Lantronix Inc 8-K/A, filed Aug 11, 2021

About this 8-K/A

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Lantronix Inc (LTRX)

8-K/A 2021-08-11 For: 2021-08-02

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Added on April 07, 2026

Lantronix Inc filed this 8-K/A on August 11, 2021, reporting on events of August 2, 2021.

LANTRONIX, INC.

August 10, 2021

/s/ Jeremy Whitaker

Jeremy Whitaker

Chief Financial Officer

Item 9.01: Financial statements and exhibits

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Delaware	1-16027	33-0362767
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

7535 Irvine Center Drive, Suite 100 Irvine, California 92618
(Address of Principal Executive Offices, including zip code)

Registrant’s telephone number, including area code: (949) 453-3990

Not Applicable
(Former name or former address, if changed since last report)

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

Exhibit No.		Description

23.1 99.1 99.2		Consent of Baker Tilly US, LLP (consent of independent auditors). Audited combined carve-out financial statements of the E&S Segment as of and for the year ended December 31, 2020 and the related Independent Auditors Report, issued by Baker Tilly US, LLP, dated August 10, 2021. Unaudited condensed combined carve-out financial statements of the E&S Segment as of March 31, 2021 and for the three months ended March 31, 2021 and 2020.

99.3		Unaudited pro forma condensed combined balance sheet as of March 31, 2021 and unaudited pro forma condensed combined statements of operations for the year ended June 30, 2020 and nine months ended March 31, 2021.

	December 31
	2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	302,509
Trade accounts receivable, net		5,775,422
Inventories, net		8,560,616
Other current assets		439,518
TOTAL CURRENT ASSETS		15,078,065

PROPERTY, PLANT AND EQUIPMENT, net		190,299
OTHER ASSETS:
Deferred income taxes		1,197,966
Operating lease right of use asset		129,164
TOTAL OTHER ASSETS		1,327,130
TOTAL ASSETS	$	16,595,494

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,669,166
Accrued compensation and benefits		1,039,619
Operating lease liability		86,310
Other accrued liabilities		1,205,864
Income taxes payable		1,440,918
TOTAL CURRENT LIABILITIES		5,441,877
LONG TERM LIABILITIES:
Uncertain tax positions		99,596
Operating lease liability		29,611
TOTAL LONG-TERM LIABILITIES		129,207

NET INVESTMENT IN ELECTRONICS & SOFTWARE		11,024,410
TOTAL LIABILITIES AND E&S NET INVESTMENT	$	16,595,494

	Twelve Months Ended
	December 31, 2020

Sales	$	34,495,984
Cost of sales		19,606,468
Gross profit		14,889,516
Operating expenses:
Selling, general and administrative expenses		13,917,278
Operating income		972,238
Other income (expenses):
Investment and other expense		(10,289	)
Gain on sale of assets		209
Other expense, net		(10,080	)
Operating income before income taxes		962,158
Income tax expense		483,150
Net income		479,008

Other comprehensive income, net of tax:
Foreign currency translation adjustment		9,648
Comprehensive income	$	488,656

				Accumulated
				Other
	Retained			Comprehensive
	Earnings			Loss			Total
BALANCE AT DECEMBER 31, 2019	$	13,180,194		$	(708,552	)	$	12,471,642
Net income		479,008			–			479,008
Noncash contributions from CSI		146,705			–			146,705
Distributions to CSI		(2,082,593	)		–			(2,082,593	)
Other comprehensive income		–			9,648			9,648
BALANCE AT DECEMBER 31, 2020	$	11,723,314		$	(698,904	)	$	11,024,410

	Twelve Months Ended
	December 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	479,008
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		154,269
Share based compensation		124,448
Deferred taxes		231,832
Gain on sale of assets		(209	)
Changes in assets and liabilities:
Trade accounts receivable, net		4,144,854
Inventories, net		(98,084	)
Other assets, net		310,825
Accounts payable		(1,676,203	)
Accrued compensation and benefits		(973,081	)
Other accrued liabilities		(822,127	)
Income taxes payable		251,242
Net cash provided by operating activities		2,126,774
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(80,627	)
Proceeds from the sale of property, plant and equipment		3,000
Net cash used in investing activities		(77,627	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in CSI net investment		(2,082,593	)
Net cash used in financing activities		(2,082,593	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		38,143
NET INCREASE IN CASH AND CASH EQUIVALENTS		4,697
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		297,812
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	302,509

