Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

☒      ANNUAL REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2025

☐      TRANSITIONREPORT 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)

(949) 453-3990

(Registrant’s telephone number, includingarea code)

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

Securities registered pursuant to Section 12(g)of the Act: None.

Indicate by check mark if the registrant is a well-knownseasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not requiredto file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

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

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

Indicate by check mark whether the registrant has fileda report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reportingunder Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued itsaudit report. ☒

If securities are registered pursuant to Section 12(b)of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction ofan error to previously issued financial statements. ☐

Indicate by check mark whether any of those error correctionsare restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executiveofficers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

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

The aggregate market value of the registrant’scommon stock held by non-affiliates based upon the closing sales price of the common stock as reported by the Nasdaq Capital Market onDecember 31, 2024, the last trading day of the registrant’s second fiscal quarter, was approximately $134,820,000. The determinationof affiliate status for this purpose shall not be a conclusive determination for any other purpose.

As of August 22, 2025, there were 39,151,106 sharesof the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statementon Schedule 14A relating to the registrant’s 2025 annual meeting of stockholders, which will be filed with the Securities and ExchangeCommission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, are incorporated by referenceinto Part III of this Annual Report on Form 10-K.

LANTRONIX, INC.

ANNUAL REPORT ON FORM 10-K

For the Fiscal Year Ended June 30, 2025

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the fiscal year ended June 30, 2025,or this Report, contains forward-looking statements within the meaning of the federal securities laws, which statements are subject tosubstantial risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability establishedby 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-lookingstatements 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 wordsor similar words or expressions or the negative thereof. Additionally, statements concerning future matters such as our expectedearnings, revenues, expenses and financial condition, our expectations with respect to the development of new products, and other statementsregarding matters that are not historical are forward-looking statements.

We have based our forward-looking statements on management’s currentexpectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-lookingstatements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements aresubject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performanceto 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 differmaterially from our expectations include, but are not limited to, those set forth under “Risk Factors” in Item 1A of PartI of this Report, as such factors may be updated, amended or superseded from time to time by subsequent quarterly reports on Form 10-Qor current reports on Form 8-K. In addition, actual results may differ as a result of additional risks and uncertainties of which we arecurrently unaware or which we do not currently view as material to our business.

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

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

PART I

Overview

Lantronix Inc. (Nasdaq: LTRX) is a global leader in Edge AI and IndustrialInternet of Things (“IoT”) solutions, delivering intelligent computing, secure connectivity, and remote management for mission-criticalapplications. Serving high-growth markets, including smart cities, enterprise information technology (“IT”), and commercialand defense unmanned systems, we enable customers to optimize operations and accelerate digital transformation. Our comprehensive portfolioof hardware, software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilientout-of-band network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, anda competitive edge in today’s artificial intelligence (“AI”)-driven world.

We conduct our business globally and manage our sales teams by three geographicregions: the Americas; Europe, Middle East, and Africa (“EMEA”); and Asia Pacific Japan (“APJ”).

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

References in this Report to “fiscal 2025” refer to the fiscalyear ended June 30, 2025, and references to “fiscal 2024” refer to the fiscal year ended June 30, 2024. In addition, unlessthe context suggests otherwise, all references in this Report to the “Company,” “we,” “our” and “us,”refer to Lantronix, Inc. together with its subsidiaries.

Our Strategy

We focus on three high-potential vertical markets - smart cities, enterpriseand unmanned aerial systems (“UAS”) (drones). We position ourselves in these markets to deliver complete solutions encompassingour hardware, software, device management, and design services to meet the evolving needs of our customers and address each layer of theIoT stack. Below are customer examples that highlight our impact:

Our growth strategy centers on continuous innovation and strategic acquisitionsdesigned to increase scale, broaden our scope, and enhance our value proposition. This approach allows us to address a broader spectrumof our customers’ operational needs, positioning Lantronix as a strategic partner rather than just a vendor. Our acquisitions andinnovations have expanded our capabilities in key areas such as critical infrastructure and connected transportation solutions, drivingdeeper customer engagement and market penetration.

By focusing on these strategic priorities, we continue to strengthen ourcompetitive position and attract new customers across a wide variety of applications. Looking ahead, we plan to capitalize on market opportunitiesby further enhancing our product offerings, expanding geographically, and pursuing targeted acquisitions that align with our long-termgrowth objectives.

Products and Solutions

Embedded IoT Solutions

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

Our latest SIP devices are designed to process multiple media streams usingComputer Vision (CV) technology, enabling sophisticated edge analytics. These modules are remotely managed via Percepxion™, Lantronix’sCloud IoT Edge Solution software, offering seamless control and monitoring. Typically embedded into customer product designs, Lantronix’sIoT compute products provide application processing that enables edge solutions for data transformation, computer vision, machine learning,augmented/virtual reality, and custom applications.

Our products are designed with customer needs in mind, offering pre-certifiedsolutions across multiple regions, significantly reducing regulatory certification costs and expediting time-to-market for OEM customers.Additionally, we provide software tools that further accelerate development, empowering customers to quickly bring their products to marketwhile enhancing their overall value proposition.

Our embedded IoT solutions serve a wide range of applications, fromindustrial automation and transportation systems to smart city infrastructure, positioning us as a leading provider of flexible and scalablesolutions in the growing IoT market.

IoT System Solutions

Our IoT System Solutions portfolio includes a wide range of fully functionalstandalone systems that provide routing, switching or gateway functionalities as well as telematics and media conversion. These productsinclude wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing securenetwork 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 multipleregions, Lantronix significantly reduces OEM customers’ regulatory certification costs and speeds up their time-to-market.

Our PoE products support remote devices such as cameras and wireless accesspoints by passing electrical power along with data on Ethernet cabling, eliminating the need for traditional AC/DC electrical power inhard-to-reach locations. As the adoption of smart city technologies accelerates, our switches provide the critical connectivity, bandwidth,and power needed to support intelligent transportation systems and surveillance networks that safeguard citizens.

Our products also incorporate features to perform advanced levels offault management and diagnostics to troubleshoot networks and proactively fix problems. Our media converters and other customer premiseequipment assist customers in resolving challenges in the areas of bandwidth constraints, security risks and distance limitations as networksextend from local area to wide area networks and adapt to ever-increasing end-user demands.

Our smart tracking devices are designed to deliver robust data loggingand positional tracking functionality and reliability for supply chain and logistics solutions. Our Industrial IoT devices are designedto be flexible in the field while offering a variety of connectivity options to suit customers’ needs across 4G, 5G and LTE cellularnetworks. These power-efficient products are designed to support communications across interfaces and industrial protocols for vehicle,fleet and asset tracking and equipment management. Many of the products are offered with software tools intended to further accelerateour customers’ time-to-market and increase their value add. Our Industrial IoT products are pre-certified in a number of countries,significantly reducing our OEM customers’ regulatory certification costs and accelerating their time-to-market.

As Edge Computing deployment accelerates, Out-of-Band (OOB) Managementallows for full comprehension and control of remote information technology (“IT”) infrastructure across a range of sensors(e.g., temperature, humidity, light, acceleration, open/close, etc.), providing status and alerting while enabling automation and remotecontrol of devices, servers and end stations. OOB uses a dedicated management network to access critical infrastructure components andensure production-independent connectivity. Remote Management allows organizations to effectively monitor and control their enterpriseIT equipment and facilities (environments), either in or out of band, optimizing their IT support resources.

Our Advanced OOB product line includes console management, power managementand IP-connected keyboard-video-mouse (commonly referred to as “IPKVM”) products that provide remote access to IT and networkinginfrastructure deployed in test labs, data centers, branch offices, remote sites and server rooms.

Software and Engineering Services

Our Software as a Service (“SaaS”) platform offers comprehensivesingle-pane-of-glass management for OOB and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automateacross 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-scaledeployments.

For OEMs and System Integrators (“SI”) our platform offersmultitenancy functionality for supporting a broad customer base while ensuring customer separation and data security. Over the Air (“OTA”)updates streamline the process of security patches, firmware upgrades and configuration changes, keeping devices up to date and secure.

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

In addition to our production-ready edge computing solutions, we offerexperienced multidisciplinary engineering services across complete aspects of IoT product development, including hardware, software, mechanicalengineering, rapid prototyping, and quality assurance. Our specialized services also extend to camera, audio, and AI/machine learningdevelopment, ensuring our customers can bring cutting-edge products to market faster and with greater reliability.

Our engineering design services are a key component of our business model,enabling clients to accelerate product development and market readiness. The services focus on designing and developing high-quality,innovative IoT and embedded solutions. We leverage extensive expertise in hardware and software engineering to provide custom designsfor complex applications, helping customers reduce costs and time-to-market while improving performance and reliability.

Our design services are especially valuable in the developmentof IoT systems, remote management solutions, and edge computing applications. Our engineering teams have experience across a range oftechnologies, including embedded systems, wireless connectivity, and custom hardware. By integrating these design services, we offer end-to-endsupport, from concept through to manufacturing, allowing businesses to focus more on core operations while still achieving advanced technologicaloutcomes.

This strategy positions us as a go-to partner for companies needing specializedengineering capabilities for industrial, automotive, medical, and other high-tech applications.

Net Revenue by Product Line

We have one operating and reportable business segment. A summary of ournet revenue by product line is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”included in Part II, Item 7 of this Report, which is incorporated herein by reference. A discussion of factors potentially affecting ournet revenue and other operating results is set forth in “Risk Factors” included in Part I, Item 1A of this Report, which isincorporated herein by reference.

Sales Cycle

Our embedded IoT solutions are typically designed into products by OEMs,original design manufacturers (“ODMs”) and contract manufacturers. OEMs design and sell products under their own brand thatare either manufactured by the OEM in-house or by third-party contract manufacturers. ODMs design and manufacture products for third parties,which then sell those products under the third parties’ brands. The design cycles using our embedded solutions typically range fromnine to 24 months and can generate revenue for the entire life cycle of an end user’s product.

Our IoT System Solutions are typically sold to end users through value-addedresellers (“VARs”), systems integrators, distributors, online retailers and, to a lesser extent, OEMs. The design cycles forthese products typically range from three to 18 months and are often project-based.

Sales Channels

Distributors

A majority of our sales are made through distributors. Distributors resellour products to a wide variety of resellers and end customers including OEMs, ODMs, VARs, systems integrators, consumers, online retailers,IT resellers, corporate customers and government entities.

Resellers

Our products are sold by industry-specific system integrators and VARs,who often obtain our products from our distributors. Additionally, our products are sold by direct market resellers such as CDW, ProVantage,and Amazon.com.

Direct Sales

We sell products directly to larger OEMs and end users. We also maintainan e-commerce site for direct sales.

Sales and Marketing

We sell our products primarily through an internal sales force, which includesregional sales managers, inside sales personnel and field applications engineers in major regions throughout the world. This team managesour relationships with our partners and end users, identifies and develops new sales opportunities and increases penetration at existingaccounts. We implement marketing programs, tools, and services, including displaying our products at industry-specific events, to generatesales leads and increase demand for our products.

