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 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

 FORM 10-K

 (Mark One)

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

 For the fiscal year ended June 30, 2025

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

 For the transition period from ________ to ________

 Commission File Number 1-16027

 (Exact name of registrant as specified in its charter)

 Delaware

 33-0362767

 (State or other jurisdiction of incorporation or organization)

 (I.R.S. Employer Identification No.)

 48 Discovery, Suite 250 Irvine, California

 92618

 (Address of principal executive offices)

 (Zip Code)

 ( 949) 453-3990

 (Registrant's telephone number, including
area code)

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

 Title of each class

 Trading Symbol(s)

 Name of each exchange on which registered

 Common Stock, $0.0001 par value

 LTRX

 The Nasdaq Stock Market LLC

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

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

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

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

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

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

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

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

 Indicate by check mark whether the registrant has filed
a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting
under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit 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 of
an error to previously issued financial statements.

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

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

 The aggregate market value of the registrant's
common stock held by non-affiliates based upon the closing sales price of the common stock as reported by the Nasdaq Capital Market on
December 31, 2024, the last trading day of the registrant's second fiscal quarter, was approximately $ 134,820,000. The determination
of 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 shares
of the registrant's common stock outstanding.

 DOCUMENTS INCORPORATED BY REFERENCE

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

 ANNUAL REPORT ON FORM 10-K

 For the Fiscal Year Ended June 30, 2025

 Page

 Cautionary Note Regarding Forward-Looking Statements

 ii

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 Reserved

 Item 7.

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

 Item 7A.

 Quantitative and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary Data

 3 6

 Item 9.

 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 3 8

 Item 10.

 Directors, Executive Officers and Corporate Governance

 3 9

 Item 11.

 Executive Compensation

 3 9

 Item 12.

 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 3 9

 Item 13.

 Certain Relationships and Related Transactions and Director Independence

 3 9

 Item 14.

 Principal Accountant Fees and Services

 3 9

 Item 15.

 Exhibits and Financial Statement Schedules

 Item 16.

 Form 10-K Summary

 i

 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 to
substantial risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established
by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report,
or incorporated by reference into this Report, are forward-looking statements. Throughout this Report, we have attempted to identify forward-looking
statements by using words such as "may," "believe," "will," "could," "project,"
"anticipate," "expect," "estimate," "should," "continue," "potential,"
"plan," "forecasts," "goal," "seek," "intend," other forms of these words
or similar words or expressions or the negative thereof. Additionally, statements concerning future matters such as our expected
earnings, revenues, expenses and financial condition, our expectations with respect to the development of new products, and other statements
regarding matters that are not historical are forward-looking statements.

 We have based our forward-looking statements on management's current
expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking
statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements are
subject to substantial risks and uncertainties that could cause our future business, financial condition, results of operations or performance
to differ materially from our historical results or those expressed or implied in any forward-looking statement contained in this Report.
Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ
materially from our expectations include, but are not limited to, those set forth under "Risk Factors" in Item 1A of Part
I of this Report, as such factors may be updated, amended or superseded from time to time by subsequent quarterly reports on Form 10-Q
or current reports on Form 8-K. In addition, actual results may differ as a result of additional risks and uncertainties of which we are
currently unaware or which we do not currently view as material to our business.

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

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

 ii

 ITEM 1.

 BUSINESS

 Overview

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

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

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

 References in this Report to "fiscal 2025" refer to the fiscal
year ended June 30, 2025, and references to "fiscal 2024" refer to the fiscal year ended June 30, 2024. In addition, unless
the 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, enterprise
and unmanned aerial systems ("UAS") (drones). We position ourselves in these markets to deliver complete solutions encompassing
our hardware, software, device management, and design services to meet the evolving needs of our customers and address each layer of the
IoT stack. Below are customer examples that highlight our impact:

 Smart Cities: We are partnering with various Smart Grid customers that deploy their solutions to enhance grid resiliency and flexibility through intelligence at the edge. We supply customers an entire solution that includes our SmartLV compute and connectivity solutions as well as our design services. This engagement underscores the ongoing value and scalability of our solutions within the growing smart city infrastructure market.

 Enterprise: In the financial sector, we provide solutions to a Tier 1 banking customer to enhance network resiliency using our Out-of-Band Management offerings. Our hardware and software offerings provide secure alternative pathways for critical infrastructure, including servers, networks, and routers. These solutions not only bolster cybersecurity and tracking but also improve operational efficiency through enhanced automation, uptime, and resiliency.

 Unmanned Aerial Systems (UAS): We are advancing the UAS market through our Qualcomm Dragonwing–based system-on-modules ("SoM"), purpose-built for industrial drone applications with particular focus on defense and security. We are working with customers to deliver high-performance compute at the edge for flight control, video processing, and AI-enabled situational awareness. In parallel, we are pursuing opportunities with additional UAS manufacturers in industrial, inspection, and defense segments.

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

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

 Products and Solutions

 Embedded IoT Solutions

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

 Our latest SIP devices are designed to process multiple media streams using
Computer Vision (CV) technology, enabling sophisticated edge analytics. These modules are remotely managed via Percepxion, Lantronix's
Cloud IoT Edge Solution software, offering seamless control and monitoring. Typically embedded into customer product designs, Lantronix's
IoT 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-certified
solutions 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 market
while enhancing their overall value proposition.

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

 IoT System Solutions

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

 Our PoE products support remote devices such as cameras and wireless access
points by passing electrical power along with data on Ethernet cabling, eliminating the need for traditional AC/DC electrical power in
hard-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 of
fault management and diagnostics to troubleshoot networks and proactively fix problems. Our media converters and other customer premise
equipment assist customers in resolving challenges in the areas of bandwidth constraints, security risks and distance limitations as networks
extend 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 logging
and positional tracking functionality and reliability for supply chain and logistics solutions. Our Industrial IoT devices are designed
to be flexible in the field while offering a variety of connectivity options to suit customers' needs across 4G, 5G and LTE cellular
networks. 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 accelerate
our 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) Management
allows 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 remote
control of devices, servers and end stations. OOB uses a dedicated management network to access critical infrastructure components and
ensure production-independent connectivity. Remote Management allows organizations to effectively monitor and control their enterprise
IT equipment and facilities (environments), either in or out of band, optimizing their IT support resources.

 Our Advanced OOB product line includes console management, power management
and IP-connected keyboard-video-mouse (commonly referred to as "IPKVM") products that provide remote access to IT and networking
infrastructure 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 comprehensive
single-pane-of-glass management for OOB and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate
across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device.
Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale
deployments.

 For OEMs and System Integrators ("SI") our platform offers
multitenancy 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 best
practices to deliver high-quality, innovative products cost-effectively and on schedule. Our engineering services model is flexible, offering
either turnkey product development or team augmentation to accelerate complex product development challenges, such as camera tuning, voice
control, machine learning, AI, computer vision, augmented/virtual reality, and more.

 In addition to our production-ready edge computing solutions, we offer
experienced multidisciplinary engineering services across complete aspects of IoT product development, including hardware, software, mechanical
engineering, rapid prototyping, and quality assurance. Our specialized services also extend to camera, audio, and AI/machine learning
development, 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 designs
for complex applications, helping customers reduce costs and time-to-market while improving performance and reliability.

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

 This strategy positions us as a go-to partner for companies needing specialized
engineering 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 our
net 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 our
net revenue and other operating results is set forth in "Risk Factors" included in Part I, Item 1A of this Report, which is
incorporated 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 that
are 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 from
nine 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-added
resellers ("VARs"), systems integrators, distributors, online retailers and, to a lesser extent, OEMs. The design cycles for
these 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 resell
our 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 maintain
an e-commerce site for direct sales.

 Sales and Marketing

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

 Manufacturing

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

 Our contract manufacturers source raw materials, components and
integrated 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 because
alternative 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 of
hardware and software technology to differentiate our products and enhance our competitive position in the markets we serve. Product research
and development is primarily performed in-house and supplemented with outsourced resources.

 Competition

 Our industry is highly competitive and characterized by rapid technological
advances and evolving industry standards. The market can be affected significantly by new product introductions and marketing activities
of 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 intellectual
property. 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-disclosure
agreements and contractual provisions. We enter into a non-disclosure and confidentiality agreement with each of our employees, consultants
and third parties that have access to our proprietary technology. Pursuant to assignment of inventions agreements, all of our employees
and consultants assign to us all intellectual property rights for the relevant inventions created in connection with their employment
or contract with us. We currently hold U.S. and international patents covering various aspects of our products, with additional patent
applications pending.

 U.S. and Foreign Government Regulation

 Many of our products are subject to certain mandatory regulatory approvals
in the regions in which our products are deployed. In particular, wireless products must be approved by the relevant government authority
prior to these products being offered for sale. In addition, certain jurisdictions have regulations requiring products to use environmentally
friendly 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 full
time employees, none of whom is represented by a labor union. We have not experienced any labor problems resulting in a work stoppage
and believe we have good relationships with our employees.

 Customer and Geographic Concentrations

 We conduct our business globally and manage our sales teams by three
geographic regions: the Americas; EMEA; and APJ. A discussion of sales to our significant customers and sales within geographic regions
is set forth in Notes 2 and 11 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporated
herein by reference. A discussion of factors potentially affecting our customer and geographic concentrations is set forth in "Risk
Factors" 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, Current
Reports on Form 8-K, Proxy Statements on Schedule 14A and other reports and information that we file or furnish pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act") are available free of charge on our website at www.lantronix.com as
soon 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 regarding
issuers that file electronically. The contents of our website are not incorporated by reference into this Report. References to our website
address 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 presents
the names, ages, and positions held by our executive officers as of the date of this Report:

 Name

 Age

 Position

 Saleel Awsare

 President and Chief Executive Officer

 Brent Stringham

 Chief Financial Officer

 Mathi Gurusamy

 Chief Product and Strategy Officer

 Kurt Hoff

 Chief Revenue Officer

 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 and
Mobile Division of Synaptics Incorporated, a developer of human interface hardware and software, from September to November 2023. Prior
to that, Mr. Awsare served as Senior Vice President and General Manager of the PC and Peripherals Unit of Synaptics from August 2020 to
September 2023; Senior Vice President and General Manager of Synaptics's IoT Division from April 2019 to July 2020; and Senior Vice
President of Corporate Marketing & Investor Relations at Synaptics from October 2018 until April 2019. Prior to joining Synaptics
as 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 August
2017, and Conexant's Senior Vice President & General Manager of Audio & Imaging from April 2012 to March 2016. Prior to
joining Conexant, Mr. Awsare served as President of U.S. Operations and General Manager of Audio & Voice Solutions of Nuvoton Technology
Corporation, a Taiwan-based semiconductor company, from December 2008 to March 2012.

 BRENT STRINGHAM has served as our Chief Financial Officer since January
2025. Mr. Stringham joined Lantronix in 2012 and previously served as the Company's interim Chief Financial Officer and Chief Accounting
Officer since September 2024. Prior to that, he served as our Senior Director of Finance and Corporate Controller beginning in February
2012. Previously, Mr. Stringham served as Controller at Iteris, Inc., a provider of software, hardware and services for smart mobility
infrastructure 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 since
April 2025. Previously Mr. Gurusamy served as our Chief Strategy Officer since May 2024. Prior to joining Lantronix, Mr. Gurusamy served
as Chief Operating Officer at Ikotek USA, Inc., a global provider of original design manufacturing for IoT, from November 2023 to May
2024. Mr. Gurusamy served as President at Telit Cinterion, an end-to-end IoT solutions enabler, from October 2022 to October 2023, and
previously served at Telit as Chief Operating Officer from January 2010 to March 2016 and as Global VP – Operations & Supply
Chain from June 2008 to December 2009. He also served as President and Chief Operating Officer of Mobilogix, a startup company specializing
in custom IoT solutions, from April 2016 to June 2018 and as Chief Executive Officer and President from June 2018 until Mobilogix's
acquisition by Telit in September 2022.

 KURT HOFF has served as our Chief Revenue Officer since April 2025. Previously
Mr. Hoff served as our Vice President of Worldwide Sales since March 2024. Prior to joining Lantronix, Mr. Hoff served as Vice President
of Global Sales at MYTHIC AI, a venture-backed AI processor company, from May 2022 to December 2022. Previously, Mr. Hoff served as Senior
Vice 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 acquisition
by Synaptics in July 2017. He served as Senior Vice President of Worldwide Sales at Silicon Laboratories Inc. from July 2007 until November
2015.

 ITEM 1A.

 RISK FACTORS

 We operate in a rapidly changing environment that involves numerous
risks and uncertainties. Before deciding to purchase, hold or sell our common stock, you should carefully consider the risks described
in this section, as well as other information contained in this Report and in our other filings with the SEC. This section should be read
in 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 7
of this Report. If any of these risks or uncertainties actually occurs, our business, financial condition, results of operations or prospects
could be materially harmed. In that event, the market price for our common stock could decline and you could lose all or part of your
investment. In addition, risks and uncertainties not presently known to us or that we currently deem immaterial may also adversely affect
our business.

 Risks Related to Our Operations and Industry

 We depend upon a relatively small number of distributor and end-user
customers 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-user
customers 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 significant
customers or a decline in sales to our significant customers could result in a material loss of sales and possible increase in excess
inventories which would adversely affect our business, financial condition, and results of operations.

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

 Some of our integrated circuits are only available from a single source
and in some cases, are no longer being manufactured. From time to time, integrated circuits, and potentially other components used in
our products, will be phased out of production by the manufacturer. When this happens, we attempt to purchase sufficient inventory to
meet our needs until a substitute component can be incorporated into our products. Nonetheless, we may be unable to purchase sufficient
components 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, tensions
between China and Taiwan, increased tariffs and changes in U.S. trade policies or otherwise. From time to time, we have been unable to
meet customer orders because we were unable to purchase necessary components for our products. We do not have long-term supply arrangements
with most of our vendors to obtain necessary components, including semiconductor chips, or technology for our products and instead purchase
components on a purchase order basis. If we are unable to purchase components from these suppliers, our product shipments could be prevented
or 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 shortage
in components, we will likely lose net revenue, risk losing customers and risk harm to our reputation in the marketplace, which could
adversely affect our business, financial condition or results of operations.

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

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

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

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

 reduced control over delivery schedules, quality assurance, manufacturing yields and production costs;

 lack of guaranteed production capacity or product supply;

 effects of terrorist attacks or geopolitical conflicts abroad;

 reliance on these manufacturers to maintain competitive manufacturing technologies;

 unexpected changes in regulatory requirements, taxes, trade laws and tariffs;

 reduced protection for intellectual property rights in some countries;

 differing labor regulations;

 disruptions to the business, financial stability or operations, including due to strikes, labor disputes or other disruptions to the workforce, of these manufacturers;

 compliance with a wide variety of complex regulatory requirements;

 fluctuations in currency exchange rates;

 changes in a country's or region's political or economic conditions;

 greater difficulty in staffing and managing foreign operations; and

 increased financial accounting and reporting burdens and complexities.

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

 From time to time, we may transition the manufacturing of certain products
from one contract manufacturer to another. For example, in connection to the recently increased tariffs proposed to be imposed by the
U.S. against China, we continue to transition our remaining manufacturing out of China. We have and may in the future incur substantial
expenses, 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 as
the 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, an
adverse 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 significantly
curtailed. If these activities are suspended, cancelled and/or significantly curtailed in the future, whether due to a possible pandemic
and similar outbreak, our sales may be negatively impacted in the future.

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

 significant volatility or decreases in the demand for our products or extended sales cycles;

 changes in customer behavior and preferences, as customers may experience financial difficulties and/or may delay orders or reduce their spending;

 adverse impacts on our ability to distribute or deliver our products or services, as well as temporary disruptions, restrictions or closures of the facilities of our suppliers or customers and their contract manufacturers;

 further disruptions in our contract manufacturers' ability to manufacture our products, as some contract manufacturers and suppliers of materials used in the production of our products are, or may be, located in areas more severely impacted by a possible pandemic, which has in the past limited and could in the future limit, our ability to obtain sufficient materials to produce and manufacture our products; and

 volatility in the availability of raw materials and components that our
 contract manufacturers purchase and volatility in raw material and other input costs.

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

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

 Certain of our products are sold into mature markets that are characterized
by a trend of declining demand. As the overall market for these products decreases due to the adoption of new technologies, our revenues
from these products have declined, and we expect they will continue to decline in the future. As a result, our future prospects will depend
on our ability to develop and successfully market new products that address new and growing markets. Our failure to develop new products
or failure to achieve widespread customer acceptance of any new products could cause us to lose market share and cause our revenues to
decline. 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 new
products often involves a significant technical evaluation, and we often face delays because of our customers' internal procedures
for evaluating, approving and deploying new technologies. For these and other reasons, the sales cycle associated with new products is
typically lengthy, often lasting six to 24 months and sometimes longer. Therefore, there can be no assurance that our introduction or
announcement of new product offerings will achieve any significant or sustainable degree of market acceptance or result in increased revenue
in the near term.

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

 We continue to dedicate engineering resources to our management software
platform, applications, and SaaS offerings. These product and service offerings are subject to significant additional risks that are not
necessarily related to our hardware products. Our ability to succeed with these offerings will depend in large part on our ability to
provide customers with software products and services that offer features and functionality that address their specific needs. We may
face challenges and delays in the development of this product line as the marketplace for products and services evolves to meet the needs
and 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 establish
or maintain market share for our software and SaaS offerings. As we develop new product lines, we must adapt to market conditions that
are unfamiliar to us, such as competitors and distribution channels that are different from those we have known in the past. We have and
will 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 realize
a profit from this new segment.

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

 Our operating results fluctuate because we often receive large orders from
customers that coincide with the timing of the customer's project. Sales of our products and services may be delayed if customers
delay approval or commencement of projects due to budgetary constraints, internal acceptance review procedures, timing of budget cycles
or timing of competitive evaluation processes. In addition, sometimes our customers make significant one-time hardware purchases for projects
which are not repeated. We sell primarily on a purchase order basis rather than pursuant to long-term contracts, and we expect fluctuations
in our revenues as a result of one-time project-based purchases to continue in the future. In addition, our sales may be subject to significant
fluctuations based on the acceleration, delay or cancellation of customer projects, or our failure to complete one or a series of significant
potential sales. Because a significant portion of our operating expenses are fixed, even a single order can have a disproportionate effect
on 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 difficult
for 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 with
delays 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 extends
between three and 24 months and sometimes longer due to a lengthy customer evaluation and approval process. The length of this process
can be affected by factors over which we have little or no control, including the customer's budgetary constraints, timing of the
customer's budget cycles, and concerns by the customer about the introduction of new products by us or by our competitors. As a
result, sales cycles for customer orders vary substantially among different customers. The lengthy sales cycle is one of the factors that
has 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 agreements
or revenues, which may prevent us from pursuing other opportunities. Accordingly, excessive delays in sales could be material and adversely
affect our business, financial condition or results of operations.

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

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

 the lengthy and unpredictable sales cycle for our products that can extend from six to 24 months or longer;

 the project-driven nature of many of our customers' requirements;

 we primarily sell our products indirectly through distributors;

 the uncertainty of the extent and timing of market acceptance of our new products;

 the need to obtain industry certifications or regulatory approval for our products;

 the lack of long-term contracts with our customers;

 the diversity of our product lines and geographic scope of our product distribution;

 we have some customers who make single, non-recurring purchases; and

 a large number of our customers typically purchase in small quantities.

 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 costs
and potentially require us to write-off inventory that becomes obsolete. Additionally, if we underestimate our customers' future
requirements, 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 and
the value of our common stock may decline.

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

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

 Prior to purchasing our products, some of our customers require that products
undergo a qualification process, which may involve testing of the products in the customer's system. A subsequent revision to a
product's hardware or firmware, changes in the manufacturing process or our selection of a new supplier may require a new qualification
process, 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 customer
commences volume production of components or devices that incorporate our products. If we are unsuccessful or delayed in qualifying any
new or revised products with a customer, that failure or delay would preclude or delay sales of these products to the customer, and could
negatively impact our financial results. In addition, new revisions to our products could cause our customers to alter the timing of their
purchases, 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 complete
order fulfillment.

 We depend on the resale of products through distributor accounts for a
substantial 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 change
in our relationship with one or more distributors may reduce our access to certain end customers and adversely affect our ability to sell
our products. Furthermore, if a key distributor materially defaults on a contract or otherwise fails to perform, our business and financial
results would suffer.

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

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

 A substantial part of our revenues is generated through sales by distributors
and resellers. To the extent they are unsuccessful in selling our products, or if we are unable to obtain and retain a sufficient number
of high-quality distributors and resellers, our operating results could be materially and adversely affected. In addition, our distributors
and resellers may devote more resources to marketing, selling and supporting products and services that are competitive with ours, than
to our products. They also may have incentives to promote our competitors' products over our products, particularly for our competitors
with larger volumes of orders, more diverse product offerings and a longer relationship with our distributors and resellers. In these
cases, one or more of our important distributors or resellers may stop selling our products completely or may significantly decrease the
volume of products they sell on our behalf. This sales structure also could subject us to lawsuits, potential liability and reputational
harm if, for example, any of our distributors or resellers misrepresents the functionality of our products or services to customers or
violates 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 affect
our net revenue and gross margins and adversely affect results of operations.

 In the past, we have experienced reductions in the average selling prices
and gross margins of our products. We expect competition to continue to increase, and we anticipate this could result in additional downward
pressure on our pricing. Our average selling prices for our products might also decline as a result of other reasons, including promotional
programs 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, our
gross 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 the
decline in prices.

 If we are unable to sell our inventory in a timely manner, it could
become 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 attractive
features or at lower prices than ours. If this occurs, and for other reasons, we may not be able to accurately forecast demand for our
products and our inventory levels may increase. There is a risk that we may be unable to sell our inventory in a timely manner to avoid
it 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 substantially
harmed.

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

 The market in which we operate is intensely competitive, subject to rapid
technological advances and highly sensitive to evolving industry standards. The market can also be affected significantly by new product
and technology introductions and marketing and pricing activities of industry participants. Our products compete directly with products
produced by a number of our competitors. Many of our competitors and potential competitors have greater financial and human resources
for marketing and product development, more experience conducting research and development activities, greater experience obtaining regulatory
approval 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 against
our current or potential future competitors. In addition, the amount of competition we face in the marketplace may change and grow as
the market for IoT and machine-to-machine networking solutions grows and new companies enter the marketplace. Present and future competitors
may be able to identify new markets, adapt new technologies, develop and commercialize products more quickly and gain market acceptance
of 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 investments
may 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, strategic
partnerships and joint ventures that we believe would allow us to complement our growth strategy, increase market share in our current
markets 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 businesses
of Communication Systems, Inc., Uplogix, Inc. ("Uplogix"), and Netcomm Wireless Pty Ltd ("Netcomm") in calendar
years 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 we
are 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 increased
fixed costs, and may expose us to unanticipated liabilities. If any of these occur, we may fail to meet our business objectives and our
business, financial condition and operating results could be materially and adversely affected.

 We may experience difficulties associated with utilizing third-party
logistics providers.

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

 Relying on third-party logistics providers could increase the risk of the
following: 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 our
information and expose us to liability, which could cause our business and reputation to suffer.

 Increased global information technology security threats and more sophisticated
and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity
of our data. There have been several highly publicized cases in which organizations of various types and sizes have reported the unauthorized
disclosure of customer or other confidential information, as well as cyberattacks involving the dissemination, theft and destruction of
corporate information, intellectual property, cash or other valuable assets. There have also been several highly publicized cases in which
hackers have requested "ransom" payments in exchange for not disclosing customer or other confidential information or for
not disabling the target company's computer or other systems. The secure processing, maintenance and transmission of the information
that 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 information
systems, 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 advanced
forms of machine learning, AI and quantum computing, long-term implementation plans designed to address cybersecurity risks become obsolete
quickly 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 includes
a threat, such as introducing malicious code by incorporating AI generated source code. Any unauthorized access, disclosure or other loss
of information could result in legal claims or proceedings, disrupt our operations, damage our reputation, and cause a loss of confidence
in our products and services, which could adversely affect our business.

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

 In the ordinary course of our business, we collect and store sensitive
data, 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 unauthorized
access to such information, we may incur significant costs or liabilities and lose customer confidence in us, which would harm our reputation
and results of operations. In addition, we could be subject to liability or our reputation could be harmed if technologies integrated
into our products, or our products, fail to prevent cyberattacks, or if our partners or customers fail to safeguard the systems with security
policies that conform to industry best practices. In addition, any cyberattack or security breach that affects a competitor's products
could 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 cybersecurity
risks, 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 or
proprietary information, intellectual property or personally identifiable information of our customers or other third parties with whom
they do business. It is important for us to maintain solutions and related infrastructure that are perceived by our customers and other
parties with whom we do business to provide a reasonable level of reliability and security. Despite available security measures and other
precautions, the infrastructure and transmission methods used by our products and services may be vulnerable to interception, attack or
other disruptive problems. Additionally, some of our products include capabilities to support AI which may further increase our products
susceptibility or perceived susceptibility of security risks.

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

 Failure to comply with data privacy laws and regulations could have
a 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 business
may involve access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuse
or improper disclosure of which could result in legal liability. The collection, hosting, transfer, disclosure, use, storage and security
of 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 outside
the country of collection), processing, storage, use and disclosure of personal information, and require notice to individuals of privacy
practices and in some cases consent to collection of personal information; give individuals certain access, correction and deletion rights
with respect to their personal information; and prevent the use or disclosure of personal information, or require providing opt-outs for
the use and disclosure of personal information, for secondary purposes such as marketing. Under certain circumstances, some of these laws
require us to provide notification to affected individuals, data protection authorities and/or other regulators in the event of a data
breach. 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 more
stringent. For example, the European General Data Protection Regulation (the "GDPR") requires us to meet stringent requirements
regarding (i) our access, use, disclosure, transfer, protection, or otherwise processing of personal information; and (ii) the ability
of 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 generally
prohibited unless certain measures are followed.

 The 2018 California Consumer Privacy Act and California Privacy Rights
Act of 2020 provide individuals similar rights with respect to the processing of their personal data. Multiple states in the U.S. have
enacted 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 increased
enforcement by the Federal Trade Commission under its power to regulate unfair and deceptive trade practices. Markets in the Asia Pacific
region have also recently adopted GDPR-like legislation, including China's new Personal Information Protection Law. Failure to meet
Privacy and Data Protection Law requirements could result in significant civil penalties (including fines up to 4% of annual worldwide
revenue under the GDPR) as well as criminal penalties. Privacy and data protection law requirements also confer a private right of action
in some countries, including under the GDPR.

 As these laws continue to evolve, we may be required to make changes to
our systems, services, solutions and/or products to enable us and/or our clients to meet the new legal requirements, including by taking
on more onerous obligations, limiting our storage, transfer and processing of data and, in some cases, limiting our service and/or solution
offerings 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 compliance
with, and other burdens imposed by, such laws and regulations and client demand in this area may limit the use of, or demand for, our
services, solutions and/or products, make it more difficult and costly to meet client expectations, or lead to significant fines, penalties
or 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 and
we expect this part of our business to grow. As with many new emerging technologies, AI presents risks and challenges and increasing ethical
concerns 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 competitive
harm, 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 impact
our ability to sell or the ability of our customers and users worldwide to acquire, deploy and use systems that include our AI-related
products and services, which could thus require us to change our business practices and could adversely affect our business, financial
condition and results of operations. If the AI-related products that we offer have unintended consequences or unintended usage or customization
by our customers or are otherwise controversial due to their perceived or actual impact on human rights, privacy, employment or other
social, economic or political issues the public's acceptance of AI may be impaired and may result in reputational and financial
harm and liability to our business.

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

 Certain of our products contain software developed and maintained by third-party
software vendors or which are available through the "open source" software community. We also expect that we may incorporate
software from third-party vendors and open source software in our future products. Our business would be disrupted if this software, or
functional 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 or
defects 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 of
our products. Our products could contain undetected software or hardware errors or defects. If there is a product failure, we might have
to replace all affected products, or we might have to refund the purchase price for the units. Regardless of the amount of testing we
undertake, some errors might be discovered only after a product has been installed and used by customers. Any errors discovered after
commercial release could result in financial losses and claims against us. Significant product warranty claims against us could harm our
business, 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 intellectual
property 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 protect
our proprietary rights. Despite any precautions that we have taken:

 laws and contractual restrictions might not be sufficient to prevent misappropriation of our technology or deter others from developing similar technologies;

 other companies might claim intellectual property rights based upon prior use that negatively impacts our ability to enforce our trademarks and patents; and

 policing unauthorized use of our patented technology and trademarks is difficult, expensive and time-consuming, and we might be unable to determine the extent of this unauthorized use.

 Also, the laws of some of the countries in which we market and manufacture
our products offer little or no effective protection of our proprietary technology. Reverse engineering, unauthorized copying or other
misappropriation 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 costly
efforts 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 property
rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could
result 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 interruptions
could 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 products
are 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 chain
that would hinder our ability to produce our products in a timely manner, or cause us to seek other sources of supply, which may be more
costly or which we may not be able to procure on a timely basis. In addition, our customers may not follow their normal purchasing patterns
or temporarily cease purchasing from us due to impacts to their businesses in the region, creating unexpected fluctuations or decreases
in our revenues and profitability. Natural disasters in other parts of the world on which our operations are reliant also could have material
adverse impacts on our business.

 In addition, our operations and those of our suppliers are vulnerable to
interruption by fire, earthquake, power loss, telecommunications failure, cybersecurity breaches, IT systems failure, terrorist attacks
and other events beyond our control, including the effects of climate change. A substantial portion of our facilities, including our corporate
headquarters and other critical business operations, are located near major earthquake faults and, therefore, may be more susceptible
to damage if an earthquake occurs. We do not carry earthquake insurance for direct earthquake-related losses. If a business interruption
occurs, 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 Deposit
Insurance Corporation ("FDIC") insured banks, which exceed the FDIC insurance limits. Bank failures, events involving limited
liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about such
events, 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 and
were 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 that
bank could simultaneously prevent access to both a substantial portion of our cash holdings and to our credit line for funds needed to
meet our working capital requirements and other financial commitments. Our cash balances are concentrated at a small number of financial
institutions. 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 deposits
in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or any applicable foreign government in the
future or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government
institutions 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 payments
to us could be adversely affected.

 We have a history of losses.

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

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

 To remain competitive, we must continue to make significant investments
to operate our business and develop our products. Our future capital requirements will depend on many factors, including the timing and
amount of our net revenue, research and development expenditures, expenses associated with any strategic partnerships or acquisitions
and infrastructure investments, and expenses related to litigation, each of which could negatively affect our ability to generate additional
cash from operations. If cash generated from operations is insufficient to satisfy our working capital requirements, we may need to raise
additional capital. Looking ahead at long-term needs, we may need to raise additional funds for a number of purposes, including, but not
limited to:

 to fund working capital requirements;

 to update, enhance or expand the range of products we offer;

 to refinance existing indebtedness;

 to increase our sales and marketing activities;

 to respond to competitive pressures or perceived opportunities, such as investment, acquisition and international expansion activities; or

 to acquire additional businesses

 We may seek additional capital from public or private offerings of our
capital stock, borrowings under our existing or future credit lines or other sources. If we issue equity or debt securities to raise additional
funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges
senior 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 on
terms acceptable to us, if at all. If we are unable to secure additional financing in sufficient amounts or on favorable terms, we may
not be able to develop or enhance our products, take advantage of future opportunities, respond to competition or continue to operate
our business.

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

 The terms of our amended and restated credit facility restrict, among
other things, our ability to incur liens or indebtedness, dispose of assets, make investments, make certain restricted payments, merge
or consolidate and enter into certain transactions with our affiliates. Further, we are currently and may in the future be required to
maintain 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 that
we 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 ability
to manage our cash holdings effectively.

 Risks Related to International Operations

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

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

 We cannot predict whether, and to what extent, there may be changes to
international trade agreements or whether additional quotas, duties, tariffs, exchange controls or other restrictions on our products
will be changed or imposed. If we are unable to source our products from the countries where we wish to purchase them, either because
of 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 implementing
local or alternative sourcing initiatives that make it more difficult to sell our products in foreign countries, which would negatively
impact our business and operating results.

 We face risks associated with our international operations that could
impair 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 ability
to increase sales in international markets. These sales are subject to a variety of risks, including geopolitical events, fluctuations
in currency exchange rates, tariffs, import restrictions and other trade barriers, unexpected changes in regulatory requirements, longer
accounts receivable payment cycles, potentially adverse tax consequences, and export license requirements. In addition, we are subject
to the risks inherent in conducting business internationally, including political and economic instability and unexpected changes in diplomatic
and trade relationships. In many markets where we operate, business and cultural norms are different than those in the U.S., and practices
that may violate laws and regulations applicable to us such as the Foreign Corrupt Practices Act (the "FCPA") unfortunately
are more commonplace. Although we have implemented policies and procedures with the intention of ensuring compliance with these laws and
regulations, our employees, contractors and agents, as well as distributors and resellers involved in our international sales, may take
actions in violation of our policies. Many of our vendors and strategic business allies also have international operations and are subject
to the risks described above. Even if we are able to successfully manage the risks of international operations, our business may be adversely
affected if one or more of our business partners are not able to successfully manage these risks. There can be no assurance that one or
more 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 and
interest rates. In particular, we are exposed to changes in the value of the U.S. dollar versus the local currency in which our products
are sold and our services are purchased, including devaluation and revaluation of local currencies. Accordingly, fluctuations in foreign
currency 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 approvals
from governmental regulatory bodies could impede our ability to grow revenues in our wireless products.

 The sale of our wireless products in some geographical markets is
sometimes dependent on the ability to gain certifications and/or approvals by relevant governmental bodies. In addition, many of our products
are 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 markets
and could have an adverse impact on our revenues.

 Our failure to comply effectively with regulatory laws pertaining
to 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 the
sale of our products to foreign customers, including requirements to properly classify and screen our products against a denied parties
list prior to shipment. We are also required to comply with the provisions of the FCPA and all other anti-corruption laws, such as the
U.K. Anti-Bribery Act, of all other countries in which we do business, directly or indirectly, including compliance with the anti-bribery
prohibitions and the accounting and recordkeeping requirements of these laws. Violations of the FCPA or other similar laws could trigger
sanctions, including ineligibility for U.S. government insurance and financing, as well as large fines. Failure to comply with the aforementioned
regulations could also affect our decision to sell our products in international jurisdictions, which could have a material adverse effect
on our revenues and profitability.

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

 Certain states and countries have passed regulations relating to chemical
substances in electronic products and requiring electronic products to use environmentally friendly components. For example, the European
Union has the Waste Electrical and Electronic Equipment Directive, the Restrictions of Hazardous Substances Directive, and the Regulation
on Registration, Evaluation, Authorization and Restriction of Chemicals. In the future, China and other countries including the U.S. may
adopt further environmental compliance programs. In order to comply with these regulations, we may need to redesign our products to use
different components, which may be more expensive, if they are available at all. If we fail to comply with these regulations, we may not
be able to sell our products in jurisdictions where these regulations apply, which could have a material adverse effect on our revenues
and profitability.

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

 We may become subject to increased scrutiny and evolving expectations from
investors, customers, lawmakers, regulators, and other stakeholders on environmental, social and governance ("ESG") practices
and 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 organizations
that 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 companies
or 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 of
our business. Any lawsuit may involve complex questions of fact and law and may require the expenditure of significant funds and the diversion
of other resources. The results of litigation are inherently uncertain, and adverse outcomes are possible. Adverse outcomes may have a
material adverse effect on our business, financial condition or results of operations.

 In particular, litigation regarding intellectual property rights occurs
frequently 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, business
processes and other property rights in our industry might be increasingly subject to third-party infringement claims as the number of
competitors grows and the functionality of products in different industry segments overlaps. Other parties might currently have, or might
eventually be issued, patents that pertain to the proprietary rights we use. Any of these third parties might make a claim of infringement
against us. The results of litigation are inherently uncertain, and adverse outcomes are possible.

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

 be time-consuming, costly and/or result in litigation;

 divert management's time and attention from developing our business;

 require us to pay monetary damages, including treble damages if we are held to have willfully infringed;

 require us to enter into royalty and licensing agreements that we would not normally find acceptable;

 require us to stop selling or to redesign certain of our products; or

 require us to satisfy indemnification obligations to our customers.

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

 General Risk Factors

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

 Interest rates are highly sensitive to many factors that are beyond our
control, 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 interest
rates may hinder the economic growth in markets where we do business, and has and may continue to have negative impacts on the global
economy. High interest rates may lead customers to decrease or delay spending on products and projects, including on products that we
sell, which may have a material adverse effect on our business, financial condition and results of operations. In addition, higher interest
rates impact the amount of interest we pay for our debt obligations and leases and continue and sustained increases in interest rates
could negatively impact our financing costs or cash flow.

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

 As disclosed in Part II, Item 9A of our Annual Report on Form 10-K
for the year ended June 30, 2024, during fiscal 2023, management identified a material weakness related to the design and implementation
of information technology general controls related to the Company's information systems that are relevant to the preparation of
consolidated financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements
will not be prevented or detected on a timely basis. We implemented a number of measures that effectively remediated the previously disclosed
material weakness and concluded as of June 30, 2025 that our internal control over financial report was effective. However, we cannot
provide assurances that a new material weakness will not occur in the future. If we, or our independent registered public accounting firm
identify one or more additional material weaknesses, or, if we are otherwise unable to maintain effective internal control over financial
reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare
financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations
requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements
and 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 a
timely 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 management
and technical personnel, it could materially harm our business.

 Our financial performance depends substantially on the performance of our
executive officers and of key engineers, marketing and sales employees. We are particularly dependent upon our technical personnel, due
to the specialized technical nature of our business. If we were to lose the services of our executive officers or any of our key personnel
and 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 cause
the market price of our common stock to decline.

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

 The market price of our common stock has been highly volatile. The market
price 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:

 adverse changes in domestic or global economic, market and other conditions;

 new products or services offered by our competitors;

 our completion of or failure to complete significant one-time sales of our products;

 actual or anticipated variations in quarterly operating results;

 changes in financial estimates by securities analysts;

 announcements of technological innovations;

 our announcement of significant mergers, acquisitions, strategic partnerships, joint ventures or capital commitments;

 conditions or trends in the industry;

 additions or departures of key personnel;

 increased competition from industry consolidation; and

 sales of common stock by our stockholders or us or repurchases of common stock by us.

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

 ITEM 1B.

 UNRESOLVED STAFF COMMENTS

 None.

 ITEM 1C.

 CYBERSECURITY

 Risk Management and Strategy

 We have established policies and processes for assessing, identifying,
and managing material risk from cybersecurity threats, and have integrated these processes into our overall risk management systems and
processes. We routinely assess material risks from cybersecurity threats, including any potential unauthorized occurrence on or conducted
through our information systems that may result in adverse effects on the confidentiality, integrity, or availability of our information
systems or any information residing therein.

 We leverage guidance from the National Institute of Standards and Technology
Cybersecurity Framework ("NIST CSF"), which provides an outline of enterprise security processes and controls, to inform the
design and assessment of our cybersecurity risk management program. This does not imply that we meet any particular technical standards,
specifications, or requirements, only that we use the NIST CSF as a guide to help us identify, assess, and manage cybersecurity risks
relevant to our business.

 As part of our risk management process, we may engage third-party experts
to help identify and assess risks from cybersecurity threats. Our risk management process also encompasses cybersecurity risks associated
with our use of third-party service providers.

 Our cybersecurity risk management program includes:

 risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services and our broader IT environment;

 evaluations of our readiness to assess, respond and, as applicable, recover from potential cybersecurity incidents;

 periodic tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes, technologies and incident response plan;

 the use of external service providers, where appropriate, to assess, test, or otherwise assist with the aspects of our security controls;

 cybersecurity training to educate our employees, consultants and other users about their individual responsibilities regarding our IT systems and data;

 weekly briefings on cybersecurity incidents, threats, and related matters;

 a third-party risk management process for service providers, suppliers and vendors who have access to our critical systems and information; and

 cybersecurity risk insurance that provides protection against certain potential costs and losses arising from a cybersecurity incident.

 As of the date of this report, we do not believe that known risks from
cybersecurity threats, including as a result of any previous cybersecurity incidents that we are aware of, have materially affected or
are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However,
we can give no assurance that we have detected or protected against all such cybersecurity incidents or threats or that we will not experience
such an incident in the future. Further details about the cybersecurity risks we face are described under the heading " Risks
Related to Technology, Cybersecurity and Intellectual Property, " included as part of our risk factor disclosures in Part I,
Item 1A of this Report, which disclosures are incorporated by reference herein.

 Governance

 The Board is responsible for the oversight of risks from cybersecurity
threats. Our Board oversees management's implementation of our cybersecurity risk management program. On a quarterly basis, and
more frequently as needed, our Board receives updates from our senior management concerning, among other relevant information, the status
of our cybersecurity initiatives to strengthen our cybersecurity risk management and are apprised, as necessary, regarding any material
cybersecurity incidents, as well as any incidents with lesser impact potential.

 While the Board reviews and oversees the Company's information security
efforts, our Director of IT, under the oversight of our executive officers, is responsible for the day-to-day management of cybersecurity
risk and the design and implementation of policies, processes and procedures to identify and mitigate this risk. Our Director of IT, in
coordination with the executive officers, is responsible for assessing and managing material risks from cybersecurity threats, as well
as managing and responding to material cybersecurity incidents if any occur. Our Director of IT has over 28 years of experience in various
information technology roles, which includes over 10 years of management of cybersecurity matters.

 Our Director of IT provides weekly briefings to the Chief Financial Officer,
General Counsel and other members of our cross-functional incident response team. The weekly briefings are focused on our cybersecurity
risks and activities, including cybersecurity incidents and responses, cybersecurity systems testing, third-party activities and related
topics. In the event that threats and incidents are identified as potentially significant, the Chief Financial Officer and General Counsel
promptly report to our Board.

 ITEM 2.

 PROPERTIES

 The following table presents details regarding our leased facilities:

 Locations

 Primary Use

 Approximate Square Footage

 Irvine, California, U.S.A.

 Corporate headquarters; sales and marketing, research and development, operations and administration

 12,000

 Plymouth, Minnesota, U.S.A.

 Operations; warehouse and administration

 66,000

 Vancouver, British Columbia, Canada

 Engineering, operations and marketing

 8,500

 Hyderabad, India

 Engineering and design

 18,000

 Taipei City, Taiwan

 Engineering, sales and marketing

 5,500

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

 ITEM 3.

 LEGAL PROCEEDINGS

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

 ITEM 4.

 MINE SAFETY DISCLOSURES

 None.

 ITEM 5.

 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 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 do
not anticipate paying any cash dividends on our common stock in the foreseeable future, and we intend to retain any future earnings for
use in the expansion of our business and for general corporate purposes. Any future decision to declare or pay dividends will be made
by the Board in its sole discretion and will depend upon our financial condition, operating results, capital requirements and other factors
that 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.

 ITEM 6.

 RESERVED

 ITEM 7.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 You should read the following discussion and analysis in conjunction
with our consolidated financial statements and the accompanying notes thereto included in Part II, Item 8 of this Annual Report on Form
10-K for the fiscal year ended June 30, 2025 (this "Report"). This discussion and analysis contains forward-looking statements
that 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 "Cautionary
Note Regarding Forward-Looking Statements" at the beginning of this Report.

 Overview

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

 We conduct our business globally and manage our sales teams by three
geographic regions: the Americas; EMEA; and APJ.

 References to "fiscal 2025" refer to the fiscal year ended
June 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 following
product 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 acquisition
of Netcomm Wireless Pty Ltd ("Netcomm"), a subsidiary of DZS Inc., for $6,458,000 in cash. Netcomm operated an enterprise
IoT business. The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance our connectivity
solutions in areas such as critical infrastructure, asset monitoring and telecommunications.

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

 Recent Accounting Pronouncements

 Refer to Note 1 of Notes to Consolidated Financial Statements included
in 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 in
accordance with U.S. generally accepted accounting principles ("GAAP") requires us to make judgments, estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue
and expenses during the reporting period. We regularly evaluate our estimates and assumptions related to revenue recognition, sales returns
and allowances, inventory valuation, valuation of deferred income taxes, valuation of goodwill and long-lived and intangible assets. We
base 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 apparent
from other sources. To the extent there are material differences between our estimates and the actual results, our future results of operations
will be affected.

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

 Revenue Recognition

 Revenue is recognized upon the transfer of control of promised products
or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We apply the following five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract
with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating
the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligation
is satisfied.

 A significant portion of our products are sold to distributors under
agreements which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted
for as variable consideration when estimating the amount of revenue to recognize. Establishing accruals for product returns and pricing
adjustments requires the use of judgment and estimates that impact the amount and timing of revenue recognition. When product revenue
is recognized, we establish an estimated allowance for future product returns based primarily on historical returns experience and other
known 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 consulting
service contracts with customers. These contracts generally include performance obligations in which control is transferred over time
because the customer either simultaneously receives and consumes the benefits provided or our performance on the contract creates or enhances
an asset that the customer controls. These contracts typically provide services on the following basis:

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

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

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

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

 From time to time, we may enter into contracts with customers that include
promises to transfer multiple performance obligations that may include sales of products, professional engineering services and other
product qualification or certification services. Determining whether the promises in these arrangements are considered distinct performance
obligations, that should be accounted for separately versus together, often requires judgment. We consider performance obligations to
be distinct when the customer can benefit from the promised good or service on its own or by combining it with other resources readily
available and when the promised good or service is separately identifiable from other promised goods or services in the contract. In these
arrangements, we allocate revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determine
the standalone selling price for each performance obligation. Additionally, estimating standalone selling prices for separate performance
obligations within a contract may require significant judgment and consideration of various factors including market conditions, items
contemplated during negotiation of customer arrangements and internally developed pricing models. Changes to performance obligations that
we identify, or the estimated selling prices pertaining to a contract, could materially impact the amounts of earned and unearned revenue
that 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 and
obsolete inventories. We determine excess and obsolete inventories based on an estimate of the future sales demand for our products within
a specified time horizon, which is generally 12 to 24 months. In addition, specific reserve estimates are recorded to cover risks for
end-of-life products, inventory located at our contract manufacturers and warranty replacement stock. The estimates we use for demand
are also used for near-term capacity planning and inventory purchasing. Demand for our products can fluctuate significantly from period
to period. A significant decrease in demand could result in an increase in the amount of excess inventory on hand. In addition, our industry
is characterized by rapid technological change, frequent new product development and product obsolescence that could result in an increase
in the amount of obsolete inventory quantities on hand. Our estimates of future product demand and judgement to determine excess inventory
may prove to be inaccurate, in which case we may have understated or overstated the reduction to the total carrying value of our inventory
for excess and obsolete inventory. In the future, if our inventory is determined to be overvalued, we would be required to recognize such
costs in our cost of goods sold, resulting in a reduction in our gross margins, at the time of such determination. Although we make every
effort to ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological
developments 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 assets
to zero, primarily due to historical net operating losses ("NOLs") and uncertainty of generating future taxable income. We
consider estimated future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation
allowance. 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 statements
of operations at that time.

 Business Combinations

 We allocate the fair value of the purchase consideration of a business
acquisition 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 these
identifiable assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with
an indefinite life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an
amortizable purchased intangible asset and amortized over the asset's estimated useful life. The valuation of acquired assets and
assumed liabilities requires significant judgment and estimates, especially with respect to intangible assets. The valuation of intangible
assets, in particular, requires that we use valuation techniques such as the income approach. The income approach includes the use of
a discounted cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expected
revenue, expenses, capital expenditures and other costs, and discount rates. We estimate the fair value based upon assumptions we believe
to 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 assets
acquired and liabilities assumed. Acquisition-related expenses and related restructuring costs are recognized separately from the business
combination and are expensed as incurred.

 Goodwill Impairment Testing

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

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

 significant underperformance relative to historical or projected future operating results;

 significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

 significant negative industry or economic trends;

 a significant decline in our stock price for a sustained period; and

 a significant change in our market capitalization relative to our book value.

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

 Significant management judgment is required in estimating the reporting
unit's fair value and in the creation of the forecasts of future operating results that are used in the discounted cash flow method
of valuation. These include (i) estimation of future cash flows, which is dependent on internal forecasts, (ii) estimation of the long-term
rate of growth of our business, (iii) estimation of the period during which cash flows will be generated and (iv) the determination of
our weighted-average cost of capital, which is a factor in determining the discount rate. Our estimate of the reporting unit's fair
value would also generally include the consideration of a control premium, which is the amount that a buyer is willing to pay over the
current 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 reporting
unit, we may be exposed to goodwill impairment losses.

 We performed our annual goodwill impairment test as of May 31, 2025, using
a quantitative assessment for our single reporting unit. The fair value of the reporting unit was estimated using a combination of the
income approach (discounted cash flow method) and the market approach (guideline public companies and guideline transactions methods).
Key assumptions included revenue growth, EBITDA margins, a long-term growth rate, and a discount rate. These assumptions reflect management's
best estimates of future financial performance, current market conditions, and a market participant perspective. The results of the impairment
test indicated that the estimated fair value exceeded the carrying amount by approximately 9%. No impairment of goodwill was recognized
for the year ended June 30, 2025.

 Long-Lived Assets and Intangible Assets

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

 significant decreases in the market price of the asset;

 significant adverse changes in the business climate or legal factors;

 accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset;

 current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; or

 current expectation that the asset will more likely than not be sold or disposed of significantly before the end of its estimated useful life.

 Whenever events or changes in circumstances suggest that the carrying amount
of long-lived assets and intangible assets may not be recoverable, we estimate the future cash flows expected to be generated by the asset
from its use or eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of those assets, we
recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Significant management judgment
is required in the forecasts of future operating results that are used in the discounted cash flow method of valuation. These significant
judgments may include future expected revenue, expenses, capital expenditures and other costs, discount rates and whether or not alternative
uses 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%, compared
to fiscal 2024. The decrease in net revenue was driven by a 34.2% decrease in net revenue in our IoT System Solutions product line, as
well 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 primarily
driven by the decrease in revenues partially offset by a reduction in operating expenses of $4,516,000 for fiscal 2025 compared to fiscal
2024.

 Net Revenue

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

 2025

 2024

 $

 %

 Embedded IoT Solutions

 $
 46,380

 37.7%

 $
 46,953

 29.3%

 $
 (573
)

 (1.2%
)

 IoT System Solutions

 68,735

 55.9%

 104,450

 65.1%

 (35,715
)

 (34.2%
)

 Software & Services

 7,808

 6.4%

 8,924

 5.6%

 (1,116
)

 (12.5%
)

 $

 100.0%

 $

 100.0%

 $
 (37,404
)

 (23.3%
)

 2025

 2024

 $

 %

 Americas

 $
 70,126

 57.0%

 $
 78,203

 48.8%

 $
 (8,077
)

 (10.3%
)

 EMEA

 30,898

 25.1%

 64,025

 39.9%

 (33,127
)

 (51.7%
)

 APJ

 21,899

 17.9%

 18,099

 11.3%

 3,800

 21.0%

 $

 100.0%

 $

 100.0%

 $
 (37,404
)

 (23.3%
)

 Embedded IoT Solutions

 Net revenue decreased primarily due to lower unit sales in some of our
legacy embedded ethernet connectivity products across all regions and lower volume sales of our network interface cards in the Americas
and APJ regions. These decreases were largely offset by higher unit sales of our embedded compute product line driven by a video conferencing
customer 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 from
this customer in the first half of the year. Separately, compared to the prior year, we experienced (i) decreased unit sales of our network
switches in the Americas region, and (ii) decreased unit sales of our OOB products across all regions, as revenues from these products
can 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 Americas
region.

 Software & Services

 Net revenue decreased primarily due to lower engineering services revenue
in 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 in
our OOB products.

 Gross Profit

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

 The following table presents our gross profit:

 2025

 2024

 $

 %

 Gross profit

 $
 51,699

 42.1%

 $
 64,354

 40.1%

 $
 (12,655
)

 (19.7%
)

 Gross profit as a percentage of revenue (referred
to 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, from
period-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-related
expenses including salaries and commissions, share-based compensation, facility expenses, information technology, advertising and marketing
expenses and professional legal and accounting fees.

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

 2025

 2024

 $

 %

 Personnel-related expenses

 $
 20,387

 $
 21,316

 $
 (929
)

 (4.4%
)

 Professional fees and outside services

 4,878

 5,037

 (159
)

 (3.2%
)

 Advertising and marketing

 2,239

 2,346

 (107
)

 (4.6%
)

 Facilities and insurance

 1,794

 2,754

 (960
)

 (34.9%
)

 4,424

 6,248

 (1,824
)

 (29.2%
)

 Depreciation

 1,360

 1,393

 (33
)

 (2.4%
)

 Other

 1,164

 1,112

 4.7%

 Selling, general and administrative

 $
 36,246

 29.5%

 $
 40,206

 25.1%

 $
 (3,960
)

 (9.8%
)

 Selling, general and administrative expenses decreased primarily due
to (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 development
activities.

 The following table presents our research and development expenses:

 2025

 2024

 $

 %

 Personnel-related expenses

 $
 12,164

 $
 14,022

 $
 (1,858
)

 (13.3%
)

 Facilities

 2,597

 2,523

 2.9%

 Outside services

 25.9%

 Product certifications

 8.0%

 1,522

 1,852

 (330
)

 (17.8%
)

 Other

 1,179

 28.4%

 Research and development

 $
 18,597

 15.1%

 $
 20,282

 12.7%

 $
 (1,685
)

 (8.3%
)

 Research and development expenses decreased primarily due to (i) lower
personnel-related expenses in our engineering groups resulting from restructuring activities during the current fiscal year and (ii) reduced
share-based compensation costs based on the value of new and outstanding awards. These decreases were partially offset by (i) higher facilities-related
equipment 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 and
related charges of $3,535,000 and $1,423,000, respectively, due to various headcount reduction efforts during these years. The most significant
of these actions occurred in January 2025, in which we reduced our headcount by approximately 12% worldwide, primarily in the U.S. and
India. 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 charges
in 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 primarily
in 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 their
estimated 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 interest
incurred 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 currency
remeasurement 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:

 2025

 2024

 $

 %

 $
 (239
)

 (0.2%
)

 $

 0.5%

 $
 (984
)

 (132.1%
)

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

 2025

 2024

 Effective tax rate

 2.1%

 (19.8%
)

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

 We record net deferred tax assets to the extent we believe these assets
are 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 June
30, 2025 and 2024, respectively, based on our cumulative losses and uncertainty of generating future taxable income, we provided a full
valuation allowance against our net deferred tax assets at June 30, 2025 and 2024. Refer to Note 8 of Notes to Consolidated Financial
Statements, 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:

 2025

 2024

 Working capital

 $
 46,971

 $
 58,794

 $
 (11,823
)

 Cash and cash equivalents

 $
 20,098

 $
 26,237

 $
 (6,139
)

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

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

 We define cash and cash equivalents as highly liquid deposits with original
maturities of 90 days or less when purchased. We maintain cash and cash equivalents balances at certain financial institutions in excess
of amounts insured by the Federal Deposit Insurance Corporation ("FDIC"). There can be no assurance that our deposits in excess
of 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 to
obtain 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, including
the 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 infrastructure
investments.

 From time to time, we may seek additional capital from public or private
offerings of our capital stock, borrowings under our existing or future credit lines or other sources in order to (i) develop or enhance
our products, (ii) take advantage of strategic opportunities, (iii) respond to competition or (iv) continue to operate our business. We
currently 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 to
those of our existing stockholders. If we issue debt securities to raise additional funds, we may incur debt service obligations, become
subject to additional restrictions that limit or restrict our ability to operate our business, or be required to further encumber our
assets. 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 statements
of cash flows:

 2025

 2024

 Decrease

 Net cash provided by operating activities

 $
 7,285

 $
 18,623

 $
 (11,338
)

 Net cash used in investing activities

 (6,963
)

 (1,479
)

 $
 (5,484
)

 Net cash used in financing activities

 (6,461
)

 (4,359
)

 $
 (2,102
)

 Operating Activities

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

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

 Accounts payable increased by $2,912,000, or 28.1%, from June 30, 2024
to 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% from
June 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 primarily
of the acquisition of Netcomm, which used cash of $6,458,000. We also paid for property and equipment totaling $505,000, primarily for
tooling at our contract manufacturers as well as certain research and development projects.

 Net cash used in investing activities for fiscal 2024 consisted of purchases
of 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 primarily
from principal payments of $4,512,000 on our term debt, as well as tax withholdings paid on behalf of employees for restricted shares
of $2,093,000.

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

 ITEM 7A.

 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Not required for a "smaller reporting company."

 ITEM 8.

 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

 ITEM 9.

 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 None.

 ITEM 9A.

 CONTROLS AND PROCEDURES

 Evaluation of Disclosure Controls and Procedures

 We maintain disclosure controls and procedures (as defined in Rules 13a-15I
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms and that this information is accumulated and communicated to management, including
our 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 matter
how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required
to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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

 Management's Report on Internal Control over Financial Reporting

 Our management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
Internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability
of 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:

 pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

 provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial statements in accordance with U.S. GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

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

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

 Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over
financial reporting as of June 30, 2025 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework)
issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on that evaluation, management
concluded that our internal control over financial reporting was effective as of June 30, 2025.

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

 Changes in Internal Controls over Financial Reporting

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

 ITEM 9B.

 OTHER INFORMATION

 Insider Trading Arrangements

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

 ITEM 9C.

 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 None.

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

 ITEM 10.

 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

 We have adopted a code of business conduct and ethics that applies to all
employees, including employees of our subsidiaries, as well as each member of our board of directors. The code of business conduct and
ethics is available at our website at www.lantronix.com under the Investor Relations-Corporate Governance section. We intend to satisfy
any disclosure requirement under applicable rules of the SEC or Nasdaq Stock Market regarding an amendment to, or waiver from, a provision
of 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 reference
to our Proxy Statement.

 ITEM 11.

 EXECUTIVE COMPENSATION

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

 ITEM 12.

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

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

 ITEM 13.

 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

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

 ITEM 14.

 PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

 ITEM 15.

 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 1.

 Consolidated Financial Statements

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

 Page

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

 Consolidated Balance Sheets as of June 30, 2025 and 2024

 Consolidated Statements of Operations for the fiscal years ended June 30, 2025 and 2024

 Consolidated Statements of Stockholders' Equity for the fiscal years ended June 30, 2025 and 2024

 Consolidated Statements of Cash Flows for the fiscal years ended June 30, 2025 and 2024

 Notes to Consolidated Financial Statements

 F-8 – F-35

 2. Exhibits

 Incorporated by Reference

 Exhibit

 Number

 Exhibit Description

 Provided Herewith

 Form

 Exhibit

 Filing
 Date

 3.1

 Amended and Restated Certificate of Incorporation of Lantronix, Inc., as amended

 3.1

 8/29/2013

 3.2

 Amended and Restated Bylaws of Lantronix, Inc.

 8–K

 3.2

 11/15/2012

 4.1

 Description of Lantronix Common Stock

 4.1

 9/11/2019

 10.1*

 Lantronix, Inc. Amended and Restated 2010 Stock Incentive Plan, as Amended on November 14, 2017

 99.1

 11/15/2017

 10.2*

 Form of Stock Option Agreement under the Lantronix, Inc. Amended and Restated 2010 Stock Incentive Plan

 S-8

 4.3

 5/9/2013

 10.3*

 Form of Restricted Stock Award Agreement under the Lantronix, Inc. Amended and Restated 2010 Stock Incentive Plan

 S-8

 4.4

 5/9/2013

 10.4*

 Lantronix, Inc. 2020 Performance Incentive Plan, as amended and restated

 10.1

 11/6/2024

 10.5*

 Form of Director Stock Option Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.7

 8/27/2021

 10.6*

 Form of Director Restricted Stock Unit Award Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.9

 8/27/2021

 10.7*

 Form of Nonqualified Stock Option Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.10

 8/27/2021

 10.8*

 Form of Incentive Stock Option Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.11

 8/27/2021

 10.9*

 Form of Fiscal 2025 Restricted Stock Unit Award Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.35

 9/9/2024

 10.10*

 Form of Fiscal 2025 Performance Stock Unit Award Agreement (Financial Measure) under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.36

 9/9/2024

 10.11*

 Form of Fiscal 2025 Performance Stock Unit Award Agreement (Relative TSR) under the Lantronix, Inc. 2020 Performance Incentive Plan

 10.37

 9/9/2024

 10.12*

 Form of Fiscal 2026 Restricted Stock Unit Award Agreement under the Lantronix, Inc. 2020 Performance Incentive Plan

 X

 10.13*

 Form of Fiscal 2026 Performance Stock Unit Award Agreement (Financial Measure) under the Lantronix, Inc. 2020 Performance Incentive Plan

 X

 10.14*

 Form of Fiscal 2026 Performance Stock Unit Award Agreement (Relative TSR) under the Lantronix, Inc. 2020 Performance Incentive Plan

 X

 10.15*

 Form of Inducement Restricted Stock Unit Agreement

 S-8

 4.1

 6/5/2024

 10.16*

 Form of Inducement Performance Stock Unit Agreement (Relative TSR)

 S-8

 4.2

 6/5/2024

 10.17*

 Form of Inducement Performance Stock Unit Agreement (Financial Measure)

 S-8

 4.3

 6/5/2024

 10.18*

 Lantronix, Inc. 2013 Employee Stock Purchase Plan, as amended and restated

 10.2

 11/9/2022

 10.19*

 Intrinsyc Technologies Corporation Amended and Restated Incentive Stock Option Plan

 10.1

 5/15/2020

 10.20*

 Intrinsyc Technologies Corporation Restricted Share Unit Plan

 10.2

 5/15/2020

 10.21*

 2020 Non-Employee Director Compensation Policy

 10.1

 11/12/2021

 10.22*

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

 10.32

 8/29/2022

 10.23*

 Form of Indemnification Agreement entered into between Lantronix, Inc. with its directors and certain of its executive officers

 10.2

 6/20/2016

 10.24*

 Summary of Lantronix, Inc. Annual Bonus Program

 99.1

 9/8/2015

 10.25*

 Form of Executive Officer Retention Letter Agreement

 10.1

 7/5/2023

 10.26*

 Offer Letter dated January 4, 2020, between Lantronix, Inc. and Roger Holliday

 10.22

 9/11/2020

 10.27*

 Offer Letter dated December 12, 2022 between Lantronix, Inc. and Eric Bass

 10.42

 9/12/2023

 10.28*

 Employment agreement dated October 31, 2023 between Lantronix, Inc. and Saleel Awsare

 10.1

 11/6/2023

 10.29*

 Letter Agreement dated September 14, 2024 between Lantronix, Inc. and Brent Stringham

 10.1

 9/16/2024

 10.30*

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

 10.1

 1/10/2025

 10.31*

 Offer Letter dated February 23, 2024 between Lantronix, Inc. and Kurt Hoff

 10.1

 4/3/2025

 10.32*

 Offer Letter dated April 2, 2024 between Lantronix, Inc. and Mathi Gurusamy

 10.2

 4/3/2025

 10.33

 Lease dated November 5, 2021 between Lantronix, Inc. and Discovery Business Center LLC

 10.1

 11/8/2021

 10.34

 Lease dated January 20, 2022 between Lantronix, Inc. and Jet 55 Property Owner LLC

 10.1

 1/26/2022

 10.35

 Mezzanine Loan and Security Agreement, dated August 2, 2021, by and between Lantronix, Inc. and SVB Innovation Credit Fund VIII, L.P.

 10.2

 8/2/2021

 10.36

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

 10.2

 11/12/2021

 10.37

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

 10.34

 8/29/2022

 10.38

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

 10.1

 8/2/2021

 10.39

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

 10.3

 2/11/2022

 10.40

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

 10.1

 2/16/2022

 10.41

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

 10.1

 9/12/2022

 10.42

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

 10.42

 9/9/2024

 10.43

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

 10.1

 8/21/2025

 10.44

 Letter Agreement dated April 3, 2023, by and between Silicon Valley Bank, a Division of First-Citizens Bank & Trust Company (successor by purchase to the Federal Deposit Insurance Corporation as receiver for Silicon Valley Bank, N.A. (as successor to Silicon Valley Bank), Lantronix, Inc., Lantronix Holding Company, Lantronix Technologies Canada (Taiwan) Ltd., Lantronix Canada ULC, Transition Networks, Inc. and Uplogix, Inc.

 10.1

 4/6/2023

 10.45

 Cooperation Agreement, dated August 9, 2024, between Lantronix, Inc. and 180 Degree Capital Corp.

 10.1

 8/12/2024

 10.46

 Cooperation Agreement dated June 24, 2025, by and among Lantronix, Inc. and Chain of Lakes Investment Fund, LLC, Haluk L. Bayraktar and Emre Aciksoz

 10.1

 6/30/2025

 19.1

 Lantronix, Inc. Insider Trading Policy

 X

 21.1+

 Subsidiaries of Lantronix, Inc.

 X

 23.1+

 Consent of Independent Registered Public Accounting Firm, Baker Tilly US, LLP

 X

 24.1+

 Power of Attorney (included on the signature page)

 X

 31.1+

 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 X

 31.2+

 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 X

 32.1++

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

 X

 97.1*

 Lantronix, Inc. Policy Regarding the Recoupment of Certain Compensation Payments

 X

 101.INS

 101.SCH

 101.CAL

 101.DEF

 101.LAB

 101.PRE

 __________

 *

 Indicates management contract or compensatory plan, contract or arrangement.

 +

 Filed herewith

 ++

 Furnished herewith.

 ITEM 16.

 FORM 10-K SUMMARY

 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.

 By:

 /s/ SALEEL AWSARE

 Saleel Awsare

 President and Chief Executive Officer

 Date: August 29, 2025

 POWER OF ATTORNEY

 KNOW ALL PERSONS BY THESE PRESENTS, that each individual
whose signature appears below hereby constitutes and appoints Saleel Awsare and Brent Stringham, acting individually, as his or her true
and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place
and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all
intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent,
or their or his or her substitutes, may lawfully do or cause to be done by virtue hereof.

 Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated:

 Signature

 Title

 Date

 /s/ SALEEL AWSARE

 President, Chief Executive Officer and Director

 Saleel Awsare

 (Principal Executive Officer)

 /s/ BRENT STRINGHAM

 Chief Financial Officer

 Brent Stringham

 (Principal Financial and Accounting Officer)

 /s/ HOSHI PRINTER

 Director, Chairman of the Board

 Hoshi Printer

 /s/ JAMES AUKER

 Director

 James Auker

 /s/ Sailesh Chittipeddi

 Director

 Sailesh Chittipeddi

 /s/ Narbeh Derhacobian

 Director

 Narbeh Derhacobian

 /s/ Kevin Palatnik

 Director

 Kevin Palatnik

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

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

 Opinions on the Financial Statements and Internal Control over Financial
Reporting

 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 and
cash flows, for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").
We also have audited the Company's internal control over financial reporting as of June 30, 2025, based on criteria established
in 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, in
all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash
flows for each of the two years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the
United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of June 30, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by
COSO.

 Basis for Opinions

 The Company's management is responsible for these consolidated financial
statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Item 9A of this Annual Report on Form 10-K. Our responsibility is to express
an opinion on the Company's consolidated financial statements and an opinion on the Company's internal control over financial reporting
based 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 applicable
rules 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 statements
are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained
in all material respects.

 Our audits of the financial statements included performing procedures to
assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over
financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such ' necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 F- 1

 Definition and Limitations of Internal Control Over Financial Reporting

 A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could
have a material effect on the financial statements.

 Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance

 with the policies or procedures may deteriorate.

 Critical Audit Matters

 The critical audit matters communicated below are matters arising from
the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and
that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.

 INVENTORIES – EXCESS AND OBSOLETE RESERVE

 Critical Audit Matter Description

 As described in Note 1 to the consolidated financial statements, inventories
are stated at the lower of cost or net realizable value and the Company's consolidated inventories balance was approximately $26.3
million at June 30, 2025, net of reserves. The Company excess and obsolete inventories is based on an estimate of the future sales demand
for their products within a specified time horizon, which is generally 12 to 24 months. In addition, specific reserve estimates are recorded
to cover risks for end-of-life products, inventory located at their contract manufacturers and warranty replacement stock.

 We identified the auditing of management's lower of cost or net realizable
value determination for excess or obsolete inventories as a critical audit matter. The procedures to audit management's lower
of cost or net realizable value determination for excess or obsolete inventories was especially challenging and highly judgmental because
of (i) inherent estimation uncertainty relating to assumptions used by management in the inventory reserve model which involved a
high degree of subjectivity, (ii) the uncertainties in determining demand for aging inventory and (iii) future market conditions.

 How We Addressed the Matter in Our Audit

 The primary procedures we performed to address this critical audit matter
included:

 -
 Obtaining an understanding, evaluating the design and testing the effectiveness of controls relating to the controls over the determination
of the lower of cost or net realizable value for excess and obsolete inventories.

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

 -
 Evaluating the reasonableness of management's assumptions relating to future demand of products by performing a retrospective
review of the prior year assumptions to actual activity.

 -
 Evaluating the appropriateness and consistency of management's methods and assumptions used in developing estimates around forecasted
sales and expected stock rotation privileges.

 F- 2

 ACQUISTION OF NETCOMM – VALUATION OF CUSTOMER RELATIONSHIPS

 Critical Audit Matter Description

 As described in Note 3 to the consolidated financial statements, on December
23, 2024, the Company completed the acquisition of Netcomm Wireless Pty Ltd (NetComm) for total consideration transferred of $6,458,000.
The Company accounted for the NetComm acquisition as a business combination and, accordingly, allocated the purchase price to the assets
acquired and liabilities assumed based on their respective estimated fair values as of the date of acquisition. Of the identifiable intangible
assets acquired, $1,587,600 was allocated to customer relationships. The excess of the purchase consideration over the fair value of identifiable
assets acquired and liabilities assumed was recorded as goodwill.

 We identified an input into the fair value determination of the customer
relationships for the business combination as a critical audit matter due to the significant judgment required in estimating base revenue
of the acquired entity. There was a high degree of auditor judgment, effort and subjectivity in applying audit procedures in evaluating
the significant assumption relating to the forecasted base revenue.

 How We Addressed the Matter in Our Audit

 The primary procedures we performed to address this critical audit matter
included:

 -
 Obtaining an understanding, evaluating the design and testing the effectiveness of controls relating to the acquisition accounting,
specifically controls over management's base revenue assumption used in the valuation of customer relationships.

 -
 When assessing the reasonableness of assumption related to forecasted base revenue, we evaluated whether the assumption used was appropriate
from a market participant's standpoint. This included evaluation against industry forecasts and the current performance of the NetComm
business.

 /s/ Baker Tilly US, LLP

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

 Chicago, Illinois

 F- 3

 CONSOLIDATED BALANCE SHEETS

 (In thousands, except share and par value data)

 2025

 2024

 Assets

 Current Assets:

 Cash and cash equivalents

 $
 20,098

 $
 26,237

 Accounts receivable, net

 25,092

 31,279

 Inventories, net

 26,371

 27,698

 Contract manufacturers' receivable

 3,071

 1,401

 Prepaid expenses and other current assets

 2,761

 2,335

 Total current assets

 77,393

 88,950

 Property and equipment, net

 2,456

 4,016

 Goodwill

 31,089

 27,824

 Intangible assets, net

 3,738

 5,251

 Lease right-of-use assets

 8,422

 9,567

 Other assets

 Total assets

 $
 123,722

 $
 136,208

 Liabilities and stockholders' equity

 Current Liabilities:

 Accounts payable

 $
 13,259

 $
 10,347

 Accrued payroll and related expenses

 3,471

 5,836

 Current portion of long-term debt, net

 3,070

 3,002

 Other current liabilities

 10,622

 10,971

 Total current liabilities

 30,422

 30,156

 Long-term debt, net

 8,684

 13,219

 Other non-current liabilities

 10,238

 11,478

 Total liabilities

 49,344

 54,853

 Commitments and contingencies (Note 10)

 –

 –

 Stockholders' equity:

 Preferred stock, $ 0.0001 par value; 5,000,000 shares authorized; none issued and outstanding

 –

 –

 Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 39,102,563 and 37,872,883 shares issued and outstanding at June 30, 2025 and 2024, respectively

 Additional paid-in capital

 308,397

 304,001

 Accumulated deficit

 ( 234,394
)

 ( 223,021
)

 Accumulated other comprehensive income

 Total stockholders' equity

 74,378

 81,355

 Total liabilities and stockholders' equity

 $
 123,722

 $
 136,208

 See accompanying notes to consolidated financial statements.

 F- 4

 CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands, except per share data)

 2025

 2024

 Net revenue

 $

 $

 Cost of revenue

 71,224

 95,973

 Gross profit

 51,699

 64,354

 Operating expenses:

 Selling, general and administrative

 36,246

 40,206

 Research and development

 18,597

 20,282

 Restructuring, severance and related charges

 3,535

 1,423

 Acquisition-related costs

 –

 Fair value remeasurement of earnout consideration

 –

 ( 9
)

 Amortization of intangible assets

 3,951

 5,314

 Total operating expenses

 62,700

 67,216

 Loss from operations

 ( 11,001
)

 ( 2,862
)

 Interest expense, net

 ( 511
)

 ( 916
)

 Other income (expense), net

 ( 100
)

 Loss before income taxes

 ( 11,612
)

 ( 3,771
)

 ( 239
)

 Net loss and comprehensive loss

 $
)

 $
)

 Net loss per share - basic and diluted

 $
 ( 0.29
)

 $
 ( 0.12
)

 Weighted-average common shares - basic and diluted

 38,613

 37,386

 See accompanying notes to consolidated financial statements.

 F- 5

 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

 Accumulated

 Additional

 Other

 Total

 Common
 Stock

 Paid-In

 Accumulated

 Comprehensive

 Stockholders'

 Shares

 Amount

 Capital

 Deficit

 Income

 Equity

 Balance at June 30, 2023

 36,875

 $

 $
 295,686

 $
 ( 218,505
)

 $

 $
 77,556

 Shares issued pursuant to stock
 awards, net

 –

 1,005

 –

 –

 1,005

 Tax withholding paid on behalf
 of employees for restricted shares

 –

 –

 ( 1,027
)

 –

 –

 ( 1,027
)

 –

 –

 8,337

 –

 –

 8,337

 Net loss

 –

 –

 –

)

 –

)

 Balance at June 30, 2024

 37,872

 $

 $
 304,001

 $
 ( 223,021
)

 $

 $
 81,355

 Shares issued pursuant to stock
 awards, net

 1,230

 –

 –

 –

 Tax withholding paid on behalf
 of employees for restricted shares

 –

 –

 ( 2,093
)

 –

 –

 ( 2,093
)

 –

 –

 6,132

 –

 –

 6,132

 Net loss

 –

 –

 –

)

 –

)

 Balance at June 30, 2025

 39,102

 $

 $
 308,397

 $
 ( 234,394
)

 $

 $
 74,378

 See accompanying notes to consolidated financial statements.

 F- 6

 CONSOLIDATED STATEMENTS OF CASH FLOWS

 2025

 2024

 Operating activities

 Net loss

 $
)

 $
)

 Adjustments to reconcile net loss to net cash provided by operating activities:

 6,132

 8,337

 Amortization of intangible assets

 3,951

 5,314

 Depreciation and amortization

 2,084

 2,163

 Amortization of manufacturing profit in acquired inventory associated with acquisitions

 Loss on disposal of property and equipment

 Amortization of deferred debt issuance costs

 Fair value remeasurement of earnout consideration

 –

 ( 9
)

 Changes in operating assets and liabilities, net of assets and liabilities acquired:

 Accounts receivable, net

 6,187

 ( 3,597
)

 Inventories, net

 2,036

 21,216

 Contract manufacturers' receivable

 ( 1,670
)

 1,618

 Prepaid expenses and other current assets

 ( 426
)

 Lease right-of-use assets

 2,172

 2,016

 Other assets

 ( 24
)

 ( 128
)

 Accounts payable

 2,886

 ( 2,128
)

 Accrued payroll and related expenses

 ( 2,406
)

 3,405

 Other liabilities

 ( 2,403
)

 ( 16,330
)

 Net cash provided by operating activities

 7,285

 18,623

 Investing activities

 Purchases of property and equipment

 ( 505
)

 ( 1,479
)

 Cash payment for acquisitions, net of cash and cash equivalents acquired

 ( 6,458
)

 –

 Net cash used in investing activities

 ( 6,963
)

 ( 1,479
)

 Financing activities

 Net proceeds from issuances of common stock

 1,005

 Tax withholding paid on behalf of employees for restricted shares

 ( 2,093
)

 ( 1,027
)

 Earnout consideration paid

 –

 ( 1,262
)

 Payment of borrowings on term loan

 ( 4,512
)

 ( 2,853
)

 Payment of lease liabilities

 ( 213
)

 ( 222
)

 Net cash used in financing activities

 ( 6,461
)

 ( 4,359
)

 Increase (decrease) in cash and cash equivalents

 ( 6,139
)

 12,785

 Cash and cash equivalents at beginning of year

 26,237

 13,452

 Cash and cash equivalents at end of year

 $
 20,098

 $
 26,237

 Supplemental disclosure of cash flow information

 Interest paid

 $
 1,325

 $
 1,915

 Income taxes paid

 $

 $

 See accompanying notes to consolidated financial statements.

 F- 7

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 JUNE 30, 2025

 1.

 Company and Significant Accounting Policies

 Company

 Lantronix, Inc., which we refer to herein as the Company, Lantronix, we,
our, or us, is a global leader in Edge AI and Industrial IoT solutions, delivering intelligent computing, secure connectivity, and remote
management for mission-critical applications. Serving high-growth markets, including smart cities, enterprise IT, and commercial and defense
unmanned systems, we enable customers to optimize operations and accelerate digital transformation. Our comprehensive portfolio of hardware,
software, and services powers applications from secure video surveillance and intelligent utility infrastructure to resilient out-of-band
network management. By bringing intelligence to the network edge, we help organizations achieve efficiency, security, and a competitive
edge in today's AI-driven world.

 We were incorporated in California in 1989 and re-incorporated in Delaware
in 2000.

 Basis of Presentation

 The consolidated financial statements include the accounts of Lantronix
and our wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

 Use of Estimates

 The preparation of financial statements in conformity with U.S. generally
accepted accounting principles ("U.S. GAAP") requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying notes. The industry in which we operate is characterized by rapid technological
change. As a result, estimates made in preparing the consolidated financial statements include revenue recognition, the allowance for
doubtful accounts, business combinations, inventory valuation, goodwill valuation, deferred income tax asset valuation allowances, restructuring
charges and warranty reserves. To the extent there are material differences between our estimates and actual results, future results of
operations will be affected.

 Revenue Recognition

 Refer to Note 2 below for a discussion of our significant accounting
policy over revenue recognition.

 Accounts Receivable and Allowance for Credit Losses

 Accounts receivable are stated at the amount we expect to collect, which
is net of an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments.
Our evaluation of the collectability of customer accounts receivable is based on various factors. In cases where we are aware of circumstances
that may impair a specific customer's ability to meet its financial obligations subsequent to the original sale, we record an allowance
against amounts due based on those particular circumstances. For all other customers, we estimate an allowance for credit losses based
on various considerations, including the length of time the receivables are past due and our historical bad debt collection experience.
We also consider our understanding of current economic and industry conditions, as well as reasonable and supportable forecasts of future
economic conditions that may affect the collectability of customer receivables. Accounts that are deemed uncollectible are written off
against the allowance for credit losses.

 F- 8

 Concentration of Credit Risk

 Our accounts receivable are primarily derived from revenue earned from
customers located throughout North America, Europe and Asia. We perform periodic credit evaluations of our customers' financial
condition and maintain allowances for potential credit losses. Credit losses have historically been within our expectations. We generally
do not require collateral or other security from our customers.

 Fair Value of Financial Instruments

 Our financial instruments consist primarily of cash and cash equivalents,
accounts receivable, contract manufacturers' receivable, accounts payable, and accrued liabilities. The fair value of a financial
instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated
market participants. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in
the market and the degree to which the inputs are observable. The categorization of financial instruments within the valuation hierarchy
is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels
(with Level 3 being the lowest) defined as follows:

 Level 1: Inputs
are based on quoted market prices for identical assets and liabilities in active markets at the measurement date.

 Level 2: Inputs
include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities
in markets that are not active near the measurement date.

 Level 3: Inputs
include management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.
The inputs are unobservable in the market and significant to the instrument's valuation.

 During the fiscal years ended June 30, 2025 and 2024 we did not have
any assets or liabilities that were measured at fair value on a recurring basis. As of June 30, 2025 we do not have any assets or liabilities
that were measured at fair value on a non-recurring basis.

 We believe all of our financial instruments' recorded values approximate
their current fair values because of the nature and short duration of these instruments.

 Foreign Currency Remeasurement

 The functional currency for all our foreign subsidiaries is currently the
U.S. dollar. Non-monetary and monetary foreign currency assets and liabilities are valued in U.S. dollars at historical and end-of-period
exchange rates, respectively. Exchange gains and losses from foreign currency transactions and remeasurements are recognized in the consolidated
statements of operations. Translation adjustments for foreign subsidiaries whose functional currencies were previously their respective
local currencies are suspended in accumulated other comprehensive income.

 Accumulated Other Comprehensive Income

 Accumulated other comprehensive income is composed of accumulated translation
adjustments as of June 30, 2025 and 2024. We did not have any other comprehensive income or losses during the fiscal years ended June
30, 2025 or 2024.

 F- 9

 Cash and Cash Equivalents

 Cash and cash equivalents consist of cash and short-term
investments, with original maturities of 90 days or less.

 Inventories

 Inventories are stated at the lower of cost or net realizable value, cost
being determined on a weighted-average cost basis that approximates the first-in, first-out method. We provide reserves for excess and
obsolete inventories determined primarily based upon estimates of future demand for our products.

 Inventory Sale and Purchase Transactions with Contract Manufacturers

 Under certain circumstances, we sell raw materials to our contract manufacturers
and subsequently repurchase finished goods from the contract manufacturers which contain such raw materials. Net sales of raw materials
to the contract manufacturers are recorded on the consolidated balance sheets as contract manufacturers' receivables and are eliminated
from net revenue as we intend to repurchase the raw materials from the contract manufacturers in the form of finished goods.

 We have contractual arrangements with certain of our contract manufacturers
that require us to purchase unused inventory that the contract manufacturer has purchased to fulfill our forecasted manufacturing demand.
To the extent that inventory on-hand at one or more of these contract manufacturers exceeds our contractually reported forecasts, we record
the amount we may be required to purchase as part of other current liabilities and inventories on the consolidated balance sheets.

 Property and Equipment

 Property and equipment are carried at cost. Depreciation is provided using
the straight-line method over the assets' estimated useful lives, generally ranging from three to five years. Depreciation and amortization
of leasehold improvements are computed using the shorter of the remaining lease term or five years. Major renewals and betterments are
capitalized, while replacements, maintenance and repairs, which do not improve or extend the estimated useful lives of the respective
assets, are expensed as incurred.

 Business Combinations

 We allocate the fair value of the purchase consideration of a business
acquisition to the tangible assets, liabilities, and intangible assets acquired, including in-process research and development ("IPR&D"),
based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite
life and assessed for impairment thereafter. When an IPR&D project is completed, the IPR&D is reclassified as an amortizable intangible
asset and amortized over the asset's estimated useful life. Acquisition-related expenses and related restructuring costs are recognized
separately from the business combination and are expensed as incurred.

 Goodwill

 Goodwill is recorded as the difference, if any, between the aggregate consideration
paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired. We evaluate goodwill for impairment
on an annual basis as of May 31, or more frequently if we believe indicators of impairment exist that would more likely than not reduce
the fair value of our single reporting unit below its carrying amount. We begin by assessing qualitative factors to determine whether
it is more likely than not that the fair value of our single reporting unit is less than its carrying value. Based on that qualitative
assessment, if we conclude that it is more likely than not that the fair value of our single reporting unit is less than its carrying
value, we conduct a quantitative goodwill impairment test, which involves comparing the estimated fair value of our single reporting unit
with its carrying value, including goodwill. We estimate the fair value of our single reporting unit using a combination of the income
and market approach. If the carrying value of the reporting unit exceeds its estimated fair value, we recognize an impairment loss for
the difference.

 F- 10

 We performed our annual goodwill impairment test as of May 31, 2025, using
a quantitative assessment for our single reporting unit. The fair value of the reporting unit was estimated using a combination of the
income approach (discounted cash flow method) and the market approach (guideline public companies and guideline transactions methods).
Key assumptions included revenue growth, EBITDA margins, a long-term growth rate, and a discount rate. These assumptions reflect management's
best estimates of future financial performance, current market conditions, and a market participant perspective. The results of the impairment
test indicated that the estimated fair value exceeded the carrying amount and therefore no impairment of goodwill was recognized for the
year ended June 30, 2025.

 Intangible Assets

 Included within "intangible assets, net" at June 30, 2025
are customer relationships, developed technology, trademarks and trade names, and other intangible assets acquired in connection with
various business combinations. Such capitalized costs and intangible assets are being amortized over a period of one to fourteen years.

 Impairment of Long-Lived Assets

 We assess the impairment of long-lived assets, including intangible assets,
whenever events or changes in circumstances indicate that the carrying amount of long-lived assets within an asset group may not be recoverable.
We estimate the future cash flows, undiscounted and without interest charges, expected to be generated by the assets from its use over
its remaining useful life and eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying
amount of those assets, we estimate the fair value of the asset group and recognize an impairment loss based on the excess of the carrying
amount over the fair value of the assets.

 Income Taxes

 Income taxes are computed under the liability method. This method requires
the recognition of deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis
of our assets and liabilities. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during
which temporary differences are expected to be settled and are reflected in the consolidated financial statements in the period of enactment.
A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized.

 Financial statement effects of a tax position are initially recognized
when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by a taxing authority.
A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount
of tax benefit that meets the more-likely-than-not threshold of being realized upon ultimate settlement with a taxing authority. We recognize
potential accrued interest and penalties related to unrecognized tax benefits as income tax expense.

 Share-Based Compensation

 We account for share-based compensation by expensing the estimated grant
date fair value of our shared-based awards ratably over the requisite service period.

 The fair value of our restricted stock units is based on the closing market
price of our common stock on the date of grant.

 The fair value of our performance stock units is estimated as of the grant
date based upon the expected achievement of the performance metrics specified in the grant and the closing market price of our common
stock on the date of grant. To the extent a grant of performance stock units contains a market condition, the grant date fair value is
estimated using a Monte Carlo simulation, which incorporates estimates of the potential outcomes of the market condition on the grant
date fair value of each award.

 We recognize the impact of forfeitures on our share-based compensation
expense as such forfeitures occur. Previously recognized expense is reversed for the portion of awards forfeited prior to vesting.

 F- 11

 Net Income (Loss) Per Share

 Basic net income (loss) per share is calculated by dividing net income
(loss) by the weighted-average number of common shares outstanding during the fiscal year. Diluted net income (loss) per share is calculated
by adjusting the weighted-average number of common shares outstanding, assuming any dilutive effects of outstanding share-based awards
using the treasury stock method.

 Research and Development Costs

 Costs incurred in the research and development of new products and enhancements
to existing products are expensed as incurred. Development costs of computer software to be sold, leased or otherwise marketed are subject
to capitalization beginning when a product's technological feasibility has been established and ending when a product is available
for general release to customers. In most instances, we believe our current process for developing products is essentially completed concurrently
with the establishment of technological feasibility and thus, software development costs have been expensed as incurred.

 Warranty

 The standard warranty periods we provide for our products typically range
from one to five years. We establish reserves for estimated product warranty costs at the time revenue is recognized based upon our historical
warranty experience, and for any known or anticipated product warranty issues. If actual return rates and/or replacement costs differ
significantly from our estimates, adjustments to recognize additional warranty expense in cost of revenue may be required in future periods.

 Restructuring Charges

 We recognize costs and related liabilities for restructuring activities
when they are incurred. Our restructuring charges are primarily comprised of employee separation costs, asset impairments and contract
exit costs. Employee separation costs include one-time termination benefits that are recognized as a liability at estimated fair value,
at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the
future service period. Ongoing termination benefits are recognized as a liability at estimated fair value when the amount of such benefits
are probable and reasonably estimable. Contract exit costs include contract termination fees and right-of-use asset impairments recognized
on the date that we have vacated the premises or ceased use of the leased facilities. A liability for contract termination fees is recognized
in the period in which we terminate the contract.

 Leases

 We determine if an arrangement is a lease, or contains a lease, at
the inception of the arrangement and evaluate whether the lease is an operating lease or a finance lease at the commencement date. We
recognize right-of-use ("ROU") assets and lease liabilities for operating and finance leases with terms greater than 12 months.
ROU assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments.
To the extent a lease includes a renewal option, we include such options in the calculation of the ROU asset and lease liability if it
is reasonably assured that we will exercise the option. Operating and finance lease ROU assets and liabilities are recognized based on
the present value of lease payments over the lease term at the lease commencement date. We do not separate lease and nonlease components
of contracts. To determine the present value of lease payments, we use the implicit interest rate, if it is readily determinable or estimable.
To the extent that we are unable to utilize an interest rate implicit in the lease, we generally use our collateralized incremental borrowing
rate based on the information available at the lease commencement date, including lease term, in determining the present value of lease
payments. Operating and finance lease ROU assets are recognized net of any lease prepayments and incentives. Operating lease expense
is recognized on a straight-line basis over the lease term. Finance lease expense is recognized based on the effective-interest method
over the lease term.

 F- 12

 For leases that we acquire in acquisition transactions, we generally elect
not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease term of
12 months or less.

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

 Advertising Expenses

 Advertising expenses are recorded in the period incurred and totaled $ 224,000
and $ 237,000 for the fiscal years ended June 30, 2025 and 2024, respectively. The costs are included in selling, general and administrative
expenses in the consolidated statements of operations.

 Segment Information

 Operating segments are defined as components of an enterprise for which
separate financial information is evaluated regularly by the chief operating decision maker ("CODM"), who is our Chief Executive
Officer, in deciding how to allocate resources and assess our financial and operational performance. Our CODM evaluates our financial
information, such as revenue, gross profit and net income (loss), and resources, and assesses the performance of these resources on a
consolidated and aggregated basis. As a result, we have determined that our business operates in a single operating segment: the development,
marketing, and sale of industrial and enterprise IoT products and services.

 Recent Accounting Pronouncements

 Credit Losses

 In July 2025, the Financial Accounting Standards Board ("FASB")
issued a final Accounting Standards Update ("ASU") amending Accounting Standards Codification ("ASC") 326, Financial
Instruments – Credit Losses, to allow all entities to elect a practical expedient when determining the expected credit losses on
trade accounts receivable. The practical expedient allows companies to assume that the current conditions as of the balance sheet date
will remain unchanged through the remaining life of the asset. The standard will be effective for Lantronix beginning with our interim
financial statements for the fiscal year ending June 30, 2027. The impact of adopting this guidance is not expected to have a material
effect on our consolidated financial statements.

 Income Tax Disclosures

 In December 2023, the FASB issued a final standard on improvements to income
tax disclosures. The new standard requires disaggregated information about a company's effective tax rate reconciliation and information
on income taxes paid. The standard will be effective for Lantronix beginning with our annual financial statements for the fiscal year
ending June 30, 2026. The impact of adopting this guidance is not expected to be material to our consolidated financial position and results
of operations, since it requires only enhancements to existing income tax disclosures in the footnotes to our consolidated financial statements.

 Segment Disclosures

 In November 2023, the FASB issued an ASU requiring incremental disclosures
related to a public company's reportable segments. The new guidance was issued primarily to provide financial statement users with
more disaggregated expense information about a company's reportable segments. The guidance does not change the definition of a segment,
the method for determining segments, or the criteria for aggregating operating segments into reportable segments. The guidance became
effective for Lantronix on a retrospective basis beginning with our annual financial statements for the fiscal year ended June 30, 2025.
The adoption of this guidance did not have a material effect on our consolidated financial statements.

 Disaggregation of Income Statement Expenses

 In November 2024, the FASB issued ASU 2024-03, which will require disclosure,
in the notes to financial statements, of specified information about certain costs and expenses, including disclosure of amounts for (i)
purchases of inventory, (ii) employee compensation, (iii) depreciation and (iv) intangible asset amortization, included in each relevant
expense caption. In January 2025, the FASB issued ASU 2025-01, which clarified the effective date of ASU 2024-03. The standard will be
effective for our annual financial statements beginning in the fiscal year ending June 30, 2028. We are currently evaluating the impact
of this accounting standard on our financial statement presentation and its related disclosures.

 F- 13

 2.

 Revenue is recognized upon the transfer of control of promised products
or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
We apply the following five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract
with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating
the transaction price to the performance obligations in the contract and (v) recognizing revenue when the performance obligations
are satisfied. On occasion we enter into contracts that can include various combinations of products and services, which are generally
capable of being distinct and accounted for as separate performance obligations.

 Revenue is recognized exclusive of (i) any taxes collected from customers,
which are subsequently remitted to governmental authorities and (ii) shipping and handling costs collected from customers.

 Products

 Most of our product revenue is recognized as a distinct single performance
obligation when products are tendered to a carrier for delivery, which represents the point in time that our customer obtains control
of the promised products. A smaller portion of our product revenue is recognized when our customer receives delivery of the promised products.

 A significant portion of our products are sold to distributors under agreements
which contain (i) limited rights to return unsold products and (ii) price adjustment provisions, both of which are accounted for as variable
consideration when estimating the amount of revenue to recognize. We base our estimates for returns and price adjustments primarily on
historical experience; however, we also consider contractual allowances, approved pricing adjustments and other known or anticipated returns
and price adjustments in a given period. Such estimates are generally made at the time of shipment to the customer and updated at the
end of each reporting period as additional information becomes available and only to the extent that it is probable that a significant
reversal of any incremental revenue will not occur. Our estimates of accrued variable consideration are included in other current liabilities
in the accompanying consolidated balance sheets.

 Services

 Revenues from our extended warranty, technical support, and maintenance
services are generally recognized ratably over the applicable service period. Although not significant to date, revenues from sales of
our software-as-a-service ("SaaS") solutions are recognized ratably over the applicable service period as well.

 We prepay sales commissions related to certain of these contracts, which
are incremental costs of obtaining the contract. We capitalize these costs and expense them ratably on a straight-line basis over the
life of the contract. At June 30, 2025, prepaid sales commissions included in prepaid expenses and other current assets totaled $ 404,000
and included in other assets totaled $ 134,000.
At June 30, 2024, prepaid sales commissions included in prepaid expenses and other current assets totaled $ 194,000 and included
in other assets totaled $ 190,000.

 F- 14

 Engineering Services

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

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

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

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

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

 Multiple Performance Obligations

 From time to time, we may enter into contracts with customers that include
promises to transfer multiple deliverables that may include sales of products, professional engineering services and other product qualification
or certification services. Determining whether the deliverables in such arrangements are considered distinct performance obligations that
should be accounted for separately versus together often requires judgment. We consider performance obligations to be distinct when the
customer can benefit from the promised good or service on its own or by combining it with other resources readily available and when the
promised good or service is separately identifiable from other promised goods or services in the contract. In such arrangements, we allocate
revenue on a relative standalone selling price basis by maximizing the use of observable inputs to determine the standalone selling price
for each performance obligation.

 Net Revenue by Product Line and Geographic Region

 We organize our products and solutions into three product lines: Embedded
IoT Solutions, IoT System Solutions, and Software & Services. Our Embedded IoT products are normally embedded into new designs. These
products include application processing that delivers compute to meet customer needs for data transformation, computer vision, machine
learning, augmented / virtual reality, audio / video aggregation and distribution, and custom applications at the edge. Our IoT System
products include wired and wireless connections that enhance the value and utility of modern electronic systems and equipment by providing
secure network connectivity, power for IoT end devices through Power over Ethernet ("PoE"), application hosting, protocol
conversion, media conversion, secure access for distributed IoT deployments and many other functions. Our Software & Services products
can be classified as either (i) our SaaS platform, which enables customers to easily deploy, monitor, manage, and automate across their
global deployments, all from a single platform login, virtually connected as though directly on each device, (ii) engineering services,
which is a flexible business model that allows customers to select from turnkey product development or team augmentation for accelerating
complex areas of product development or (iii) extended warranty, support and maintenance.

 F- 15

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

 The following tables present our net revenue by product line and by geographic
region. We present net revenues by geographic region generally based on the "ship-to" location of our customers for product
sales and the "bill-to" location for services:

 Schedule of net revenue by product lines

 2025

 2024

 Embedded IoT Solutions

 $
 46,380

 $
 46,953

 IoT System Solutions

 68,735

 104,450

 Software & Services

 7,808

 8,924

 $

 $

 Schedule of net revenues by geographic region

 2025

 2024

 Americas

 $
 70,126

 $
 78,203

 EMEA

 30,898

 64,025

 APJ

 21,899

 18,099

 $

 $

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

 Schedule of percentage of our total net revenue

 Year Ended June 30,

 2025

 2024

 Product revenues

 94 %

 94 %

 Service revenues

 6 %

 6 %

 Service revenues are comprised primarily of professional services, software
license subscriptions, and extended warranties.

 Contract Balances

 In certain instances, the timing of revenue recognition may differ from
the timing of invoicing to our customers. We record a contract asset receivable when revenue is recognized prior to invoicing, and a contract
or deferred revenue liability when revenue is recognized subsequent to invoicing. With respect to product shipments, we expect to fulfill
contract obligations within one year and so we have elected not to separately disclose the amount nor the timing of recognition of
these remaining performance obligations. For contract balances related to contracts that include services and multiple performance obligations,
refer to the deferred revenue discussion below.

 F- 16

 Deferred Revenue

 Deferred revenue is primarily comprised of unearned revenue related to
our extended warranty, support and maintenance services and certain software services. These services are generally invoiced at the beginning
of the contract period and revenue is recognized ratably over the service period. Current and non-current deferred revenue balances represent
revenue allocated to the remaining unsatisfied performance obligations at the end of a reporting period and are respectively included
in other current liabilities and other non-current liabilities in the accompanying consolidated balance sheets.

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

 Schedule of changes in deferred revenue

 2025

 2024

 Beginning balance

 $
 5,753

 $

 3,381

 New performance obligations

 4,292

 6,973

 Recognition of revenue as a result of satisfying performance obligations

 ( 4,489
)

 ( 4,601

)

 Ending Balance

 $
 5,556

 $

 5,753

 Less: non-current portion of deferred revenue

 ( 2,255
)

 ( 2,736

)

 Current portion

 $
 3,301

 $

 3,017

 During the years ended June 30, 2025 and 2024, approximately $ 3,000,000
and $ 2,400,000, respectively, of the revenue recognized as a result of satisfying performance obligations was included in the contract
liability balance at the beginning of the period.

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

 3.

 Acquisition

 On December 23, 2024 (the "Closing Date"), we finalized the
acquisition of Netcomm Wireless Pty Ltd ("Netcomm"), a subsidiary of DZS Inc., for $ 6,458,000 in cash. Netcomm operates an
enterprise IoT business. The acquisition complements our focus on Enterprise and Smart City vertical markets and adds products to enhance
our connectivity solutions in areas such as critical infrastructure, asset monitoring and telecommunications.

 A summary of the purchase consideration for the Netcomm acquisition is
as follows (in thousands):

 Schedule of purchase consideration

 Cash paid, including initial working capital adjustments

 $
 6,458

 Total purchase consideration

 $
 6,458

 We recorded the tangible and intangible assets and liabilities acquired
based on their estimated fair values as of the Closing Date and allocated the remaining purchase consideration to goodwill. Our valuation
assumptions of acquired assets and assumed liabilities require significant estimates, especially with respect to intangible assets. Updates
to the valuation of certain assets acquired and liabilities assumed may result in changes to the recorded amounts of assets and liabilities,
with corresponding adjustments to goodwill in subsequent periods.

 Subsequent to the acquisition, based on additional analysis and refinements
to our estimates, we adjusted the preliminary purchase price allocation as of the Closing Date to (i) increase the estimated fair value
of intangible assets acquired by $ 279,000, (ii) decrease the fair value of accounts receivable, net by $ 904,000, (iii) decrease the fair
value of accounts payable and other accrued liabilities by $ 202,000 and (iv) decrease the fair value of inventory by $ 175,000. These adjustments
resulted in an increase to goodwill of $ 598,000. In March 2025, DZS, Inc. commenced a liquidation proceeding under Chapter 7 of the
U.S. Bankruptcy Code. At that time, we had yet to settle the accounts receivable and accounts payable balances agreed to in the Netcomm
acquisition agreement. As such, we updated our estimates of the acquisition date fair value of these balances as described above.

 F- 17

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

 Schedule of purchase price allocation

 Inventories

 $

 Amortizable intangible assets

 2,437

 Goodwill

 3,265

 Accounts payable and other accrued liabilities

 ( 41
)

 Total consideration

 $
 6,458

 The factors that contributed to a purchase price resulting in the recognition
of goodwill include our belief that this acquisition will create a more diverse IoT company with respect to product offerings and our
belief that we are committed to improving cost structures in accordance with our operational and restructuring plans.

 Depending on the structure of a particular acquisition, goodwill and identifiable
intangible assets may not be deductible for tax purposes. We have determined that goodwill and identifiable intangible assets related
to this acquisition are deductible for tax purposes.

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

 The valuation of identifiable intangible assets and their estimated useful
lives are as follows:

 Schedule of intangible assets of useful lives

 Asset Fair Value

 Weighted Average Useful Life

 (In years)

 Customer relationships

 $
 1,587

 14.0

 Developed technology

 6.0

 Trademarks and trade names

 2.0

 Customer backlog

 1.0

 The intangible assets are amortized on a straight-line basis over the estimated
weighted-average useful lives.

 Valuation Methodology

 The customer relationships were valued using the multi-period excess earnings
method, which estimates revenues and cash flows derived from this asset and also considers portions of the cash flows that can be attributed
to the use of other supporting assets so that these cash flows can be excluded. The useful lives of customer relationships are estimated
based primarily upon the probability of loss associated with two major customers and customer turnover data for the other customers. Order
backlog was estimated to be substantially fulfilled within a year of the Closing Date.

 Developed technology and trades names were valued using the relief-from-royalty
method. This method is an income approach that estimates the portion of a company's earnings attributable to an asset based on the
royalty rate the company would have paid for the use of the asset if it did not own it. Royalty payments are estimated by applying a royalty
rate to the prospective revenue attributable to the intangible asset. The resulting annual royalty payments are tax-affected and then
discounted to present value.

 F- 18

 Assumptions used in forecasting cash flows for each
of the identified intangible assets included consideration of the following:

 Historical performance including sales and profitability

 Business prospects and industry expectations

 Estimated economic life of the asset

 Development of new technologies

 Acquisition of new customers

 Attrition of existing customers

 Obsolescence of technology over time

 Supplemental Pro Forma Information (Unaudited)

 The following supplemental pro forma data summarizes our results of operations
for the periods presented, as if we completed the acquisition as of the first day of our fiscal 2024. The supplemental pro forma data
reports actual operating results adjusted to include the pro forma effect and timing of the impact of amortization expense of identified
intangible assets, the purchase accounting effect on inventories acquired, and transaction costs. In accordance with the pro forma acquisition
date, we recorded in fiscal 2024 supplemental pro forma data acquisition-related costs of $ 371,000, with a corresponding reduction in
the fiscal 2025 supplemental pro forma data. Additionally, we recorded (i) additional amortization expense of $ 20,000, and (ii) $ 88,000
reduction in cost of goods sold from manufacturing profit in acquired inventory in the fiscal 2025 supplemental pro forma data, and (i)
additional amortization expense of $ 634,000 and (ii) cost of goods sold from manufacturing profit in acquired inventory of $ 106,000 in
fiscal 2024 supplemental pro forma data.

 Supplemental pro forma data is as follows:

 Schedule of supplemental pro forma data

 2025

 2024

 (In thousands, except per share amounts)

 Pro forma net revenue

 $
 124,784

 $
 168,103

 Pro forma net loss

 $
 ( 10,702
)

 $
 ( 3,876
)

 Pro forma net loss per share:

 Basic and Diluted

 $
 ( 0.28
)

 $
 ( 0.10
)

 Net revenue related to products and services from the acquisition of Netcomm
contributed approximately 3% of our total net revenue for the year ended June 30, 2025. As of the Closing Date, we began to immediately
integrate the acquisition into existing operations, engineering groups, sales distribution networks and management structure, making it
generally impracticable to determine the post-acquisition earnings on a standalone basis.

 F- 19

 4.

 Supplemental Financial Information

 Accounts Receivable

 The following table presents details of our accounts
receivable:

 Schedule of accounts
receivable

 2025

 2024

 Accounts receivable

 $
 25,231

 $
 31,526

 Allowance for credit losses

 ( 139
)

 ( 247
)

 Accounts receivable, net

 $
 25,092

 $
 31,279

 Inventories

 The following table presents details of our inventories:

 Schedule of inventories

 2025

 2024

 Finished goods

 $
 15,603

 $
 14,167

 Raw materials

 10,768

 13,531

 Inventories, net

 $
 26,371

 $
 27,698

 Property and Equipment

 The following table presents details of our property
and equipment:

 Schedule of property and equipment

 2025

 2024

 Computer, software and office equipment

 $
 4,886

 $
 4,531

 Furniture and fixtures

 2,698

 2,748

 Production, development and warehouse equipment

 3,946

 4,033

 Construction-in-progress

 –

 Property and equipment, gross

 11,530

 11,328

 Less accumulated depreciation

 ( 9,074
)

 ( 7,312
)

 Property and equipment, net

 $
 2,456

 $
 4,016

 F- 20

 Goodwill

 The following table presents details of our goodwill
balance:

 Schedule of goodwill

 Year Ended

 June 30, 2025

 Balance at June 30, 2024

 $
 27,824

 Acquisition of NetComm

 3,265

 Balance at June 30, 2025

 $
 31,089

 Intangible Assets

 The following table presents details of our intangible
assets:

 Schedule of intangible
assets

 June 30, 2025

 June 30, 2024

 Gross Carrying Amount

 Accumulated Amortization

 Net Book Value

 Gross Carrying Amount

 Accumulated Amortization

 Net Book Value

 Developed technology

 $
 6,793

 $
 ( 6,066
)

 $
 6,331

 $
 ( 5,293
)

 $
 1,038

 Customer relationships

 19,116

 ( 16,321
)

 2,795

 17,528

 ( 13,315
)

 4,213

 Order backlog

 ( 149
)

 –

 –

 –

 Trademark and trade name

 1,516

 ( 1,448
)

 1,425

 ( 1,425
)

 –

 $
 27,722

 $
 ( 23,984
)

 3,738

 $
 25,284

 $
 ( 20,033
)

 $
 5,251

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

 As of June 30, 2025, future estimated amortization
expense is as follows:

 Schedule of future estimated amortization
expense

 Years Ending June 30,

 2026

 $
 1,562

 2027

 2028

 2029

 2030

 Thereafter

 Total future amortization

 $
 3,738

 F- 21

 Warranty Reserve

 The following table presents details of our warranty
reserve:

 Schedule of warranty reserve

 2025

 2024

 Beginning balance

 $

 $

 Charged to cost of revenues

 Usage

 ( 397
)

 ( 324
)

 Ending balance

 $

 $

 Other Liabilities

 The following table presents details of our other
liabilities:

 Schedule of other liabilities

 2025

 2024

 Current

 Accrued variable consideration

 $
 2,557

 $
 1,796

 Customer deposits and refunds

 Accrued raw materials purchases

 Deferred revenue

 3,301

 3,017

 Lease liability

 1,594

 1,767

 Taxes payable

 Warranty reserve

 Accrued operating expenses

 1,879

 2,217

 Total other current liabilities

 $
 10,622

 $
 10,971

 Non-current

 Lease liability

 $
 7,811

 $
 8,563

 Deferred tax liability

 Deferred revenue

 2,255

 2,736

 Total other non-current liabilities

 $
 10,238

 $
 11,478

 F- 22

 Computation of Net Loss per Share

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

 Schedule of computation of net loss per share

 2025

 2024

 (In thousands, except per share data)

 Numerator:

 Net loss

 $
)

 $
)

 Denominator:

 Weighted-average shares outstanding - basic and diluted

 38,613

 37,386

 Net loss per share - basic and diluted

 $
 ( 0.29
)

 $
 ( 0.12
)

 The following table presents the common stock equivalents excluded from
the diluted net loss per share calculation because they were anti-dilutive for the periods presented. These excluded common stock equivalents
could be dilutive in the future.

 Schedule of anti-dilutive securities

 2025

 2024

 Common stock equivalents

 Restructuring, Severance and Related Charges

 In January 2025 we undertook a headcount reduction totaling approximately
12% of our worldwide headcount primarily in the U.S. and India locations. We may incur additional charges in future periods as we identify
additional cost saving opportunities related to our business. The following table presents details of the liability we recorded related
to restructuring, severance and related activities during the current fiscal year:

 Schedule of severance and related charges

 Year Ended

 2025

 Beginning balance

 $

 Employee-related charges

 3,156

 Lease restructuring charges

 Payments

 ( 3,309
)

 Ending balance

 $

 The ending balance is recorded in accrued payroll and related expenses
on the accompanying consolidated balance sheet at June 30, 2025.

 F- 23

 Supplemental Cash Flow Information

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

 Schedule of non-cash investing transactions

 2025

 2024

 Acquisition of property through operating leases

 $
 1,027

 $
 –

 Accrued property and equipment paid for in the subsequent period

 $

 $

 5.

 Senior Credit Facilities

 In September 2024 we entered into a Fourth Amendment to the Third Amended
and Restated Loan and Security Agreement (the "Amendment") with Silicon Valley Bank ("SVB"), pertaining to our
then-existing term loan and revolving credit facility (together, the "Senior Credit Facilities"), which amended that certain
Third Amended and Restated Loan and Security Agreement, dated as of August 2, 2021, as amended by the First Amendment to Third Amended
and Restated Loan and Security Agreement, dated as of October 21, 2021, as amended by the Second Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of February 15, 2022, as amended by the Third Amendment to Third Amended and Restated Loan and Security
Agreement, dated as of September 7, 2022, by and among Lantronix and SVB (collectively with the Amendment, the "Third Amended and
Restated Loan Agreement").

 The Amendment, among other things, extended the maturity date of our Senior
Credit Facilities from August 2, 2025 to August 2, 2026. The Senior Credit Facilities bore interest at the Term Secured Overnight Financing
Rate ("SOFR") or the Prime Rate, at the option of Lantronix, plus a margin that ranged from 3.10% to 4.10% in the case of
Term SOFR and 1.50% to 2.50% in the case of the Prime Rate, depending on our total leverage with a Term SOFR floor of 1.50% and a Prime
Rate floor of 3.25%. The minimum liquidity requirement under the Senior Credit Facilities was $ 4,000,000. The Senior Credit Facilities
were secured by substantially all of our assets.

 In April 2023, we entered into a Letter Agreement (the "Letter Agreement")
with SVB, which, among other matters, amended the Third Amended and Restated Loan Agreement to reduce the former requirement to hold 85%
of our company-wide cash balances at SVB to 50%, and provided a waiver of any event of default under the Third Amended and Restated Loan
Agreement for any failure to comply with this covenant prior to the date of the Letter Agreement.

 The following table summarizes our outstanding debt under the Senior Credit
Facilities:

 Schedule of outstanding debt

 2025

 2024

 Outstanding borrowings on Senior Credit Facilities

 $
 11,829

 $
 16,341

 Less: Unamortized debt issuance costs

 ( 75
)

 ( 120
)

 Net Carrying amount of debt

 11,754

 16,221

 Less: Current portion

 ( 3,070
)

 ( 3,002
)

 Non-current portion

 $
 8,684

 $
 13,219

 During the year ended June 30, 2025, we recognized $ 1,238,000 of interest
expense in the accompanying consolidated statement of operations related to interest and amortization of debt issuance associated with
the borrowings under the Senior Credit Facilities.

 F- 24

 The Senior Credit Facilities required Lantronix to
comply with a minimum liquidity test, a maximum leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with all
financial covenants as of June 30, 2025.

 Liquidity

 The Senior Credit Facilities require that we maintain
a minimum liquidity of $4,000,000 at SVB, as measured at the end of each month.

 Maximum leverage ratio

 The Senior Credit Facilities required that we maintain
a maximum leverage ratio, calculated as the ratio of funded debt to the consolidated trailing 12-month earnings before interest, taxes,
depreciation and amortization, and certain other allowable exclusions of 2.00 to 1.00 as measured at the end of each calendar quarter.

 Minimum fixed charge coverage ratio

 The Senior Credit Facilities required that we maintain
a minimum fixed charge coverage ratio, calculated as the ratio of consolidated trailing 12-month earnings before interest, taxes, depreciation
and amortization, and certain other allowable exclusions, less capital expenditures and taxes paid, to the trailing twelve month principal
and interest payments on all funded debt of 1.25 to 1.00 as measured at the end of each calendar quarter.

 In addition, the Senior Credit Facilities contained customary representations
and warranties, affirmative and negative covenants, including covenants that limit or restrict Lantronix and its subsidiaries' ability
to incur liens, incur indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate and enter
into certain speculative hedging arrangements. The Senior Credit Facilities included a number of events of default, including, among other
things, non-payment defaults, covenant defaults, cross-defaults to other materials indebtedness, bankruptcy and insolvency defaults and
material judgment defaults. If any event of default were to occur (subject, in certain instances, to specified grace periods), the principal,
premium, if any, interest and any other monetary obligations on all the then outstanding amounts under the Senior Credit Facilities could
become due and payable immediately.

 New Financing Arrangements

 On August 15, 2025, we entered into a Fourth Amended and Restated Loan
and Security Agreement with SVB (the "Loan Agreement"), which effectively refinanced our outstanding term loan with an asset-backed
revolving line of credit secured by our accounts receivable. The new line provides us with a revolving credit facility of up to $ 15,000,000,
subject to customary borrowing base limitations. The revolving credit facility is scheduled to mature on August 1, 2028. Borrowings under
the revolving credit facility will bear interest on the outstanding principal equal to the greater of (i) 5.0% and (ii) the Prime Rate
plus a margin of 0.0% to 0.5%, with the applicable margin depending on our liquidity.

 The Loan Agreement requires us to comply with a minimum liquidity test.
The Loan Agreement also includes customary representations and warranties and affirmative and negative covenants, including covenants
that limit or restrict our ability to incur liens or indebtedness, dispose of assets, make investments, make restricted payments, merge
or consolidate, and enter into certain transactions with our affiliates. The Loan Agreement includes customary events of default, including,
among other things, non-payment defaults, covenant defaults, bankruptcy and insolvency defaults, and material judgment defaults. If any
event of default under the Loan Agreement occurs (subject, in certain instances, to specified grace or cure periods), the principal, interest
and any other monetary obligations on all the then outstanding amounts may become due and payable immediately.

 F- 25

 6.

 Stockholders' Equity

 Stock Incentive Plans

 We have stock incentive plans in effect under which non-qualified and incentive
stock options to purchase shares of Lantronix common stock ("stock options") have been granted to employees, non-employees
and board members. In addition, we have previously granted restricted common stock awards ("non-vested shares") to employees
and board members under these plans. In November 2020, our stockholders voted to approve the 2020 Performance Incentive Plan (the "2020
Plan"), replacing our Amended and Restated 2010 Stock Incentive Plan (the "2010 Plan"), which expired in September 2020.
At the 2010 Plan's expiration date, approximately 1,097,000 shares of our common stock that remained available for award grants
under the 2010 Plan became available for award grants under the 2020 Plan. An additional 2,500,000 shares our common stock were also made
available at that time for award grants under the 2020 Plan, and shares of common stock subject to outstanding awards under the 2010 Plan
that expired, were cancelled, or otherwise terminate after the expiration date of the 2010 Plan became available for award grant purposes
under the 2020 Plan. In both November 2022 and November 2024, our stockholders voted to approve amendments to the 2020 Plan that, among
other things, increased the aggregate number of shares of our common stock available for award grants under the plan in each case by 1,800,000
shares, for a total increase of 3,600,000 shares. The 2020 Plan authorizes awards of stock options (both non-qualified and incentive),
stock appreciation rights, non-vested shares, restricted stock units ("RSUs") and performance shares ("PSUs").
New shares are issued to satisfy stock option exercises and share issuances. At June 30, 2025, approximately 1,758,000 shares remain available
for issuance under the 2020 Plan. We have also granted stock options, RSUs and PSUs under individual inducement award agreements.

 The Compensation Committee of our board of directors determines eligibility,
vesting schedules and exercise prices for stock options and shares granted under the plans. Stock options are generally granted with an
exercise price equal to the market price of our common stock on the grant date. Stock options generally have a contractual term of seven
to ten years. Share-based awards generally vest and become exercisable over a one to four-year service period. As of June 30, 2025, no
stock appreciation rights or non-vested stock was outstanding. No income tax benefit was realized from activity in the share-based plans
during the fiscal years ended June 30, 2025 and 2024.

 Restricted Stock Units

 The fair value of our RSUs is based on the closing market price of our
common stock on the grant date.

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

 Schedule of RSU activity

 Number of Shares

 Weighted-Average Grant Date Fair Value per Share

 Balance of RSUs outstanding at June 30, 2024

 1,881

 $
 4.89

 Granted

 1,625

 3.23

 Forfeited

 ( 486
)

 4.09

 Vested

 ( 913
)

 4.95

 Balance of RSUs outstanding at June 30, 2025

 2,107

 $
 3.76

 F- 26

 Performance Shares

 The fair value of our PSUs is estimated as of the grant date based upon
the expected achievement of the performance metrics specified in the grant and the closing market price of our common stock on the date
of grant. To the extent a grant of PSUs contains a market condition, the grant date fair value is estimated using a Monte Carlo simulation
with the following weighted average assumptions:

 Schedule of valuation assumptions

 2025

 2024

 Volatility of Common Stock

 65.99 %

 62.00 %

 Average correlation coefficient of peer companies

 0.36

 0.34

 Risk-free interest rate

 4.52 %

 4.55 %

 Dividend yield

 0.00 %

 0.00 %

 Contract Term

 2.99

 2.92

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

 Schedule of PSU activity

 Number of Shares

 Weighted Average Grant Date Fair Value per Share

 Balance of PSUs outstanding at June 30, 2024

 1,669

 $
 5.82

 Granted

 4.73

 Forfeited

 ( 588
)

 5.09

 Vested

 ( 669
)

 5.24

 Balance of PSUs outstanding at June 30, 2025

 $
 6.06

 Stock Option Awards

 The fair value of each stock option grant is estimated on the grant date
using the Black-Scholes-Merton option-pricing formula. The expected term of stock options granted is based on our recent historical exercise
data. Expected volatilities are based on the historical volatility of our stock price. The risk-free interest rate assumption is based
on the U.S. Treasury interest rates appropriate for the expected term of our stock options.

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

 Schedule of stock option
 activity

 Weighted-Average

 Exercise

 Remaining

 Aggregate

 Number of

 Price

 Contractual

 Intrinsic

 Shares

 Per Share

 Term

 Value

 (In years)

 Balance of options outstanding at June 30, 2024

 $
 4.13

 Forfeited

 ( 15
)

 5.46

 Expired

 ( 108
)

 4.84

 Exercised

 ( 230
)

 3.36

 Balance of options outstanding at June 30, 2025

 $
 4.51

 3.5

 $

 Options exercisable at June 30, 2025

 $
 4.41

 3.5

 $

 F- 27

 The following table presents a summary of grant date fair value and intrinsic
value information for all of our stock options:

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

 2025

 2024

 Intrinsic value of options exercised

 $

 $

 Employee Stock Purchase Plan

 Our 2013 Employee Stock Purchase Plan ("ESPP") is intended
to provide employees with an opportunity to purchase our common stock through accumulated payroll deductions at the end of a specified
purchase period. Each of our employees (including officers) is eligible to participate in our ESPP, subject to certain limitations as
set forth in our ESPP.

 The ESPP currently operates with six month offering periods commencing
on the first trading day on or after May 16 and November 16 of each year (an "Offering Period"). Common stock may be purchased
under the ESPP at the end of each six-month Offering Period unless the participant withdraws or terminates employment earlier. Shares
of the Company's common stock may be purchased under the ESPP at a price not less than 85% of the lesser of the fair market value
of our common stock on the first or last trading day of each Offering Period. The ESPP limits the number of shares of common stock that
may be issued under the plan to 1,800,000 shares.

 The per share fair value of stock purchase rights granted under the ESPP
was estimated using the following weighted-average assumptions:

 Schedule of valuation
 assumptions

 2025

 2024

 Expected term (in years)

 0.5

 0.5

 Expected volatility

 69 %

 72 %

 Risk-free interest rate

 4.44 %

 5.39 %

 Dividend yield

 0.00 %

 0.00 %

 The following table presents a summary of activity under our ESPP:

 Schedule of employee stock
 purchase plan activity

 Year Ended

 June 30, 2025

 (In thousands, except per share data)

 Shares available for issuance at June 30, 2024

 Shares issued

 ( 155
)

 Shares available for issuance at June 30, 2025

 Weighted-average purchase price per share

 $
 2.19

 Intrinsic value of ESPP shares on purchase date

 $

 After the purchase and issuance of shares that occurred in May 2025, the
ESPP has been suspended until further notice.

 F- 28

 Share-Based Compensation Expense

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

 Schedule of share-based compensation expense

 2025

 2024

 Cost of revenues

 $

 $

 Selling, general and administrative

 4,424

 6,248

 Research and development

 1,522

 1,852

 Total share-based compensation expense

 $
 6,132

 $
 8,337

 The following table presents a summary of the remaining unrecognized share-based
compensation expense related to our outstanding share-based awards as of June 30, 2025:

 Schedule of unrecognized share-based
compensation expense

 Remaining Unrecognized Compensation Expense

 Remaining Weighted-Average Years to Recognize

 Stock options

 $

 1.6

 RSUs

 6,373

 2.1

 PSUs

 2,181

 1.7

 $
 8,645

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

 7.

 Retirement Plan

 We have a retirement savings plan (the "Plan") to which eligible
employees may elect to make contributions through salary deferrals up to 100% of their base pay, subject to limitations. We made approximately
$ 364,000 and $ 376,000 in matching contributions to participants in the Plan during the fiscal years ended June 30, 2025 and 2024, respectively.

 In addition, we may make discretionary profit-sharing contributions, subject
to limitations. During the fiscal years ended June 30, 2025 and 2024, we made no such contributions to the Plan.

 F- 29

 8.

 Income Taxes

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

 The following table presents U.S. and foreign income (loss) before income
taxes:

 Schedule of components of income tax expense

 2025

 2024

 Current:

 Federal

 $
 –

 $
 –

 State

 Foreign

 ( 260
)

 Total Current taxes

 $
 ( 232
)

 $

 Deferred:

 Federal

 ( 7
)

 State

 –

 –

 Foreign

 –

 –

 $
 ( 239
)

 $

 Schedule of income before income taxes

 2025

 2024

 United States

 $
 ( 12,786
)

 $
 ( 4,655
)

 Foreign

 1,174

 Loss before income taxes

 $
 ( 11,612
)

 $
 ( 3,771
)

 F- 30

 The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:

 Schedule of deferred tax assets and liabilities

 2025

 2024

 Deferred tax assets:

 Tax losses and credits

 $
 9,492

 $
 8,984

 Reserves not currently deductible

 2,673

 2,738

 Capitalized research and development expenses

 8,987

 7,511

 State taxes

 –

 Deferred compensation

 1,509

 Inventory capitalization

 2,235

 2,570

 Lease liabilities

 2,060

 2,299

 Depreciation and amortization

 Identified intangibles

 1,572

 1,172

 Other

 Gross deferred tax assets

 27,636

 27,053

 Valuation allowance

 ( 26,002
)

 ( 24,731
)

 Deferred tax assets, net

 1,634

 2,322

 Deferred tax liabilities:

 State taxes

 –

 ( 395
)

 Right-of-use assets

 ( 1,806
)

 ( 2,106
)

 Deferred tax liabilities

 ( 1,806
)

 ( 2,501
)

 Net deferred tax assets (liabilities)

 $
 ( 172
)

 $
 ( 179
)

 Our net deferred tax liability of $ 172,000 and $ 179,000 at June 30, 2025
and 2024, respectively, represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax
assets, and are recorded in other non-current liabilities on the accompanying consolidated balance sheets at June 30, 2025 and 2024. Realization
of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC 740, we have evaluated the positive
and negative evidence bearing upon our ability to realize the deferred tax assets as of June 30, 2025 and 2024. We have determined
that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses and uncertainty
of generating future taxable income.

 The following table presents a reconciliation of the provision (benefit)
for income taxes to taxes computed at the U.S. federal statutory rate:

 Schedule of effective income tax reconciliation

 2025

 2024

 Statutory federal provision (benefit) for income taxes

 $
 ( 2,439
)

 $
 ( 792
)

 Increase (decrease) resulting from:

 State taxes

 Stock options

 Other permanent differences

 –

 Expiration of R&D Credits

 Uncertain tax position

 ( 1,211
)

 ( 523
)

 Change in valuation allowance

 1,271

 Change in state tax rate

 Global intangible low-tax income inclusion

 –

 Foreign tax rate variances

 ( 72
)

 Other

 $
 ( 239
)

 $

 F- 31

 We continue to assert that our foreign earnings are indefinitely reinvested
in our overseas operations and as such, deferred income taxes were not provided on undistributed earnings of certain foreign subsidiaries.
The 2017 Act created a requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income ("GILTI"),
must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred
taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when
incurred. During the fiscal years ended June 30, 2025 and 2024, we elected to treat the tax effect of GILTI as a current-period expense
when incurred.

 Unrecognized Tax Benefits

 The following table summarizes our liability for uncertain tax positions
for the fiscal year ended June 30, 2025:

 Schedule of uncertain tax position

 Year Ended

 June 30, 2025

 Balance as of June 30, 2024

 $
 4,289

 Change in balances related to uncertain tax positions

 ( 1,211
)

 Balance as of June 30, 2025

 $
 3,078

 At June 30, 2025, we had $ 3,078,000
of gross unrecognized tax benefits which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our
valuation allowance of $ 3,078,000.
The balance decreased from the prior year due to the expiration of certain federal research and development tax credit carryforwards
as well as the reversal of liabilities in connection with the dissolution of one of our foreign subsidiaries by a gross amount of $ 1,280,000.
To the extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the
recognition would reduce the effective tax rate. Our continuing practice is to recognize interest and penalties related to income
tax matters in income tax expense. During the fiscal years ended June 30, 2025 and 2024, we recorded an immaterial expense for
interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2025, we had approximately
$ 39,000
of accrued interest and penalties related to uncertain tax positions.

 At June 30, 2025, our fiscal years ended June 30, 2022 through 2025 remain
open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2021 through 2025 remain open to examination
by the state taxing jurisdictions. However, we have NOLs beginning in the fiscal year ended June 30, 2005 which would cause the statute
of limitations to remain open for the year in which the NOL was incurred. Our fiscal years ended June 30, 2017 through 2025 remain open
to examination by foreign taxing authorities. We currently do not anticipate that the amount of unrecognized tax benefits as of June 30,
2025 will significantly increase or decrease within the next 12 months.

 New Tax Legislation

 In July 2025, the U.S. government enacted comprehensive legislation
commonly referred to as the One Big Beautiful Bill Act of 2025 (the "OBBB Act"). The OBBB Act, which includes a broad range
of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international).
It includes reinstating the option to claim 100% accelerated deprecations deductions on qualified property and immediate expensing of
domestic research and development costs. Income tax accounting guidance requires the effects of tax law changes to be recognized in the
period of enactment. Since the legislation was signed into law after June 30, 2025, it had no impact on our operating results for the
fiscal year ended June 30, 2025. We are currently assessing the impact on our financial statements in future periods.

 F- 32

 9.

 Leases

 In general, our leases include office buildings for various facilities
worldwide which are all classified as operating leases. We also have financing leases related to some office equipment in the U.S.

 The following presents components of lease expense and supplemental cash
flow information:

 Schedule of components of lease expense

 2025

 2024

 Components of lease expense

 Operating lease cost

 $
 2,369

 $
 2,465

 Financing lease cost

 Financing lease interest expense

 Supplemental cash flow information

 Cash paid for amounts included in the measurement of operating lease liabilities

 $
 1,765

 $
 1,772

 Cash paid for amounts included in the measurement of financing lease liabilities

 $

 $

 Right-of-use assets obtained in exchange for lease obligation

 $
 1,027

 $
 –

 As of June 30, 2025 and 2024, the weighted average discount rate for
leases was 4.8 % and 4.6 %, respectively, and the weighted average remaining lease term for leases was 2.9 years and 3.4 years, respectively.

 Maturities of lease liabilities as of June 30, 2025 were as follows:

 Schedule of maturities of lease liabilities

 Years ending June 30,

 Operating

 Financing

 2026

 $
 1,959

 $

 2027

 1,906

 2028

 1,968

 2029

 1,741

 –

 2030

 –

 Thereafter

 2,025

 –

 Total remaining lease payments

 10,575

 less: imputed interest

 ( 1,310
)

 ( 19
)

 Lease liability

 $
 9,265

 $

 Reported as:

 Current liabilities

 $
 1,489

 $

 Non-current liabilities

 $
 7,776

 $

 F- 33

 10.

 Commitments and Contingencies

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

 11.

 Significant Geographic, Customer and Supplier Information

 Long-lived assets, which consists of property and equipment, net, lease
right-of-use assets, intangible assets, net, and goodwill by geographic area are as follows:

 Schedule of long-lived assets by geographic areas

 2025

 2024

 U.S.

 $
 40,065

 $
 38,650

 Canada

 5,415

 7,564

 Rest of world

 $
 45,705

 $
 46,658

 Customers

 The following table presents sales to our significant customers as a percentage
of net revenue:

 Schedule of revenue by major customers

 2025

 2024

 Top five customers (1)

 44 %

 54 %

 Customer A

 15 %

 13 %

 Customer B

 *

 25 %

 (1)

 Includes Customer A and Customer B in the fiscal year ended June 30, 2025 and in the fiscal year ended June 30, 2024.

 *

 Less than 10%

 The following table shows customers that had an outstanding receivable
balance that represented at least 10% of our total net accounts receivable:

 Schedule of accounts
receivable net customers

 2025

 2024

 Customer A

 18 %

 15 %

 Customer B

 *

 26 %

 Customer C

 13 %

 *

 *

 Less than 10%

 F- 34

 Related Party Transactions

 We had no net revenue from related parties for the fiscal years ended June
30, 2025 and 2024.

 Suppliers

 We do not own or operate a manufacturing facility. All of our products
are manufactured by third-party contract manufacturers and foundries primarily located in Thailand, Taiwan and China. We have several
single-sourced supplier relationships, either because alternative sources are not available or because the relationship is advantageous
to us. If these suppliers are unable to provide a timely and reliable supply of components, we could experience manufacturing delays that
could adversely affect our consolidated results of operations.

 12. Segment Reporting

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

 Schedule of segment disclosure

 2025

 2024

 Net revenue

 $

 $

 Less cost of revenue:

 Other costs of revenue

 70,515

 94,452

 Amortization of manufacturing profit in acquired inventory

 Depreciation and amortization

 Total cost of revenue

 71,224

 95,973

 Gross profit

 51,699

 64,354

 Less:

 Personnel-related expenses

 32,551

 35,338

 Professional fees and outside services

 4,878

 5,037

 Advertising and marketing

 2,239

 2,346

 Facilities and insurance

 4,391

 5,277

 5,946

 8,100

 Depreciation

 1,649

 1,701

 Outside services

 Product certifications

 Other operating expenses

 2,054

 1,722

 Restructuring, severance and related charges

 3,535

 1,423

 Acquisition-related costs

 –

 Fair value remeasurement of earnout consideration

 –

 ( 9
)

 Amortization of intangible assets

 3,951

 5,314

 Interest expense, net

 Other expense (income)

 ( 7
)

 ( 239
)

 Total segment expenses

 63,072

 68,870

 Segment net loss

 $
)

 $
)

 F- 35