	Year Ended
	December 31, 2020
Beginning balance	$	513,000
Amounts charged to expense		59,000
Actual warranty costs paid		(67,000	)
Ending balance	$	505,000

	Year Ended
	December 31, 2020
North America	$	29,721,000
International		4,775,000
	$	34,496,000


	December 31, 2020
Intelligent edge solutions	$	12,162,000
Traditional products		22,334,000
	$	34,496,000

	Year Ended
	December 31, 2020

Cash paid for operating leases	$	85,000

	As of
	December 31, 2020
Weighted-average remaining lease term		1.6 years
Weighted-average discount rate		4.5%

2021	$	91,000
2022		30,000
Total lease payments		121,000
Less imputed interest		(5,000	)
Total operating lease liabilities	$	116,000

	December 31
	2020
Finished goods	$	7,848,000
Raw and processed materials		713,000
	$	8,561,000

	Estimated	December 31
	useful life	2020
Buildings and improvements	3-40 years	$	28,000
Machinery and equipment	3-15 years		2,457,000
Furniture and fixtures	3-10 years		2,645,000
			5,130,000
Less accumulated depreciation			(4,940,000	)
		$	190,000

	Year Ended
	December 31, 2020
Current year income taxes:
Federal	$	244,000
State		7,000
		251,000

Deferred income taxes:
Federal	$	225,000
State		7,000
		232,000

Income tax expense	$	483,000

	Year Ended
	December 31, 2020
Tax at U.S. statutory rate		21.0%
State income taxes, net of federal benefit		1.4
Permanent differences		3.4
Foreign income taxes, net		2.0
Effect of change in uncertain tax positions		1.5
Change in valuation allowance		18.7
Other		2.2
Effective tax rate		50.2%

	Year Ended
	December 31, 2020
Customer A		23%
Customer B		21%
Customer C		12%

	December 31
	2020
Deferred tax assets:
Allowance for doubtful accounts	$	23,000
Inventory		782,000
Accrued and prepaid expenses		194,000
Stock compensation		319,000
Intangible assets		28,000
Foreign net operating loss carry-forwards and credits		1,844,000
Federal and state credits		149,000
Other		5,000

Gross deferred tax assets		3,344,000
Valuation allowance		(1,993,000	)

Net deferred tax assets		1,351,000

Deferred tax liabilities
Depreciation		(153,000	)

Net deferred tax liability		(153,000	)

Total net deferred tax asset	$	1,198,000

	December 31
	2020
Uncertain tax positions – Beginning Balance	$	86,000
Gross increases - current period tax positions		14,000
Uncertain tax positions – Ending Balance	$	100,000

	March 31		December 31
	2021		2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	250,589	$	302,509
Trade accounts receivable, net		5,508,857		5,775,422
Inventories		8,090,248		8,560,616
Other current assets		450,795		439,518
TOTAL CURRENT ASSETS		14,300,489		15,078,065

PROPERTY, PLANT AND EQUIPMENT, net		161,038		190,299
OTHER ASSETS:
Deferred income taxes		1,239,948		1,197,966
Operating lease right of use asset		109,369		129,164
TOTAL OTHER ASSETS		1,349,317		1,327,130
TOTAL ASSETS	$	15,810,844	$	16,595,494

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,019,862	$	1,669,166
Accrued compensation and benefits		970,099		1,039,619
Operating lease liability		88,027		86,310
Other accrued liabilities		1,170,073		1,205,864
Income taxes payable		1,379,429		1,440,918
TOTAL CURRENT LIABILITIES		5,627,490		5,441,877
LONG TERM LIABILITIES:
Uncertain tax positions		100,051		99,596
Operating lease liability		7,487		29,611
TOTAL LONG-TERM LIABILITIES		107,538		129,207

NET INVESTMENT IN ELECTRONICS & SOFTWARE		10,075,816		11,024,410
TOTAL LIABILITIES AND E&S NET INVESTMENT	$	15,810,844	$	16,595,494