Manufacturing

Our manufacturing operations are currently conducted through third-partycontract manufacturers. We currently utilize Hana Microelectronics, primarily located in Thailand and China, Honortone and In-Tech primarilylocated in China, and Tailyn, Info-Tek and Rubytech in Taiwan as our contract manufacturers for most of our products. In addition, weuse Marvell Technology Inc., to manage the manufacture of our large-scale integration chips in Taiwan. We manufacture certain productswith final assembly in the U.S. to meet trade compliance requirements.

Our contract manufacturers source raw materials, components andintegrated circuits, in accordance with our specifications and forecasts, and perform printed circuit board assembly, final assembly,functional testing and quality control. Our products are manufactured and tested to our specifications with standard and custom components.Many of these components are available from multiple vendors. However, we have several single-sourced supplier relationships, either becausealternative sources are not available or because the relationship is advantageous to us.

Research and Development

Our research and development efforts are focused on the development ofhardware and software technology to differentiate our products and enhance our competitive position in the markets we serve. Product researchand development is primarily performed in-house and supplemented with outsourced resources.

Competition

Our industry is highly competitive and characterized by rapid technologicaladvances and evolving industry standards. The market can be affected significantly by new product introductions and marketing activitiesof industry participants. We believe that we compete for customers based on product features, software capabilities, company reputation,brand recognition, technical support, relationships with partners, quality, reliability, product development capabilities, price and availability.A discussion of factors potentially affecting our ability to compete in the markets in which we operate is set forth in “Risk Factors”included in Part I, Item 1A of this Report, which is incorporated herein by reference.

Intellectual Property Rights

We believe that a considerable portion of our value resides in our intellectualproperty. We have developed proprietary methodologies, tools, processes and software in connection with delivering our products and services.We protect our intellectual property through a combination of patents, copyrights, trademarks, trade secrets, licenses, non-disclosureagreements and contractual provisions. We enter into a non-disclosure and confidentiality agreement with each of our employees, consultantsand third parties that have access to our proprietary technology. Pursuant to assignment of inventions agreements, all of our employeesand consultants assign to us all intellectual property rights for the relevant inventions created in connection with their employmentor contract with us. We currently hold U.S. and international patents covering various aspects of our products, with additional patentapplications pending.

U.S. and Foreign Government Regulation

Many of our products are subject to certain mandatory regulatory approvalsin the regions in which our products are deployed. In particular, wireless products must be approved by the relevant government authorityprior to these products being offered for sale. In addition, certain jurisdictions have regulations requiring products to use environmentallyfriendly components. Some of our products employ security technology, which is subject to various U.S. export restrictions.

Employees

As of August 19, 2025, we had 352 total employees including 351 fulltime employees, none of whom is represented by a labor union. We have not experienced any labor problems resulting in a work stoppageand believe we have good relationships with our employees.

Customer and Geographic Concentrations

We conduct our business globally and manage our sales teams by threegeographic regions: the Americas; EMEA; and APJ. A discussion of sales to our significant customers and sales within geographic regionsis set forth in Notes 2 and 11 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporatedherein by reference. A discussion of factors potentially affecting our customer and geographic concentrations is set forth in “RiskFactors” included in Part I, Item 1A of this Report, which is incorporated herein by reference.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K, Proxy Statements on Schedule 14A and other reports and information that we file or furnish pursuant to the SecuritiesExchange Act of 1934, as amended (the “Exchange Act”) are available free of charge on our website at www.lantronix.com assoon as reasonably practicable after filing or furnishing such reports with the Securities and Exchange Commission (the “SEC”).The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regardingissuers that file electronically. The contents of our website are not incorporated by reference into this Report. References to our websiteaddress in this Report are inactive textual references only.

Information About Our Executive Officers

Executive officers serve at the discretion of our board of directors (the“Board”). There are no family relationships between any of our directors or executive officers. The following table presentsthe names, ages, and positions held by our executive officers as of the date of this Report:

SALEEL AWSARE has served as our President and Chief Executive Officer,and as a member of our Board, since November 2023. Mr. Awsare served as Senior Vice President and General Manager of the Enterprise andMobile Division of Synaptics Incorporated, a developer of human interface hardware and software, from September to November 2023. Priorto that, Mr. Awsare served as Senior Vice President and General Manager of the PC and Peripherals Unit of Synaptics from August 2020 toSeptember 2023; Senior Vice President and General Manager of Synaptics’s IoT Division from April 2019 to July 2020; and Senior VicePresident of Corporate Marketing & Investor Relations at Synaptics from October 2018 until April 2019. Prior to joining Synapticsas Corporate Vice President and General Manager of Audio & Imaging Products in August 2017, Mr. Awsare was President of Conexant Systems,LLC, a software developer and fabless semiconductor company, from March 2016 until Conexant’s acquisition by Synaptics in August2017, and Conexant’s Senior Vice President & General Manager of Audio & Imaging from April 2012 to March 2016. Prior tojoining Conexant, Mr. Awsare served as President of U.S. Operations and General Manager of Audio & Voice Solutions of Nuvoton TechnologyCorporation, a Taiwan-based semiconductor company, from December 2008 to March 2012.

BRENT STRINGHAM has served as our Chief Financial Officer since January2025. Mr. Stringham joined Lantronix in 2012 and previously served as the Company’s interim Chief Financial Officer and Chief AccountingOfficer since September 2024. Prior to that, he served as our Senior Director of Finance and Corporate Controller beginning in February2012. Previously, Mr. Stringham served as Controller at Iteris, Inc., a provider of software, hardware and services for smart mobilityinfrastructure management, from January 2009 to February 2012, and Netlist, Inc., a developer and manufacturer of computer memory subsystems,from March 2007 to January 2009. Mr. Stringham was an Audit Manager at Ernst & Young LLP from 2000 to 2007.

MATHI GURUSAMY has served as our Chief Product and Strategy Officer sinceApril 2025. Previously Mr. Gurusamy served as our Chief Strategy Officer since May 2024. Prior to joining Lantronix, Mr. Gurusamy servedas Chief Operating Officer at Ikotek USA, Inc., a global provider of original design manufacturing for IoT, from November 2023 to May2024. Mr. Gurusamy served as President at Telit Cinterion, an end-to-end IoT solutions enabler, from October 2022 to October 2023, andpreviously served at Telit as Chief Operating Officer from January 2010 to March 2016 and as Global VP – Operations & SupplyChain from June 2008 to December 2009. He also served as President and Chief Operating Officer of Mobilogix, a startup company specializingin custom IoT solutions, from April 2016 to June 2018 and as Chief Executive Officer and President from June 2018 until Mobilogix’sacquisition by Telit in September 2022.

KURT HOFF has served as our Chief Revenue Officer since April 2025. PreviouslyMr. Hoff served as our Vice President of Worldwide Sales since March 2024. Prior to joining Lantronix, Mr. Hoff served as Vice Presidentof Global Sales at MYTHIC AI, a venture-backed AI processor company, from May 2022 to December 2022. Previously, Mr. Hoff served as SeniorVice President of Worldwide Sales at Synaptics Inc., a developer of human interface hardware and software, from July 2017 to July 2020,and at Conexant Systems, Inc., a software developer and fabless semiconductor company, from November 2015 until Conexant’s acquisitionby Synaptics in July 2017. He served as Senior Vice President of Worldwide Sales at Silicon Laboratories Inc. from July 2007 until November2015.

We operate in a rapidly changing environment that involves numerousrisks and uncertainties. Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks describedin this section, as well as other information contained in this Report and in our other filings with the SEC. This section should be readin conjunction with the consolidated financial statements and accompanying notes thereto included in Part II, Item 8 of this Report, and“Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7of this Report. If any of these risks or uncertainties actually occurs, our business, financial condition, results of operations or prospectscould be materially harmed. In that event, the market price for our common stock could decline and you could lose all or part of yourinvestment. In addition, risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affectour business.

Risks Related to Our Operations and Industry

We depend upon a relatively small number of distributor and end-usercustomers for a large portion of our revenue, and a decline in sales to these major customers would materially adversely affect our business,financial condition, and results of operations.

Historically, we have relied upon a small number of distributors and end-usercustomers for a significant portion of our net revenue. Our customer concentration could fluctuate, depending on future customer requirements,which will depend on market conditions in the industry segments in which our customers participate. The loss of one or more significantcustomers or a decline in sales to our significant customers could result in a material loss of sales and possible increase in excessinventories which would adversely affect our business, financial condition, and results of operations.

We have experienced and may in the future experience constraintsin the supply of certain materials and components that could affect our operating results.

Some of our integrated circuits are only available from a single sourceand in some cases, are no longer being manufactured. From time to time, integrated circuits, and potentially other components used inour products, will be phased out of production by the manufacturer. When this happens, we attempt to purchase sufficient inventory tomeet our needs until a substitute component can be incorporated into our products. Nonetheless, we may be unable to purchase sufficientcomponents to meet our demands, or we may incorrectly forecast our demands, and purchase too many or too few components. In addition,our products use components that have been in the past and may in the future be subject to market shortages and substantial price fluctuations,whether due to a pandemic or epidemic, the war between Ukraine and Russia, conflict in the Middle East, hostilities in the Red Sea, tensionsbetween China and Taiwan, increased tariffs and changes in U.S. trade policies or otherwise. From time to time, we have been unable tomeet customer orders because we were unable to purchase necessary components for our products. We do not have long-term supply arrangementswith most of our vendors to obtain necessary components, including semiconductor chips, or technology for our products and instead purchasecomponents on a purchase order basis. If we are unable to purchase components from these suppliers, our product shipments could be preventedor delayed, which could result in a loss of sales. If we are unable to meet existing orders or to enter into new orders because of a shortagein components, we will likely lose net revenue, risk losing customers and risk harm to our reputation in the marketplace, which couldadversely affect our business, financial condition or results of operations.

Future operating results depend upon our ability to timely obtaincomponents in sufficient quantities and on acceptable terms.

We and our contract manufacturers are responsible for procuring raw materialsfor our products. Our products incorporate some components and technologies that are only available from single or limited sources ofsupply. Depending on a limited number of suppliers exposes us to risks, including limited control over pricing, availability, qualityand delivery schedules. Moreover, due to our limited sales, we may not be able to convince suppliers to continue to make components availableto us unless there is demand for these components from their other customers. If any one or more of our suppliers cease to provide uswith sufficient quantities of components in a timely manner or on terms acceptable to us, we would have to seek alternative sources ofsupply and we may have difficulty identifying additional or replacement suppliers for some of our components.

We outsource substantially all of our manufacturing to contract manufacturersin Asia. If our contract manufacturers are unable or unwilling to manufacture our products at the quality and quantity we request, ourbusiness could be harmed.

We use contract manufacturers based in Asia to manufacture substantiallyall of our products. Generally, we do not have guaranteed supply agreements with our contract manufacturers or suppliers. If any of thesesubcontractors or suppliers were to cease doing business with us, we might not be able to obtain alternative sources in a timely or cost-effectivemanner. Our reliance on third-party manufacturers, especially in countries outside of the U.S., exposes us to a number of significantrisks, including:

Any problems that we may encounter with the delivery, quality or cost ofour products from our contract manufacturers or suppliers could cause us to lose net revenue, damage our customer relationships and harmour reputation in the marketplace, each of which could materially and adversely affect our business, financial condition or results ofoperations. 

