LANTRONIX, INC. 10-Q

Table of Contents

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 December 31, 2025

☐ 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 January 30, 2026, there were 39,692,026 shares of the registrant’s common stock outstanding.

LANTRONIX, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED

DECEMBER 31, 2025

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 December 31, 2025 and June 30, 2025	4

	Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2025 and 2024	5

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2025 and 2024	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and 2024	7

	Notes to Unaudited Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30

Item 4.	Controls and Procedures	30

PART II.	OTHER INFORMATION	31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	47

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for the three months ended December 31, 2025 (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, gross margin 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 and should not place undue reliance on the forward-looking statements contained in this Report. 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 Stock Market LLC. 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)


	December 31,			June 30,
	2025			2025
Assets
Current assets:
Cash and cash equivalents	$	22,964		$	20,098
Accounts receivable, net		23,261			25,092
Inventories, net		27,074			26,371
Contract manufacturers' receivable		1,114			3,071
Prepaid expenses and other current assets		3,488			2,761
Total current assets		77,901			77,393
Property and equipment, net		1,818			2,456
Goodwill		31,089			31,089
Intangible assets, net		2,543			3,738
Lease right-of-use assets		7,713			8,422
Other assets		667			624
Total assets	$	121,731		$	123,722

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	12,669		$	13,259
Accrued payroll and related expenses		4,163			3,471
Current portion of long-term debt, net		–			3,070
Other current liabilities		11,536			10,622
Total current liabilities		28,368			30,422
Long-term debt, net		9,677			8,684
Other non-current liabilities		9,265			10,238
Total liabilities		47,310			49,344

Commitments and contingencies (Note 8)		–			–

Stockholders' equity:
Common stock		4			4
Additional paid-in capital		311,171			308,397
Accumulated deficit		(237,125	)		(234,394	)
Accumulated other comprehensive income		371			371
Total stockholders' equity		74,421			74,378
Total liabilities and stockholders' equity	$	121,731		$	123,722

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						Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
Net revenue	$	29,774		$	31,161		$	59,568		$	65,584
Cost of revenue		16,807			17,877			33,255			37,825
Gross profit		12,967			13,284			26,313			27,759
Operating expenses:
Selling, general and administrative		8,740			8,811			18,282			18,278
Research and development		4,620			4,984			9,218			9,940
Restructuring, severance and related charges		43			193			136			1,093
Acquisition-related costs		40			208			83			237
Amortization of intangible assets		598			1,248			1,195			2,499
Total operating expenses		14,041			15,444			28,914			32,047
Loss from operations		(1,074	)		(2,160	)		(2,601	)		(4,288	)
Interest expense, net		(9	)		(126	)		(24	)		(245	)
Other income (expense), net		(4	)		8			179			(29	)
Loss before income taxes		(1,087	)		(2,278	)		(2,446	)		(4,562	)
Provision for income taxes		243			94			285			312
Net loss	$	(1,330	)	$	(2,372	)	$	(2,731	)	$	(4,874	)

Net loss per share - basic and diluted	$	(0.03	)	$	(0.06	)	$	(0.07	)	$	(0.13	)

Weighted-average common shares - basic and diluted		39,496			38,631			39,343			38,330

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)


	Three Months Ended December 31, 2025
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at September 30, 2025		39,268	$	4	$	309,870		$	(235,795	)	$	371	$	74,450
Shares issued pursuant to stock awards, net		414		–		425			–			–		425
Tax withholding paid on behalf of employees for restricted shares		–		–		(704	)		–			–		(704	)
Share-based compensation		–		–		1,580			–			–		1,580
Net loss		–		–		–			(1,330	)		–		(1,330	)
Balance at December 31, 2025		39,682	$	4	$	311,171		$	(237,125	)	$	371	$	74,421

	Three Months Ended December 31, 2024
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at September 30, 2024		38,474	$	4	$	304,078		$	(225,523	)	$	371	$	78,930
Shares issued pursuant to stock awards, net		314		–		201			–			–		201
Tax withholding paid on behalf of employees for restricted shares		–		–		(359	)		–			–		(359	)
Share-based compensation		–		–		1,513			–			–		1,513
Net loss		–		–		–			(2,372	)		–		(2,372	)
Balance at December 31, 2024		38,788	$	4	$	305,433		$	(227,895	)	$	371	$	77,913

