DEF 14A of Lantronix Inc, Oct 2, 2023

DEF 14A of Lantronix Inc

Filed Oct 2, 2023 · FY20230001140361-23-046348

Open on EDGAR

  1. What happens if a majority of the votes cast are not voted in favor of a director nominee?

    What happens if a majority of the votes cast are not voted in favor of a director nominee? Pursuant to the procedures established by the Corporate Governance and Nominating Committee of the Board, each incumbent director has submitted to the Chair of the Corporate Governance and Nominating Committee in writing such director’s irrevocable resignation which will be effective upon (1) the failure of such director to receive the required vote at any annual or special meeting at which such director is nominated for re-election and (2) Board acceptance of the resignation. If a nominee fails to receive a majority of the votes cast in the director election, the Corporate Governance and Nominating Committee will make a recommendation to the Board whether to accept or reject the director’s resignation and whether any other action should be taken. If a director’s resignation is not accepted, that director will continue to serve until our next annual meeting of stockholders and until his successor is duly elected and qualified, or until his earlier resignation or removal. If the Board accepts the director’s resignation, it may, in its sole discretion, either fill the resulting vacancy or decrease the size of the Board to eliminate the vacancy.

  2. Criteria for Director Nominees and Board Diversity

    Criteria for Director Nominees and Board Diversity The Board believes that it should be composed of directors with diverse, complementary backgrounds and that directors should, at a minimum, exhibit proven leadership capabilities and experience at a high level of responsibility within their respective fields and have the ability to quickly grasp complex principles of business, finance and technology. Directors should possess the highest personal and professional ethics, integrity and values and should be committed to representing the long-term interests of our stockholders. When considering a candidate for director, the Corporate Governance and Nominating Committee takes into account a number of factors, including the following:

  3. Criteria for Director Nominees and Board Diversity

    | • | Independence from management; |

  4. Criteria for Director Nominees and Board Diversity

    | • | Depth of understanding of technology, manufacturing, sales and marketing, finance and/or other elements directly relevant to our business; |

  5. Criteria for Director Nominees and Board Diversity

    | • | Education and professional background; |

  6. Criteria for Director Nominees and Board Diversity

    | • | Judgment, skill, integrity and reputation; |

  7. Criteria for Director Nominees and Board Diversity

    | • | Existing commitments to other businesses as a director, executive or owner; |

  8. Criteria for Director Nominees and Board Diversity

    | • | Personal conflicts of interest, if any; and |

  9. Criteria for Director Nominees and Board Diversity

    | • | The size and composition of our existing Board. |

  10. Criteria for Director Nominees and Board Diversity

    In general, candidates who hold or who have held an established executive-level position in a technology company are preferred. The Board’s consideration of diversity as one of the criteria for director nominations is primarily focused on evaluating a nominee’s expected contribution to the diversity of skills, background, experiences and perspectives, given the then-existing composition of the Board as a whole. When seeking candidates for director, the Corporate Governance and Nominating Committee may solicit suggestions from incumbent directors, management, stockholders and others. Additionally, the Corporate Governance and Nominating Committee may use the services of third party search firms to assist in the identification and review of appropriate candidates. After conducting an initial evaluation of a prospective candidate, the Corporate Governance and Nominating Committee will interview that candidate if it believes the candidate might be suitable. The Corporate Governance and Nominating Committee may also ask the candidate to meet with other members of the Board and with management. If the Corporate Governance and Nominating Committee believes a candidate would be a valuable addition to the Board, it may recommend to the Board that candidate’s appointment or election. The Corporate Governance and Nominating Committee applies the same standards of review to all prospective candidates for director, regardless of who initially brings them to the Corporate Governance and Nominating Committee’s attention. Following is a summary of the diversity and demographic background of our directors (as self-identified):

  11. Criteria for Director Nominees and Board Diversity

    | Board Diversity Matrix (As of September 11, 2023) | | | | | | Total Number of Directors | 6 | | | | | Part I: Gender Identity | Female | Male | Non- Binary | Did Not Disclose Gender | | Directors | 1 | 5 | — | — | | Part II: Demographic Background | | | | | | African American or Black | — | — | — | — | | Alaskan Native or Native American | — | — | — | — | | Asian | 1 | 2 | — | — | | Hispanic or Latinx | — | — | — | — | | Native Hawaiian or Pacific Islander | — | — | — | — | | White | — | 3 | — | — | | Two or More Races or Ethnicities | — | — | — | — | | LGBTQ+ | — | | | | | Did Not Disclose Demographic Background | — | | | |

  12. Compensation of Non-Employee Directors

    Compensation of Non-Employee Directors Directors who are also employees of the Company are not paid any fees or remuneration, as such, for their service on the Board or on any Board committee. In fiscal 2023, we provided the annual compensation described below to directors who are not employees of the Company or any of our subsidiaries (“non-employee directors”). Cash Compensation Under our Non-Employee Director Compensation Policy as amended by the Board effective November 8, 2022, each non-employee director is entitled to receive the following cash compensation for board services, as applicable:

  13. Compensation of Non-Employee Directors

    | • | $50,000 annual retainer for service as a Board member; |

  14. Compensation of Non-Employee Directors

    | • | $35,000 additional annual retainer for service as Chairman of the Board; and |

  15. Compensation of Non-Employee Directors

    | • | $15,000 additional annual retainer for service as Chair of the Audit Committee, $10,000 additional annual retainer for service as Chair of the Compensation Committee and $10,000 additional annual retainer for service as Chair of the Corporate Governance and Nominating Committee. |