From time to time, we may transition the manufacturing of certain productsfrom one contract manufacturer to another. For example, in connection to the recently increased tariffs proposed to be imposed by theU.S. against China, we continue to transition our remaining manufacturing out of China. We have and may in the future incur substantialexpenses, risk material delays or encounter other unexpected issues in connection with this transition or future transitions.

The effect of a pandemic or major public health concern, such asthe COVID-19 pandemic, could result in material adverse effects on our business, financial position, results of operations and cash flows.

Pandemics or similar outbreaks have had, and may in the future have, anadverse impact on the economy, our business and the businesses of our suppliers, and our results of operations and financial condition.For example, the COVID-19 pandemic resulted in industry events, trade shows and business travel being suspended, cancelled and/or significantlycurtailed. If these activities are suspended, cancelled and/or significantly curtailed in the future, whether due to a possible pandemicand similar outbreak, our sales may be negatively impacted in the future.

In addition, the impact of possible pandemics subjects us to variousrisks and uncertainties that could materially adversely affect our business, results of operations and financial condition, includingthe following:

The duration and extent of a future pandemics or other similar outbreak’seffect on our operations and financial condition will depend on future developments, which are highly uncertain and cannot be predictedat this time. The adverse impact of a possible future pandemic or similar outbreak on our business, results of operations and financialcondition may be material.

Certain of our products are sold into mature markets, which couldlimit our ability to continue to generate revenue from these products. Our ability to sustain and grow our business depends on our abilityto develop, market, scale, and sell new products.

Certain of our products are sold into mature markets that are characterizedby a trend of declining demand. As the overall market for these products decreases due to the adoption of new technologies, our revenuesfrom these products have declined, and we expect they will continue to decline in the future. As a result, our future prospects will dependon our ability to develop and successfully market new products that address new and growing markets. Our failure to develop new productsor failure to achieve widespread customer acceptance of any new products could cause us to lose market share and cause our revenues todecline. There can be no assurance that we will not experience difficulties that could delay or prevent the successful development, introduction,marketing and sale of new products or product enhancements. Factors that could cause delays include regulatory and/or industry approvals,product design cycle and failure to identify products or features that customers demand. In addition, the introduction and sale of newproducts often involves a significant technical evaluation, and we often face delays because of our customers’ internal proceduresfor evaluating, approving and deploying new technologies. For these and other reasons, the sales cycle associated with new products istypically lengthy, often lasting six to 24 months and sometimes longer. Therefore, there can be no assurance that our introduction orannouncement of new product offerings will achieve any significant or sustainable degree of market acceptance or result in increased revenuein the near term.

Our software offerings are subject to risks that differ from thosefacing our hardware products.

We continue to dedicate engineering resources to our management softwareplatform, applications, and SaaS offerings. These product and service offerings are subject to significant additional risks that are notnecessarily related to our hardware products. Our ability to succeed with these offerings will depend in large part on our ability toprovide customers with software products and services that offer features and functionality that address their specific needs. We mayface challenges and delays in the development of this product line as the marketplace for products and services evolves to meet the needsand desires of customers. We cannot provide assurances that we will be successful in operating and growing this product line.

In light of these risks and uncertainties, we may not be able to establishor maintain market share for our software and SaaS offerings. As we develop new product lines, we must adapt to market conditions thatare unfamiliar to us, such as competitors and distribution channels that are different from those we have known in the past. We have andwill encounter competition from other solutions providers, many of whom may have more significant resources than us with which to compete.There can be no assurance that we will recover our investments in this segment, or that we will receive meaningful revenue from or realizea profit from this new segment.

We may experience significant fluctuation in our revenue becausethe timing of large orders placed by some of our customers is often project-based.

Our operating results fluctuate because we often receive large orders fromcustomers that coincide with the timing of the customer’s project. Sales of our products and services may be delayed if customersdelay approval or commencement of projects due to budgetary constraints, internal acceptance review procedures, timing of budget cyclesor timing of competitive evaluation processes. In addition, sometimes our customers make significant one-time hardware purchases for projectswhich are not repeated. We sell primarily on a purchase order basis rather than pursuant to long-term contracts, and we expect fluctuationsin our revenues as a result of one-time project-based purchases to continue in the future. In addition, our sales may be subject to significantfluctuations based on the acceleration, delay or cancellation of customer projects, or our failure to complete one or a series of significantpotential sales. Because a significant portion of our operating expenses are fixed, even a single order can have a disproportionate effecton our operating results. As a result of the factors discussed above, and due to the complexities of the industry in which we operate,it is difficult for us to forecast demand for our current or future products with any degree of certainty, which means it is difficultfor us to forecast our sales. If our quarterly or annual operating results fall below the expectations of investors or securities analysts,the price of our common stock could decline substantially.

The lengthy sales cycle for our products and services, along withdelays in customer completion of projects, make the timing of our revenues difficult to predict.

We have a lengthy sales cycle for many of our products that generally extendsbetween three and 24 months and sometimes longer due to a lengthy customer evaluation and approval process. The length of this processcan be affected by factors over which we have little or no control, including the customer’s budgetary constraints, timing of thecustomer’s budget cycles, and concerns by the customer about the introduction of new products by us or by our competitors. As aresult, sales cycles for customer orders vary substantially among different customers. The lengthy sales cycle is one of the factors thathas caused, and may continue to cause, our revenues and operating results to vary significantly from quarter to quarter. In addition,we may incur substantial expenses and devote significant management effort to develop potential relationships that do not result in agreementsor revenues, which may prevent us from pursuing other opportunities. Accordingly, excessive delays in sales could be material and adverselyaffect our business, financial condition or results of operations.

The nature of our products, customer base and sales channels resultsin lack of visibility into future demand for our products, which makes it difficult for us to forecast our manufacturing and inventoryrequirements.

We use forecasts based on anticipated product orders to manage our manufacturingand inventory levels and other aspects of our business. However, several factors contribute to a lack of visibility with respect to futureorders, including:

This lack of visibility impacts our ability to forecast our inventory requirements.If we overestimate our customers’ future requirements for products, we may have excess inventory, which would increase our costsand potentially require us to write-off inventory that becomes obsolete. Additionally, if we underestimate our customers’ futurerequirements, we may have inadequate inventory, which could interrupt and delay delivery of our products to our customers, harm our reputation,and cause our revenues to decline. If any of these events occur, they could prevent us from achieving or sustaining profitability andthe value of our common stock may decline.

Delays in qualifying revisions of existing products for certain ofour customers could result in the delay or loss of sales to those customers, which could negatively impact our business and financialresults.

Our industry is characterized by intense competition, rapidly evolvingtechnology and continually changing customer preferences and requirements. As a result, we frequently develop and introduce new versionsof our existing products, which we refer to as revisions.

Prior to purchasing our products, some of our customers require that productsundergo a qualification process, which may involve testing of the products in the customer’s system. A subsequent revision to aproduct’s hardware or firmware, changes in the manufacturing process or our selection of a new supplier may require a new qualificationprocess, which may result in delays in sales to customers, loss of sales, or us holding excess or obsolete inventory.

After products are qualified, it can take additional time before the customercommences volume production of components or devices that incorporate our products. If we are unsuccessful or delayed in qualifying anynew or revised products with a customer, that failure or delay would preclude or delay sales of these products to the customer, and couldnegatively impact our financial results. In addition, new revisions to our products could cause our customers to alter the timing of theirpurchases, by either accelerating or delaying purchases, which could result in fluctuations of our net revenue from quarter to quarter.

We depend on distributors for a majority of our sales and to completeorder fulfillment.

We depend on the resale of products through distributor accounts for asubstantial majority of our worldwide net revenue. In addition, sales through our top five distributors accounted for approximately 37%of our net revenue in fiscal 2025. A significant reduction of effort by one or more distributors to sell our products or a material changein our relationship with one or more distributors may reduce our access to certain end customers and adversely affect our ability to sellour products. Furthermore, if a key distributor materially defaults on a contract or otherwise fails to perform, our business and financialresults would suffer.

In addition, the financial health of our distributors and our continuingrelationships with them are important to our success. Our business could be harmed if the financial health of these distributors impairstheir performance and we are unable to secure alternate distributors.

Our ability to sustain and grow our business depends in part on thesuccess of our distributors and resellers.

A substantial part of our revenues is generated through sales by distributorsand resellers. To the extent they are unsuccessful in selling our products, or if we are unable to obtain and retain a sufficient numberof high-quality distributors and resellers, our operating results could be materially and adversely affected. In addition, our distributorsand resellers may devote more resources to marketing, selling and supporting products and services that are competitive with ours, thanto our products. They also may have incentives to promote our competitors’ products over our products, particularly for our competitorswith larger volumes of orders, more diverse product offerings and a longer relationship with our distributors and resellers. In thesecases, one or more of our important distributors or resellers may stop selling our products completely or may significantly decrease thevolume of products they sell on our behalf. This sales structure also could subject us to lawsuits, potential liability and reputationalharm if, for example, any of our distributors or resellers misrepresents the functionality of our products or services to customers orviolates laws or our corporate policies. If we fail to effectively manage our existing or future distributors and resellers effectively,our business and operating results could be materially and adversely affected.

Changes to the average selling prices of our products could affectour net revenue and gross margins and adversely affect results of operations.

In the past, we have experienced reductions in the average selling pricesand gross margins of our products. We expect competition to continue to increase, and we anticipate this could result in additional downwardpressure on our pricing. Our average selling prices for our products might also decline as a result of other reasons, including promotionalprograms introduced by us or our competitors and customers who negotiate price concessions. To the extent we are able to increase prices,we may experience a decline in sales volumes if customers decide to purchase competitive products. If any of these were to occur, ourgross margins could decline and we might not be able to reduce the cost to manufacture our products enough or at all to keep up with thedecline in prices.

If we are unable to sell our inventory in a timely manner, it couldbecome obsolete, which could require us to write-down or write off obsolete inventory, which could harm our operating results.

At any time, competitive products may be introduced with more attractivefeatures or at lower prices than ours. If this occurs, and for other reasons, we may not be able to accurately forecast demand for ourproducts and our inventory levels may increase. There is a risk that we may be unable to sell our inventory in a timely manner to avoidit becoming obsolete. If we are required to substantially discount our inventory or are unable to sell our inventory in a timely manner,we would be required to increase our inventory reserves or write off obsolete inventory and our operating results could be substantiallyharmed.

Our failure to compete successfully in our highly competitive marketcould result in reduced prices and loss of market share.

The market in which we operate is intensely competitive, subject to rapidtechnological advances and highly sensitive to evolving industry standards. The market can also be affected significantly by new productand technology introductions and marketing and pricing activities of industry participants. Our products compete directly with productsproduced by a number of our competitors. Many of our competitors and potential competitors have greater financial and human resourcesfor marketing and product development, more experience conducting research and development activities, greater experience obtaining regulatoryapproval for new products, larger distribution and customer networks, more established relationships with contract manufacturers and suppliers,and more established reputations and name recognition. For these and other reasons, we may not be able to compete successfully againstour current or potential future competitors. In addition, the amount of competition we face in the marketplace may change and grow asthe market for IoT and machine-to-machine networking solutions grows and new companies enter the marketplace. Present and future competitorsmay be able to identify new markets, adapt new technologies, develop and commercialize products more quickly and gain market acceptanceof products with greater success. As a result of these competitive factors, we may fail to meet our business objectives and our business,financial condition and operating results could be materially and adversely affected.

