Delaware
|
33-0362767
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
Identification
No.)
|
Page
|
|||
PART
I.
|
FINANCIAL
INFORMATION
|
1
|
|
Item
1.
|
Financial
Statements
|
1
|
|
Unaudited
Condensed Consolidated Balance Sheets at December 31, 2007 and June 30,
2007
|
1
|
||
Unaudited
Condensed Consolidated Statements of Operations for the Three and Six
Months Ended
|
|||
December
31, 2007 and 2006
|
2
|
||
Unaudited
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended
|
|||
December
31, 2007 and 2006
|
3
|
||
Notes
to Unaudited Condensed Consolidated Financial Statements
|
4
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
8
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
18
|
|
Item
4.
|
Controls
and Procedures
|
19
|
|
PART
II.
|
OTHER
INFORMATION
|
19
|
|
Item
1.
|
Legal
Proceedings
|
19
|
|
Item
1A.
|
Risk
Factors
|
19
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
27
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
27
|
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
27
|
|
Item
5.
|
Other
Information
|
28
|
|
Item
6.
|
Exhibits
|
28
|
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 7,224 | $ | 7,582 | ||||
Marketable
securities
|
- | 97 | ||||||
Accounts
receivable, net
|
3,260 | 3,411 | ||||||
Inventories,
net
|
9,963 | 10,981 | ||||||
Contract
manufacturers' receivable
|
1,001 | 1,270 | ||||||
Prepaid
expenses and other current assets
|
456 | 578 | ||||||
Total
current assets
|
21,904 | 23,919 | ||||||
Property
and equipment, net
|
2,097 | 1,911 | ||||||
Goodwill
|
9,488 | 9,488 | ||||||
Purchased
intangible assets, net
|
435 | 485 | ||||||
Officer
loans
|
94 | 129 | ||||||
Other
assets
|
70 | 26 | ||||||
Total
assets
|
$ | 34,088 | $ | 35,958 | ||||
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 8,749 | $ | 11,017 | ||||
Accrued
payroll and related expenses
|
2,342 | 1,993 | ||||||
Warranty
reserve
|
342 | 446 | ||||||
Accrued
settlements
|
1,057 | 1,068 | ||||||
Other
current liabilities
|
3,541 | 3,808 | ||||||
Total
current liabilities
|
16,031 | 18,332 | ||||||
Long-term
liabilities
|
235 | 256 | ||||||
Long-term
capital lease obligations
|
626 | 142 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders'
equity:
|
||||||||
Common
stock
|
6 | 6 | ||||||
Additional
paid-in capital
|
185,814 | 184,953 | ||||||
Accumulated
deficit
|
(169,069 | ) | (168,173 | ) | ||||
Accumulated
other comprehensive income
|
445 | 442 | ||||||
Total
stockholders' equity
|
17,196 | 17,228 | ||||||
Total
liabilities and stockholders' equity
|
$ | 34,088 | $ | 35,958 | ||||
See
accompanying notes.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In thousands, except per share
data)
|
||||||||||||||||
Net
revenues (1)
|
$ | 15,277 | $ | 14,829 | $ | 28,331 | $ | 27,343 | ||||||||
Cost
of revenues (2)
|
7,414 | 7,429 | 14,027 | 13,336 | ||||||||||||
Gross
profit
|
7,863 | 7,400 | 14,304 | 14,007 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
5,331 | 6,057 | 11,610 | 11,555 | ||||||||||||
Research
and development
|
1,758 | 1,882 | 3,526 | 3,600 | ||||||||||||
Litigation
settlement costs
|
- | 75 | - | 90 | ||||||||||||
Amortization
of purchased intangible assets
|
18 | 18 | 36 | 36 | ||||||||||||
Total
operating expenses
|
7,107 | 8,032 | 15,172 | 15,281 | ||||||||||||
Income
(loss) from operations
|
756 | (632 | ) | (868 | ) | (1,274 | ) | |||||||||
Interest
(expense) income, net
|
(61 | ) | 1 | (80 | ) | 7 | ||||||||||
Other
income, net
|
120 | 730 | 131 | 727 | ||||||||||||
Income
(loss) before income taxes
|
815 | 99 | (817 | ) | (540 | ) | ||||||||||
(Benefit)
Provision for income taxes
|
(168 | ) | 12 | (147 | ) | 24 | ||||||||||
Net
Income (loss)
|
$ | 983 | $ | 87 | $ | (670 | ) | $ | (564 | ) | ||||||
Basic
- net income (loss) per share
|
$ | 0.02 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Diluted