  16. Compensation of Non-Employee Directors

    Prior to November 8, 2022, the annual retainer for service as a Board member was $36,000, the additional annual retainer for the Chairman of the Board was $20,000, and the additional annual retainer for the Chair of the Audit Committee was $12,500. Under the Non-Employee Director Compensation Policy, directors are not paid fees for service as members on any of our standing committees, apart from the Chair fees discussed above. Further, directors are not paid meeting fees, except that (1) each non-employee director will be paid a meeting fee of $1,000 for each Board meeting attended in person or by telephone in excess of 12 meetings during the fiscal year; and (2) each non-employee director will be paid a meeting fee of $1,000 for attending in person or by telephone each meeting of a standing committee of which he or she is a member in excess of 12 meetings per committee during the fiscal year. Equity Award Program Under our Non-Employee Director Compensation Policy, each of the non-employee directors elected at our annual meeting of stockholders each year, effective as of the 2021 annual meeting, will receive an award of restricted stock units (“RSUs”), with the number of RSUs for each grant to be determined by dividing a grant-date dollar value by the average of the closing prices of a share of our common stock for the last 30 trading days of the fiscal quarter preceding the fiscal quarter in which the grant is made. On November 8, 2022, the Board increased the grant date dollar value for each non-employee director’s annual equity award from $60,000 to $75,000, effective for new award grants after that date. Each such RSU award will be scheduled to vest as to 50% of the award six months after the grant date and as to the other 50% of the award on the earlier of the first anniversary of the grant date and the day immediately preceding the next annual meeting of stockholders. If a non-employee director is appointed to the Board other than at the time of an annual meeting of stockholders, the director will receive an initial award of RSUs with a value as of the grant date of $75,000 ($60,000 for grants prior to November 8, 2022) applying the methodology described above and pro-rated based on the period of the director’s service on the Board during the one-year period following the last annual meeting. This initial award will be scheduled to vest in two installments on the same vesting dates as the annual awards granted to non-employee directors at the last annual meeting (with the RSUs subject to the award allocated proportionately between the two vesting dates based on the director’s period of service on the Board), or if the initial award is granted more than six months after the last annual meeting, the award will be scheduled to vest in one installment on the earlier of the first anniversary of the date of the last annual meeting and the day immediately preceding the next annual meeting. In addition, if a change in control of the Company occurs, all annual and initial grants of RSUs to non-employee directors that are then outstanding will vest in full upon (or immediately prior to) the closing of the transaction. The Board may change the terms of our director compensation program from time to time. Reimbursements Under the Non-Employee Director Compensation Policy, non-employee directors will be reimbursed for their reasonable out of pocket expenses, including travel expenses incurred to attend meetings up to a maximum of $2,000 per meeting requiring travel. Non-Employee Director Compensation Table The table below sets forth the compensation earned by our non-employee directors during fiscal 2023. The compensation paid to Mr. Pickle, who was employed by us and served on the Board during fiscal 2023, is presented below in the Summary Compensation Table and the related explanatory tables. Directors who are also officers or employees of the Company or its subsidiaries receive no additional compensation for their services as directors.

  17. Compensation of Non-Employee Directors

    | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2)(6) | Option Awards ($)(1)(6) | All Other Compensation ($) | Total ($) | | Jason W. Cohenour(3) | 32,397 | 53,185 | — | — | 85,582 | | Margaret A. Evashenk(4) | 19,000 | 54,527 | — | — | 73,527 | | Paul F. Folino(5) | 92,750 | 53,185 | — | — | 145,935 | | Phu Hoang(6) | 32,397 | 53,185 | — | — | 85,582 | | Heidi Nguyen(7) | 46,500 | 53,185 | — | — | 99,685 | | Hoshi Printer | 60,250 | 53,185 | — | — | 113,435 |

  18. Compensation of Non-Employee Directors

    | (1) The dollar value of stock and option awards shown represents the grant date fair value determined in accordance with FASB ASC Topic 718. For a discussion of the valuation assumptions used in the calculations, see Note 6 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of our Form 10-K, which was filed with the SEC on September 12, 2023. These values differ slightly from the values used to determine the number of RSUs subject to each award because the FASB ASC Topic 718 grant date fair values are determined taking into account the closing price of a share of our common stock on the date of grant while the values used to determine the number of RSUs subject to each award are determined using an average of the closing prices of our common stock over the last 30 trading days of the last complete fiscal quarter before the grant date. |

  19. Compensation of Non-Employee Directors

    | (2) In accordance with our Non-Employee Director Compensation Policy described above, following the Company’s 2022 Annual Meeting of Stockholders, Messrs. Cohenour, Folino, Hoang and Printer, and Dr. Nguyen were each awarded 12,909 RSUs. |

  20. Compensation of Non-Employee Directors

    | (3) Mr. Cohenour was elected to the Board on November 8, 2022. |

  21. Compensation of Non-Employee Directors

    | (4) Ms. Evashenk resigned from the Board effective November 8, 2022. In connection with Ms. Evashenk’s appointment to our Advisory Board as described above, she was granted an award of 10,776 RSUs, which is scheduled to vest as to one-third of the RSUs on each of March 1, 2023, June 1, 2023 and September 1, 2023. The number of RSUs subject to the award was determined by dividing $50,000 by the average closing price of the Company’s common stock over the last 30 trading days of the last complete fiscal quarter before the grant date. |

  22. Compensation of Non-Employee Directors

    | (5) Mr. Folino is not standing for re-election at the Annual Meeting. |

  23. Compensation of Non-Employee Directors

    | (6) Mr. Hoang was elected to the Board on November 8, 2022. |

  24. Compensation of Non-Employee Directors

    | (7) Dr. Nguyen is not standing for re-election at the Annual Meeting. |

  25. Compensation of Non-Employee Directors

    Outstanding Non-Employee Director Equity Awards at 2023 Fiscal Year End The following table shows the total number of RSUs outstanding, and total number of shares of our common stock subject to outstanding stock options, as of June 30, 2023 for each person who served as a non-employee director during fiscal 2023:

  26. Compensation of Non-Employee Directors

    | Name | RSUs Outstanding (#) | Option Awards Outstanding (#) | | Jason W. Cohenour | 6,455 | — | | Margaret A. Evashenk | 3,593 | — | | Paul F. Folino | 6,455 | — | | Phu Hoang | 6,455 | — | | Heidi Nguyen | 6,455 | — | | Hoshi Printer | 6,455 | — |

  27. Compensation of Non-Employee Directors

    Director Stock Ownership Requirements The Board encourages its members to acquire and hold stock in the Company to link the interests of the directors to the stockholders. The Board has adopted stock ownership guidelines for the non-employee directors of the Company. Under the guidelines, our non-employee directors are each expected to own shares of our common stock with a value equal to three times the annual cash retainer for such director. Progress toward the achievement of these ownership guidelines is based on shares purchased in the open market, or acquired through option exercises or vesting of RSUs. The value of the shareholdings is based on the greater of (1) the closing price of a share of our common stock as of the most recent fiscal year end, or (2) the acquisition value of the shares, determined based upon the purchase price for open market purchases and the fair market value of shares on the date of issuance in the case of shares issued upon the exercise of stock options or settlement of RSUs. The guidelines provide that non-employee directors are expected to establish the minimum ownership levels within five years of adoption of the guidelines or within five years of appointment as a new non-employee director of the Company. Neither the Board nor the Compensation Committee has established stock ownership guidelines for members of the Board who are employees of the Company.