Acquisitions, strategic partnerships, joint ventures or investmentsmay impair our capital and equity resources, divert our management’s attention or otherwise negatively impact our operating results.

We have in the past and may in the future pursue acquisitions, strategicpartnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share in our currentmarkets and expand into adjacent markets, broaden our technology and intellectual property and strengthen our relationships with distributors,OEMs and original design manufacturers. For instance, we acquired Maestro, Intrinsyc, the Transition Networks and Net2Edge businessesof Communication Systems, Inc., Uplogix, Inc. (“Uplogix”), and Netcomm Wireless Pty Ltd (“Netcomm”) in calendaryears 2019, 2020, 2021, 2022 and 2024, respectively. Our previous acquisitions have required, and any future acquisition, partnership,joint venture or investment may also require, that we pay significant cash, issue equity and/or incur substantial debt. Acquisitions,partnerships or joint ventures may also result in the loss of key personnel and the dilution of existing stockholders to the extent weare required to issue equity securities. In addition, acquisitions, partnerships or joint ventures require significant managerial attention,which may be diverted from our other operations. These capital, equity and managerial commitments may impair the operation of our business.Furthermore, acquired businesses may not be effectively integrated, may be unable to maintain key pre-acquisition business relationships,may not result in expected synergies, an increase in revenues or earnings or the delivery of new products, may contribute to increasedfixed costs, and may expose us to unanticipated liabilities. If any of these occur, we may fail to meet our business objectives and ourbusiness, financial condition and operating results could be materially and adversely affected.

We may experience difficulties associated with utilizing third-partylogistics providers.

A portion of our physical inventory management process, as well as theshipping and receiving of our inventory, is performed by a third-party logistics provider in Hong Kong. There is a possibility that third-partylogistics providers will not perform as expected and we could experience delays in our ability to ship, receive, and process the relateddata in a timely manner. This could adversely affect our financial position, results of operations, cash flows and the market price ofour common stock.

Relying on third-party logistics providers could increase the risk of thefollowing: failing to receive accurate and timely inventory data, theft or poor physical security of our inventory, inventory damage,ineffective internal controls over inventory processes or other similar business risks out of our immediate control.

Risks Related to Technology, Cybersecurity and Intellectual Property

Cybersecurity breaches and other disruptions could compromise ourinformation and expose us to liability, which could cause our business and reputation to suffer.

Increased global information technology security threats and more sophisticatedand targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrityof our data. There have been several highly publicized cases in which organizations of various types and sizes have reported the unauthorizeddisclosure of customer or other confidential information, as well as cyberattacks involving the dissemination, theft and destruction ofcorporate information, intellectual property, cash or other valuable assets. There have also been several highly publicized cases in whichhackers have requested “ransom” payments in exchange for not disclosing customer or other confidential information or fornot disabling the target company’s computer or other systems. The secure processing, maintenance and transmission of the informationthat we collect and store on our systems is critical to our operations and implementing security measures designed to prevent, detect,mitigate or correct these or other cybersecurity threats involve significant costs.

Although we have taken steps to protect the security of our informationsystems, we have, from time to time, experienced, and we expect to continue experiencing, threats to our data and systems, including malware,phishing and computer virus attacks, and it is possible that in the future our safety and security measures will not prevent the systems’improper functioning or damage, or the improper access or disclosure of personally identifiable information such as in the event of cyber-attacks.In addition, due to the fast pace and unpredictability of cybersecurity threats, including from emerging technologies, such as advancedforms of machine learning, AI and quantum computing, long-term implementation plans designed to address cybersecurity risks become obsoletequickly and, in some cases, it may be difficult to anticipate or immediately detect such incidents and the damage they cause. In addition,such threats could be introduced as a result of our customers and business partners incorporating the output of an AI tool that includesa threat, such as introducing malicious code by incorporating AI generated source code. Any unauthorized access, disclosure or other lossof information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidencein our products and services, which could adversely affect our business.

If unauthorized access is obtained to the personal and/or proprietarydata we collect and store, our products become subject to cybersecurity breaches, or if public perception is that they are vulnerableto cyberattacks, our reputation and business could suffer.

In the ordinary course of our business, we collect and store sensitivedata, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners,and personally identifiable information of our employees, on our networks and third-party cloud software providers. If there is unauthorizedaccess to such information, we may incur significant costs or liabilities and lose customer confidence in us, which would harm our reputationand results of operations. In addition, we could be subject to liability or our reputation could be harmed if technologies integratedinto our products, or our products, fail to prevent cyberattacks, or if our partners or customers fail to safeguard the systems with securitypolicies that conform to industry best practices. In addition, any cyberattack or security breach that affects a competitor’s productscould lead to the negative perception that our solutions are or could be subject to similar attacks or breaches.

Some of our software offerings may be subject to various cybersecurityrisks, which are particularly acute in the cloud-based technologies operated by us and other third parties that form a part of our solutions.

In connection with certain implementations of our management software platform,application, and SaaS offerings, we expect to store, convey and process data produced by devices. This data may include confidential orproprietary information, intellectual property or personally identifiable information of our customers or other third parties with whomthey do business. It is important for us to maintain solutions and related infrastructure that are perceived by our customers and otherparties with whom we do business to provide a reasonable level of reliability and security. Despite available security measures and otherprecautions, the infrastructure and transmission methods used by our products and services may be vulnerable to interception, attack orother disruptive problems. Additionally, some of our products include capabilities to support AI which may further increase our productssusceptibility or perceived susceptibility of security risks.

If a cyberattack or other security incident were to allow unauthorizedaccess to or modification of our customers’ data or our own data, whether due to a failure with our systems or related systems operatedby third parties, we could suffer damage to our brand and reputation. The costs we would incur to address and fix these incidents couldsignificantly increase our expenses. These types of security incidents could also lead to lawsuits, regulatory investigations and increasedlegal liability, including in some cases contractual costs related to customer notification and fraud monitoring.

Failure to comply with data privacy laws and regulations could havea materially adverse effect on our reputation, results of operations or financial condition, or have other adverse consequences.

Certain of our products and services as well as the operations of our businessmay involve access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuseor improper disclosure of which could result in legal liability. The collection, hosting, transfer, disclosure, use, storage and securityof personal information is subject to federal, state and foreign data privacy laws. These laws, (“Privacy and Data Protection Requirements”)which are not uniform, do one or more of the following: regulate the collection, transfer (including in some cases, the transfer outsidethe country of collection), processing, storage, use and disclosure of personal information, and require notice to individuals of privacypractices and in some cases consent to collection of personal information; give individuals certain access, correction and deletion rightswith respect to their personal information; and prevent the use or disclosure of personal information, or require providing opt-outs forthe use and disclosure of personal information, for secondary purposes such as marketing. Under certain circumstances, some of these lawsrequire us to provide notification to affected individuals, data protection authorities and/or other regulators in the event of a databreach. In many cases, these laws apply not only to third-party transactions, but also to transfers of information among us and our subsidiaries.

Laws and regulations in this area are evolving and generally becoming morestringent. For example, the European General Data Protection Regulation (the “GDPR”) requires us to meet stringent requirementsregarding (i) our access, use, disclosure, transfer, protection, or otherwise processing of personal information; and (ii) the abilityof data subjects to exercise their related various rights such as to access, correct or delete or limit the use of their personal data.Under the GDPR and the U.K.’s version of the GDPR, information transfers from the European Union and the U.K. to the U.S. are generallyprohibited unless certain measures are followed.

The 2018 California Consumer Privacy Act and California Privacy RightsAct of 2020 provide individuals similar rights with respect to the processing of their personal data. Multiple states in the U.S. haveenacted such privacy laws, and data privacy laws are scheduled to become effective in several others in 2026.

There is also the possibility of federal privacy legislation and increasedenforcement by the Federal Trade Commission under its power to regulate unfair and deceptive trade practices. Markets in the Asia Pacificregion have also recently adopted GDPR-like legislation, including China’s new Personal Information Protection Law. Failure to meetPrivacy and Data Protection Law requirements could result in significant civil penalties (including fines up to 4% of annual worldwiderevenue under the GDPR) as well as criminal penalties. Privacy and data protection law requirements also confer a private right of actionin some countries, including under the GDPR.

As these laws continue to evolve, we may be required to make changes toour systems, services, solutions and/or products to enable us and/or our clients to meet the new legal requirements, including by takingon more onerous obligations, limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solutionofferings in certain locations and our ability to market to customers. Changes in these laws, or the interpretation and application thereof,may also increase our potential exposure through significantly higher potential penalties for non-compliance. The costs of compliancewith, and other burdens imposed by, such laws and regulations and client demand in this area may limit the use of, or demand for, ourservices, solutions and/or products, make it more difficult and costly to meet client expectations, or lead to significant fines, penaltiesor liabilities for noncompliance, any of which could adversely affect our business, financial condition, and results of operations.

Issues related to the responsible use of AI may result in reputational,competitive and financial harm and liability.

We offer products that include capabilities to support AI deployment andwe expect this part of our business to grow. As with many new emerging technologies, AI presents risks and challenges and increasing ethicalconcerns relating to its responsible use that could affect the adoption of AI, and thus our business. Third-party misuse of AI applications,models, or solutions, or ineffective or inadequate AI development or deployment practices by us or our customers or business partners,could cause harm to individuals, our business or impair the public’s acceptance of AI. Moreover, we may be subject to competitiveharm, regulatory action and legal liability as a result of new proposed legislation regulating AI, new applications of existing data protection,privacy and intellectual property and other laws. Such regulations could cause us to incur greater compliance costs and could also impactour ability to sell or the ability of our customers and users worldwide to acquire, deploy and use systems that include our AI-relatedproducts and services, which could thus require us to change our business practices and could adversely affect our business, financialcondition and results of operations. If the AI-related products that we offer have unintended consequences or unintended usage or customizationby our customers or are otherwise controversial due to their perceived or actual impact on human rights, privacy, employment or othersocial, economic or political issues the public’s acceptance of AI may be impaired and may result in reputational and financialharm and liability to our business.

If software that we incorporate into our products were to becomeunavailable or no longer available on commercially reasonable terms, it could adversely affect sales of our products, which could disruptour business and harm our financial results.

Certain of our products contain software developed and maintained by third-partysoftware vendors or which are available through the “open source” software community. We also expect that we may incorporatesoftware from third-party vendors and open source software in our future products. Our business would be disrupted if this software, orfunctional equivalents of this software, were either no longer available to us or no longer offered to us on commercially reasonable terms.In either case, we would be required to either redesign our products to function with alternate third-party software or open source software,or develop these components ourselves, which would result in increased costs and could result in delays in our product shipments. Furthermore,we might be forced to limit the features available in our current or future product offerings.

