by product line and by geographic

We present net revenues by geographic region generally based on the “ship-to” location of our customers for product

sales and the “bill-to” location for services:

Schedule of net revenue by product lines

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Software & Services

Schedule of net revenue by geographic region

Schedule of net revenues by geographic region

Years Ended June 30,

(In thousands)

The following table presents product revenues and service revenues

as a percentage of our total net revenue:

Schedule of percentage total net revenues

The following table presents product revenues and service revenues as

a percentage of our total net revenue:

Schedule of percentage of our total net revenue

Year Ended June 30,

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Service revenues

Service revenue is comprised primarily of professional services, software

Service revenues are comprised primarily of professional services, software

license subscriptions, and extended warranties.

Contract Balances

In certain instances, the timing of revenue recognition may differ

from the timing of invoicing to our customers.

We record a contract asset receivable when revenue is recognized prior to invoicing, and

a contract or deferred revenue liability when revenue is recognized subsequent to invoicing.

With respect to product shipments, we expect

to fulfill contract obligations within one year and so we have elected not to separately disclose the amount nor the timing of recognition

of these remaining performance obligations.

For contract balances related to contracts that include services and multiple performance

obligations, refer to the deferred revenue discussion below.

In certain instances, the timing of revenue recognition may differ from

the timing of invoicing to our customers.

We record a contract asset receivable when revenue is recognized prior to invoicing, and a contract

or deferred revenue liability when revenue is recognized subsequent to invoicing.

With respect to product shipments, we expect to fulfill

contract obligations within one year and so we have elected not to separately disclose the amount nor the timing of recognition of

these remaining performance obligations.

For contract balances related to contracts that include services and multiple performance obligations,

refer to the deferred revenue discussion below.

Deferred Revenue

Deferred revenue is primarily comprised of unearned revenue related

to our extended warranty, support and maintenance services and certain software services.

These services are generally invoiced at the

beginning of the contract period and revenue is recognized ratably over the service period.

Current and non-current deferred revenue balances

represent revenue allocated to the remaining unsatisfied performance obligations at the end of a reporting period and are respectively

included in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets.

Deferred revenue is primarily comprised of unearned revenue related to

our extended warranty, support and maintenance services and certain software services.

These services are generally invoiced at the beginning

of the contract period and revenue is recognized ratably over the service period.

Current and non-current deferred revenue balances represent

revenue allocated to the remaining unsatisfied performance obligations at the end of a reporting period and are respectively included

in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets.

The following table presents the changes in our deferred revenue balance:

for the year ended June 30, 2024 (in thousands):

Schedule of changes in deferred revenue

Balance, July 1, 2023

Years Ended June 30,

(In thousands)

Beginning balance

New performance obligations

Recognition of revenue as a result of satisfying performance obligations

Balance, June 30, 2024

Ending Balance

non-current portion of deferred revenue

Current portion, June 30, 2024

Current portion

During the years ended June 30, 2025 and 2024, approximately $ 3,000,000

and $ 2,400,000 , respectively, of the revenue recognized as a result of satisfying performance obligations was included in the contract

liability balance at the beginning of the period.

We currently expect to recognize substantially all of the non-current

portion of deferred revenue over the next 2 to 5 years.

On September 12, 2022 (the “Closing Date”), we entered

into a merger agreement (the “Merger Agreement”) with Uplogix, Inc.

(“Uplogix”) pursuant to which Uplogix became

a wholly-owned subsidiary of Lantronix (the “Merger”).

Pursuant to the Merger Agreement, all of the issued and outstanding

shares of Uplogix were cancelled and converted into the right to receive an applicable portion of the Consideration Pool Amount (as defined

in the Merger Agreement).

In addition, the holders of promissory notes issued by Uplogix entered into note termination agreements with

Uplogix, which provided, among other things, that the issued and outstanding promissory notes were cancelled and terminated upon the closing

of the Merger.

Holders of Company Junior-Only Notes (as defined in the Merger Agreement) received, in connection with their cancellation

and termination of such notes, the full payment of principal and interest.

Holders of Company Senior Notes (as defined in the Merger Agreement),

including those holders of Company Senior Notes and Company Junior Notes (as defined in the Merger Agreement) (the “Company Senior

Noteholders”), received the applicable portions of the Estimated Merger Consideration (as defined in the Merger Agreement).

The aggregate consideration payable by Lantronix under the Merger Agreement

was equal to $8,000,000 (inclusive of payments to satisfy the Company Junior-Only Notes), subject to certain adjustments, including, without

limitation, for cash, debt, transaction expenses (including the Bonus Amount (as defined below)) and net working capital.

Closing Date, Uplogix entered into an amended and restated bonus plan, which provided that certain of its employees would be entitled

to receive, in the aggregate, 15% of the consideration otherwise payable to the holders of Company Senior Notes (the “Bonus Amount”)

under the Merger Agreement, with the terms of such bonus payments (including the amounts per employee and the timing of such payments)

as specified in such bonus plan.

In addition, the Company Senior Noteholders and former Uplogix employees

with the right to receive up to an additional $4,000,000 in the aggregate (the “Earnout Amount”), payable after the closing

of the Merger based on revenue targets for the business of Uplogix as specified in the Merger Agreement.