	Six Months Ended December 31, 2025
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at June 30, 2025		39,102	$	4	$	308,397		$	(234,394	)	$	371	$	74,378
Shares issued pursuant to stock awards, net		580		–		425			–			–		425
Tax withholding paid on behalf of employees for restricted shares		–		–		(1,004	)		–			–		(1,004	)
Share-based compensation		–		–		3,353			–			–		3,353
Net loss		–		–		–			(2,731	)		–		(2,731	)
Balance at December 31, 2025		39,682	$	4	$	311,171		$	(237,125	)	$	371	$	74,421

	Six Months Ended December 31, 2024
											Accumulated
					Additional						Other		Total
	Common Stock				Paid-In			Accumulated			Comprehensive		Stockholders'
	Shares		Amount		Capital			Deficit			Income		Equity
Balance at June 30, 2024		37,872	$	4	$	304,001		$	(223,021	)	$	371	$	81,355
Shares issued pursuant to stock awards, net		916		–		220			–			–		220
Tax withholding paid on behalf of employees for restricted shares		–		–		(1,901	)		–			–		(1,901	)
Share-based compensation		–		–		3,113			–			–		3,113
Net loss		–		–		–			(4,874	)		–		(4,874	)
Balance at December 31, 2024		38,788	$	4	$	305,433		$	(227,895	)	$	371	$	77,913

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Six Months Ended
	December 31,
	2025			2024
Operating activities
Net loss	$	(2,731	)	$	(4,874	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Share-based compensation		3,353			3,113
Depreciation and amortization		853			1,116
Amortization of intangible assets		1,195			2,499
Amortization of manufacturing profit in acquired inventory associated with acquisitions		18			–
Amortization of deferred debt issuance costs		29			21
Changes in operating assets and liabilities, net of assets and liabilities acquired:
Accounts receivable		1,831			1,711
Inventories		(721	)		(400	)
Contract manufacturers' receivable		1,957			(2,072	)
Prepaid expenses and other current assets		(727	)		(994	)
Lease right-of-use assets		800			933
Other assets		(43	)		(83	)
Accounts payable		(639	)		5,413
Accrued payroll and related expenses		692			(2,910	)
Other liabilities		(84	)		(470	)
Net cash provided by operating activities		5,783			3,003
Investing activities
Purchases of property and equipment		(166	)		(241	)
Cash payment for acquisition		–			(6,458	)
Net cash used in investing activities		(166	)		(6,699	)
Financing activities
Net proceeds from issuances of common stock		425			220
Tax withholding paid on behalf of employees for restricted shares		(1,004	)		(1,901	)
Borrowings on debt		4,800			–
Payments on debt		(6,906	)		(1,556	)
Payment of lease liabilities		(66	)		(94	)
Net cash used in financing activities		(2,751	)		(3,331	)
Increase (decrease) in cash and cash equivalents		2,866			(7,027	)
Cash and cash equivalents at beginning of period		20,098			26,237
Cash and cash equivalents at end of period	$	22,964		$	19,210

See accompanying notes to unaudited condensed consolidated financial statements.

LANTRONIX, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025

1.	Company and Significant Accounting Policies

Company

Lantronix, Inc., which we refer to herein as the Company, Lantronix, we, our, or us, is a global leader in Edge AI and Industrial Internet of Things (“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 (including drones), 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.

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 (the “SEC”) Regulation S-X. Accordingly, they should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, which was filed with the SEC on August 29, 2025. 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 December 31, 2025, the consolidated results of our operations for the three and six months ended December 31, 2025 and our consolidated cash flows for the six months ended December 31, 2025. 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 six months ended December 31, 2025 are not necessarily indicative of the results to be expected for the full fiscal year or any future interim periods.

Segment Information

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.

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 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 have a material effect on our consolidated financial statements, since it requires only enhancements to existing income tax disclosures in the footnotes to 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 with our 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.

2.	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 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.

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. 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 December 31, 2025, prepaid sales commissions included in prepaid expenses and other current assets totaled $175,000 and those included in other assets totaled $171,000.

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. 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.