Our products may contain undetected software or hardware errors ordefects that could lead to an increase in our costs, reduce our net revenue or damage our reputation.

We currently offer warranties ranging from one to five years on each ofour products. Our products could contain undetected software or hardware errors or defects. If there is a product failure, we might haveto replace all affected products, or we might have to refund the purchase price for the units. Regardless of the amount of testing weundertake, some errors might be discovered only after a product has been installed and used by customers. Any errors discovered aftercommercial release could result in financial losses and claims against us. Significant product warranty claims against us could harm ourbusiness, reputation and financial results and cause the market price of our common stock to decline.

We may not be able to adequately protect or enforce our intellectualproperty rights, which could harm our competitive position or require us to incur significant expenses to enforce our rights.

We rely primarily on a combination of laws, such as patent, copyright,trademark and trade secret laws, and contractual restrictions, such as confidentiality agreements and licenses, to establish and protectour proprietary rights. Despite any precautions that we have taken:

Also, the laws of some of the countries in which we market and manufactureour products offer little or no effective protection of our proprietary technology. Reverse engineering, unauthorized copying or othermisappropriation of our proprietary technology could enable third parties to benefit from our technology without paying us for it. Consequently,we may be unable to prevent our proprietary technology from being exploited by others in the U.S. or abroad, which could require costlyefforts to protect our technology. Policing the unauthorized use of our technology, trademarks and other proprietary rights is expensive,difficult and, in some cases, impracticable. Litigation may be necessary in the future to enforce or defend our intellectual propertyrights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation couldresult in substantial costs and diversion of management resources, either of which could harm our business. Accordingly, despite our efforts,we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property, which may harm our business,financial condition and results of operations.

The impact of natural disasters and other business interruptionscould negatively impact our supply chain and customers resulting in an adverse impact to our revenues and profitability.

Certain of our components and other materials used in producing our productsare from regions susceptible to natural disasters. A natural disaster could damage equipment and inventory at our suppliers’ facilities,adversely affecting our supply chain. If we are unable to obtain these materials, we could experience a disruption to our supply chainthat would hinder our ability to produce our products in a timely manner, or cause us to seek other sources of supply, which may be morecostly or which we may not be able to procure on a timely basis. In addition, our customers may not follow their normal purchasing patternsor temporarily cease purchasing from us due to impacts to their businesses in the region, creating unexpected fluctuations or decreasesin our revenues and profitability. Natural disasters in other parts of the world on which our operations are reliant also could have materialadverse impacts on our business.

In addition, our operations and those of our suppliers are vulnerable tointerruption by fire, earthquake, power loss, telecommunications failure, cybersecurity breaches, IT systems failure, terrorist attacksand other events beyond our control, including the effects of climate change. A substantial portion of our facilities, including our corporateheadquarters and other critical business operations, are located near major earthquake faults and, therefore, may be more susceptibleto damage if an earthquake occurs. We do not carry earthquake insurance for direct earthquake-related losses. If a business interruptionoccurs, whether due to a natural disaster or otherwise, our business could be materially and adversely affected.

Risks Related to Liquidity and Capital Resources

We maintain cash deposits in excess of federally insured limits.Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.

We regularly maintain domestic cash deposits in the Federal DepositInsurance Corporation (“FDIC”) insured banks, which exceed the FDIC insurance limits. Bank failures, events involving limitedliquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about suchevents, may lead to widespread demands for customer withdrawals and liquidity constraints that may result in market-wide liquidity problems.For example, in March 2023, Silicon Valley Bank (“SVB”), Signature Bank Corp. and Silvergate Capital Corp. each failed andwere taken into receivership by the FDIC. At that time, we maintained deposits amounting to approximately 85% of our total cash at SVB.While we were able to regain full access to our deposits with SVB and have taken steps to diversify our banking relationships since then,our loan agreement with SVB currently requires us to hold 75% of our US cash balances at SVB. Consequently, any future failure of thatbank could simultaneously prevent access to both a substantial portion of our cash holdings and to our credit line for funds needed tomeet our working capital requirements and other financial commitments. Our cash balances are concentrated at a small number of financialinstitutions. In addition, macroeconomic conditions have caused turmoil in the banking sector in the past and may do so again in the future.A failure to timely access our cash on deposit with SVB or other banks could require the scaling back of our operations and production,negatively affect our credit, and prevent us from fulfilling contractual obligations. Moreover, there can be no assurance that our depositsin excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or any applicable foreign government in thefuture or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, governmentinstitutions or by acquisition in the event of a future failure or liquidity crisis, and such uninsured deposits may ultimately be lost.In addition, if any of the parties with whom we conduct business are unable to access funds due to the status of their financial institution,such parties’ ability to pay their obligations to us or to enter into new commercial arrangements requiring additional paymentsto us could be adversely affected.

We have a history of losses.

We have historically incurred net losses. There can be no assurance thatwe will generate net profits in future periods. Further, there can be no assurance that we will be cash flow positive in future periods. Inthe event that we fail to achieve profitability in future periods, the value of our common stock may decline. In addition, if weare unable to achieve or maintain positive cash flows, we would be required to seek additional funding, which may not be available onfavorable terms, if at all.

We may need additional capital and it may not be available on acceptableterms, or at all.

To remain competitive, we must continue to make significant investmentsto operate our business and develop our products. Our future capital requirements will depend on many factors, including the timing andamount of our net revenue, research and development expenditures, expenses associated with any strategic partnerships or acquisitionsand infrastructure investments, and expenses related to litigation, each of which could negatively affect our ability to generate additionalcash from operations. If cash generated from operations is insufficient to satisfy our working capital requirements, we may need to raiseadditional capital. Looking ahead at long-term needs, we may need to raise additional funds for a number of purposes, including, but notlimited to:

We may seek additional capital from public or private offerings of ourcapital stock, borrowings under our existing or future credit lines or other sources. If we issue equity or debt securities to raise additionalfunds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privilegessenior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures,or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies,or grant licenses on terms that are not favorable to us. There can be no assurance that we will be able to raise any needed capital onterms acceptable to us, if at all. If we are unable to secure additional financing in sufficient amounts or on favorable terms, we maynot be able to develop or enhance our products, take advantage of future opportunities, respond to competition or continue to operateour business.

The terms of our amended and restated credit facility may restrictour financial and operational flexibility and, in certain cases, our ability to operate.

The terms of our amended and restated credit facility restrict, amongother things, our ability to incur liens or indebtedness, dispose of assets, make investments, make certain restricted payments, mergeor consolidate and enter into certain transactions with our affiliates. Further, we are currently and may in the future be required tomaintain specified financial ratios, including pursuant to a minimum interest coverage ratio, and to satisfy a minimum liquidity test.Our ability to meet those financial ratios and tests can be affected by events beyond our control, and there can be no assurance thatwe will meet those tests. Pursuant to our amended credit facility, we have pledged substantially all of our assets to our senior lender,SVB. In addition, our loan agreement with SVB currently requires us to hold 75% of our US cash balances at SVB, which may limit our abilityto manage our cash holdings effectively.

Risks Related to International Operations

Rising concern regarding international tariffs could materially andadversely affect our business and results of operations.

The current political landscape has introduced significant uncertaintywith respect to future trade regulations and existing international trade agreements, as shown by the new or increased tariffs imposedby the U.S. on many countries.

We cannot predict whether, and to what extent, there may be changes tointernational trade agreements or whether additional quotas, duties, tariffs, exchange controls or other restrictions on our productswill be changed or imposed. If we are unable to source our products from the countries where we wish to purchase them, either becauseof regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse effect on our business,financial condition and results of operations. Furthermore, imposition of tariffs or other developments may result in our implementinglocal or alternative sourcing initiatives that make it more difficult to sell our products in foreign countries, which would negativelyimpact our business and operating results.

We face risks associated with our international operations that couldimpair our ability to grow our revenues abroad as well as our overall financial condition.

We believe that our future growth is dependent in part upon our abilityto increase sales in international markets. These sales are subject to a variety of risks, including geopolitical events, fluctuationsin currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements, longeraccounts receivable payment cycles, potentially adverse tax consequences, and export license requirements. In addition, we are subjectto the risks inherent in conducting business internationally, including political and economic instability and unexpected changes in diplomaticand trade relationships. In many markets where we operate, business and cultural norms are different than those in the U.S., and practicesthat may violate laws and regulations applicable to us such as the Foreign Corrupt Practices Act (the “FCPA”) unfortunatelyare more commonplace. Although we have implemented policies and procedures with the intention of ensuring compliance with these laws andregulations, our employees, contractors and agents, as well as distributors and resellers involved in our international sales, may takeactions in violation of our policies. Many of our vendors and strategic business allies also have international operations and are subjectto the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adverselyaffected if one or more of our business partners are not able to successfully manage these risks. There can be no assurance that one ormore of these factors will not have a material adverse effect on our business strategy and financial condition.

Foreign currency exchange rates may adversely affect our results.

We are exposed to market risk primarily related to foreign currencies andinterest rates. In particular, we are exposed to changes in the value of the U.S. dollar versus the local currency in which our productsare sold and our services are purchased, including devaluation and revaluation of local currencies. Accordingly, fluctuations in foreigncurrency rates could adversely affect our revenues and operating results.

Risks Related to Regulatory Compliance and Legal Matters

Our inability to obtain appropriate industry certifications or approvalsfrom governmental regulatory bodies could impede our ability to grow revenues in our wireless products.

The sale of our wireless products in some geographical markets issometimes dependent on the ability to gain certifications and/or approvals by relevant governmental bodies. In addition, many of our productsare certified as meeting various industry quality and/or compatibility standards.  Failure to obtain these certifications or approvals,or delays in receiving any needed certifications or approvals, could impact our ability to compete effectively or at all in these marketsand could have an adverse impact on our revenues.

Our failure to comply effectively with regulatory laws pertainingto our foreign operations could have a material adverse effect on our revenues and profitability.

We are required to comply with U.S. government export regulations in thesale of our products to foreign customers, including requirements to properly classify and screen our products against a denied partieslist prior to shipment. We are also required to comply with the provisions of the FCPA and all other anti-corruption laws, such as theU.K. Anti-Bribery Act, of all other countries in which we do business, directly or indirectly, including compliance with the anti-briberyprohibitions and the accounting and recordkeeping requirements of these laws. Violations of the FCPA or other similar laws could triggersanctions, including ineligibility for U.S. government insurance and financing, as well as large fines. Failure to comply with the aforementionedregulations could also affect our decision to sell our products in international jurisdictions, which could have a material adverse effecton our revenues and profitability.

Our failure to comply effectively with the requirements of applicableenvironmental legislation and regulation could have a material adverse effect on our revenues and profitability.

Certain states and countries have passed regulations relating to chemicalsubstances in electronic products and requiring electronic products to use environmentally friendly components. For example, the EuropeanUnion has the Waste Electrical and Electronic Equipment Directive, the Restrictions of Hazardous Substances Directive, and the Regulationon Registration, Evaluation, Authorization and Restriction of Chemicals. In the future, China and other countries including the U.S. mayadopt further environmental compliance programs. In order to comply with these regulations, we may need to redesign our products to usedifferent components, which may be more expensive, if they are available at all. If we fail to comply with these regulations, we may notbe able to sell our products in jurisdictions where these regulations apply, which could have a material adverse effect on our revenuesand profitability.