  28. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS Our Board currently consists of six directors. Subsequent to our 2022 Annual Meeting of Stockholders, Philip Brace was identified as a potential candidate by a third-party search firm and one of our stockholders to the Corporate Governance and Nominating Committee, which evaluated, reviewed and recommended Mr. Brace to the Board for nomination by the Board of Directors. The Board of Directors met, discussed and approved the appointment of Mr. Brace to the Board on August 4, 2023. On September 11, 2023, Mr. Folino and Dr. Nguyen notified us of their decision not to stand for re-election at the Annual Meeting. On the same date, the Board, upon the recommendation of the Corporate Governance and Nominating Committee, nominated Bernhard Bruscha for election by stockholders at the Annual Meeting; on September 22, 2023, however, Mr. Bruscha informed the Board that, for personal reasons, he is unable to stand for election at the Annual Meeting, and is not a nominee for election as a director at the Annual Meeting. The Corporate Governance and Nominating Committee has recommended to the Board, and the Board has approved, the nomination of the following four nominees for election as directors at the Annual Meeting, each to serve a one-year term until the 2024 Annual Meeting of Stockholders and until the director’s successor has been duly elected and qualified, or until the director’s earlier resignation or removal: Philip Brace, Jason Cohenour, Phu Hoang and Hoshi Printer. If all four of the above nominees are elected to the Board at the Annual Meeting, the size of the Board will be reduced to four members, effective as of the Annual Meeting. Each of the nominees presently serves as a director and has served continuously as a director since the date indicated in the nominee’s biography below. All nominees have consented to be named and have indicated their intent to serve if elected.

  29. Information About the Director Nominees

    Information About the Director Nominees The following table sets forth certain information, in each case as of October 2, 2023, concerning the nominees for director:

  30. Information About the Director Nominees

    | Name | Age | Director Since | Position With Lantronix | | Philip Brace | 53 | 2023 | Director | | Jason Cohenour | 62 | 2022 | Director | | Phu Hoang | 55 | 2022 | Director | | Hoshi Printer | 81 | 2010 | Director |

  31. Information About the Director Nominees

    Mr. Folino and Dr. Nguyen are not standing for re-election at the Annual Meeting. The following is a description of the business experience, qualifications, skills and educational background of each of the director nominees, including each nominee’s relevant business experience:

  32. Philip Brace

    Philip Brace

  33. Independent Director

    Independent Director

  34. Since 2023

    Since 2023 Mr. Brace served as President and Chief Executive Officer of Sierra Wireless Inc., a manufacturer of high-performance cellular networking for mission critical applications, from July 2021 to January 2023. Prior to this, Mr. Brace served as an Executive Vice President of Veritas Technologies, an international multi-cloud data management company, from April 2019 to July 2021. He was President of Cloud Systems and Electronic Solutions at Seagate Technology, a provider of data storage technology and infrastructure solutions, from July 2015 to October 2017 and Executive Vice President - Electronics Solutions at Seagate from September 2014 to July 2015. Mr. Brace began his career at Intel Corporation and LSI Corporation, holding various engineering and management roles. Mr. Brace’s 30 years of experience in the semiconductor, server, IoT and storage industries, filling multiple roles ranging across various disciplines, including software, hardware, engineering, marketing and sales, enables Mr. Brace to provide our Board with business, technical and strategic insight into the issues faced by our Company and our industry.

  35. Since 2023

    | Jason Cohenour | | | Independent Director Since 2022 | Current Board Committees -Audit Committee -Compensation Committee |

  36. Career Highlights

    Career Highlights Mr. Cohenour served as President, Chief Executive Officer and a director of Sierra Wireless, Inc., from 2005 until June 2018, and held other senior management positions with Sierra Wireless, including Chief Operating Officer, from 1996 until 2005. Mr. Cohenour is a director of CalAmp Corp. (Nasdaq: CAMP), a connected intelligence company, where he was appointed in June 2019 and serves on the Audit Committee and chairs the Governance and Nominating Committee; RF Industries Ltd. (Nasdaq: RFIL), a manufacturer of interconnect products and systems for next generation communication services, where he was appointed in September 2022 and serves on the Audit Committee and the Strategic Planning and Capital Allocation Committee; and Blackline Safety Corp. (TSX: BLN), a global leader in connected safety technology. Mr. Cohenour also previously served as a director of Ikanos Communications, Inc. from 2014 until August 2015, when that company was acquired by Qualcomm Atheros, and a director of Epic Data International, Inc. from 2004 to 2010.

  37. Skills and Qualifications

    Skills and Qualifications Mr. Cohenour brings many years of executive leadership, sales, operations, and international M&A experience in the technology industry and extensive experience on public company boards of directors, including as a member of audit, compensation and governance committees.

  38. Skills and Qualifications

    | Phu Hoang | | | Independent Director Since 2022 | Current Board Committees -Audit Committee -Corporate Governance & Nominating Committee |

  39. Career Highlights

    Career Highlights Mr. Hoang is the founder, and has served since 1997 as Chief Executive Officer and a director of, Virtium LLC, a designer and manufacturer of industrial-grade solid-state storage and memory solutions for the networking, telecommunications, industrial, transportation, rugged computing systems, and other key markets that require data-storage integrity.

  40. Skills and Qualifications

    Skills and Qualifications Mr. Hoang has a demonstrated record of entrepreneurship and innovation as well as extensive business, operational and leadership experience as the long-term Chief Executive Officer of a technology company.