The Earnout Amount was based

on Uplogix achieving revenue of $7,000,000 to $14,000,000 for the period beginning at the Closing Date and ending on September 30, 2023.

The acquisition of Uplogix brought immediate scale to our out-of-band

remote management solutions, adding a complementary high-end product offering that includes high-margin maintenance and licensing revenues.

A summary of the purchase consideration for the Uplogix acquisition

is as follows (in thousands):

On December 23, 2024 (the “Closing Date”), we finalized the

acquisition of Netcomm Wireless Pty Ltd (“Netcomm”), a subsidiary of DZS Inc., for $ 6,458,000 in cash.

Netcomm operates an

enterprise IoT business.

The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance

our connectivity solutions in areas such as critical infrastructure, asset monitoring and telecommunications.

A summary of the purchase consideration for the Netcomm acquisition is

as follows (in thousands):

Schedule of purchase consideration

Cash paid, including initial working capital adjustments

Preliminary estimated fair value of earnout consideration

Total purchase consideration

We recorded Uplogix’s tangible and intangible assets and liabilities

We recorded the tangible and intangible assets and liabilities acquired

based on their estimated fair values as of the Closing Date and allocated the remaining purchase consideration to goodwill.

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assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets.

measurement period for assessing the valuation of acquired assets and assumed liabilities was complete as of June 30, 2023.

to the valuation of certain assets acquired and liabilities assumed may result in changes to the recorded amounts of assets and liabilities,

with corresponding adjustments to goodwill in subsequent periods.

Subsequent to the acquisition, based on additional analysis and refinements

to our estimates, we adjusted the preliminary purchase price allocation as of the Closing Date to (i) increase the estimated fair value

of intangible assets acquired by $ 279,000 , (ii) decrease the fair value of accounts receivable, net by $ 904,000 , (iii) decrease the fair

value of accounts payable and other accrued liabilities by $ 202,000 and (iv) decrease the fair value of inventory by $ 175,000 .

These adjustments

resulted in an increase to goodwill of $ 598,000 .

In March 2025, DZS, Inc.

commenced a liquidation proceeding under Chapter 7 of the

Bankruptcy Code.

At that time, we had yet to settle the accounts receivable and accounts payable balances agreed to in the Netcomm

acquisition agreement.

As such, we updated our estimates of the acquisition date fair value of these balances as described above.

The final purchase price allocation is as follows (in thousands):

Schedule of purchase price allocation

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expense and other current assets

Lease right-of-use asset

Other non-current assets

Amortizable intangible assets

Accounts payable

Accrued payroll

Deferred revenue

Other current liabilities

Notes payable

Other noncurrent liabilities

Accounts payable and other accrued liabilities

Total consideration

As discussed above, the purchase consideration and resulting purchase

price allocation for this acquisition included various adjustments for transaction expenses, the Bonus Amount, payment of Company Junior-Only

Notes and certain other accrued expenses paid shortly after the Closing Date.

Pursuant to the Merger Agreement, substantially all of the

$ 4,104,000 cash acquired was to be utilized for these items.

The purchase price allocation above reflects both this cash acquired and

the applicable accrued liabilities and notes payable that were substantially all disbursed on or shortly after the Closing Date.

The factors that contributed to a purchase price resulting in the recognition

of goodwill include our belief that this acquisition will create a more diverse IoT company with respect to product offerings and our

belief that we are committed to improving cost structures in accordance with our operational and restructuring plans which should result

in a realization of cost savings and an improvement of overall efficiencies.

Depending on the structure of a particular acquisition, goodwill and

identifiable intangible assets may not be deductible for tax purposes.

We have determined that goodwill and identifiable intangible assets

related to this acquisition are deductible.

Acquisition-related costs were expensed in the periods in which the

costs were incurred.

The valuation of identifiable intangible assets and their estimated

useful lives are as follows:

belief that we are committed to improving cost structures in accordance with our operational and restructuring plans.

Depending on the structure of a particular acquisition, goodwill and identifiable

intangible assets may not be deductible for tax purposes.

We have determined that goodwill and identifiable intangible assets related

to this acquisition are deductible for tax purposes.

Acquisition-related costs were expensed in the periods in which the costs

were incurred.

The valuation of identifiable intangible assets and their estimated useful

lives are as follows:

Schedule of intangible assets of useful lives

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Trademarks and trade names

The intangible assets are amortized on a straight-line basis over the

estimated weighted-average useful lives.

Customer backlog

The intangible assets are amortized on a straight-line basis over the estimated

weighted-average useful lives.

Valuation Methodology

The customer relationships were valued using the multi-period excess

earnings method, which estimates revenues and cash flows derived from this asset and also considers portions of the cash flows that can

be attributed to the use of other supporting assets.

The useful lives of customer relationships are estimated based primarily upon customer

turnover data.

Order backlog was estimated to be substantially fulfilled within a year of the Closing Date.

The customer relationships were valued using the multi-period excess earnings

method, which estimates revenues and cash flows derived from this asset and also considers portions of the cash flows that can be attributed

to the use of other supporting assets so that these cash flows can be excluded.

The useful lives of customer relationships are estimated

based primarily upon the probability of loss associated with two major customers and customer turnover data for the other customers.

backlog was estimated to be substantially fulfilled within a year of the Closing Date.