Evolving expectations from investors, customers, lawmakers, regulators,and other stakeholders regarding environmental, social and governance practices and disclosures may adversely affect our reputation, adverselyimpact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community or enforcementauthorities or otherwise adversely impact our business and results of operations.

We may become subject to increased scrutiny and evolving expectations frominvestors, customers, lawmakers, regulators, and other stakeholders on environmental, social and governance (“ESG”) practicesand disclosures, including those related to environmental stewardship, climate change, diversity, equity and inclusion, forced labor,racial justice, and workplace conduct. Regulators have imposed in the past, and may impose in the future, ESG-related rules and guidance,which may conflict with one another and impose additional costs on us or expose us to new or additional risks. Moreover, certain organizationsthat provide information to investors have developed ratings for evaluating companies on their approach to different ESG-related matters,and unfavorable ratings of us or our industry may lead to negative investor sentiment and the diversion of investment to other companiesor industries. As a smaller company, we may not have resources to meet the evolving ESG-related expectations of the investment community.

Current or future litigation, including related to intellectual property,could adversely affect us.

We are subject to a wide range of claims and lawsuits in the course ofour business. Any lawsuit may involve complex questions of fact and law and may require the expenditure of significant funds and the diversionof other resources. The results of litigation are inherently uncertain, and adverse outcomes are possible. Adverse outcomes may have amaterial adverse effect on our business, financial condition or results of operations.

In particular, litigation regarding intellectual property rights occursfrequently in our industry. There is a risk that other third parties could claim that our products, or our customers’ products,infringe on their intellectual property rights or that we have misappropriated their intellectual property. In addition, software, businessprocesses and other property rights in our industry might be increasingly subject to third-party infringement claims as the number ofcompetitors grows and the functionality of products in different industry segments overlaps. Other parties might currently have, or mighteventually be issued, patents that pertain to the proprietary rights we use. Any of these third parties might make a claim of infringementagainst us. The results of litigation are inherently uncertain, and adverse outcomes are possible.

Responding to any infringement claim, regardless of its validity, could:

If any of these occur, our business, financial condition or results ofoperations could be adversely affected.

General Risk Factors

High interest rates may negatively impact our results of operationsand financing costs.

Interest rates are highly sensitive to many factors that are beyond ourcontrol, including general economic conditions and policies of various governmental and regulatory agencies. In an effort to combat inflation,a number of central banks around the world, including the U.S., raised interest rates and may raise them in the future. Higher interestrates may hinder the economic growth in markets where we do business, and has and may continue to have negative impacts on the globaleconomy. High interest rates may lead customers to decrease or delay spending on products and projects, including on products that wesell, which may have a material adverse effect on our business, financial condition and results of operations. In addition, higher interestrates impact the amount of interest we pay for our debt obligations and leases and continue and sustained increases in interest ratescould negatively impact our financing costs or cash flow.

If we fail to maintaineffective internal controls, we may conclude that our internal control over financial reporting is not effective, which could adverselyaffect our ability to report our results of operations and financial condition accurately and in a timely manner.

We have previously identified and remediated a material weakness in ourinternal control over financial reporting. If we fail to maintain effective internal controls, we may conclude that our internal controlover financial reporting is not effective, which could adversely affect our ability to report our results of operations and financialcondition accurately and in a timely manner. Our management is responsible for establishing and maintaining adequate internal controlover financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”). Ourmanagement is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changesand material weaknesses identified through such evaluation in those internal controls.

As disclosed in Part II, Item 9A of our Annual Report on Form 10-Kfor the year ended June 30, 2024, during fiscal 2023, management identified a material weakness related to the design and implementationof information technology general controls related to the Company’s information systems that are relevant to the preparation ofconsolidated financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statementswill not be prevented or detected on a timely basis. We implemented a number of measures that effectively remediated the previously disclosedmaterial weakness and concluded as of June 30, 2025 that our internal control over financial report was effective. However, we cannotprovide assurances that a new material weakness will not occur in the future. If we, or our independent registered public accounting firmidentify one or more additional material weaknesses, or, if we are otherwise unable to maintain effective internal control over financialreporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to preparefinancial statements within required time periods, could be adversely affected, which could subject us to litigation or investigationsrequiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statementsand adversely impact our stock price. Additionally, if any such material weakness is not remediated effectively or in a timely manner,we could be impacted by a material misstatement of our annual or interim financial statements that was not prevented or detected on atimely basis, which could have a negative effect on our results of operations and/or the trading price of our securities.

If we are unable to attract, retain or motivate key senior managementand technical personnel, it could materially harm our business.

Our financial performance depends substantially on the performance of ourexecutive officers and of key engineers, marketing and sales employees. We are particularly dependent upon our technical personnel, dueto the specialized technical nature of our business. If we were to lose the services of our executive officers or any of our key personneland were not able to find replacements in a timely manner, our business could be disrupted, other key personnel might decide to leave,and we might incur increased operating expenses associated with finding and compensating replacements.

Our quarterly operating results may fluctuate, which could causethe market price of our common stock to decline.

We have experienced, and expect to continue to experience, significantfluctuations in net revenue, expenses and operating results from quarter to quarter. We therefore believe that quarter to quarter comparisonsof our operating results are not a good indication of our future performance, and investors should not rely on them to predict our futureoperating or financial performance or the future performance of the market price of our common stock. A high percentage of our operatingexpenses are relatively fixed and are based on our forecast of future revenue. If we were to experience an unexpected reduction in netrevenue in a quarter, we would likely be unable to adjust our short-term expenditures significantly. If this were to occur, our operatingresults for that fiscal quarter would be harmed. In addition, if our operating results in future fiscal quarters were to fall below theexpectations of equity analysts and investors, the market price of our common stock would likely fall.

The market price of our common stock may be volatile basedon a number of factors, many of which are not under our control.

The market price of our common stock has been highly volatile. The marketprice of our common stock could be subject to wide fluctuations in response to a variety of factors, many of which are out of our control,including:

In addition, the Nasdaq Capital Market often experiences price and volumefluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of companies listed on theNasdaq Capital Market.

None.

Risk Management and Strategy

Governance

The following table presents details regarding our leased facilities:

We believe our existing facilities are adequate to meet our needs. If additionalspace is needed in the future, we believe that suitable space will be available on commercially reasonable terms.

Refer to Note 10 of Notes to Consolidated FinancialStatements, included in Part II, Item 8 of this Report, which is incorporated herein by reference, for a discussion of legal proceedings.

None.

PART II

Common Stock

Our common stock is traded on the Nasdaq Capital Market under the symbol“LTRX.” The number of holders of record of our common stock as of August 22, 2025 was approximately 24.

Dividend Policy

We have never declared or paid cash dividends on our common stock. We donot anticipate paying any cash dividends on our common stock in the foreseeable future, and we intend to retain any future earnings foruse in the expansion of our business and for general corporate purposes. Any future decision to declare or pay dividends will be madeby the Board in its sole discretion and will depend upon our financial condition, operating results, capital requirements and other factorsthat the Board deems appropriate at the time of its decision.

Issuer Repurchases

We did not repurchase any shares of our common stock during fiscal 2025.

You should read the following discussion and analysis in conjunctionwith our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Annual Report on Form10-K for the fiscal year ended June 30, 2025 (this “Report”). This discussion and analysis contains forward-looking statementsthat are based on our management’s current beliefs and assumptions, which statements are subject to substantial 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 discussed in “Risk Factors” included in Part I, Item 1A of this Report. Please also see “CautionaryNote Regarding Forward-Looking Statements” at the beginning of this Report.

Overview

Lantronix Inc. (Nasdaq: LTRX) is a global leader in Edge AI and IndustrialIoT solutions, delivering intelligent computing, secure connectivity, and remote management for mission-critical applications. Servinghigh-growth markets, including smart cities, enterprise IT, and commercial and defense unmanned systems, we enable customers to optimizeoperations and accelerate digital transformation. Our comprehensive portfolio of hardware, software, and services powers applicationsfrom secure video surveillance and intelligent utility infrastructure to resilient out-of-band network management. By bringing intelligenceto 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 threegeographic regions: the Americas; EMEA; and APJ.

References to “fiscal 2025” refer to the fiscal year endedJune 30, 2025 and references to “fiscal 2024” refer to the fiscal year ended June 30, 2024.

Products and Solutions

We organize our portfolio services and products into the followingproduct lines: Embedded IoT Solutions, IoT Systems Solutions, and Software and Engineering Services. Refer to “Products and Solutions”included in Part I, Item 1 of this Report, which is incorporated herein by reference, for further discussion.

Recent Developments

Acquisition

In December 2024, we finalized the acquisitionof Netcomm Wireless Pty Ltd (“Netcomm”), a subsidiary of DZS Inc., for $6,458,000 in cash. Netcomm operated an enterpriseIoT business. The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance our connectivitysolutions in areas such as critical infrastructure, asset monitoring and telecommunications.

Refer to Note 3 of Notes to ConsolidatedFinancial Statements included in Part II, Item 8 of this Report, which is incorporated herein by reference, for additional discussionregarding the acquisition.

Recent Accounting Pronouncements

Refer to Note 1 of Notes to Consolidated Financial Statements includedin Part II, Item 8 of this Report, which is incorporated herein by reference, for a discussion of recent accounting pronouncements.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures inaccordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make judgments, estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenueand expenses during the reporting period. We regularly evaluate our estimates and assumptions related to revenue recognition, sales returnsand allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets. Webase our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances,the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparentfrom other sources. To the extent there are material differences between our estimates and the actual results, our future results of operationswill be affected.

We believe the following critical accounting policies require us to makesignificant judgments and estimates in the preparation of our consolidated financial statements:

Revenue Recognition

Revenue is recognized upon the transfer of control of promised productsor 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 contractwith a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocatingthe transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligationis satisfied.

A significant portion of our products are sold to distributors underagreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accountedfor as variable consideration when estimating the amount of revenue to recognize. Establishing accruals for product returns and pricingadjustments requires the use of judgment and estimates that impact the amount and timing of revenue recognition. When product revenueis recognized, we establish an estimated allowance for future product returns based primarily on historical returns experience and otherknown or anticipated returns. We also record reductions of revenue for pricing adjustments, such as competitive pricing programs and rebates,in the same period that the related revenue is recognized, based primarily on approved pricing adjustments and our historical experience.Actual product returns or pricing adjustments that differ from our estimates could result in increases or decreases to our net revenue.

A portion of our revenues are derived from engineering and related consultingservice contracts with customers. These contracts generally include performance obligations in which control is transferred over timebecause the customer either simultaneously receives and consumes the benefits provided or our performance on the contract creates or enhancesan asset that the customer controls. These contracts typically provide services on the following basis:

Performance obligations for T&M contracts qualify for the “Rightto 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 inceptionof the contract and reassess the estimate each reporting period. We determined that this method best represents the transfer of servicesas, upon billing, we have a right to consideration from a customer in an amount that directly corresponds with the value to the customerof our performance completed to date.