  41. Skills and Qualifications

    | Hoshi Printer | | | Independent Director Since 2010 | Current Board Committees -Audit Committee (Chair) -Compensation Committee -Corporate Governance & Nominating Committee |

  42. Skills and Qualifications

    Mr. Printer has served as a member of our Board since 2010. Mr. Printer’s background includes four decades of relevant general and financial management experience, including serving as Chief Financial Officer for several technology companies, including the following: Autobytel, an online automotive marketplace; Peerless Systems Corporation, an embedded imaging systems company; Neuron Data, a developer of high-end, client-server, object- and web-oriented tools; Soane Technologies, an ophthalmic and bioscience business; and Catalytica, a developer of environmental technology. From 2005 to 2010, Mr. Printer was a Chief Financial Officer consultant. His clients included Private Access, Inc., a technology company, Avamar Technologies, Inc., a provider of enterprise data storage software, and Path 1 Network Technologies, a provider of television over IP technology to broadcasters. Mr. Printer also served as the divisional Vice President of Finance for Xerox Corporation. Mr. Printer’s financial expertise, exemplified by his background and experience in a number of companies as a senior financial officer, and his broad experience with technology companies make him a valuable asset to the Board and qualify him to serve as an audit committee financial expert and Chair of the Audit Committee.

  43. EXECUTIVE COMPENSATION

    | | Pay Component | Role | Performance Metric and Description | | | Short Term Incentive | Base Salary | Provides a competitive fixed annual income | Reviewed annually and adjusted based on competitive market practices and individual performance | Fixed | | | Annual Bonus Program | Variable cash component designed to encourage performance to annual objectives which support the long-term strategy | Metrics for fiscal 2023 include: • Organic Revenue Growth • Non-GAAP Earnings Per Share Growth Actual payout is capped at 50% of non-GAAP income, calculated before the foregoing payouts, and in all cases at 200% of target. | Variable / At-Risk | | Long Term Incentive | Performance- Based Restricted Stock Units (“PSUs”) | Aligns interest of executives with those of shareholders; provides retention value and motivates executives to build long-term shareholder value | Other than new-hire grants, equity awards granted to named executive officers are 100% performance-based. Metrics for PSUs vesting in fiscal 2023 include: • Revenue (or Revenue Growth) • Non-GAAP Earnings per Share (or Non-GAAP Earnings per Share Growth) • PSUs granted in fiscal 2023 also have a multiplier based on TSR compared with the companies in the Russell Microcap Index Vesting is over 3 years. | | | | Time-based Restricted Stock Units (“RSUs”) and Stock Options | Provides retention value and motivates executives to build long-term shareholder value | Normally granted to executives at the time of hiring. | |

  44. EXECUTIVE COMPENSATION

    | ✔ | Long-Term Equity Incentives. All of our equity incentive awards have multi-year vesting and/or performance requirements. With the exception of new hire equity grants, all equity awards granted to our named executives over the last four fiscal years are subject to performance-based vesting as well as continued employment. |

  45. EXECUTIVE COMPENSATION

    | ✔ | No Single-Trigger Benefits. Our executives’ change in control arrangements have a double-trigger provision (benefits require both a change in control and termination of employment) rather than a single-trigger provision (under which benefits are triggered automatically by any change in control). |

  46. EXECUTIVE COMPENSATION

    | ✔ | No Re-Pricing of Stock Options. We prohibit re-pricing of “underwater” stock options (stock options where the exercise price is below the then-current market price of our stock) without stockholder approval. |

  47. EXECUTIVE COMPENSATION

    | ✔ | Anti-Hedging Policy. Our Stock Trading Guidelines prohibit our officers and directors from engaging in hedging transactions in relation to the Company’s stock or equity awards (including unvested equity awards) as collateral for any margin account or other form of credit arrangement. |

  48. EXECUTIVE COMPENSATION

    | ✔ | Independent Compensation Consultant. Our Compensation Committee retains an independent compensation consultant for independent advice and market data. |

  49. EXECUTIVE COMPENSATION

    | • | administering our equity incentive plans; |

  50. EXECUTIVE COMPENSATION

    | • | approving annual cash incentive program performance metrics as well as payouts thereunder; and |

  51. EXECUTIVE COMPENSATION

    Our Compensation Committee also analyzes the alignment of our overall executive compensation package with our compensation philosophy and objectives. How Compensation Decisions Are Made The Compensation Committee annually determines the compensation levels for our executive officers by considering several factors, including competitive market data, each executive officer’s roles and responsibilities, how the executive officer is performing those responsibilities and our financial performance. The Compensation Committee makes all decisions for the total direct compensation – that is, base salary, cash incentive awards under our incentive bonus plan, and stock-based awards – of our executive officers and other members of our senior management, including the named executive officers. At the request of the Compensation Committee, our Chief Executive Officer and other officers may attend meetings of the Compensation Committee or meetings of our Board at which executive compensation is discussed. The Compensation Committee considers the recommendations from our Chief Executive Officer with respect to executive compensation. While our Chief Executive Officer discusses his recommendations with the Compensation Committee, he does not participate in deliberation or determination with respect to his own compensation. The Compensation Committee may also engage independent compensation consultants to assist the Compensation Committee in its duties, including providing advice regarding industry trends and benchmarking information relating to the form and amount of compensation provided to executives by companies with which we compete for executive talent and other similarly situated companies. When considering a proposed compensation package for an executive officer, the Compensation Committee considers both the compensation package as a whole and each element of total compensation. For example, before determining officer compensation, the Compensation Committee reviews, for each executive, each element of compensation paid in the prior fiscal year, including base salary, incentive bonus, and the value of equity awards, information regarding equity awards made in prior periods, and competitive market data. The Compensation Committee uses this information to assess the overall effect and long- term implications of compensation decisions, rather than viewing individual decisions in isolation. 2022 Say-On-Pay Vote At our 2022 Annual Meeting of Stockholders, our stockholders approved, on a non-binding, advisory basis, the compensation paid to our named executive officers described in our 2022 proxy statement. Approximately 99.6% of the votes cast on the matter were voted in favor of this “say-on-pay” approval. The Board and the Compensation Committee considered the voting results and high level of stockholder support when establishing our executive compensation programs for fiscal 2023 and implemented an executive compensation program for fiscal 2023 that was substantially similar to the program in place for fiscal 2022. Independent Compensation Consultants The Compensation Committee has the authority to retain independent advisors to assist it in the compensation-setting process and receive funding to engage such advisors. The Chair of the Compensation Committee, in consultation with other Compensation Committee members, defines the scope of any advisor’s engagement and related responsibilities. The Compensation Committee engaged Compensation Strategies, Inc. (“Compensation Strategies”) for fiscal 2023 to assist in a review of the executive compensation practices at a peer group of companies. The compensation consultants from Compensation Strategies have no other direct or indirect business relationships with us. The Compensation Committee has assessed the independence of Compensation Strategies and concluded that its engagement of Compensation Strategies does not raise any conflict of interest with the Company or any of its directors or executive officers. Compensation Peer Group As noted above, the Compensation Committee selects a peer group of companies each year with input from its independent compensation consultant to help evaluate our executive compensation program. In May 2023, the Compensation Committee identified the following companies as the peer group for fiscal 2024:

  52. EXECUTIVE COMPENSATION

    In selecting the peer group for fiscal 2024, the Compensation Committee considered public companies with a thematic fit with the Company’s business and targeted a group of about 20 companies with the Company’s revenue at approximately the 50th percentile of the group. The peer group for fiscal 2024 is the same as the fiscal 2023 peer group. Components of Executive Compensation Our Compensation Committee utilizes three main components for executive officer compensation: base salary, a cash incentive bonus, and long-term equity-based awards. Our compensation program is designed to balance our need to provide our executive officers with incentives to achieve our short- and long-term performance goals with the need to pay competitive base salaries. There is no pre-established policy for allocating between cash and non-cash or short-term and long-term compensation. In determining the allocation each year among base salary, annual cash incentive bonus, and long-term equity-based awards, the Compensation Committee considers our short-term and long-term business objectives, competitive trends within our industry, and each named executive officer’s current and prior compensation. An important guiding principle for our executive compensation program is our belief that it benefits our stockholders for executive management’s compensation to be tied to our short-term and long-term performance, so that a significant portion of each executive officer’s compensation is tied to the achievement of our goals and objectives. As a result, “at risk” compensation makes up a significant portion of our executives’ compensation. Base Salaries Base salaries for our executive officers are set with regard to a number of factors, including the executive’s title and responsibilities within the Company, the executive’s performance in recent periods, the executive’s potential for continued development within the organization, an assessment of the base salaries of similarly situated executives with the peer group companies noted above, and internal parity with other executives. The base salary levels for each executive officer, and any increases or decreases to those levels, are reviewed and approved each year by the Compensation Committee. In December 2022, we entered into an offer letter with Mr. Bass in connection with his joining the Company. The terms of the offer letter were negotiated with Mr. Bass and provided that his annual base salary would be $250,000. In February 2023, Mr. Holliday’s base salary was increased by $5,000 to $255,000. In June 2023, the Compensation Committee determined that the fiscal 2024 base salary for Mr. Whitaker would be increased by 18% over his fiscal 2023 level and that the fiscal 2024 base salaries for Messrs. Holliday and Bass would each be increased by 10%. These increases were based on the Compensation Committee’s assessment of the factors noted above, and Mr. Whitaker’s larger increase took into account his appointment as Interim Chief Executive Officer. Accordingly, these named executive officers’ base salaries for fiscal 2024 are as follows:

  53. EXECUTIVE COMPENSATION

    Annual Cash Incentive Program Our Compensation Committee believes that annual performance-based cash bonuses play an important role in providing incentives to our executive officers to achieve annual performance goals. To that end, we have established an annual cash bonus program (the “Bonus Program”) in order to align executives’ goals with our financial, strategic and tactical objectives for the current year. Selected employees, including all of our named executive officers, are eligible to participate in the Bonus Program. Each participant in the Bonus Program is assigned a target annual cash bonus, generally expressed as a percentage of the participant’s base salary, the payment of which is conditioned on the achievement of certain performance goals and objectives established by the Compensation Committee. Bonuses paid under the Bonus Program, if any, may be based upon achievement of performance goals for two independent semi-annual performance periods, corresponding with the first and second half of the fiscal year, respectively (each, a “Performance Period”). The Compensation Committee generally sets the corporate performance goals at “target” levels the Compensation Committee believes are challenging, but reasonable, for management to achieve, with reduced or increased bonus opportunities for performance below or above, as the case may be, the targeted level. The Compensation Committee may also establish a maximum aggregate amount of bonuses that all participants will be eligible to receive during a Performance Period based on our earnings for the fiscal year as it may determine. If the bonus pool for a Performance Period is insufficient to fully fund the bonuses earned during the Performance Period, each participant’s bonus is ratably reduced. At the end of each Performance Period, the Compensation Committee determines the level of Company achievement with respect to the specified goals. The Compensation Committee retains discretion to make appropriate adjustments to the performance goals for the effects of events that were not anticipated in establishing the performance goals, to exclude one-time or non-recurring expenses in calculating achievement of performance goals, and to make other adjustments to the bonuses that otherwise would be payable based on actual performance. Final bonus levels are then based on those determinations and generally paid to the executives in the quarter following the completion of a Performance Period. For fiscal 2023, the Compensation Committee determined that annual bonuses would be based on achievement of specified levels of growth in “organic revenue” (i.e. excluding revenue derived from any companies acquired after the adoption of the bonus program) relative to organic revenue for the prior fiscal year and non-GAAP earnings (from both organic and inorganic sources) per share (“non-GAAP EPS”) for the fiscal year. The Compensation Committee believes revenue and non-GAAP EPS to be good indicators of our success, given the market in which we compete. In addition, they are metrics that management can calculate and communicate to employees throughout the applicable Performance Period. The goals were weighted 60% towards the revenue goal and 40% towards the non-GAAP EPS goal. If, at the end of the first two quarters of fiscal 2023, the Company was on pace to achieve at least the target level of revenue and non-GAAP EPS for the fiscal year shown in the table below, the Compensation Committee could approve a partial bonus payment of up to 50% of a participant’s target bonus amount for the year (with the final bonus to be awarded at the end of the fiscal year to be reduced by the amount of such partial payment). The revenue growth and non-GAAP EPS goals for fiscal 2023, which apply to all participants (including each of the named executive officers), and the payout percentages are set forth in the table below (with the percentage determined by linear interpolation for performance between the levels indicated in the table). For each metric, growth is relative to fiscal 2022 levels.