Developed technology and trades names were valued using the relief-from-royalty

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discounted to present value.

Assumptions used in forecasting cash flows for

each of the identified intangible assets included consideration of the following:

Assumptions used in forecasting cash flows for each

of the identified intangible assets included consideration of the following:

Historical performance including sales and profitability

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Obsolescence of technology over time

The fair value of earnout consideration was estimated based on applying

a Monte Carlo simulation method to forecast achievement of the revenue targets.

This method involves many possible value outcomes which

are evaluated to establish an estimated value.

Key inputs in the valuation include forecasted revenue, revenue volatility and discount

Remeasurement of Earnout Consideration

During the fiscal year ended June 30, 2024, we finalized the fair value

of the earnout consideration based on financial results through September 30, 2023.

The earnout liability was paid out in full in December

The table below presents the change in the earnout consideration liability

during the current fiscal year (in thousands):

Schedule of change in the earnout consideration liability

Balance at June 30, 2023

Final remeasurement estimate

Balance at June 30, 2024

Supplemental Pro Forma Information (Unaudited)

The following supplemental pro forma data summarizes our results of

operations for the periods presented, as if we completed the acquisition of Uplogix as of the first day of our fiscal year ended June

The supplemental pro forma data reports actual operating results adjusted to include the pro forma effect and timing of the

impact of amortization expense of identified intangible assets, restructuring costs, the purchase accounting effect on inventories acquired,

and transaction costs.

In accordance with the pro forma acquisition date, we recorded in the year ended June 30, 2022 supplemental pro

forma data (i) cost of goods sold from manufacturing profit in acquired inventory of $ 225,000 , (ii) acquisition related restructuring

costs of $ 315,000 and (iii) acquisition-related costs of $ 315,000 , with a corresponding reduction in the year ended June 30, 2023 supplemental

pro forma data.

Additionally, we recorded $ 506,000 of amortization expense in the year ended June 30, 2022 supplemental pro forma data,

and a reduction of amortization expense of $ 79,000 in the year ended June 30, 2023 supplemental pro forma data to represent amortization

for the full fiscal year period.

Net revenue related to products and services from the acquisition of

Uplogix contributed just under 4% of our total net revenue for the year ended June 30, 2023.

As of the Closing Date, we began to immediately

integrate the acquisition into existing operations, engineering groups, sales distribution networks and management structure, making it

generally impracticable to determine the post-acquisition earnings on a standalone basis.

The following supplemental pro forma data summarizes our results of operations

for the periods presented, as if we completed the acquisition as of the first day of our fiscal 2024.

The supplemental pro forma data

reports actual operating results adjusted to include the pro forma effect and timing of the impact of amortization expense of identified

intangible assets, the purchase accounting effect on inventories acquired, and transaction costs.

In accordance with the pro forma acquisition

date, we recorded in fiscal 2024 supplemental pro forma data acquisition-related costs of $ 371,000 , with a corresponding reduction in

the fiscal 2025 supplemental pro forma data.

Additionally, we recorded (i) additional amortization expense of $ 20,000 , and (ii) $ 88,000

reduction in cost of goods sold from manufacturing profit in acquired inventory in the fiscal 2025 supplemental pro forma data, and (i)

additional amortization expense of $ 634,000 and (ii) cost of goods sold from manufacturing profit in acquired inventory of $ 106,000 in

fiscal 2024 supplemental pro forma data.

Supplemental pro forma data is as follows:

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Basic and Diluted

Net revenue related to products and services from the acquisition of Netcomm

contributed approximately 3% of our total net revenue for the year ended June 30, 2025.

As of the Closing Date, we began to immediately

integrate the acquisition into existing operations, engineering groups, sales distribution networks and management structure, making it

generally impracticable to determine the post-acquisition earnings on a standalone basis.

Supplemental Financial Information

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The following table presents details of our inventories:

Schedule of inventory

Schedule of inventories

(In thousands)

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Balance at June 30, 2024

Current year activity

Acquisition of NetComm

Balance at June 30, 2025

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The following table presents details of our intangible

Schedule of intangible assets

Schedule of intangible

June 30, 2025

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Customer relationships

Order backlog

Trademark and trade name

We do not currently have any intangible assets

with indefinite useful lives.

We do not currently have any intangible assets with

indefinite useful lives.

As of June 30, 2025, future estimated amortization

expense is as follows:

Schedule of future estimated amortization expense

Schedule of future estimated amortization

Years Ending June 30,

(In thousands)

Total amortization expense

Total future amortization

Warranty Reserve

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Net loss per share - basic and diluted

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.

Schedule of antidilutive securities

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.

Schedule of anti-dilutive securities

Years Ended June 30,

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Common stock equivalents

Severance and Related Charges

The following table presents details of the liability we recorded

related to restructuring, severance and related activities during the current fiscal year:

Restructuring, Severance and Related Charges

In January 2025 we undertook a headcount reduction totaling approximately

12% of our worldwide headcount primarily in the U.S.

and India locations.

We may incur additional charges in future periods as we identify

additional cost saving opportunities related to our business.

The following table presents details of the liability we recorded related

to restructuring, severance and related activities during the current fiscal year:

Schedule of severance and related charges

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Beginning balance

Employee-related charges

Lease restructuring charges

Ending balance

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excluded from the consolidated statements of cash flows:

Schedule of non-cash transactions

Schedule of non-cash investing transactions

Years Ended June 30,

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Acquisition of property through operating leases

Acquisition of property through financing leases

Accrued property and equipment paid for in the subsequent period

Bank Loan Agreements

On September 7, 2022 we entered into a Third Amendment to the Third

Amended and Restated Loan and Security Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”), pertaining

to our existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), which amends that certain

Senior Credit Facilities

In September 2024 we entered into a Fourth Amendment to the Third Amended

and Restated Loan and Security Agreement (the “Amendment”) with Silicon Valley Bank (“SVB”), pertaining to our

then-existing term loan and revolving credit facility (together, the “Senior Credit Facilities”), which amended that certain

Third Amended and Restated Loan and Security Agreement, dated as of August 2, 2021, as amended by the First Amendment to Third Amended

and Restated Loan and Security Agreement, dated as of October 21, 2021, as amended by the Second Amendment to Third Amended and Restated

Loan and Security Agreement, dated as of February 15, 2022 by and among Lantronix and SVB (collectively with the Amendment, the “Loan

The Amendment, among other things, provided for an additional

term loan in the original principal amount of $ 5,000,000 that

matures on August 2, 2025 .

Senior Credit Facilities bears interest at Term Secured Overnight Financing Rate (“SOFR”) or the Prime Rate, at the

option of Lantronix, plus a margin that ranges from 3.10% to 4.10% in the case of Term SOFR and 1.50% to 2.50% in the case of the

Prime Rate, depending on our total leverage with a Term SOFR floor of 1.50% and a Prime Rate floor of 3.25%.

The Amendment reduced

the minimum liquidity requirement from $ 5,000,000 to

$ 4,000,000 .

As a condition to entering into the Amendment, we were obligated to pay a nonrefundable facility increase fee in the amount of

Pursuant to the Amendment, the Senior Credit Facilities were scheduled to mature on August

On September 3, 2024, we entered into a Fourth Amendment to our Loan Agreement, pursuant to which the maturity of

our Senior Credit Facilities was extended to August 2, 2026 .

See Part II, Item 9B of this Report.

The Senior Credit Facilities are

secured by substantially all of our assets.

On April 3, 2023, we entered into a Letter Agreement

(the “Letter Agreement”) with SVB, which, among other matters, amended the Loan Agreement to reduce the former requirement

to hold 85% of our company-wide cash balances at SVB to 50%, and provided a waiver of any event of default under the Loan Agreement for

any failure to comply with this covenant prior to the date of the Letter Agreement.

The following table summarizes our outstanding debt:

Loan and Security Agreement, dated as of February 15, 2022, as amended by the Third Amendment to Third Amended and Restated Loan and Security

Agreement, dated as of September 7, 2022, by and among Lantronix and SVB (collectively with the Amendment, the “Third Amended and

Restated Loan Agreement”).

The Amendment, among other things, extended the maturity date of our Senior

Credit Facilities from August 2, 2025 to August 2, 2026.

The Senior Credit Facilities bore interest at the Term Secured Overnight Financing

Rate (“SOFR”) or the Prime Rate, at the option of Lantronix, plus a margin that ranged from 3.10% to 4.10% in the case of

Term SOFR and 1.50% to 2.50% in the case of the Prime Rate, depending on our total leverage with a Term SOFR floor of 1.50% and a Prime

Rate floor of 3.25%.

The minimum liquidity requirement under the Senior Credit Facilities was $ 4,000,000 .

The Senior Credit Facilities

were secured by substantially all of our assets.

In April 2023, we entered into a Letter Agreement (the “Letter Agreement”)

with SVB, which, among other matters, amended the Third Amended and Restated Loan Agreement to reduce the former requirement to hold 85%

of our company-wide cash balances at SVB to 50%, and provided a waiver of any event of default under the Third Amended and Restated Loan

Agreement for any failure to comply with this covenant prior to the date of the Letter Agreement.

The following table summarizes our outstanding debt under the Senior Credit

Schedule of outstanding debt

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Non-current portion

During the year ended June 30, 2024, we recognized $ 1,697,000

of interest expense in the accompanying consolidated statement of operations related to interest and amortization of debt issuance associated

with the borrowings under the Senior Credit Facilities.

Financial Covenants

The Senior Credit Facilities require Lantronix to comply with a minimum

liquidity test, a maximum leverage ratio and a minimum fixed charge coverage ratio.

We were in compliance with all financial covenants

as of June 30, 2024.

The Senior Credit Facilities require that we maintain a minimum liquidity

of $4,000,000 at SVB, as measured at the end of each month.

During the year ended June 30, 2025, we recognized $ 1,238,000 of interest

expense in the accompanying consolidated statement of operations related to interest and amortization of debt issuance associated with

the borrowings under the Senior Credit Facilities.

The Senior Credit Facilities required Lantronix to

comply with a minimum liquidity test, a maximum leverage ratio and a minimum fixed charge coverage ratio.

We were in compliance with all

financial covenants as of June 30, 2025.

The Senior Credit Facilities require that we maintain

a minimum liquidity of $4,000,000 at SVB, as measured at the end of each month.