We recognize revenue on fixed price contracts, over time, using an inputmethod based on the proportion of our actual costs incurred (generally labor hours expended) to the total costs expected to complete thecontract performance obligation. We determined that this method best represents the transfer of services as the proportion closely depictsthe efforts or inputs completed towards the satisfaction of a fixed price contract performance obligation.

From time to time, we may enter into contracts with customers that includepromises to transfer multiple performance obligations that may include sales of products, professional engineering services and otherproduct qualification or certification services. Determining whether the promises in these arrangements are considered distinct performanceobligations, that should be accounted for separately versus together, often requires judgment. We consider performance obligations tobe distinct when the customer can benefit from the promised good or service on its own or by combining it with other resources readilyavailable and when the promised good or service is separately identifiable from other promised goods or services in the contract. In thesearrangements, we allocate revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determinethe standalone selling price for each performance obligation. Additionally, estimating standalone selling prices for separate performanceobligations within a contract may require significant judgment and consideration of various factors including market conditions, itemscontemplated during negotiation of customer arrangements and internally developed pricing models. Changes to performance obligations thatwe identify, or the estimated selling prices pertaining to a contract, could materially impact the amounts of earned and unearned revenuethat we record.

Inventory Valuation

We value inventories at the lower of cost (on a first-in, first-out basis)or net realizable value, whereby we make estimates regarding the market value of our inventories, including an assessment of excess andobsolete inventories. We determine excess and obsolete inventories based on an estimate of the future sales demand for our products withina specified time horizon, which is generally 12 to 24 months. In addition, specific reserve estimates are recorded to cover risks forend-of-life products, inventory located at our contract manufacturers and warranty replacement stock. The estimates we use for demandare also used for near-term capacity planning and inventory purchasing. Demand for our products can fluctuate significantly from periodto period. A significant decrease in demand could result in an increase in the amount of excess inventory on hand. In addition, our industryis characterized by rapid technological change, frequent new product development and product obsolescence that could result in an increasein the amount of obsolete inventory quantities on hand. Our estimates of future product demand and judgement to determine excess inventorymay prove to be inaccurate, in which case we may have understated or overstated the reduction to the total carrying value of our inventoryfor excess and obsolete inventory. In the future, if our inventory is determined to be overvalued, we would be required to recognize suchcosts in our cost of goods sold, resulting in a reduction in our gross margins, at the time of such determination. Although we make everyeffort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technologicaldevelopments could have a significant impact on the value of our inventory and our results of operations.

Valuation of Deferred Income Taxes

We have recorded a valuation allowance to reduce our net deferred tax assetsto zero, primarily due to historical net operating losses (“NOLs”) and uncertainty of generating future taxable income. Weconsider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuationallowance. If we determine that it is more likely than not that we will realize a deferred tax asset that currently has a valuation allowance,we would be required to reverse the valuation allowance, which would be reflected as an income tax benefit in our consolidated statementsof operations at that time.

Business Combinations

We allocate the fair value of the purchase consideration of a businessacquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development (“IPR&D”),if applicable, based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of theseidentifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset withan indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as anamortizable purchased intangible asset and amortized over the asset’s estimated useful life. The valuation of acquired assets andassumed liabilities requires significant judgment and estimates, especially with respect to intangible assets. The valuation of intangibleassets, in particular, requires that we use valuation techniques such as the income approach. The income approach includes the use ofa discounted cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expectedrevenue, expenses, capital expenditures and other costs, and discount rates. We estimate the fair value based upon assumptions we believeto be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from our estimates.Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assetsacquired and liabilities assumed. Acquisition-related expenses and related restructuring costs are recognized separately from the businesscombination and are expensed as incurred.

Goodwill Impairment Testing

We evaluate goodwill for impairment on an annual basis on May 31, or morefrequently if we believe indicators of impairment exist that would more likely than not reduce the fair value of our single reportingunit below its carrying amount.

We begin our evaluation of goodwill for impairment by assessing qualitativefactors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value.Some factors that we consider important in the qualitative assessment which could trigger a goodwill impairment review include:

Based on our qualitative assessment, if we conclude that it is more likelythan not that the fair value of our single reporting unit is less than its carrying value, we conduct a quantitative goodwill impairmenttest, which involves comparing the estimated fair value of our single reporting unit with its carrying value, including goodwill. We estimatethe fair value of our single reporting unit using a combination of the income and market approach. If the carrying value of the reportingunit exceeds its estimated fair value, we recognize an impairment loss for the difference.

Significant management judgment is required in estimating the reportingunit’s fair value and in the creation of the forecasts of future operating results that are used in the discounted cash flow methodof valuation. These include (i) estimation of future cash flows, which is dependent on internal forecasts, (ii) estimation of the long-termrate of growth of our business, (iii) estimation of the period during which cash flows will be generated and (iv) the determination ofour weighted-average cost of capital, which is a factor in determining the discount rate. Our estimate of the reporting unit’s fairvalue would also generally include the consideration of a control premium, which is the amount that a buyer is willing to pay over thecurrent market price of a company as indicated by the traded price per share (i.e., market capitalization) to acquire a controlling interest.If our actual financial results are not consistent with our assumptions and judgments used in estimating the fair value of our reportingunit, we may be exposed to goodwill impairment losses.

We performed our annual goodwill impairment test as of May 31, 2025, usinga quantitative assessment for our single reporting unit. The fair value of the reporting unit was estimated using a combination of theincome 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’sbest estimates of future financial performance, current market conditions, and a market participant perspective. The results of the impairmenttest indicated that the estimated fair value exceeded the carrying amount by approximately 9%. No impairment of goodwill was recognizedfor the year ended June 30, 2025.

Long-Lived Assets and Intangible Assets

We assess the impairment of long-lived assets and intangible assets wheneverevents or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Circumstances that could triggera review include, but are not limited to the following:

Whenever events or changes in circumstances suggest that the carrying amountof long-lived assets and intangible assets may not be recoverable, we estimate the future cash flows expected to be generated by the assetfrom its use or eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of those assets, werecognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Significant management judgmentis required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. These significantjudgments may include future expected revenue, expenses, capital expenditures and other costs, discount rates and whether or not alternativeuses are available for impacted long-lived assets.

Results of Operations - Fiscal Years Ended June 30, 2025 and 2024

Summary

For fiscal 2025, our net revenue decreased by $37,404,000, or 23.3%, comparedto fiscal 2024. The decrease in net revenue was driven by a 34.2% decrease in net revenue in our IoT System Solutions product line, aswell as decreases in net revenue in our Embedded IoT Solutions product line of 1.2% and our Software and Services product line of 12.5%.We had a net loss of $11,373,000 for fiscal 2025, compared to a net loss of $4,516,000 for fiscal 2024. The increase in net loss was primarilydriven by the decrease in revenues partially offset by a reduction in operating expenses of $4,516,000 for fiscal 2025 compared to fiscal2024.

Net Revenue

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

Embedded IoT Solutions

Net revenue decreased primarily due to lower unit sales in some of ourlegacy embedded ethernet connectivity products across all regions and lower volume sales of our network interface cards in the Americasand APJ regions. These decreases were largely offset by higher unit sales of our embedded compute product line driven by a video conferencingcustomer in the APJ region.

IoT System Solutions

The decrease in net revenue was substantially driven by our custom solution to our European smart energy grid customer. In fiscal 2024,this customer represented just over 25% of our net revenue. By comparison, in fiscal 2025, we recognized approximately $11 million fromthis customer in the first half of the year. Separately, compared to the prior year, we experienced (i) decreased unit sales of our networkswitches in the Americas region, and (ii) decreased unit sales of our OOB products across all regions, as revenues from these productscan be dependent on project-based capital spending. These decreases were partially offset by higher unit sales of (i) our gateways, routers,and modems products, which was largely driven by contributions from our Netcomm acquisition, and (ii) our telematic gateways in the Americasregion.

Software & Services

Net revenue decreased primarily due to lower engineering services revenuein the EMEA region as two of our large design services projects transitioned in the prior year from the design phase to full production.We also saw a moderate decrease in our extended warranty services in the Americas region, primarily related to lower service volumes inour OOB products.

Gross Profit

Gross profit represents net revenue less cost of revenue. Cost of revenueconsists primarily of the cost of raw material components, subcontract labor assembly from contract manufacturers, direct and indirectpersonnel expenses related to professional services, manufacturing overhead, inventory reserves for excess and obsolete products or rawmaterials, warranty costs, royalties and share-based compensation.

The following table presents our gross profit:

Gross profit as a percentage of revenue (referredto as “gross margin”) increased primarily as a result of lower overhead costs and our product sales mix.

We currently expect that gross margin will fluctuate in the future, fromperiod-to-period, based on changes in our product mix, average selling prices, and average manufacturing costs. 

Selling, General and Administrative

Selling, general and administrative expenses consist of personnel-relatedexpenses including salaries and commissions, share-based compensation, facility expenses, information technology, advertising and marketingexpenses and professional legal and accounting fees.

The following table presents our selling, general and administrative expenses:

Selling, general and administrative expenses decreased primarily dueto (i) reduced share-based compensation costs based on the value of new and outstanding awards, (ii) lower spending on various sales conferences,IT infrastructure and related facilities costs, and (iii) lower personnel-related expenses resulting from less variable compensation and restructuring activities during the current fiscal year.

Research and Development

Research and development expenses consists of personnel-related expenses,share-based compensation, and expenditures to third-party vendors for research and development activities and product certification costs.Our costs from period-to-period related to outside services and product certifications vary depending on our level and timing of developmentactivities.

The following table presents our research and development expenses:

Research and development expenses decreased primarily due to (i) lowerpersonnel-related expenses in our engineering groups resulting from restructuring activities during the current fiscal year and (ii) reducedshare-based compensation costs based on the value of new and outstanding awards. These decreases were partially offset by (i) higher facilities-relatedequipment and software costs, (ii) increased costs for third party contract labor, which are included in the “outside services”category in the table above, and (iii) increased spending on certain prototype and materials costs, which are included in the “other”category in the table above.

Restructuring, Severance and Related Charges

During fiscal 2025 and 2024, we incurred restructuring, severance andrelated charges of $3,535,000 and $1,423,000, respectively, due to various headcount reduction efforts during these years. The most significantof these actions occurred in January 2025, in which we reduced our headcount by approximately 12% worldwide, primarily in the U.S. andIndia. The severance and related charges resulting from this action totaled approximately $1,400,000.

In addition, during fiscal 2025 we downsized the usage of certain sites,resulting in a charge of approximately $379,000, which is included in the total restructuring charges above.

We may incur additional restructuring, severance and related chargesin future periods as we continue to identify cost savings and efficiencies related to our business.

Acquisition-Related Costs

During fiscal 2025 we incurred approximately $371,000 of costs primarilyin connection with the acquisition of Netcomm. These costs were mainly comprised of banking, legal and other professional fees.

Amortization of Intangible Assets

We acquired certain intangible assets through our recent acquisitions,which we recorded at fair-value as of the acquisition dates. These assets are generally amortized on a straight-line basis over theirestimated useful lives and resulted in charges of $3,951,000 and $5,314,000 during fiscal 2025 and 2024, respectively.