- net income (loss) per share
|
$ | 0.02 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Basic
- weighted average shares
|
60,088 | 59,562 | 60,015 | 59,413 | ||||||||||||
Diluted
- weighted average shares
|
60,542 | 60,196 | 60,015 | 59,413 | ||||||||||||
(1) Includes
net revenues from related party
|
$ | 211 | $ | 302 | $ | 502 | $ | 581 | ||||||||
(2) Includes
amortization of purchased intangible assets
|
$ | 8 | $ | 4 | $ | 13 | $ | 6 | ||||||||
Six Months
Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
Loss
|
$ | (670 | ) | $ | (564 | ) | ||
Adjustments
to reconcile net loss to net cash used in
|
||||||||
operating
activities:
|
||||||||
Share-based
compensation
|
641 | 635 | ||||||
Provision
for inventories
|
314 | (70 | ) | |||||
Depreciation
and amortization
|
267 | 194 | ||||||
Gain
on sale of investment
|
(104 | ) | (700 | ) | ||||
Amortization
of purchased intangible assets
|
50 | 42 | ||||||
Provision
for officer loan
|
35 | - | ||||||
(Recovery)
Provision for doubtful accounts
|
(3 | ) | 20 | |||||
Litigation
settlement costs
|
- | 90 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
148 | (401 | ) | |||||
Inventories
|
704 | (345 | ) | |||||
Contract
manufacturers' receivable
|
269 | 16 | ||||||
Prepaid
expenses and other current assets
|
135 | (25 | ) | |||||
Other
assets
|
(17 | ) | (6 | ) | ||||
Accounts
payable
|
(2,272 | ) | 1,272 | |||||
Accrued
payroll and related expenses
|
333 | 304 | ||||||
Accrued
settlements
|
- | (400 | ) | |||||
Warranty
reserve
|
(104 | ) | (219 | ) | ||||
Other
liabilities
|
(195 | ) | (617 | ) | ||||
Net
cash used in operating activities
|
(469 | ) | (774 | ) | ||||
Cash
flows from investing activities:
|
||||||||
Purchases
of property and equipment, net
|
(252 | ) | (271 | ) | ||||
Proceeds
from the sale of investment
|
104 | 700 | ||||||
Net
cash (used) provided in investing activities
|
(148 | ) | 429 | |||||
Cash
flows from financing activities:
|
||||||||
Net
proceeds from issuances of common stock
|
220 | 395 | ||||||
Payment
of capital lease obligations
|
(69 | ) | (78 | ) | ||||
Net
cash provided by financing activities
|
151 | 317 | ||||||
Effect
of foreign exchange rate changes on cash
|
108 | 43 | ||||||
Increase
(decrease) in cash and cash equivalents
|
(358 | ) | 15 | |||||
Cash
and cash equivalents at beginning of period
|
7,582 | 7,729 | ||||||
Cash
and cash equivalents at end of period
|
$ | 7,224 | $ | 7,744 | ||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands, except per share data)
|
||||||||||||||||
Numerator:
|
||||||||||||||||
Net
Income (loss)
|
$ | 983 | $ | 87 | $ | (670 | ) | $ | (564 | ) | ||||||
Denominator:
|
||||||||||||||||
Basic
weighted-average shares outstanding
|
60,088 | 59,562 | 60,015 | 59,413 | ||||||||||||
Effect
of dilutive shares:
|
||||||||||||||||
Stock
options
|
454 | 634 | - | - | ||||||||||||
Diluted
weighted-average shares
|
60,542 | 60,196 | 60,015 | 59,413 | ||||||||||||
Basic
- net income (loss) per share
|
$ | 0.02 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Diluted
- net income (loss) per share
|
$ | 0.02 | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) |
|
Three
Months Ended
|
Six
Months Ended
|
||||||
December
31,
|
December
31,
|
|||||||
2007
|
2006
|
2007
|
2006
|
|||||
Common
stock equivalents
|
1,326,975
|
1,682,991
|
2,001,466
|
2,500,146
|
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Finished
goods
|
$ | 6,727 | $ | 7,848 | ||||
Raw
materials
|
1,906 | 2,653 | ||||||
Inventory
at distributors
|
1,832 | 1,876 | ||||||
Large
scale integration chips *
|
2,207 | 1,530 | ||||||
Inventories,
gross
|
12,672 | 13,907 | ||||||
Reserve
for excess and obsolete inventory
|
(2,709 | ) | (2,926 | ) | ||||
Inventories,
net
|
$ | 9,963 | $ | 10,981 | ||||
*
This item is sold individually and embedded into the Company's
products.
|
|
Six
Months Ended
|
Year
Ended
|
||||||
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Beginning
balance
|
$ | 446 | $ | 693 | ||||
Charged
to cost of revenues
|
93 | 107 | ||||||
Usage
|
(197 | ) | (354 | ) | ||||
Ending
balance
|
$ | 342 | $ | 446 |
Number
of
|
||||
Shares
|
||||
Balance
of options outstanding at June 30, 2007
|
5,891,896 | |||
Options
granted
|
375,750 | |||
Options
forfeited
|
(909,800 | ) | ||
Options
expired
|
(132,500 | ) | ||
Options
exercised
|
(124,396 | ) | ||
Balance
of options outstanding at December 31, 2007
|
5,100,950 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Weighted-average
grant date fair value
|
$ | 0.73 | $ | 1.18 | $ | 0.78 | $ | 1.22 | ||||||||
Weighted-average
grant date exercise price
|
$ | 0.98 | $ | 1.54 | $ | 1.05 | $ | 1.57 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Cost
of revenues
|
$ | 26 | $ | 24 | $ | 53 | $ | 36 | ||||||||
Selling,
general and administrative
|
132 | 202 | 402 | 411 | ||||||||||||
Research
and development
|
74 | 96 | 186 | 188 | ||||||||||||
Total
share-based compensation
|
$ | 232 | $ | 322 | $ | 641 | $ | 635 |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Effective
tax rate
|
21 | % | 12 | % | 18 | % | 4 | % |
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
Income (loss)
|
$ | 983 | $ | 87 | $ | (670 | ) | $ | (564 | ) | ||||||
Other
comprehensive income (loss):
|
||||||||||||||||
Change
in net unrealized gain on investment, net of taxes of $0
|
8 | 2 | 7 | 8 | ||||||||||||
Reclassification
adjustment for net realized gain on sale of investment
|
(96 | ) | - | (97 | ) | - | ||||||||||
Change
in translation adjustments, net of taxes of $0
|
29 | 53 | 100 | 39 | ||||||||||||
Total
comprehensive income (loss)
|
$ | 924 | $ | 142 | $ | (660 | ) | $ | (517 | ) |
·
|
Device Enablement – We
offer an array of embedded and external device enablement solutions that
enable integrators and manufacturers of electronic and electro-mechanical
products to add network connectivity, manageability and
control. Our customers’ products originate from a wide variety
of applications within the M2M market, from blood analyzers that relay
critical patient information directly to a hospital’s information system,
to simple devices such as time clocks, allowing the user to obtain
information from these devices and to improve how they are managed and
controlled. We also offer products such as multi-port device
servers that enable devices outside the data center to cost effectively
share the network connection and convert various protocols to industry
standard interfaces such as Ethernet and the
Internet.
|
·
|
Device Management –We
offer off-the-shelf appliances such as console servers, digital remote
keyboard, video, mouse extenders, and power control products that enable
IT professionals to remotely connect, monitor and control network
infrastructure equipment, distributed branch office equipment and large
groups of servers using highly secure out-of-band management
technology. In addition, we offer off-the-shelf appliances that
enable IT professionals to reliably, remotely and simply monitor,
configure and manage multiple devices from a single point of
control.
|
·
|
Non-core – Over the
years, we have innovated or acquired various product lines that are no
longer part of our primary, core markets described above. In general,
these non-core businesses represent decreasing markets and we minimize
research and development in these product lines. Included in this category
are terminal servers, visualization solutions, legacy print servers,
software and other miscellaneous products. We have announced the
end-of-life for almost all of our non-core products and expect a steep
decline in non-core revenues in fiscal 2008 while we complete the exit of
this product category.
|
·
|
Net
revenues were $15.3 million for the three months ended December 31,
2007, an increase of $448,000 or 3.0% as compared to $14.8 million
for the three months ended December 31, 2006. The increase was
primarily the result of a $767,000 or 5.7% increase in our device
networking product lines offset by a $319,000, or 22.2% decrease in our
non-core product
lines.
|
·
|
Gross
profit as a percentage of net revenues was 51.5% for the three months
ended December 31, 2007 as compared to 49.9% reported for the three months
ended December 31, 2006. The increase in gross profit margin
percent was primarily attributable to a favorable product mix and
inventory overhead absorption offset by an increase in certain inventory
reserves in connection with a review of our product offerings as part of
our effort to simplify our product portfolio by discontinuing slow-moving
and non-strategic products.
|
·
|
Income
from operations was $756,000, or 4.9%, of net revenues for the three
months ended December 31, 2007 as compared to a loss from operations of
$632,000, or 4.3%, of net revenues for the three months ended December 31,
2006.
|
·
|
Net
income of $1.0 million, or $0.02 per basic and diluted share, for the
three months ended December 31, 2007, increased from a net income of
$87,000, or $0.00 per basic and diluted share, for the three months
ended December 31, 2006. Net income for the quarter ended
December 31, 2006 was significantly impacted by the $700,000 of income
recognized on the sale of our investment in
Xanboo.
|
·
|
Cash,
cash equivalents and marketable securities were $7.2 million as of
December 31, 2007 as compared to $7.7 million as of June 30,
2007.
|
·
|
Net
accounts receivable were $3.3 million as of December 31, 2007 as
compared to $3.4 million as of June 30, 2007. Annualized days sales
outstanding (“DSO”) in receivables as of December 31, 2007 decreased
to 20 days from 21 days as of June 30, 2007. Our accounts
receivable and DSO are primarily affected by the timing of shipments
within a quarter, our collections performance and the fact that a
significant portion of our revenues are recognized on a sell-through basis
(upon shipment from distributor inventories rather than as goods are
shipped to distributors).
|
·
|
Net
inventories were $10.0 million as of December 31, 2007 as compared to
$11.0 million as of June 30, 2007. Our annualized inventory turns
remained constant at 2.8 annualized turns for the fiscal quarter ended
December 31, 2007 as compared to the fiscal quarter ended June 30,
2007.
|
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Net
revenues
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of revenues
|
48.5 | % | 50.1 | % | 49.5 | % | 48.8 | % | ||||||||
Gross
profit
|
51.5 | % | 49.9 | % | 50.5 | % | 51.2 | % | ||||||||
Operating
expenses:
|
||||||||||||||||
Selling,
general and administrative
|
34.9 | % | 40.8 | % | 41.0 | % | 42.3 | % | ||||||||
Research
and development
|
11.5 | % | 12.7 | % | 12.4 | % | 13.2 | % | ||||||||
Litigation
settlement costs
|
0.0 | % | 0.5 | % | 0.0 | % | 0.3 | % | ||||||||
Amortization
of purchased intangible assets
|
0.1 | % | 0.1 | % | 0.1 | % | 0.1 | % | ||||||||
Total
operating expenses
|
46.5 | % | 54.2 | % | 53.6 | % | 55.9 | % | ||||||||
Income
(loss) from operations
|
4.9 | % | (4.3 | %) | (3.1 | %) | (4.7 | %) | ||||||||
Interest
(expense) income, net
|
(0.4 | %) | 0.0 | % | (0.3 | %) | 0.0 | % | ||||||||
Other
income, net
|
0.8 | % | 4.9 | % | 0.5 | % | 2.7 | % | ||||||||
Income
(loss) before income taxes
|
5.3 | % | 0.7 | % | (2.9 | %) | (2.0 | %) | ||||||||
(Benefit)
Provision for income taxes
|
(1.1 | %) | 0.1 | % | (0.5 | %) | 0.1 | % | ||||||||
Net
Income (loss)
|
6.4 | % | 0.6 | % | (2.4 | %) | (2.1 | %) | ||||||||
Three
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Device
enablement
|
$ | 11,285 | 73.9 | % | $ | 10,833 | 73.1 | % | $ | 452 | 4.2 | % | ||||||||||||
Device
management
|
2,875 | 18.8 | % | 2,560 | 17.3 | % | 315 | 12.3 | % | |||||||||||||||
Device
networking
|
14,160 | 92.7 | % | 13,393 | 90.4 | % | 767 | 5.7 | % | |||||||||||||||
Non-core
|
1,117 | 7.3 | % | 1,436 | 9.6 | % | (319 | ) | (22.2 | %) | ||||||||||||||
Net
revenues
|
$ | 15,277 | 100.0 | % | $ | 14,829 | 100.0 | % | $ | 448 | 3.0 | % |
Six
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenue
|
2006
|
Revenue
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Device
enablement
|
$ | 21,114 | 74.5 | % | $ | 19,836 | 72.5 | % | $ | 1,278 | 6.4 | % | ||||||||||||
Device
management
|
4,826 | 17.0 | % | 4,274 | 15.6 | % | 552 | 12.9 | % | |||||||||||||||
Device
networking
|
25,940 | 91.5 | % | 24,110 | 88.1 | % | 1,830 | 7.6 | % | |||||||||||||||
Non-core
|
2,391 | 8.5 | % | 3,233 | 11.9 | % | (842 | ) | (26.0 | %) | ||||||||||||||
Net
revenues
|
$ | 28,331 | 100.0 | % | $ | 27,343 | 100.0 | % | $ | 988 | 3.6 | % | ||||||||||||
Three
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Americas
|
$ | 8,908 | 58.3 | % | $ | 9,573 | 64.6 | % | $ | (665 | ) | (6.9 | %) | |||||||||||
EMEA
|
4,125 | 27.0 | % | 3,720 | 25.1 | % | 405 | 10.9 | % | |||||||||||||||
Asia
Pacific
|
2,244 | 14.7 | % | 1,536 | 10.3 | % | 708 | 46.1 | % | |||||||||||||||
Net
revenues
|
$ | 15,277 | 100.0 | % | $ | 14,829 | 100.0 | % | $ | 448 | 3.0 | % |
Six
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenue
|
2006
|
Revenue
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Americas
|
$ | 16,843 | 59.5 | % | $ | 17,229 | 63.0 | % | $ | (386 | ) | (2.2 | %) | |||||||||||
EMEA
|
7,510 | 26.5 | % | 6,711 | 24.5 | % | 799 | 11.9 | % | |||||||||||||||
Asia
Pacific
|
3,978 | 14.0 | % | 3,403 | 12.5 | % | 575 | 16.9 | % | |||||||||||||||
Net
revenues
|
$ | 28,331 | 100.0 | % | $ | 27,343 | 100.0 | % | $ | 988 | 3.6 | % |
Three
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Gross
profit
|
$ | 7,863 | 51.5 | % | $ | 7,400 | 49.9 | % | $ | 463 | 6.3 | % |
Six Months
Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Gross
profit
|
$ | 14,304 | 50.5 | % | $ | 14,007 | 51.2 | % | $ | 297 | 2.1 | % |
Three
Months Ended December 31,
|
||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||
Personnel-related
expenses
|
$ | 2,922 | $ | 3,189 | $ | (267 | ) | (8.4 | %) | |||||||||
Professional
fees & outside services
|
768 | 847 | (79 | ) | (9.3 | %) | ||||||||||||
Advertising
and marketing
|
663 | 842 | (179 | ) | (21.3 | %) | ||||||||||||
Facilities
|
389 | 477 | (88 | ) | (18.4 | %) | ||||||||||||
Share-based
compensation
|
132 | 202 | (70 | ) | (34.7 | %) | ||||||||||||
Depreciation
|
93 | 66 | 27 | 40.9 | % | |||||||||||||
Other
|
364 | 434 | (70 | ) | (16.1 | %) | ||||||||||||
Selling,
general and administrative
|
$ | 5,331 |
34.9%
|
$ | 6,057 |
40.8%
|
$ | (726 | ) | (12.0 | %) | |||||||
Six
Months Ended December 31,
|
||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||
Personnel-related
expenses
|
$ | 6,585 | $ | 6,050 | $ | 535 | 8.8 | % | ||||||||||
Professional
fees & outside services
|
1,476 | 1,605 | (129 | ) | (8.0 | %) | ||||||||||||
Advertising
and marketing
|
1,321 | 1,587 | (266 | ) | (16.8 | %) | ||||||||||||
Facilities
|
772 | 1,017 | (245 | ) | (24.1 | %) | ||||||||||||
Share-based
compensation
|
402 | 411 | (9 | ) | (2.2 | %) | ||||||||||||
Depreciation
|
176 | 143 | 33 | 23.1 | % | |||||||||||||
Other
|
878 | 742 | 136 | 18.3 | % | |||||||||||||
Selling,
general and administrative
|
$ | 11,610 |
41.0%
|
$ | 11,555 |
42.3%
|
$ | 55 | 0.5 | % |
Three Months Ended December
31,
|
||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||
Personnel-related
expenses
|
$ | 1,333 | $ | 1,339 | $ | (6 | ) | (0.4 | %) | |||||||||
Facilities
|
216 | 148 | 68 | 45.9 | % | |||||||||||||
Professional
fees & outside services
|
53 | 137 | (84 | ) | (61.3 | %) | ||||||||||||
Share-based
compensation
|
74 | 96 | (22 | ) | (22.9 | %) | ||||||||||||
Depreciation
|
14 | 11 | 3 | 27.3 | % | |||||||||||||
Other
|
68 | 151 | (83 | ) | (55.0 | %) | ||||||||||||
Research
and development
|
$ | 1,758 |
11.5%
|
$ | 1,882 |
12.7%
|
$ | (124 | ) | (6.6 | %) | |||||||
Six
Months Ended December 31,
|
||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||
Personnel-related
expenses
|
$ | 2,588 | $ | 2,613 | $ | (25 | ) | (1.0 | %) | |||||||||
Facilities
|
428 | 314 | 114 | 36.3 | % | |||||||||||||
Professional
fees & outside services
|
134 | 218 | (84 | ) | (38.5 | %) | ||||||||||||
Share-based
compensation
|
186 | 188 | (2 | ) | (1.1 | %) | ||||||||||||
Depreciation
|
26 | 20 | 6 | 30.0 | % | |||||||||||||
Other
|
164 | 247 | (83 | ) | (33.6 | %) | ||||||||||||
Research
and development
|
$ | 3,526 |
12.4%
|
$ | 3,600 |
13.2%
|
$ | (74 | ) | (2.1 | %) | |||||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Effective
tax rate
|
21 | % | 12 | % | 18 | % | 4 | % | ||||||||
Three
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Other
income, net
|
$ | 120 | 0.8 | % | $ | 730 | 4.9 | % | $ | (610 | ) | (83.6 | %) | |||||||||||
Six Months
Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenues
|
2006
|
Revenues
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Other
income, net
|
$ | 131 | 0.5 | % | $ | 727 | 2.7 | % | $ | (596 | ) | (82.0 | %) | |||||||||||
|
December
31,
|
June
30,
|
Increase
|
|||||||||
2007
|
2007
|
(Decrease)
|
||||||||||
(In
thousands)
|
||||||||||||
Working
capital
|
$ | 5,873 | $ | 5,587 | $ | 286 | ||||||
Cash
and cash equivalents
|
$ | 7,224 | $ | 7,582 | $ | (358 | ) | |||||
Marketable
securities
|
- | 97 | (97 | ) | ||||||||
Total
cash, cash equivalents and marketable securities
|
$ | 7,224 | $ | 7,679 | $ | (455 | ) | |||||
|
December
31,
|
June
30,
|
||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Available
borrowing capacity
|
$ | 2,835 | $ | 3,462 | ||||
Outstanding
letters of credit
|
$ | 1,280 | $ | 1,280 | ||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands)
|
||||||||||||||||
Net
cash provided by (used in):
|
||||||||||||||||
Net
Income (loss)
|
$ | 983 | $ | 87 | $ | (670 | ) | $ | (564 | ) | ||||||
Non-cash
operating expenses, net
|
468 | (257 | ) | 1,200 | 211 | |||||||||||
Changes
in operating assets and liabilities:
|
- | |||||||||||||||
Accounts
receivable
|
(1,286 | ) | (735 | ) | 148 | (401 | ) | |||||||||
Inventories
|
328 | 777 | 704 | (345 | ) | |||||||||||
Contract
manufacturers' receivable
|
250 | (352 | ) | 269 | 16 | |||||||||||
Prepaid
expenses and other current assets
|
59 | (50 | ) | 135 | (25 | ) | ||||||||||
Other
assets
|
(16 | ) | (3 | ) | (17 | ) | (6 | ) | ||||||||
Accounts
payable
|
108 | (685 | ) | (2,272 | ) | 1,272 | ||||||||||
Accrued
payroll and related expenses
|
130 | 517 | 333 | 304 | ||||||||||||
Accrued
settlements
|
- | - | - | (400 | ) | |||||||||||
Warranty
reserve
|
(31 | ) | (21 | ) | (104 | ) | (219 | ) | ||||||||
Other
liabilities
|
(872 | ) | 124 | (195 | ) | (617 | ) | |||||||||
Net
cash provided (used) in operating activities
|
121 | (598 | ) | (469 | ) | (774 | ) | |||||||||
Net
cash (used) provided in investing activities
|
(22 | ) | 433 | (148 | ) | 429 | ||||||||||
Net
cash provided by financing activities
|
2 | 166 | 151 | 317 | ||||||||||||
Effect
of foreign exchange rate changes on cash
|
34 | 56 | 108 | 43 | ||||||||||||
Increase
(decrease) in cash and cash equivalents
|
$ | 135 | $ | 57 | $ | (358 | ) | $ | 15 | |||||||
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Cash
and cash equivalents
|
$ | 7,224 | $ | 7,582 | ||||
Marketable
securities
|
- | 97 | ||||||
Total
cash, cash equivalents and marketable securities
|
$ | 7,224 | $ | 7,679 | ||||
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Cash
held in foreign currencies
|
$ | 1,826 | $ | 2,042 | ||||
·
|
changes
in the mix of net revenues attributable to higher-margin and lower-margin
products;
|
·
|
customers’
decisions to defer or accelerate
orders;
|
·
|
variations
in the size or timing of orders for our
products;
|
·
|
changes
in demand for our products;
|
·
|
fluctuations
in exchange rates;
|
·
|
defects
and other product quality problems;
|
·
|
loss
or gain of significant customers;
|
·
|
short-term
fluctuations in the cost or availability of our critical
components;
|
·
|
announcements
or introductions of new products by our
competitors;
|
·
|
effects
of terrorist attacks in the U.S. and abroad;
and
|
·
|
changes
in demand for devices that incorporate our
products.
|
·
|
the
liquidity of our common stock;
|
·
|
the
market price of our common stock;
|
·
|
the
number of institutional investors that will consider investing in our
common stock;
|
·
|
the
number of investors in general that will consider investing in our common
stock;
|
·
|
the
number of market makers in our common
stock;
|
·
|
the
availability of information concerning the trading
prices;
|
·
|
the
number of broker-dealers willing to execute trades in shares of our common
stock; and
|
·
|
our
ability to obtain financing for the continuation of our
operations.
|
Six
Months Ended
|
||||||||
December
31,
|
||||||||
2007
|
2006
|
|||||||
Top five customers
(1)
|
37.1 | % | 34.1 | % | ||||
Tech
Data
|
13.8 | % | 7.2 | % | ||||
Ingram
Micro
|
8.2 | % | 11.5 | % | ||||
(1) Includes Ingram Micro
and Tech Data.
|
||||||||
·
|
reduced
control over delivery schedules, quality assurance, manufacturing yields
and production costs;
|
·
|
lack
of guaranteed production capacity or product supply;
and
|
·
|
reliance
on these manufacturers to maintain competitive manufacturing
technologies.
|
Six
Months Ended December 31,
|
||||||||||||||||||||||||
%
of Net
|
%
of Net
|
Change
|
||||||||||||||||||||||
2007
|
Revenue
|
2006
|
Revenue
|
$
|
%
|
|||||||||||||||||||
(In
thousands, except percentages)
|
||||||||||||||||||||||||
Americas
|
$ | 16,843 | 59.5 | % | $ | 17,229 | 63.0 | % | $ | (386 | ) | (2.2 | %) | |||||||||||
EMEA
|
7,510 | 26.5 | % | 6,711 | 24.5 | % | 799 | 11.9 | % | |||||||||||||||
Asia
Pacific
|
3,978 | 14.0 | % | 3,403 | 12.5 | % | 575 | 16.9 | % | |||||||||||||||
Net
revenues
|
$ | 28,331 | 100.0 | % | $ | 27,343 | 100.0 | % | $ | 988 | 3.6 | % | ||||||||||||
·
|
unexpected
changes in regulatory requirements, taxes, trade laws and
tariffs;
|
·
|
reduced
protection for intellectual property rights in some
countries;
|
·
|
differing
labor regulations;
|
·
|
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;
|
·
|
effects
of terrorist attacks in the U.S. and
abroad;
|
·
|
greater
difficulty in staffing and managing foreign operations;
and
|
·
|
increased
financial accounting and reporting burdens and
complexities.
|
December
31,
|
June
30,
|
|||||||
2007
|
2007
|
|||||||
(In
thousands)
|
||||||||
Finished
goods
|
$ | 6,727 | $ | 7,848 | ||||
Raw
materials
|
1,906 | 2,653 | ||||||
Inventory
at distributors
|
1,832 | 1,876 | ||||||
Large
scale integration chips *
|
2,207 | 1,530 | ||||||
Inventories,
gross
|
12,672 | 13,907 | ||||||
Reserve
for excess and obsolete inventory
|
(2,709 | ) | (2,926 | ) | ||||
Inventories,
net
|
$ | 9,963 | $ | 10,981 | ||||
*
This item is sold individually and embedded into our
products.
|
||||||||
·
|
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.
|
·
|
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 common law trademark rights based upon use that
precedes the registration of our
marks;
|
·
|
other
companies might assert other rights to market products using our
trademarks;
|
·
|
policing
unauthorized use of our products and trademarks is difficult, expensive
and time-consuming, and we might be unable to determine the extent of this
unauthorized use;
|
·
|
courts
may determine that our software programs use open source software in such
a way that deprives the entire programs of intellectual property
protection; and
|
·
|
current
federal laws that prohibit software copying provide only limited
protection from software pirates.
|
Nominee
|
For
|
Against
|
Abstain
|
Curtis
Brown
|
46,951,086
|
6,217,034
|
153,631
|
Bernhard
Bruscha
|
52,689,628
|
541,334
|
90,789
|
Thomas
W. Burton
|
53,013,503
|
154,617
|
153,631
|
Howard
T. Slayen
|
53,081,255
|
172,631
|
67,865
|
Thomas
Wittenschlaeger
|
52,734,456
|
433,664
|
153,631
|
Nominee
|
For
|
Against
|
Abstain
|
Broker
Non-Votes
|
McGladrey
& Pullen, LLP
|
53,121,924
|
63,683
|
136,144
|
-
|
Exhibit
|
|
Number
|
Description of Document
|
10.1
(1)
|
Executive
Compensation Plan.
|
31.1
|
Certification
of Principal Executive Officer and Principal Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of Interim Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
|
Date:
February 8, 2008
|
LANTRONIX,
INC.
|
|
(Registrant)
|
||
By:
|
/s/
Reagan Y. Sakai
|
|
Reagan
Y. Sakai
|
||
Interim
Chief Executive Officer
Chief
Financial Officer and Secretary
|
||
(Principal
Executive and Financial Officer)
|