	Three Months Ended December 31,				Six Months Ended December 31,
	2025		2024		2025		2024
	(In thousands)
Embedded IoT Solutions	$	13,865	$	10,784	$	25,332	$	24,171
IoT System Solutions		13,281		18,592		29,740		37,351
Software & Services		2,628		1,785		4,496		4,062
	$	29,774	$	31,161	$	59,568	$	65,584


	Three Months Ended December 31,				Six Months Ended December 31,
	2025		2024		2025		2024
	(In thousands)
Americas	$	20,481	$	16,386	$	41,132	$	33,806
EMEA		5,138		9,036		10,225		19,520
Asia Pacific Japan		4,155		5,739		8,211		12,258
	$	29,774	$	31,161	$	59,568	$	65,584

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


	Three Months Ended December 31,				Six Months Ended December 31,
	2025		2024		2025		2024
Product revenues		91%		94%		92%		94%
Service revenues		9%		6%		8%		6%

Service revenues are comprised primarily of SAAS solutions, professional services, 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 six months ended December 31, 2025 (in thousands):


Balance, June 30, 2025	$	5,556
New performance obligations		2,719
Recognition of revenue from satisfying performance obligations		(2,474	)
Balance, December 31, 2025		5,801
Less: non-current portion of deferred revenue		(2,033	)
Current portion, December 31, 2025	$	3,768

During the six months ended December 31, 2025, approximately $1,975,000 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.

3.	Supplemental Financial Information

Inventories

Schedule of inventories
	December 31,		June 30,
	2025		2025
	(In thousands)
Finished goods	$	16,157	$	15,603
Raw materials		10,917		10,768
Inventories	$	27,074	$	26,371

Other Liabilities

The following table presents details of our other liabilities:

Schedule of other liabilities
	December 31,		June 30,
	2025		2025
	(In thousands)
Current
Accrued variable consideration	$	1,915	$	2,557
Customer deposits and refunds		417		321
Accrued raw materials purchases		486		204
Deferred revenue		3,768		3,301
Lease liability		1,594		1,594
Taxes payable		134		103
Warranty reserve		642		663
Other accrued operating expenses		2,580		1,879
Total other current liabilities	$	11,536	$	10,622

Non-current
Lease liability	$	7,039	$	7,811
Deferred tax liability		193		172
Deferred revenue		2,033		2,255
Total other non-current liabilities	$	9,265	$	10,238

Computation of Net Loss per Share

Basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the applicable period.

The following table presents the computation of net loss per share:


	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
	(In thousands, except per share data)
Numerator:
Net loss	$	(1,330	)	$	(2,372	)	$	(2,731	)	$	(4,874	)
Denominator:
Weighted-average common shares outstanding - basic and diluted		39,496			38,631			39,343			38,330

Net loss per share - basic and diluted	$	(0.03	)	$	(0.06	)	$	(0.07	)	$	(0.13	)

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
	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
	(In thousands)
Common stock equivalents		1,033		508		1,070		543

Intangible Assets

The following table presents details of intangible assets:

Schedule of intangible assets
	December 31, 2025							June 30, 2025
	Gross Carrying Amount		Accumulated Amortization			Net Book Value		Gross Carrying Amount		Accumulated Amortization			Net Book Value
	(In thousands)
Developed technology	$	6,793	$	(6,185	)	$	608	$	6,793	$	(6,066	)	$	727
Customer relationships		19,116		(17,226	)		1,890		19,116		(16,321	)		2,795
Order backlog		297		(297	)		–		297		(149	)		148
Trademark and trade name		1,516		(1,471	)		45		1,516		(1,448	)		68
	$	27,722	$	(25,179	)	$	2,543	$	27,722	$	(23,984	)	$	3,738

We do not currently have any intangible assets with indefinite useful lives.

As of December 31, 2025, future estimated amortization expense is as follows:


Years Ending June 30,
(In thousands)
2026 (remainder)	$	367
2027		539
2028		256
2029		191
2030		191
Thereafter		999
Total future amortization	$	2,543

Restructuring, Severance and Related Charges

During the six months ended December 31, 2025, we incurred charges of approximately $136,000 related to certain headcount reductions. We may incur additional charges in future periods as we identify additional cost savings and efficiencies related to our business.

