UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to ___________.

Commission file number: 1-16027

LANTRONIX, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0362767
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

48 Discovery, Suite 250, Irvine, California

(Address of principal executive offices)

92618

(Zip Code)

(949) 453-3990

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	LTRX	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2023, there were 36,619,483 shares of the registrant’s common stock outstanding.

LANTRONIX, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED

March 31, 2023

INDEX

		Page

	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	3

PART I.	FINANCIAL INFORMATION	4

Item 1.	Financial Statements	4

	Unaudited Condensed Consolidated Balance Sheets at March 31, 2023 and June 30, 2022	4

	Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2023 and 2022	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2023 and 2022	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35

Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION	37

Item 1.	Legal Proceedings	37

Item 1A	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	53

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the three months ended March 31, 2023 (the “Report”) contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report, or incorporated by reference into this Report, are forward-looking statements. Throughout this Report, we have attempted to identify forward-looking statements by using words such as “may,” “believe,” “will,” “could,” “project,” “anticipate,” “expect,” “estimate,” “should,” “continue,” “potential,” “plan,” “forecasts,” “goal,” “seek,” “intend,” other forms of these words or similar words or expressions or the negative thereof. Additionally, statements concerning future matters such as our expected earnings, revenues, expenses and financial condition, our expectations with respect to the development of new products, expectations regarding the impact of the COVID-19 pandemic and other statements regarding matters that are not historical are forward-looking statements.

We have based our forward-looking statements on management’s current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this Report. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to, those set forth under “Risk Factors” in Item 1A of Part II of this Report, as such factors may be updated, amended or superseded from time to time by subsequent public filings with the Securities and Exchange Commission. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business.

You should read this Report in its entirety, together with the documents that we file as exhibits to this Report, with the understanding that our future results may be materially different from what we currently expect. The forward-looking statements we make speak only as of the date on which they are made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of The Nasdaq Capital Market. If we do update or correct any forward-looking statements, investors should not conclude that we will make additional updates or corrections.

We qualify all of our forward-looking statements by these cautionary statements.

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)


	March 31,			June 30,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	12,795		$	17,221
Accounts receivable, net		25,609			26,262
Inventories, net		51,725			37,679
Contract manufacturers' receivables		2,315			3,454
Prepaid expenses and other current assets		3,445			5,417
Total current assets		95,889			90,033
Property and equipment, net		4,813			3,652
Goodwill		27,858			20,768
Purchased intangible assets, net		12,029			14,559
Lease right-of-use assets		10,413			8,037
Other assets		485			325
Total assets	$	151,487		$	137,374

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	15,189		$	20,644
Line of credit		–			–
Accrued payroll and related expenses		3,073			4,729
Current portion of long-term debt, net		2,484			1,671
Other current liabilities		25,206			8,477
Total current liabilities		45,952			35,521
Long-term debt, net		16,972			14,274
Other non-current liabilities		10,535			7,683
Total liabilities		73,459			57,478

Commitments and contingencies (Note 9)		–			–

Stockholders' equity:
Common stock		4			4
Additional paid-in capital		294,505			289,046
Accumulated deficit		(216,852	)		(209,525	)
Accumulated other comprehensive income		371			371
Total stockholders' equity		78,028			79,896
Total liabilities and stockholders' equity	$	151,487		$	137,374

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2023			2022			2023			2022
Net revenue	$	32,964		$	32,324		$	96,265		$	93,710
Cost of revenue		18,328			18,708			53,799			53,191
Gross profit		14,636			13,616			42,466			40,519
Operating expenses:
Selling, general and administrative		9,946			8,326			28,916			25,167
Research and development		5,067			4,483			14,677			12,834
Restructuring, severance and related charges		490			51			664			760
Acquisition-related costs		–			154			315			763
Fair value remeasurement of earnout consideration		140			1,203			(533	)		2,462
Amortization of purchased intangible assets		1,424			1,479			4,340			4,112
Total operating expenses		17,067			15,696			48,379			46,098
Loss from operations		(2,431	)		(2,080	)		(5,913	)		(5,579	)
Interest expense, net		(465	)		(303	)		(1,081	)		(1,277	)
Loss on extinguishment of debt		–			(764	)		–			(764	)
Other income (expense), net		(29	)		32			(21	)		(25	)
Loss before income taxes		(2,925	)		(3,115	)		(7,015	)		(7,645	)
Provision for income taxes		140			75			312			223
Net loss	$	(3,065	)	$	(3,190	)	$	(7,327	)	$	(7,868	)

Net loss per share - basic and diluted	$	(0.08	)	$	(0.09	)	$	(0.20	)	$	(0.25	)

Weighted-average common shares - basic and diluted		36,548			34,695			36,105			31,925

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


	Three Months Ended March 31, 2023
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at December 31, 2022		36,517	$	4	$	292,930		$	(213,787	)	$	371	$	79,518
Shares issued pursuant to stock awards, net		92		–		23			–			–		23
Tax withholding paid on behalf of employees for restricted shares		–		–		(176	)		–			–		(176	)
Share-based compensation		–		–		1,728			–			–		1,728
Net loss		–		–		—			(3,065	)		–		(3,065	)
Balance at March 31, 2023		36,609	$	4	$	294,505		$	(216,852	)	$	371	$	78,028

Three Months Ended March 31, 2022

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders'

Amount

Capital

Deficit

Income

Equity

Balance at December 31, 2021

34,644

284,976

(208,841

)

371

76,509

Shares issued pursuant to equity offering, net

154

–

Shares issued pursuant to stock awards, net

–

Tax withholding paid on behalf of employees for restricted shares

–

Fair value of warrants to purchase common stock issued with bank credit facility

–

Share-based compensation

–

1,612

–

1,612

Net loss

–

(3,190

)

–

(3,190

)

Balance at March 31, 2022

34,798

286,686

(212,031

)

371

75,029

	Nine Months Ended March 31, 2023
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at June 30, 2022		35,129	$	4	$	289,046		$	(209,525	)	$	371	$	79,896
Shares issued pursuant to stock awards, net		1,480		–		752			–			–		752
Tax withholding paid on behalf of employees for restricted shares		–		–		(674	)		–			–		(674	)
Fair value of warrants to purchase common stock issued with bank credit facility		–		–		–			–			–		–
Share-based compensation		–		–		5,381			–			–		5,381
Net loss		–		–		–			(7,327	)		–		(7,327	)
Balance at March 31, 2023		36,609	$	4	$	294,505		$	(216,852	)	$	371	$	78,028

	Nine Months Ended March 31, 2022
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at June 30, 2021		29,088	$	3	$	249,885		$	(204,163	)	$	371	$	46,096
Shares issued pursuant to equity offering, net		4,700		–		32,593			–			–		32,593
Shares issued pursuant to stock awards, net		1,010		–		761			–			–		761
Tax withholding paid on behalf of employees for restricted shares		–		–		(1,646	)		–			–		(1,646	)
Fair value of warrants to purchase common stock issued with bank credit facility		–		–		500			–			–		500
Share-based compensation		–		–		4,593			–			–		4,593
Net loss		–		–		–			(7,868	)		–		(7,868	)
Balance at March 31, 2022		34,798	$	3	$	286,686		$	(212,031	)	$	371	$	75,029

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(7,327	)	$	(7,868	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		5,381			4,593
Depreciation and amortization		1,223			737
Amortization of purchased intangible assets		4,340			4,112
Amortization of manufacturing profit in acquired inventory associated with acquisitions		181			380
Loss on disposal of property and equipment		(10	)		3
Amortization of deferred debt issuance costs		77			241
Fair value remeasurement of earnout consideration		(533	)		2,462
Non-cash loss on extinguishment of debt		–			764
Changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable		2,553			(4,518	)
Inventories		(10,637	)		(10,657	)
Contract manufacturers’ receivable		1,139			(68	)
Prepaid expenses and other current assets		2,260			(761	)
Lease right-of-use assets		1,332			1,203
Other assets		(31	)		(94	)
Accounts payable		(5,782	)		4,281
Accrued payroll and related expenses		(1,918	)		(1,261	)
Other liabilities		6,796			385
Net cash used in operating activities		(956	)		(6,066	)

Investing activities
Purchases of property and equipment		(2,325	)		(1,138	)
Cash payment for acquisitions, net of cash and cash equivalents acquired		(4,650	)		(23,629	)
Net cash used in investing activities		(6,975	)		(24,767	)

Financing activities
Net proceeds from issuances of common stock		752			33,354
Tax withholding paid on behalf of employees for restricted shares		(674	)		(1,646	)
Net proceeds from issuance of debt		4,909			28,800
Payment of borrowings on term loan		(1,475	)		(16,625	)
Net proceeds from borrowing on line of credit		2,000			2,500
Payment of borrowings on line of credit		(2,000	)		(2,500	)
Net proceeds from public offering		–			–
Payment of lease liabilities		(7	)		(7	)
Net cash provided by financing activities		3,505			43,876
Increase (decrease) in cash and cash equivalents		(4,426	)		13,043
Cash and cash equivalents at beginning of period		17,221			9,739
Cash and cash equivalents at end of period	$	12,795		$	22,782

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Company and Significant Accounting Policies

Company

Lantronix, Inc., which we refer to herein as the Company, Lantronix, we, our, or us, is a global Industrial and Enterprise internet of things (“IoT”) provider of solutions that target diversified verticals ranging from Smart Cities, Utilities and Healthcare to Enterprise, Intelligent Transportation, and Industrial Automation. Building on a long history of connectivity and video processing competence, target applications include Video Surveillance, Traffic management, Infotainment systems, Robotics, Edge Computing and Remote Environment Management.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Lantronix have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Securities and Exchange Commission (“SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended June 30, 2022, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, which was filed with the SEC on August 29, 2022. The unaudited condensed consolidated financial statements contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the consolidated financial position of Lantronix at March 31, 2023, the consolidated results of our operations for the three and nine months ended March 31, 2023 and our consolidated cash flows for the nine months ended March 31, 2023. All intercompany accounts and transactions have been eliminated.

Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end.

The results of operations for the three and nine months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or any future interim periods.

Recent Accounting Pronouncements

Revenue Contracts

In October 2021, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity and inconsistency related to (i) recognition of an acquired contract liability and (ii) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with existing revenue recognition guidance under Accounting Standard Codification Topic (“ASC”) 606. At the acquisition date, an acquirer would assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts. Generally, this would result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements. Lantronix adopted this ASU in the first quarter of our fiscal year ending June 30, 2023, and as such, we recorded applicable contract assets and liabilities acquired in the Uplogix acquisition (see Note 3) in accordance with this ASU.

Current Expected Credit Losses

In June 2016, the FASB issued a new 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 is effective for Lantronix beginning in the first quarter of fiscal year 2024. The adoption of this guidance is not expected to have a material effect on our consolidated financial statements.

Revenue

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.

Products

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 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 unaudited condensed consolidated balance sheets.

Services

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 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 March 31, 2023, prepaid sales commissions included in prepaid expenses and other current assets totaled $141,000 and included in other assets totaled $52,000.

Engineering Services

We derive a portion of our revenues from engineering and related consulting service contracts with customers. Revenues from professional engineering services are generally recognized as services are performed. These contracts generally include performance obligations in which control is transferred over time because the customer either simultaneously receives and consumes the benefits provided or our performance on the contract creates or enhances an asset that the customer controls. These contracts typically provide services on the following basis:

	·	Time & Materials (“T&M”) – services consist of revenues from software modification, consulting implementation, training and integration services. These services are set forth separately in the contractual arrangements such that the total price of the customer arrangement is expected to vary depending on the actual time and materials incurred based on the customer’s needs.