	Three Months Ended March 31
	2021			2020

Sales	$	8,364,527		$	8,536,404
Cost of sales		4,780,717			4,806,767
Gross profit		3,583,810			3,729,637
Operating expenses:
Selling, general and administrative expenses		3,714,277			3,897,136
Transaction costs		271,112			–
Total operating expenses		3,985,389			3,897,136
Operating loss		(401,579	)		(167,499	)
Other income (expenses):
Investment and other (expense) income		(19,403	)		14,067
Other (expense) income, net		(19,403	)		14,067
Operating loss before income taxes		(420,982	)		(153,432	)
Income tax (benefit) expense		(103,016	)		44,876
Net loss		(317,966	)		(198,308	)

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		19,731			(132,103	)
Comprehensive loss	$	(298,235	)	$	(330,411	)

	Electronics & Software Sales by Region
	Three Months Ended March 31
	2021		2020
North America	$	7,201,000	$	7,448,000
International		1,164,000		1,088,000
	$	8,365,000	$	8,536,000

	Electronics & Software Sales by Product Group
	Three Months Ended March 31
	2021		2020
Intelligent edge solutions	$	3,713,000	$	3,354,000
Traditional products		4,652,000		5,182,000
	$	8,365,000	$	8,536,000

							As of
							March 31, 2021
Weighted-average remaining lease term							1.3 years
Weighted-average discount rate							4.5%

Q2 - Q4 2021	$	68,000
2022		30,000
Total lease payments		98,000
Less imputed interest		(2,000	)
Total operating lease liabilities	$	96,000

	Lantronix			E&S Segment			Pro Forma Debt						Pro Forma
	Historical			Historical			Financing			Adjustments			Combined
Assets
Current assets:
Cash and cash equivalents	$	8,277		$	251		$	29,500	(i)	$	(799	)(g)	$	8,669
								(4,050	)(j)		(24,510	)(f)
Accounts receivable, net		11,623			5,509			–			–			17,132
Inventories		15,079			8,090			–			431	(b)		23,600
Contract manufacturers' receivables		1,258			–			–			–			1,258
Prepaid expenses and other current assets		2,337			450			–			–			2,787
Total current assets		38,574			14,300			25,450			(24,878	)		53,446
Property and equipment, net		1,442			161			–			–			1,603
Goodwill		15,810			–			–			2,269	(e)		18,079
Purchased intangible assets, net		9,934			–			–			11,495	(c)		21,429
Lease right-of-use assets		2,266			109			–			–			2,375
Other assets		243			1,240			–			(1,240	)(d)		243
Total assets	$	68,269		$	15,810		$	25,450		$	(12,354	)	$	97,175

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	6,791		$	2,020		$	–		$	–		$	8,811
Accrued payroll and related expenses		2,427			970			–			–			3,397
Short-term debt, net		1,472			–			2,950	(i)		–			2,950
								(1,472	)(j)
Other current liabilities		8,033			2,637			–			(1,379	)(d)		9,291
Total current liabilities		18,723			5,627			1,478			(1,379	)		24,449
Long-term debt, net		2,578			–			26,550	(i)					26,550
								(2,578	)(j)
Other non-current liabilities		1,061			107			–			(100	)(d)		1,068
Total liabilities		22,362			5,734			25,450			(1,479	)		52,067

Commitments and contingencies

Stockholders' equity:
Common stock		3			–			–			–			3
Additional paid-in capital		248,600			–			–			–			248,600
Retained earnings (accumulated deficit)		(203,067	)		10,755			–			(10,755	)(h)		(203,866	)
											(799	)(g)
Accumulated other comprehensive income (loss)		371			(679	)		–			679	(h)		371
Total stockholders' equity		45,907			10,076			–			(10,875	)		45,108
Total liabilities and stockholders' equity	$	68,269		$	15,810		$	25,450		$	(12,354	)	$	97,175

						Intrinsyc			E&S		Pro Forma			E&S Segment
	Lantronix			Intrinsyc		Pro Forma			Segment		Debt			Pro Forma			Pro Forma
	Historical			Historical		Adjustments			Historical		Financing			Adjustments			Combined

Net revenue	$	59,878		$	11,652	$	–		$	44,603	$	–		$	–		$	116,133
Cost of revenue		32,978			7,847		–			24,475		–			–			65,300
Gross profit		26,900			3,805		–			20,128		–			–			50,833
Operating expenses:
Selling, general and administrative		19,582			3,015		–			11,293		–			–			33,890
Research and development		9,691			620		–			4,898		–			–			15,209
Restructuring, severance and related charges		3,844			–		–			–		–			–			3,844
Acquisition-related costs		2,284			–		–			–		–			–			2,284
Amortization of purchased intangible assets		2,037			–		1,618	(p)		–		–			4,801	(c)		8,456
Total operating expenses		37,438			3,635		1,618			16,191		–			4,801			63,683
Loss from operations		(10,538	)		170		(1,618	)		3,937		–			(4,801	)		(12,850	)
Interest income (expense), net		(133	)		210		–			–		(870	)(k)		–			(1,893	)
												(1,233	)(l)
												133	(m)
Other income, net		77			–		–			–		–			–			77
Loss before income taxes		(10,594	)		380		(1,618	)		3,937		(1,970	)		(4,801	)		(14,666	)
Provision for income taxes		144			34		–			–		–			–	(n)		178
Net (loss) income	$	(10,738	)	$	346	$	(1,618	)	$	3,937	$	(1,970	)	$	(4,801	)	$	(14,844	)

Net loss per share - basic and diluted	$	(0.42	)														$	(0.59	)

Weighted-average common shares - basic and diluted		25,281																25,281

Consideration:
Cash consideration paid at close of transaction	$	24,160
Estimated fair value of earnout consideration		350	(a)
Total purchase consideration	$	24,510

Preliminary allocation of consideration:
Book value of TN Companies net assets as of the pro forma acquisition date	$	10,076
Adjustments to historical net book value:
Inventories		431	(b)
Identifiable intangible assets		11,495	(c)
Deferred income taxes and income taxes payable		239	(d)
Adjusted book value of TN Companies net assets as of the pro forma acquisition date	$	22,241

Adjustment to goodwill	$	2,269	(e)

					Amortization Expense Based on the Preliminary Allocation of Identifiable Intangible Assets
	Preliminary Estimated Asset Fair Value		Weighted Average Useful Life (Years)		Nine Months Ended March 31, 2021		Year Ended June 30, 2020		Annual Effect of a 10% Increase to the Preliminary Allocation		Annual Effect of a 10% Decrease to the Weighted Average Useful Life
Customer relationship	$	7,727		4.0	$	1,449	$	1,932	$	193	$	214
Developed technology		947		2.0		355		474		47		52
Order backlog		1,969		1.0		–		1,969		197		–
Trademarks and trade names		852		2.0		320		426		43		47
	$	11,495			$	2,123	$	4,801	$	480	$	313

(d)	Amount represents the removal of the E&S Segment’s deferred tax assets and income taxes payable recorded for stand-alone purposes, as these items are not assumed by Lantronix as part of the acquisition.

(e)	Goodwill is calculated as the difference between the assumed acquisition date fair value of the consideration to be paid and the estimated values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized and instead will be tested for impairment at least annually and whenever events or circumstances occur that may indicate a possible impairment. The factors that contributed to a purchase consideration resulting in the recognition of goodwill include Lantronix’s belief the acquisition will create a more diverse company with additional technologies that will enable the combined company to expand its product offerings and Lantronix’s belief that the combined company is committed to improving cost structures and combined efforts after the acquisition should result in a realization of cost savings and an improvement in overall efficiencies.

(f)	Amount reflects total consideration paid for the E&S Segment, including cash consideration as well as the estimated fair value of cash earnout consideration.

(g)	Amount represents payments of the estimated transaction costs for the acquisition of the E&S Segment.

(h)	Amount represents the elimination of the historical equity of the E&S Segment.

(i)	Amount represents the increase in cash and related debt obligations resulting from the execution of the Senior Credit Facilities and the Mezzanine Credit Facility

(j)	Amount represents the elimination of Lantronix’ historical term loan balance that was refinanced with the issuance of the Senior Credit Facilities.

(k)	Amount represents the net increase to interest expense resulting from interest on the Senior Credit Facilities, used to finance the acquisition of the E&S Segment and the amortization of related debt issuance costs.

(l)	Amount represents the net increase to interest expense resulting from interest on the Mezzanine Credit Facility, used to finance the acquisition of the E&S Segment and the amortization of related debt issuance costs.

(m)	Amount represents the net interest expense savings resulting from Lantronix’ historical term loan being refinanced with the issuance of the Senior Credit Facilities.

(n)	Due to valuation allowances on Lantronix’s net deferred tax assets, the unaudited pro forma condensed combined statement of operations does not reflect a statutory rate income tax adjustment for pro forma purposes.