The following table presents details of the liability we recorded related to restructuring, severance and related activities:


	Six Months Ended
	December 31,
	2025
	(In thousands)
Beginning balance	$	479
Charges		136
Payments		(605	)
Ending balance	$	10

These balances are recorded in accrued payroll and related expenses in the accompanying unaudited condensed consolidated balance sheets.

Supplemental Cash Flow Information

The following table presents non-cash investing and financing transactions excluded from the accompanying unaudited condensed consolidated statements of cash flows:


	Six Months Ended
	December 31,
	2025		2024
	(In thousands)
Acquisition of property through operating leases	$	84	$	79
Acquisition of property through financing leases	$	7	$	–
Accrued property and equipment paid for in the subsequent period	$	49	$	14

4.	Warranty Reserve

The standard warranty periods we provide for our products typically range from one to five years. Certain products carry a limited lifetime warranty, which requires us to repair or replace a defective product or offer a refund of a portion of the purchase price based on a depreciated value at our option. We establish reserves for estimated product warranty costs at the time revenue is recognized based upon our historical warranty experience, and for any known or anticipated product warranty issues.

The following table presents details of our warranty reserve, which is included in other current liabilities in the unaudited condensed consolidated balance sheets:

Schedule of warranty reserve
	Six Months Ended			Year Ended
	December 31,			June 30,
	2025			2025
	(In thousands)
Beginning balance	$	663		$	840
Charged to cost of revenue		152			220
Usage		(173	)		(397	)
Ending balance	$	642		$	663

Debt

Bank Line of Credit

On August 15, 2025, we entered into a Fourth Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”), 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, as defined in the Loan Agreement, 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. If any 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.

The following table summarizes our outstanding debt:

Schedule of outstanding debt
	December 31,			June 30,
	2025			2025
	(In thousands)
Outstanding debt	$	9,828		$	11,829
Less: Unamortized debt issuance costs		(151	)		(75	)
Net Carrying amount of debt		9,677			11,754
Less: Current portion		–			(3,070	)
Non-current portion	$	9,677		$	8,684

During the three and six months ended December 31, 2025, we recognized $136,000 and $313,000, respectively, of interest expense in the accompanying unaudited condensed consolidated statements of operations related to interest and amortization of debt issuance associated with the debt. As of December 31, 2025 the available borrowing capacity on the line of credit was $1,398,000.

Financial Covenants

The Loan Agreement requires Lantronix to comply with a minimum liquidity test and a minimum interest coverage ratio.

Liquidity

The Loan Agreement requires that we maintain a minimum liquidity of $5,000,000 at SVB, as measured at the end of each month.

Maximum leverage ratio

The Loan Agreement requires that we maintain a minimum interest coverage ratio, calculated as the ratio of interest expense for the trailing 12-month period to the consolidated trailing 12-month earnings before interest, taxes, depreciation and amortization, and certain other allowable exclusions of 1.50 to 1.00 for each calendar quarter.

As of December 31, 2025 we were in compliance with all financial covenants under the Loan Agreement.

6.	Stockholders’ Equity

Restricted Stock Units (“RSUs”)

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

Schedule of RSUs activity
	Number of Shares			Weighted- Average Grant Date Fair Value per Share
	(In thousands)
Balance of RSUs outstanding at June 30, 2025		2,107		$	3.76
Granted		924			4.05
Forfeited		(140	)		3.94
Vested		(696	)		4.13
Balance of RSUs outstanding at December 31, 2025		2,195		$	3.76

Performance Stock Units (“PSUs”)

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

Schedule of PSU activity
	Number of Shares
	(In thousands)
Balance of PSUs outstanding at June 30, 2025		995
Granted		579
Forfeited		(283	)
Balance of PSUs outstanding at December 31, 2025		1,291

Stock Options

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

Schedule of stock option activity
	Number of Shares			Weighted- Average Exercise Price per Share
	(In thousands)
Balance of options outstanding at June 30, 2025		215		$	4.51
Forfeited		(35	)		4.95
Expired		(3	)		3.16
Exercised		(95	)		4.47
Balance of options outstanding at December 31, 2025		82		$	4.43