	·	Fixed Price – arrangements to render specific consulting and software modification services which tend to be more complex.

Performance obligations for T&M contracts qualify for the "Right to Invoice" practical expedient within the revenue guidance. Under this practical expedient, we may recognize revenue, over time, in the amount to which we have a right to invoice. In addition, we are not required to estimate variable consideration upon inception of the contract and reassess the estimate each reporting period. We have determined that this method best represents the transfer of services as, upon billing, we have a right to consideration from a customer in an amount that directly corresponds with the value to the customer 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 have determined that this method best represents the transfer of services as the proportion closely depicts the efforts or inputs completed towards the satisfaction of a fixed price contract performance obligation.

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.

Net Revenue by Product Line and Geographic Region

We organize our products and solutions into three product lines: Embedded IoT Solutions, IoT System Solutions, and Software & Services. Our Embedded IoT products are normally embedded into new designs. These products include application processing that delivers compute to meet customer needs for data transformation, computer vision, machine learning, augmented / virtual reality, audio / video aggregation and distribution, and custom applications at the edge. Our IoT System products include wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing secure network connectivity, power for IoT end devices through Power over Ethernet (PoE), application hosting, protocol conversion, media conversion, secure access for distributed IoT deployments and many other functions. 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: the Americas; Europe, Middle East, and Africa (“EMEA”); 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 based on the “bill-to” location of our customers:

Net revenue by product lines
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Embedded IoT Solutions	$	16,055	$	15,349	$	44,818	$	43,329
IoT System Solutions		14,034		14,862		43,568		44,386
Software & Services		2,875		2,113		7,879		5,995
	$	32,964	$	32,324	$	96,265	$	93,710

Net revenue by geographic region
	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022
	(In thousands)				(In thousands)
Americas	$	19,095	$	20,448	$	59,713	$	58,748
EMEA		6,380		5,071		16,486		15,481
Asia Pacific Japan		7,489		6,805		20,066		19,481
	$	32,964	$	32,324	$	96,265	$	93,710

The following table presents product revenues and service revenues as a percentage of our total net revenue:


	Three Months Ended March 31,				Nine Months Ended March 31,
	2023		2022		2023		2022

Product revenues		91%		94%		92%		94%
Service revenues		9%		6%		8%		6%

Service revenue is 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.

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 unaudited condensed consolidated balance sheets.

The following table presents the changes in our deferred revenue balance for the nine months ended March 31, 2023 (in thousands):

Changes in deferred revenue
Balance, June 30, 2022	$	1,342
New performance obligations		2,475
Performance obligations assumed from acquisition		4,096
Recognition of revenue from satisfying performance obligations		(3,807	)
Balance, March 31, 2023		4,106
Less: non-current portion of deferred revenue		(1,025	)
Current portion, March 31, 2023	$	3,081

We currently expect to recognize substantially all of the non-current portion of deferred revenue over the next 2 to 5 years.

Acquisition

On September 12, 2022 (the “Closing Date”), we entered into a Merger Agreement with Uplogix, Inc. (“Uplogix”) pursuant to which Uplogix became a wholly-owned subsidiary of Lantronix. 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. Prior to the 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 have 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 will be based on Uplogix achieving revenue (subject to certain adjustments as specified in the Merger Agreement) of $7,000,000 to $14,000,000 for the period beginning at the Closing Date and ending on September 30, 2023. The Company Senior Noteholders are entitled to an advance of the Earnout Amount if the revenue of the Uplogix business for the period beginning at the closing of the Merger and ending on March 31, 2023 is between $7,000,000 to $14,000,000, but in no event will the Earnout Amount, together with any such advance of the Earnout Amount, exceed $4,000,000.

The acquisition of Uplogix brings 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):

Summary of purchase consideration
Cash paid, including initial working capital adjustments	$	8,754
Preliminary estimated fair value of earnout consideration		1,71