Interest Expense, Net

For fiscal 2025 and 2024, we incurred net interest expense from interestincurred on borrowings on our credit facilities. We also earn interest on our domestic cash balances.

Other Income (Expense), Net

Other income (expense), net, is comprised primarily of foreign currencyremeasurement and transaction adjustments related to our foreign subsidiaries whose functional currency is the U.S. dollar.

Provision for Income Taxes

The following table presents our provision for income taxes:

The following table presents our effective tax rate based upon our provisionfor income taxes:

We utilize the liability method of accounting for income taxes. Thedifferences between our effective tax rate and the federal statutory rate in fiscal 2025 and 2024 were also impacted by the effect ofour domestic losses recorded without a tax benefit, as well as the effect of certain state and foreign earnings taxed at rates differingfrom the federal statutory rate. Additionally, in fiscal 2025, we reversed a portion of our liability for uncertain tax positions as aresult of the dissolution of one of our foreign subsidiaries.

We record net deferred tax assets to the extent we believe these assetsare more likely than not to be realized. Aside from a net deferred tax liability of $172,000 and $179,000 that we recorded as of June30, 2025 and 2024, respectively, based on our cumulative losses and uncertainty of generating future taxable income, we provided a fullvaluation allowance against our net deferred tax assets at June 30, 2025 and 2024. Refer to Note 8 of Notes to Consolidated FinancialStatements, included in Part II, Item 8 of this Report, for additional information.

Liquidity and Capital Resources

Liquidity

The following table presents our working capital and cash and cash equivalents:

Our principal sources of cash and liquidity include our existing cash andcash equivalents, borrowings and amounts available under our existing bank borrowing agreement, and cash generated from operations. Weare subject to a variable amount of interest on the principal balance of our borrowings and could be adversely impacted by rising interestrates in the future. We believe that our current cash holdings, net cash provided by operating activities, and expected availability underour bank borrowing agreement will be sufficient to fund our material requirements for working capital, capital expenditures and otherfinancial commitments for at least the next 12 months and beyond.

We continue to monitor our existing banking relationships and the availabilityof potential alternate sources of credit based on market conditions and our ongoing capital requirements. There can be no guarantee thatwe would be able to obtain any needed alternate financing on acceptable terms, or at all, or that such a financing would not result ina default under the current borrowing agreement. Refer to Note 5 of Notes to Consolidated Financial Statements, including in PartII, Item 8 of this Report, for additional information. We anticipate that the primary factors affecting our cash and liquidity are netrevenue, working capital requirements and capital expenditures.

We define cash and cash equivalents as highly liquid deposits with originalmaturities of 90 days or less when purchased. We maintain cash and cash equivalents balances at certain financial institutions in excessof amounts insured by the Federal Deposit Insurance Corporation (“FDIC”). There can be no assurance that our deposits in excessof the FDIC limits will be backstopped by the U.S., or that any bank or financial institution with which we do business will be able toobtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.

Our future working capital requirements will depend on many factors, includingthe following: timing and amount of our net revenue; our product mix and the resulting gross margins; research and development expenses;selling, general and administrative expenses; and expenses associated with any strategic partnerships, acquisitions or infrastructureinvestments.

From time to time, we may seek additional capital from public or privateofferings of our capital stock, borrowings under our existing or future credit lines or other sources in order to (i) develop or enhanceour products, (ii) take advantage of strategic opportunities, (iii) respond to competition or (iv) continue to operate our business. Wecurrently have a Form S-3 shelf registration statement on file with the SEC. If we issue equity securities to raise additional funds,our existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior tothose of our existing stockholders. If we issue debt securities to raise additional funds, we may incur debt service obligations, becomesubject to additional restrictions that limit or restrict our ability to operate our business, or be required to further encumber ourassets. There can be no assurance that we will be able to raise any such capital on terms acceptable to us, if at all.

Cash Flows

The following table presents the major components of the consolidated statementsof cash flows:

Operating Activities

Cash provided by operating activities during fiscal 2025 decreased comparedto fiscal 2024. Cash from operations increased in the prior fiscal year due to (i) reduction of our inventories and higher net revenuesand (ii) the receipt of customer deposits. In the current fiscal year, we made payments against previously accrued variable compensationbalances, as discussed further below. For fiscal 2025, our net loss included $12,306,000 of non-cash charges, while the changes in operatingassets and liabilities provided net cash of $6,352,000.

Accounts receivable decreased by $6,187,000, or 19.8%, from June 30, 2024to June 30, 2025. The decrease was primarily due to lower net revenue levels in the current fiscal year, as well as the timing of paymentsfrom certain customers.

Accounts payable increased by $2,912,000, or 28.1%, from June 30, 2024to June 30, 2025 primarily due to the timing of inventory receipts and payments made to our vendors.

Accrued payroll and related expenses decreased by $2,365,000 or 40.5% fromJune 30, 2024 to June 30, 2025. The decrease was primarily due to accrued variable compensation paid out during the current fiscal year.

Investing Activities

Net cash used in investing activities for fiscal 2025 consisted primarilyof the acquisition of Netcomm, which used cash of $6,458,000. We also paid for property and equipment totaling $505,000, primarily fortooling at our contract manufacturers as well as certain research and development projects.

Net cash used in investing activities for fiscal 2024 consisted of purchasesof equipment amounting to $1,479,000, primarily for research and development and certain business analysis tools.

Financing Activities

Net cash used in financing activities during fiscal 2025 resulted primarilyfrom principal payments of $4,512,000 on our term debt, as well as tax withholdings paid on behalf of employees for restricted sharesof $2,093,000.

Net cash used in financing activities during fiscal 2024 resulted primarilyfrom $2,853,000 of principal payments on our term debt as well as $1,027,000 tax withholdings paid on behalf of employees for restrictedshares. Additionally, we used cash of $1,262,000 to pay the contingent consideration earned related to the Uplogix acquisition.

Not required for a “smaller reporting company.”

All financial statements required by this Item 8, including the reportof our independent registered public accounting firm, are included in Part IV, Item 15 of this Report, as set forth beginning on pageF-1 of this Report, and are incorporated by reference into this Item 8.

None.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15Iand 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure thatinformation required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within thetime periods specified in the SEC’s rules and forms and that this information is accumulated and communicated to management, includingour Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matterhow well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is requiredto apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer andour Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period coveredby this Annual Report on Form 10-K. Based on this evaluation, we have concluded that our disclosure controls and procedures were effectiveas of June 30, 2025.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing andmaintaining 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 reliabilityof financial reporting and the preparation of Consolidated Financial Statements for external reporting purposes in accordance with U.S.GAAP. Our internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, a system of internalcontrol over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because ofchanging conditions, effectiveness of internal control over financial reporting may vary over time.

Under the supervision and with the participation of our management, includingour Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control overfinancial 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, managementconcluded that our internal control over financial reporting was effective as of June 30, 2025.

Baker Tilly US, LLP, the independent registered public accounting firmthat audited the financial statements included in this Annual Report on Form 10-K, has provided an attestation report on our internalcontrol over financial reporting, which is included herein.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reportingidentified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarterended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.

Insider Trading Arrangements

During the quarterended June 30, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

None.

PART III

Portions of our definitive Proxy Statement on Schedule 14A relating toour 2025 annual meeting of stockholders (“Proxy Statement”), which will be filed with the SEC within 120 days after the endof the fiscal year covered by this Report, are incorporated by reference into Part III of this Report, as indicated below.

The names of our executive officers and their ages, titles and biographiesas of the date hereof are set forth in the section entitled “Information About Our Executive Officers” in Part I, Item 1 ofthis Report, which is incorporated herein by reference.

We have adopted a code of business conduct and ethics that applies to allemployees, including employees of our subsidiaries, as well as each member of our board of directors. The code of business conduct andethics is available at our website at www.lantronix.com under the Investor Relations-Corporate Governance section. We intend to satisfyany disclosure requirement under applicable rules of the SEC or Nasdaq Stock Market regarding an amendment to, or waiver from, a provisionof this code of business conduct and ethics by posting such information on our website, at the web address specified above.

The other information required by this Item is incorporated by referenceto our Proxy Statement. 

The information required by this Item is incorporated by reference to ourProxy Statement. 

The information required by this Item is incorporated by reference to ourProxy Statement. 

The information required by this Item is incorporated by reference to ourProxy Statement. 

The information required by this Item is incorporated by reference to ourProxy Statement.

PART IV

The following consolidated financial statements and related Report of IndependentRegistered Public Accounting Firm are filed as part of this Report.

2.  Exhibits

__________

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned,thereunto duly authorized.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individualwhose signature appears below hereby constitutes and appoints Saleel Awsare and Brent Stringham, acting individually, as his or her trueand lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, placeand stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto andother documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power andauthority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for allintents 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 ExchangeAct of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacitiesand on the dates indicated:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM

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

Opinions on the Financial Statements and Internal Control over FinancialReporting

We have audited the accompanying consolidated balance sheets of Lantronix,Inc. (the “Company”) as of June 30, 2025 and 2004, the related consolidated statements of operations, stockholders’ equity andcash 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 establishedin Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).

In our opinion, the consolidated financial statements present fairly, inall material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cashflows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in theUnited States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financialreporting as of June 30, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued byCOSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financialstatements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Item 9A of this Annual Report on Form 10-K. Our responsibility is to expressan opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reportingbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicablerules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statementsare free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintainedin all material respects.

Our audits of the financial statements included performing procedures toassess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing proceduresthat respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in theconsolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control overfinancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a materialweakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Ouraudits 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 designedto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes thosepolicies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that couldhave a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reportingmay not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the riskthat 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 fromthe current period audit of the financial statements that were communicated or required to be communicated to the audit committee andthat: (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 auditmatters 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, inventoriesare stated at the lower of cost or net realizable value and the Company’s consolidated inventories balance was approximately $26.3million at June 30, 2025, net of reserves. The Company excess and obsolete inventories is based on an estimate of the future sales demandfor their products within a specified time horizon, which is generally 12 to 24 months. In addition, specific reserve estimates are recordedto 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 realizablevalue determination for excess or obsolete inventories as a critical audit matter. The procedures to audit management’s lowerof cost or net realizable value determination for excess or obsolete inventories was especially challenging and highly judgmental becauseof (i) inherent estimation uncertainty relating to assumptions used by management in the inventory reserve model which involved ahigh 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 matterincluded:

ACQUISTION OF NETCOMM – VALUATION OF CUSTOMER RELATIONSHIPS

Critical Audit Matter Description

As described in Note 3 to the consolidated financial statements, on December23, 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 assetsacquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition. Of the identifiable intangibleassets acquired, $1,587,600 was allocated to customer relationships. The excess of the purchase consideration over the fair value of identifiableassets acquired and liabilities assumed was recorded as goodwill.

We identified an input into the fair value determination of the customerrelationships for the business combination as a critical audit matter due to the significant judgment required in estimating base revenueof the acquired entity. There was a high degree of auditor judgment, effort and subjectivity in applying audit procedures in evaluatingthe 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 matterincluded: