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Stockholders’ Equity
 12 Months Ended
Jun. 30, 2021
Equity [Abstract]  
Stockholders’ Equity

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 are also available for award grants under the 2020 Plan. In addition, any shares of common stock subject to outstanding awards under the 2010 Plan that expire, are cancelled, or otherwise terminate after the expiration date of the 2010 Plan will be available for award grant purposes under the 2020 Plan. 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. New shares are issued to satisfy stock option exercises and share issuances. At June 30, 2021, approximately 2,995,000 shares remain available for issuance under the 2020 Plan. We have also granted stock options and RSUs 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, 2021, 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, 2021 and 2020.

 

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. Expected volatilities are based on the historical volatility of our stock price. The expected term of stock options granted is estimated using the simplified method, as permitted by guidance issued by the Securities and Exchange Commission. We use the simplified method because we believe we are unable to rely on our limited historical exercise data or alternative information as a reasonable basis upon which to estimate the expected term of such options. 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 weighted-average assumptions were used to estimate the fair value of all of our stock option grants: 

          
   Years Ended June 30, 
   2021   2020 
Expected term (in years)   7.0    4.3 
Expected volatility   69%    65% 
Risk-free interest rate   0.59%    1.56% 
Dividend yield   0.00%    0.00% 

  

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

                    
       Weighted-Average     
       Exercise   Remaining   Aggregate 
   Number of   Price   Contractual   Intrinsic 
   Shares   Per Share   Term   Value 
   (In thousands)       (In years)   (In thousands) 
Balance of options outstanding at June 30, 2020   2,055   $2.72           
Options granted   50    4.41           
Options forfeited   (38)   1.81           
Options expired   (18)   2.20           
Options exercised   (352)   1.79           
Balance of options outstanding at June 30, 2021   1,697   $2.98    3.9   $3,699 
Options exercisable at June 30, 2021   1,278   $2.71    3.5   $3,123 

 

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

          
   Years Ended June 30, 
   2021   2020 
   (In thousands,
except per share data)		 
Weighted-average grant date fair value per share  $2.84   $1.90 
Intrinsic value of options exercised  $1,110   $1,850 

 

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 during the fiscal year ended June 30, 2021: 

          
   Number of Shares   Weighted-Average Grant Date Fair Value per Share 
   (In thousands)     
Balance of RSUs outstanding at June 30, 2020   927   $3.93 
Granted   400    4.69 
Forfeited   (45)   3.00 
Vested   (364)   3.77 
Balance of RSUs outstanding at June 30, 2021   918   $4.14 

  

Performance Stock Units

 

Fiscal 2021 Grant

 

In November 2020, we granted 415,000 RSUs with performance-based vesting requirements (“performance stock units” or “PSUs”) to certain executive employees. One third of the PSUs are eligible to vest in each of the three years beginning with the fiscal year ended June 30, 2021 if certain earnings per share and revenue targets are met.

 

Fiscal 2020 Grants

 

In October 2019, we granted 975,000 PSUs to certain executive employees. In February 2020, we granted an additional 70,000 PSUs with performance-based vesting requirements and vesting schedule identical to those granted in October 2019. One third of the PSUs are eligible to vest in each of the three years beginning in fiscal 2020 if certain earnings per share, revenue targets and market conditions are met. The estimate of the grant date fair value and related share-based compensation expense of these awards included the use of a Monte Carlo simulation. The Monte Carlo simulation incorporates estimates of the potential outcomes of the market condition of these awards, which is based on the relative total shareholder return of the Company as compared to that of the Russell Microcap Index.

 

The following table presents a summary of activity with respect to our PSUs during the fiscal year ended June 30, 2021: 

     
   Number of Shares 
   (In thousands) 
Balance of PSUs outstanding at June 30, 2020   985 
Granted   415 
Forfeited   (115)
Vested   (201)
Balance of PSUs outstanding at June 30, 2021   1,084 

 

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

          
   Years Ended June 30, 
   2021   2020 
Expected term (in years)   0.5    0.5 
Expected volatility   62%    61% 
Risk-free interest rate   0.08%    1.00% 
Dividend yield   0.00%    0.00% 

 

The following table presents a summary of activity under our ESPP during the fiscal year ended June 30, 2021: 

     
   Year Ended 
   June 30, 2021 
   (In thousands, except per share data) 
Shares available for issuance at June 30, 2020   404 
Shares issued   (154)
Shares available for issuance at June 30, 2021   250 
Weighted-average purchase price per share  $3.36 
Intrinsic value of ESPP shares on purchase date  $225 

 

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: 

          
           
   Years Ended June 30, 
   2021   2020 
   (In thousands) 
Cost of revenues  $281   $227 
Selling, general and administrative   2,719    2,959 
Research and development   584    453 
Total share-based compensation expense  $3,584   $3,639 

 

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, 2021: 

          
   Remaining Unrecognized Compensation Expense   Remaining Weighted-Average Years to Recognize 
   (In thousands)     
Stock options  $864    1.7 
RSUs   3,404    2.6 
PSUs   958    1.5 
Common stock purchase rights under ESPP   86    0.4 

 

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.