Maximum leverage ratio

The Senior Credit Facilities require that we maintain a maximum leverage

ratio, calculated as the ratio of funded debt to the consolidated trailing 12 month earnings before interest, taxes, depreciation and

amortization, and certain other allowable exclusions of (i) 2.50 to 1.00 for each calendar quarter ending June 30, 2021 through and including

September 30, 2022, (ii) 2.25 to 1.00 for each calendar quarter ending December 31, 2022 through and including September 30, 2023, and

(iii) 2.00 to 1.00 for the calendar quarter ending December 31, 2023 and each calendar quarter thereafter.

The Senior Credit Facilities required that we maintain

a maximum leverage ratio, calculated as the ratio of funded debt to the consolidated trailing 12-month earnings before interest, taxes,

depreciation and amortization, and certain other allowable exclusions of 2.00 to 1.00 as measured at the end of each calendar quarter.

Minimum fixed charge coverage ratio

The Senior Credit Facilities require that we maintain a minimum fixed

charge coverage ratio, calculated as the ratio of consolidated trailing 12 month earnings before interest, taxes, depreciation and amortization,

and certain other allowable exclusions, less capital expenditures and taxes paid, to the trailing twelve month principal and interest

payments on all funded debt of 1.25 to 1.00 as measured at the end of each calendar quarter.

In addition, the Senior Credit Facilities contain customary representations

The Senior Credit Facilities required that we maintain

a minimum fixed charge coverage ratio, calculated as the ratio of consolidated trailing 12-month earnings before interest, taxes, depreciation

and amortization, and certain other allowable exclusions, less capital expenditures and taxes paid, to the trailing twelve month principal

and interest payments on all funded debt of 1.25 to 1.00 as measured at the end of each calendar quarter.

In addition, the Senior Credit Facilities contained customary representations

and warranties, affirmative and negative covenants, including covenants that limit or restrict Lantronix and its subsidiaries’ ability

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into certain speculative hedging arrangements.

The Senior Credit Facilities include a number of events of default, including, among other

The Senior Credit Facilities included a number of events of default, including, among other

things, non-payment defaults, covenant defaults, cross-defaults to other materials indebtedness, bankruptcy and insolvency defaults and

material judgment defaults.

If any event of default occurs (subject, in certain instances, to specified grace periods), the principal,

premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Senior Credit Facilities may

If any event of default were to occur (subject, in certain instances, to specified grace periods), the principal,

premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Senior Credit Facilities could

become due and payable immediately.

New Financing Arrangements

On August 15, 2025, we entered into a Fourth Amended and Restated Loan

and Security Agreement with SVB (the “Loan Agreement”), which effectively refinanced our outstanding term loan with an asset-backed

revolving line of credit secured by our accounts receivable.

The new line provides us with a revolving credit facility of up to $ 15,000,000 ,

subject to customary borrowing base limitations.

The revolving credit facility is scheduled to mature on August 1, 2028.

Borrowings under

the revolving credit facility will bear interest on the outstanding principal equal to the greater of (i) 5.0% and (ii) the Prime Rate

plus a margin of 0.0% to 0.5%, with the applicable margin depending on our liquidity.

The Loan Agreement requires us to comply with a minimum liquidity test.

The Loan Agreement also includes customary representations and warranties and affirmative and negative covenants, including covenants

that limit or restrict our ability to incur liens or indebtedness, dispose of assets, make investments, make restricted payments, merge

or consolidate, and enter into certain transactions with our affiliates.

The Loan Agreement includes customary events of default, including,

among other things, non-payment defaults, covenant defaults, bankruptcy and insolvency defaults, and material judgment defaults.

event of default under the Loan Agreement occurs (subject, in certain instances, to specified grace or cure periods), the principal, interest

and any other monetary obligations on all the then outstanding amounts may become due and payable immediately.

Stockholders’ Equity

Stock Incentive Plans

We have stock incentive plans in effect under which non-qualified and

incentive stock options to purchase shares of Lantronix common stock (“stock options”) have been granted to employees, non-employees

We have stock incentive plans in effect under which non-qualified and incentive

stock options to purchase shares of Lantronix common stock (“stock options”) have been granted to employees, non-employees

and board members.

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under the 2020 Plan.

In November 2022, our stockholders voted to approve amendments to the 2020 Plan that, among other things, increased

the aggregate number of shares of our common stock available for award grants under the plan by 1,800,000 shares.

The 2020 Plan authorizes

awards of stock options (both non-qualified and incentive), stock appreciation rights, non-vested shares, restricted stock units (“RSUs”)

and performance shares (“PSUs”).

In both November 2022 and November 2024, our stockholders voted to approve amendments to the 2020 Plan that, among

other things, increased the aggregate number of shares of our common stock available for award grants under the plan in each case by 1,800,000

shares, for a total increase of 3,600,000 shares.

The 2020 Plan authorizes awards of stock options (both non-qualified and incentive),

stock appreciation rights, non-vested shares, restricted stock units (“RSUs”) and performance shares (“PSUs”).

New shares are issued to satisfy stock option exercises and share issuances.

2024, approximately 1,107,000 shares remain available for issuance under the 2020 Plan.