  54. EXECUTIVE COMPENSATION

    | Organic Revenue Growth for the FY23 Performance Period (60%)* | Non-GAAP EPS for the FY23 Performance Period (40%) | Payout Percentage (% of Target Bonus) | | 1% or less | Less than or equal to $0.33 | 0% | | 3% | $0.34 | 75% | | 5% | $0.35 | 100% | | 8% | $0.36 | 125% | | 10% | $0.37 | 150% | | 12% | $0.38 | 175% | | 15% or more | $0.39 or more | 200% |

  55. EXECUTIVE COMPENSATION

    | * If the Company’s total revenue for fiscal 2023 (including revenue derived from any companies acquired after the bonus program was adopted) was $162 million or more, the payout percentage for the revenue growth metric would be 200%. |

  56. EXECUTIVE COMPENSATION

    Bonuses under the Bonus Program for fiscal 2023 were capped at 200% of target, and the total bonus pool for all bonuses awarded for fiscal 2023 was limited to 50% of the Company’s non-GAAP income for the fiscal year (defined as our earnings before interest, taxes, depreciation, amortization, and share-based compensation, excluding the impact of non-recurring charges or gains, consistent with the approach used for reporting “Non-GAAP Net Income” in our quarterly earnings releases), and calculated before taking the bonuses into account. To the extent the total payout under the Bonus Program exceeded this bonus pool, the bonuses awarded under the program may be capped at the bonus pool amount. A member of management awarded a bonus for fiscal 2023 could also elect, subject to approval by the Compensation Committee and concurrence by the Board, to receive the bonus in the form of restricted stock units that would vest 50% on grant and 50% after six months, with the number of units to be determined based on the average closing price of our common stock over the period of 30 trading days ending immediately prior to the grant date. The Compensation Committee established the following target and maximum bonus amounts set forth below for the named executive officers under the Bonus Program. Mr. Pickle’s target bonus for fiscal 2023 remained at the same level as for fiscal 2022, while the target bonuses amounts for Messrs. Whitaker and Holliday (as a percentage of base salary) were each increased by 10% to align them more closely with those provided to similarly situated executives with the peer companies.

  57. EXECUTIVE COMPENSATION

    | Name | Fiscal 2023 Base Salary | Target Bonus | | Incentive Mix | | Maximum Payout | | | | | % of Salary | Dollars | Revenue Growth | Non- GAAP EPS | % of Salary | Dollars | | Jeremy R. Whitaker | $255,000 | 65% | $165,750 | 60% | 40% | 130% | $331,500 | | Roger Holliday | $250,000 | 50% | $125,000 | 60% | 40% | 100% | $250,000 | | Eric Bass* | $250,000 | 40% | $100,000 | 60% | 40% | 80% | $200,000 | | Paul Pickle | $400,000 | 85% | $340,000 | 60% | 40% | 170% | $680,000 |

  58. EXECUTIVE COMPENSATION

    | * Pursuant to his offer letter, Mr. Bass’ target bonus is set at 40% of his base salary. His fiscal 2023 bonus was pro-rated based on his period of employment with the Company during the fiscal year. |

  59. EXECUTIVE COMPENSATION

    In August 2023, the Compensation Committee determined that the Company’s organic revenue for fiscal 2023 had declined from the fiscal 2022 level, and that the Company’s non-GAAP EPS for fiscal 2023 was $0.22. Based on these performance results, the Compensation Committee determined that no bonuses would be paid under the 2023 Bonus Program. Equity Awards We believe that providing a significant portion of our executive officers’ total compensation opportunity in equity awards aligns the incentives of our executives with the interests of our stockholders and with our long-term success. By compensating our executives with our equity, executives receive a stake in our financial future and the values realized in the long term depend on the executives’ ability to drive our financial performance. Equity incentive awards are also a useful vehicle for attracting and retaining executive talent in a competitive market. In determining the equity awards to be granted to our executives, the Compensation Committee takes into account the executive’s equity ownership in the Company and the terms of the executive’s then-outstanding awards. Our Compensation Committee administers our equity incentive plans and establishes the terms for all awards granted thereunder, including grant guidelines, vesting schedules, and other provisions. Since fiscal 2020, we have granted annual equity awards to our executives in the form of RSUs that vest based on our achievement of specific performance goals as well as the executive’s continued service with the Company (“PSUs”). In connection with hiring new employees, we may grant stock options and RSUs that vest based on continued employment over a multi-year period. The Compensation Committee annually evaluates its equity compensation program to determine whether to issue either RSUs, stock options, a combination thereof, or other types of equity awards. Vesting of our PSUs is generally subject to our achievement of pre-established growth rates in our total revenue and non-GAAP EPS for the applicable performance period. Although these metrics are similar to the metrics used for our Bonus Program, we have based vesting of PSUs awarded over the past three fiscal years on three-year growth in total revenue (whereas the Bonus Program utilizes one-year organic revenue) and three-year growth in non-GAAP EPS (as opposed to the one-year absolute target values used in the Bonus Program). In addition, we have also included relative total shareholder return (“TSR”) as a metric for vesting of our PSUs awarded in certain fiscal years (including PSUs that we recently awarded to our executives for fiscal 2023), which is not a metric used in our Bonus Program. As noted above, the Compensation Committee believes revenue and non-GAAP EPS to be good indicators of our success, given the market in which we compete. In addition, they are metrics that management can calculate and communicate to employees. Using growth in total revenue as a performance measure in our PSUs aligns with our strategy of growth through acquisitions, and balances with the use of organic revenue (which incentivizes management to grow our existing business) as a performance measure under our Bonus Program. We use non-GAAP EPS because we believe the adjustments we make to our EPS for purposes of our incentive programs provide a more accurate picture of the value of our company than EPS computed in accordance with GAAP. In particular, we believe it is appropriate to exclude non-cash accounting charges for amortization of goodwill from EPS as we believe our value, and the value of the companies in our industry we acquire, is not in the tangible property we own, but rather in the design and development of products which we then have other people build for us. As such, we believe deducting a non-cash expense from earnings would under-represent our core profitability. Grant of Fiscal 2023 PSU Awards. In July 2022, the Compensation Committee approved an award of PSUs to each of the named executive officers then employed with us, with the target number of PSUs subject to these awards as follows: Mr. Whitaker – 109,489 PSUs, Mr. Holliday – 72,993 PSUs, and Mr. Pickle – 182,482 PSUs. The target number of PSUs subject to each award was determined by dividing a dollar amount determined by the Compensation Committee (Mr. Whitaker – $600,000, Mr. Holliday - $400,000 and Mr. Pickle - $1,000,000) by the average closing price of our common stock over the last 30 trading days before July 1, 2022 (the last 30 trading days of the last full fiscal quarter prior to the quarter in which the grant was made). The vesting of each award is subject to the Company’s performance over each of fiscal 2023, fiscal 2024 and fiscal 2025 (as well as the executive’s continued employment with the Company), with one-third of the target number of PSUs for the award allocated to fiscal 2023, two-thirds of the target number of PSUs for the award allocated to fiscal 2024, and 100% of the target number of PSUs for the award allocated to fiscal 2025 (and with the number of PSUs vested for fiscal 2024 and fiscal 2025 to be reduced by any PSUs that vested for a prior fiscal year). The percentage of the target number of PSUs that vest for each performance period is determined 60% based on the Company’s revenue compound annual growth rate (“Revenue CAGR”) for the applicable period and 40% based on the Company’s non-GAAP EPS compound annual growth rate (“Non-GAAP EPS CAGR”) for the performance period (with the Company’s revenue and non-GAAP EPS for fiscal 2022 used in each case as the base year). In no event will an award vest more than 200% of the target number of PSUs subject to the award (with interim limits such that no more than 40% of the total target number of PSUs subject to award may vest for fiscal 2023 and no more than 90% of the total target number of PSUs subject to the award may vest for fiscal 2023 and fiscal 2024 in the aggregate). When it approved these grants in July 2022, the Compensation Committee provided that the vesting percentage for the PSUs allocated to each performance period would be determined in accordance with the following table (with the percentage determined by linear interpolation for performance between the levels indicated in the table):