Share-Based Compensation Expense

The following table presents a summary of share-based compensation expense included in each applicable functional line item on our accompanying unaudited condensed consolidated statements of operations:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
	(In thousands)
Cost of revenue	$	29	$	48	$	64	$	112
Selling, general and administrative		1,354		1,044		2,808		2,170
Research and development		197		421		481		831
Total share-based compensation expense	$	1,580	$	1,513	$	3,353	$	3,113

The following table presents the remaining unrecognized share-based compensation expense related to our outstanding share-based awards as of December 31, 2025:


	Remaining		Remaining
	Unrecognized		Weighted-
	Compensation		Average Years
	Expense		To Recognize
	(In thousands)
RSUs	$	7,339		2.2
PSUs		3,406		1.9
	$	10,745

If there are any modifications or cancellations of the underlying unvested share-based awards, we may be required to accelerate, increase or cancel remaining unearned share-based compensation expense. Future share-based compensation expense and unrecognized share-based compensation expense will increase to the extent that we grant additional share-based awards.

7.	Income Taxes

We utilize the liability method of accounting for income taxes. The following table presents our effective tax rates based upon our provision for income taxes for the periods shown:


	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
Effective tax rate		22	%		4	%		12	%		7	%

The difference between our effective tax rates in the periods presented above and the federal statutory rate is primarily due to (i) a tax benefit from our domestic losses being recorded with a full valuation allowance, (ii) our current estimates of pre-tax profitability for the full fiscal year and (iii) the effect of foreign earnings taxed at rates differing from the federal statutory rate.

We have a net deferred tax liability of $193,000 and $172,000 at December 31, 2025 and June 30, 2025, respectively. This balance represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax assets and is recorded in other non-current liabilities on the accompanying unaudited condensed consolidated balance sheets.

The realization of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC Topic 740, we have evaluated the positive and negative evidence bearing upon our ability to realize our deferred tax assets. 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 have therefore provided a full valuation allowance against our deferred tax assets as of December 31, 2025 and June 30, 2025.

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 depreciation 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. We have analyzed the impact of the OBBB Act to our current income tax position and have determined that it does not have material impact as we continue to project taxable losses and maintain a full valuation allowance against the future losses that would be generated by these favorable positions. We will continue to evaluate the potential future impact of the OBBB Act on our financial statements.

8.	Commitments and Contingencies

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 or in the aggregate, a material adverse effect on our business, prospects, financial position, operating results or cash flows. We maintain insurance policies for settlements and judgments, as well as legal defense costs, although the amount of insurance coverage that we maintain may not be adequate to cover all claims or liabilities that may arise. In addition, provisions of the Company’s Certificate of Incorporation, Bylaws and indemnification agreements entered into with current and former directors and officers require us, among other things, to indemnify these directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers and to advance expenses to such directors or officers in connection therewith.

9.	Segment Reporting

The following table presents segment revenue, gross profit, and net loss for the periods presented:

Schedule of segment disclosure
	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2025			2024			2025			2024
	(In thousands)
Net revenue	$	29,774		$	31,161		$	59,568		$	65,584
Less cost of revenue:
Other costs of revenue		16,672			17,715			32,961			37,476
Share-based compensation		29			48			64			112
Amortization of manufacturing profit in acquired inventory		–			–			18			–
Depreciation and amortization		106			114			212			237
Total cost of revenue		16,807			17,877			33,255			37,825
Gross profit		12,967			13,284			26,313			27,759
Less:
Personnel-related expenses		8,465			8,446			16,955			17,049
Professional fees and outside services		781			1,069			1,886			2,561
Advertising and marketing		501			494			1,031			950
Facilities and insurance		1,058			1,083			2,132			2,142
Share-based compensation		1,551			1,465			3,289			3,001
Depreciation		301			459			641			879
Outside services		316			108			653			324
Product certifications		186			205			301			343
Other operating expenses		201			466			612			969
Restructuring, severance and related charges		43			193			136			1,093
Acquisition-related costs		40			208			83			237
Amortization of intangible assets		598			1,248			1,195			2,499
Interest expense, net		9			126			24			245
Other expense (income)		4			(8	)		(179	)		29
Provision for income taxes		243			94			285			312
Total segment expenses		14,297			15,656			29,044			32,633

Segment net loss	$	(1,330	)	$	(2,372	)	$	(2,731	)	$	(4,874	)

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and the related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the three months ended December 31, 2025 (this “Report”). This discussion and analysis contains forward-looking statements that are based on our current expectations and reflect our plans, estimates and anticipated future financial performance. See the section of this Report entitled “Cautionary Note Regarding Forward-Looking Statements” for additional information. These statements involve numerous risks and uncertainties. Our actual results may differ materially from those expressed or implied by these forward-looking statements as a result of many factors, including those set forth in “Risk Factors” in Part II, Item 1A of this Report.