We have also granted stock options, RSUs and PSUs

under individual inducement award agreements.

At June 30, 2025, approximately 1,758,000 shares remain available

for issuance under the 2020 Plan.

We have also granted stock options, RSUs and PSUs under individual inducement award agreements.

The Compensation Committee of our board of directors determines eligibility,

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Restricted Stock Units

The fair value of our RSUs is based on the closing market price of

our common stock on the grant date.

The following table presents a summary of activity with respect to

The fair value of our RSUs is based on the closing market price of our

common stock on the grant date.

The following table presents a summary of activity with respect to our

Schedule of RSU activity

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Performance Shares

The fair value of our PSUs is estimated as of the grant date based

upon the expected achievement of the performance metrics specified in the grant and the closing market price of our common stock on the

date of grant.

To the extent a grant of PSUs contains a market condition, the grant date fair value is estimated using a Monte Carlo

simulation with the following weighted average assumptions:

The fair value of our PSUs is estimated as of the grant date based upon

the expected achievement of the performance metrics specified in the grant and the closing market price of our common stock on the date

To the extent a grant of PSUs contains a market condition, the grant date fair value is estimated using a Monte Carlo simulation

with the following weighted average assumptions:

Schedule of valuation assumptions

3 unchanged sentences

Risk-free interest rate

Contract term (in years)

Dividend yield

The following table presents a summary of activity with respect to

Contract Term

The following table presents a summary of activity with respect to our

Schedule of PSU activity

Number of Shares

Weighted Average Grant Date Fair Value

Weighted Average Grant Date Fair Value per Share

(In thousands)

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Stock Option Awards

The fair value of each stock option grant is estimated on the grant

date using the Black-Scholes-Merton option-pricing formula.

The expected term of stock options granted is based on our recent historical

exercise data.

The fair value of each stock option grant is estimated on the grant date

using the Black-Scholes-Merton option-pricing formula.

The expected term of stock options granted is based on our recent historical exercise

Expected volatilities are based on the historical volatility of our stock price.

The risk-free interest rate assumption

is based on the U.S.

The risk-free interest rate assumption is based

Treasury interest rates appropriate for the expected term of our stock options.

The following table presents a summary of activity for all of our

stock options:

The following table presents a summary of activity for all of our stock

Schedule of stock option

5 unchanged sentences

Options exercisable at June 30, 2025

The following table presents a summary of grant date fair value and

intrinsic value information for all of our stock options:

The following table presents a summary of grant date fair value and intrinsic

value information for all of our stock options:

Schedule of option grant-date fair value and intrinsic value information

1 unchanged sentence

(In thousands)

except per share data)

Weighted-average grant date fair value per share

Intrinsic value of options exercised

The following weighted-average assumptions were used to estimate the

fair value of all of our stock option grants during the year ended June 30, 2023:

Schedule of valuation assumptions

Expected term (in years)

Expected volatility

Risk-free interest rate

Dividend yield

Employee Stock Purchase Plan

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may be issued under the plan to 1,800,000 shares.

The per share fair value of stock purchase rights granted under the

ESPP was estimated using the following weighted-average assumptions:

The per share fair value of stock purchase rights granted under the ESPP

was estimated using the following weighted-average assumptions:

Schedule of valuation

14 unchanged sentences

Intrinsic value of ESPP shares on purchase date

After the purchase and issuance of shares that occurred in May 2025, the

ESPP has been suspended until further notice.

Share-Based Compensation Expense

The following table presents a summary of share-based compensation

expense included in each applicable functional line item on our consolidated statements of operations:

The following table presents a summary of share-based compensation expense

included in each applicable functional line item on our consolidated statements of operations:

Schedule of share-based compensation expense

5 unchanged sentences

Total share-based compensation expense

The following table presents a summary of the remaining unrecognized

share-based compensation expense related to our outstanding share-based awards as of June 30, 2024:

Schedule of unrecognized share-based compensation expense

The following table presents a summary of the remaining unrecognized share-based

compensation expense related to our outstanding share-based awards as of June 30, 2025:

Schedule of unrecognized share-based

compensation expense

Remaining Unrecognized Compensation Expense

2 unchanged sentences

Stock options

Common stock purchase rights under ESPP

If there are any modifications or cancellations of the underlying unvested

3 unchanged sentences

Retirement Plan

We have a retirement savings plan (the “Plan”) to which

eligible employees may elect to make contributions through salary deferrals up to 100% of their base pay, subject to limitations.

approximately $ 376,000 and $ 411,000 in matching contributions to participants in the Plan during the fiscal years ended June 30, 2024

and 2023, respectively.

In addition, we may make discretionary profit-sharing contributions,

subject to limitations.

We have a retirement savings plan (the “Plan”) to which eligible

employees may elect to make contributions through salary deferrals up to 100% of their base pay, subject to limitations.

We made approximately

$ 364,000 and $ 376,000 in matching contributions to participants in the Plan during the fiscal years ended June 30, 2025 and 2024, respectively.

In addition, we may make discretionary profit-sharing contributions, subject

to limitations.

During the fiscal years ended June 30, 2025 and 2024, we made no such contributions to the Plan.