  60. EXECUTIVE COMPENSATION

    In addition, the Compensation Committee determined that the vesting percentage for the portion of the award allocated to fiscal 2025 would be subject to a multiplier based on the Company’s TSR for the three-year period covered by the award (consisting of fiscal 2023, fiscal 2024 and fiscal 2025) relative to the TSRs for the companies in the Russell Microcap Index for that period (the “TSR Multiplier”). If the Company’s relative TSR for the three-year period was at the 25th percentile or lower, the TSR Multiplier would be 66 2/3%, and if the Company’s relative TSR for the three-year period was at the 75th percentile or higher, the TSR Multiplier would be 133 1/3%. If the Company’s relative TSR for the three-year period was between the 25th percentile and the 75th percentile, the TSR multiplier would be determined by linear interpolation for performance between 66 2/3% and 133 1/3%. However, in no event will an award vest more than 200% of the target number of PSUs subject to the award. In August 2023, the Compensation Committee determined that the Company’s Revenue CAGR for fiscal 2023 was less than 5%, and the Company’s Non-GAAP EPS CAGR for fiscal 2023 was less than 5% (each determined as described above). Accordingly, no portion of the named executive officers’ awards vested for the fiscal 2023 performance period. Vesting of Fiscal 2022 PSU Awards During Fiscal 2023. In July 2021, the Compensation Committee approved an award of PSUs to each of the named executive officers (other than Mr. Bass), with the target number of PSUs subject to these awards as follows: Mr. Pickle – 77,892 PSUs, Mr. Whitaker – 50,459 PSUs, and Mr. Holliday – 36,698 PSUs. The target number of PSUs subject to each award was determined by dividing a dollar amount determined by the Compensation Committee (Mr. Pickle - $425,000, Mr. Whitaker – $275,000, and Mr. Holliday - $200,000) by the average closing price of our common stock over the last 30 trading days before July 1, 2021. The vesting of each award is subject to the Company’s performance over each of fiscal 2022, fiscal 2023 and fiscal 2024 (as well as the executive’s continued employment with the Company), with one-third of the target number of PSUs for the award allocated to fiscal 2022, two-thirds of the target number of PSUs for the award allocated to fiscal 2023, and 100% of the target number of PSUs for the award allocated to fiscal 2024 (and with the number of PSUs vested for fiscal 2023 and fiscal 2024 to be reduced by any PSUs that vested for a prior fiscal year). The percentage of the target number of PSUs that vest for each performance period is determined 60% based on the Company’s Revenue CAGR for the applicable period and 40% based on the Company’s Non-GAAP EPS CAGR for that period (with the Company’s revenue and non-GAAP EPS for fiscal 2021 used in each case as the base year). In no event will an award vest more than 150% of the target number of PSUs subject to the award (with interim limits such that no more than 40% of the total target number of PSUs subject to award may vest for fiscal 2022 and no more than 90% of the total target number of PSUs subject to the award may vest for fiscal 2022 and fiscal 2023 in the aggregate). When it approved these grants in July 2021, the Compensation Committee provided that the vesting percentage for the PSUs allocated to each performance period would be determined in accordance with the following table (with the percentage determined by linear interpolation for performance between the levels indicated in the table):