Unless otherwise indicated by the context, all references to the “Company”, “Lantronix”, “we”, “us”, and “our” in this Quarterly Report on Form 10-Q include Lantronix, Inc. and its consolidated subsidiaries.

Overview

Lantronix Inc. 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 (including drones), 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 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”).

Products and Solutions

We organize our portfolio services and products into the following product lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Services.

Embedded IoT Solutions

Our embedded product portfolio includes a broad range of Compute System-on-Modules (“SoM”) and System-in-Package (“SiP”) solutions, together with wired and wireless connectivity products. As semiconductor technology continues to evolve and integrate more functionality, our compute modules now provide not only processing power but also the ability to run advanced AI and machine learning applications. This enables our customers to process and analyze digital inputs such as video, audio, and sensor data, directly at the device level, reducing latency, enhancing security, and enabling real-time decision making.

IoT System Solutions

Our IoT System Solutions portfolio includes a wide range of fully functional standalone systems that provide routing, switching or gateway functionalities as well as telematics and media conversion. These products include wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing secure network connectivity, power for IoT end devices through Power over Ethernet (“PoE”), application hosting, protocol conversion, media conversion, secure access for distributed IoT deployments and many other functions. By offering pre-certified products across multiple regions, Lantronix significantly reduces Original Equipment Manufacturer (“OEM”) customers’ regulatory certification costs and speeds up their time-to-market.

Software and Services

Our Software as a Service (“SaaS”) platform offers comprehensive single-pane-of-glass management for Out-of-Band (“OOB”) and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device. Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale deployments.

We leverage our deep engineering expertise and product development best practices to deliver high-quality, innovative products cost-effectively and on schedule. Our engineering services model is flexible, offering either turnkey product development or team augmentation to accelerate complex product development challenges, such as camera tuning, voice control, machine learning, AI, computer vision, augmented/virtual reality, and more.

We also provide extended warranty, support and maintenance services related to our OOB and certain other product families.

Recent Accounting Pronouncements

Refer to Note 1 of Notes to Unaudited Condensed Consolidated Financial Statements, included in Part I, Item 1 of this Report, which is incorporated herein by reference, for a discussion of recent accounting pronouncements.

Critical Accounting Policies and Estimates

The accounting policies that have the greatest impact on our financial condition and results of operations and that require the most judgments are those relating to revenue recognition, sales returns and allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets. These policies are described in further detail in our Annual Report on Form 10-K for the ficsal year ended June 30, 2025 and filed with the SEC on August 29, 2025 (the “Form 10-K”) and have not changed significantly during the six months ended December 31, 2025 as compared to what was previously disclosed in the Form 10-K.

Results of Operations – Three Months Ended December 31, 2025 Compared to the Three Months Ended December 31, 2024

Summary

In the three months ended December 31, 2025, our net revenue decreased by $1,387,000 or 4.5%, compared to the three months ended December 31, 2024. The decrease in net revenue was driven by a 28.6% decrease in net revenue in our IoT System Solutions product line, partially offset by increases in net revenue in our Embedded IoT Solutions product line of 28.6% and our Software and Services product line of 47.2%. We had a net loss of $1,330,000 for the three months ended December 31, 2025 compared to a net loss of $2,372,000 for the three months ended December 31, 2024. The improvement in net loss was primarily driven by a decrease in operating expenses of $1,403,000 for the three months ended December 31, 2025 compared to the three months ended December 31, 2024.

Net Revenue

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

Three Months Ended December 31,

% of Net

Change

2025

Revenue

2024

SEC Form 10-Q filed by Lantronix Inc.