The provision (benefit) for income taxes consists of the following

The provision (benefit) for income taxes consists of the following components:

The following table presents U.S.

and foreign income (loss) before income

Schedule of components of income tax expense

2 unchanged sentences

Total Current taxes

Provision for income taxes

The following table presents U.S.

and foreign income (loss) before

income taxes:

Provision for (benefit from) income taxes

Schedule of income before income taxes

3 unchanged sentences

Loss before income taxes

The tax effects of temporary differences that give rise to deferred

tax assets and liabilities are as follows:

The tax effects of temporary differences that give rise to deferred tax

assets and liabilities are as follows:

Schedule of deferred tax assets and liabilities

15 unchanged sentences

Right-of-use assets

Depreciation and amortization

Deferred tax liabilities

1 unchanged sentence

Our net deferred tax liability of $ 172,000 and $ 179,000 at June 30, 2025

2024 and 2023, respectively, represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred

tax assets, and are recorded in other non-current liabilities on the accompanying consolidated balance sheets at June 30, 2024 and 2023.

Realization of deferred tax assets is dependent upon the generation of future taxable income.

As required by ASC 740, we have evaluated

the positive and negative evidence bearing upon our ability to realize the deferred tax assets as of June 30, 2024 and 2023.

We have determined that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses

and uncertainty of generating future taxable income.

and 2024, respectively, represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax

assets, and are recorded in other non-current liabilities on the accompanying consolidated balance sheets at June 30, 2025 and 2024.

of deferred tax assets is dependent upon the generation of future taxable income.

As required by ASC 740, we have evaluated the positive

and negative evidence bearing upon our ability to realize the deferred tax assets as of June 30, 2025 and 2024.

We have determined

that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses and uncertainty

of generating future taxable income.

The following table presents a reconciliation of the provision (benefit)

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Stock options

Other permanent differences

Expiration of R&D Credits

Uncertain tax position

Change in valuation allowance

2 unchanged sentences

Foreign tax rate variances

Provision for income taxes

Provision for (benefit from) income taxes

We continue to assert that our foreign earnings are indefinitely reinvested

15 unchanged sentences

Balance as of June 30, 2025

At June 30, 2024, we had $ 4,289,000 of gross unrecognized tax benefits

which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our valuation allowance of $ 4,289,000 .

balance decreased from the prior year due to the expiration of certain federal research and development tax credit carryforwards.

extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the recognition would

reduce the effective tax rate.

Our continuing practice is to recognize interest and penalties related to income tax matters in income

During the fiscal years ended June 30, 2024 and 2023, we recorded an immaterial expense for interest and penalties related

to income tax matters in the provision for income taxes.

At June 30, 2024, we had approximately $ 333,000 of accrued interest and penalties

related to uncertain tax positions.

At June 30, 2024, our fiscal years ended June 30,

2021 through 2024 remain open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2020 through 2024

remain open to examination by the state taxing jurisdictions.

However, we have NOLs beginning in the fiscal year ended June 30, 2005

which would cause the statute of limitations to remain open for the year in which the NOL was incurred.

Our fiscal years ended June 30,

2016 through 2024 remain open to examination by foreign taxing authorities.

We currently do not anticipate that the amount of unrecognized

tax benefits as of June 30, 2024 will significantly increase or decrease within the next 12 months.

At June 30, 2025, we had $ 3,078,000

of gross unrecognized tax benefits which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our

valuation allowance of $ 3,078,000 .

The balance decreased from the prior year due to the expiration of certain federal research and development tax credit carryforwards

as well as the reversal of liabilities in connection with the dissolution of one of our foreign subsidiaries by a gross amount of $ 1,280,000 .

To the extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the

recognition would reduce the effective tax rate.

Our continuing practice is to recognize interest and penalties related to income

tax matters in income tax expense.

During the fiscal years ended June 30, 2025 and 2024, we recorded an immaterial expense for

interest and penalties related to income tax matters in the provision for income taxes.

At June 30, 2025, we had approximately

of accrued interest and penalties related to uncertain tax positions.

At June 30, 2025, our fiscal years ended June 30, 2022 through 2025 remain

open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2021 through 2025 remain open to examination

by the state taxing jurisdictions.

However, we have NOLs beginning in the fiscal year ended June 30, 2005 which would cause the statute

of limitations to remain open for the year in which the NOL was incurred.

Our fiscal years ended June 30, 2017 through 2025 remain open

to examination by foreign taxing authorities.

We currently do not anticipate that the amount of unrecognized tax benefits as of June 30,

2025 will significantly increase or decrease within the next 12 months.

New Tax Legislation

In July 2025, the U.S.

government enacted comprehensive legislation

commonly referred to as the One Big Beautiful Bill Act of 2025 (the “OBBB Act”).

The OBBB Act, which includes a broad range

of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international).

It includes reinstating the option to claim 100% accelerated deprecations deductions on qualified property and immediate expensing of

domestic research and development costs.

Income tax accounting guidance requires the effects of tax law changes to be recognized in the

period of enactment.

Since the legislation was signed into law after June 30, 2025, it had no impact on our operating results for the

fiscal year ended June 30, 2025.

We are currently assessing the impact on our financial statements in future periods.

In general, our leases include office buildings for various facilities

1 unchanged sentence

We also have financing leases related to some office equipment in the U.S.

The following presents components of lease expense and supplemental

cash flow information:

The following presents components of lease expense and supplemental cash

flow information:

Schedule of components of lease expense

(In thousands)

Years Ended June 30,

Components of lease expense

(In thousands)

Operating lease cost

5 unchanged sentences

Right-of-use assets obtained in exchange for lease obligation

As of June 30, 2024 and 2023, the weighted average

discount rate for leases was 4.6 %

and 4.6 %, respectively,

and the weighted average remaining lease term for leases was 3.4

years and 3.8

years, respectively.

As of June 30, 2025 and 2024, the weighted average discount rate for

leases was 4.8 % and 4.6 %, respectively, and the weighted average remaining lease term for leases was 2.9 years and 3.4 years, respectively.

Maturities of lease liabilities as of June 30, 2025 were as follows:

8 unchanged sentences

Commitments and Contingencies

On February 23, 2024, a purported class action, brought on behalf of

a putative class who purchased or otherwise acquired shares of Lantronix between May 11, 2023 and February 8, 2024, was filed in the United

States District Court for the Central District of California against the Company, its former chief executive officer, and its chief financial

The action, styled Neilsen v.

Lantronix, Inc.

, asserted securities fraud claims under Sections 10(b) and 20(a) of the

Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with statements made in the Company’s

annual report, quarterly reports and earnings releases during the period of May 11, 2023 through February 8, 2024.

On May 7, 2024, the

court appointed Robert Ratliff and Hana Touati as co-lead plaintiffs and Levi & Korsinsky and Pomerantz as co-lead counsel.

14, 2024, the parties filed a joint stipulation to dismiss the case pursuant to voluntary dismissal.

On April 11, 2024, a purported stockholder of Lantronix filed a derivative

lawsuit styled Jernigan derivatively on behalf of Lantronix, Inc.

Cohenour et al., in the United States District Court for

the Central District of California against the Company, as the nominal defendant, former and current directors of the Company, its former

chief executive officer, and its chief financial officer, alleging breach of fiduciary duties, mismanagement, waste of corporate assets,

unjust enrichment, aiding and abetting, insider trading and violations of Section 14(a) of the Exchange Act in connection with statements

made in the Company’s annual and quarterly reports, earnings releases, and proxy statement beginning May 11, 2023.

The plaintiff

did not make a demand on the Board before instituting the lawsuit and alleged such demand would have been futile.

On May 28, 2024, the

plaintiff voluntarily dismissed Christa Steele as a defendant from the lawsuit.

On June 26, 2024, the plaintiff voluntarily dismissed

From time to time, we are subject to legal proceedings and claims in

the ordinary course of business.

From time to time, we are subject to legal proceedings and claims in the

ordinary course of business.

We are currently not aware of any such legal proceedings or claims that we believe will have, individually

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Significant Geographic, Customer and Supplier Information

Long-lived assets, which consists of property and equipment, net,

lease right-of-use assets, intangible assets, net, and goodwill by geographic area are as follows:

Long-lived assets, which consists of property and equipment, net, lease

right-of-use assets, intangible assets, net, and goodwill by geographic area are as follows:

Schedule of long-lived assets by geographic areas

1 unchanged sentence

Rest of world

The following table presents sales to our significant customers as

a percentage of net revenue:

The following table presents sales to our significant customers as a percentage

of net revenue:

Schedule of revenue by major customers

1 unchanged sentence

Top five customers (1)

Includes Customer A, Customer B, and Customer C in the fiscal year ended June 30, 2024 and Customer C in the fiscal year ended June 30, 2023.

Includes Customer A and Customer B in the fiscal year ended June 30, 2025 and in the fiscal year ended June 30, 2024.

Less than 10%

The following table shows customers that had an outstanding receivable balance that represented

at least 10% of our total net accounts receivable:

The following table shows customers that had an outstanding receivable

balance that represented at least 10% of our total net accounts receivable:

Schedule of accounts

2 unchanged sentences

Related Party Transactions

We had no net revenue from related parties for the fiscal years ended

June 30, 2024 and 2023.

We had no net revenue from related parties for the fiscal years ended June

30, 2025 and 2024.

We do not own or operate a manufacturing facility.

5 unchanged sentences

could adversely affect our consolidated results of operations.

Subsequent Event

On September 3, 2024, we entered into a Fourth Amendment to our Loan

Agreement, pursuant to which the maturity of our Senior Credit Facilities was extended from August 2, 2025 to August 2, 2026.

II, Item 9B of this Report.

Segment Reporting

The following table presents segment revenue, gross profit, and net income

(loss) for the periods presented:

Schedule of segment disclosure

Years Ended June 30,

(In thousands)

Less cost of revenue:

Other costs of revenue

Share-based compensation

Amortization of manufacturing profit in acquired inventory

Depreciation and amortization

Total cost of revenue

Personnel-related expenses

Professional fees and outside services

Advertising and marketing

Facilities and insurance

Share-based compensation

Outside services

Product certifications

Other operating expenses

Restructuring, severance and related charges

Acquisition-related costs

Fair value remeasurement of earnout consideration

Amortization of intangible assets

Interest expense, net

Other expense (income)

Provision for (benefit from) income taxes

Total segment expenses

Segment net loss

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 9A. Controls and Procedures