  61. EXECUTIVE COMPENSATION

    In August 2023, the Compensation Committee determined that the Company’s Revenue CAGR for fiscal 2023 was 20%, and the Company’s Non-GAAP EPS CAGR for fiscal 2023 was 8% (each determined as described above). As the number of PSUs that would vest for fiscal 2023 based on the table above, when aggregated with the number of PSUs that previously vested based on fiscal 2022 performance, would exceed 90% of the total target number of PSUs subject to the award, Mr. Whitaker’s award and Mr. Holliday’s award each award vested for the fiscal 2023 performance period as to a number of PSUs that resulted in the award being vested for fiscal 2022 and fiscal 2023 as to approximately 90% of the total target number of PSUs subject to the award in the aggregate. The portion of Mr. Pickle’s award allocated to performance for fiscal 2023 and fiscal 2024 terminated without vesting upon his resignation on June 29, 2023. Vesting of Fiscal 2021 PSU Awards During Fiscal 2023. In November 2020, the Compensation Committee approved an award of PSUs to each of the named executive officers (other than Mr. Bass), with the target number of PSUs being 80,000 PSUs for Mr. Pickle, 60,000 PSUs for Mr. Whitaker, and 45,000 PSUs for Mr. Holliday. The vesting of each award was subject to the Company’s performance over each of fiscal 2021, fiscal 2022 and fiscal 2023, with one-third of the target number of PSUs for the award allocated to each performance period, as well as the executive’s continued employment with the Company. The percentage of the target number of PSUs that vested for each performance period was determined 60% based on the Company’s revenue (or revenue growth compared with the preceding fiscal year) for the applicable period and 40% based on the Company’s non-GAAP EPS (or non-GAAP EPS growth compared with the preceding fiscal year) for the performance period. In no event would an award vest more than 150% of the target number of PSUs subject to the award. When it approved these grants in November 2020, the Compensation Committee provided that the vesting percentage for the PSUs allocated to the fiscal 2023 performance period would be determined in accordance with the following table (with the percentage determined by linear interpolation for performance between the levels indicated in the table):

  62. EXECUTIVE COMPENSATION

    In August 2023, the Compensation Committee determined that the Company’s revenue for fiscal 2023 had increased by less than 4% relative to fiscal 2022 revenue, and the Company’s non-GAAP EPS for fiscal 2023 had decreased relative to non- GAAP EPS for fiscal 2022. Accordingly, no portion of the named executive officers’ awards vested for the fiscal 2023 performance period. New-Hire Grants to Mr. Bass. On February 1, 2023, the Compensation Committee approved awards of 59,267 RSUs and 100,000 stock options to Mr. Bass as an inducement to him to commence employment with the Company, provide long-term retention incentives, and further align his interests with those of our stockholders. The RSU award vests as to 25% of the RSUs subject to the award on March 1, 2024, and the remaining RSUs subject to the award will vest ratably each quarter thereafter for a period of 12 quarters. The stock option award vests with respect to 25% of the shares subject to the award on February 1, 2024 and with respect to the remaining 75% of the shares subject to the award in equal monthly installments over the next 36 months thereafter. The Compensation Committee also approved an award to Mr. Bass with a target number of 86,207 PSUs on February 1, 2023 that are subject to the same performance-based and time-based vesting requirements as the PSUs granted to the other named executive officers in July 2022 described above, except that since Mr. Bass commenced employment during fiscal 2023, 16 percent of the target number of PSUs were allocated to fiscal 2023 and 42 percent of the target number of PSUs were allocated to each of fiscal 2024 and fiscal 2025. The Company currently expects that future annual grants to Mr. Bass and the other named executive officers will continue to be in the form of PSUs. Delegation to CEO of Certain Grant Authority. The Compensation Committee has delegated authority to our Chief Executive Officer to grant options and/or RSUs to selected newly-hired employees, other than executive officers and employees directly reporting to the Chief Executive Officer, within certain parameters established by the Compensation Committee. Management reports these new-hire award grants to the Compensation Committee. Benefits All of our executive officers are eligible to participate in our benefits programs offered to our employees generally, which include medical, dental and vision plans, our Amended and Restated 2013 Employee Stock Purchase Plan, a 401(k) plan, tuition reimbursement, life insurance and short and long-term disability coverage. In designing our employee benefits program, we seek to provide an overall level of benefits that is competitive with that offered by similarly situated companies in the markets in which we operate based upon our general understanding of industry practices. The Company makes matching contributions under the 401(k) plan to each plan participant, including our executive officers, in an amount equal to 25% of the first 6% of salary deferred by the participant. The Company has an executive physical program, under which Messrs. Pickle and Whitaker were eligible to be reimbursed during fiscal 2023 up to $2,500 for the costs of an annual executive physical examination. With the exception of this annual executive physical program, it is our policy to not extend significant perquisites to executives that are not broadly available to our other employees. Severance Arrangements The Company has entered into arrangements with its executive officers to provide severance benefits upon certain terminations of their employment with the Company, including retention agreements with each of Messrs. Whitaker, Holliday and Bass in July 2023. These agreements are described in more detail below and were intended to provide an additional retention incentive for the executives following Mr. Pickle’s departure from the Company. Clawback Policy In accordance with SEC and Nasdaq requirements, the Board has adopted an executive compensation recovery policy regarding the adjustment or recovery of certain incentive awards or payments made to current or former executive officers in the event that we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws. In general, the policy provides that, unless an exception applies, we will seek to recover compensation that is awarded to an executive officer based on the Company’s attainment of a financial metric during the three-year period prior to the fiscal year in which the restatement occurs, to the extent such compensation exceeds the amount that would have been awarded based on the restated financial results. Tax Considerations Section 162(m) of the Internal Revenue Code generally prohibits a publicly-held company from deducting compensation paid to a current or former named executive officer that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attaining pre-established performance measures that were set by the Compensation Committee under a plan approved by our stockholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. The Compensation Committee notes this deductibility limitation as one of the factors in its consideration of compensation matters. However, the Compensation Committee generally has the flexibility to take any compensation-related actions that it determines are in the Company’s and its stockholders’ best interest, including designing and awarding compensation for our executive officers that is not fully deductible for tax purposes. Risk Management Considerations Our Compensation Committee structures our executive compensation programs so as to appropriately reward executives for operating performance and growth without undue risk-taking and oversees, among other things, the assessment and management of risks related to the Company’s compensation plans and policies. The Compensation Committee has evaluated our compensation policies and programs and believes that our compensation policies and practices provide appropriate incentives and controls and are not reasonably likely to have a material adverse effect on the Company. Executive Stock Ownership Requirements The Board encourages members of senior management to acquire and hold stock in the Company to link the interests of the executives to the stockholders. However, neither the Board nor the Compensation Committee has established formal stock ownership guidelines for the executive officers of the Company.

  63. Fiscal 2023 Summary Compensation Table

    Fiscal 2023 Summary Compensation Table The following table sets forth, for the fiscal years indicated, the compensation paid to our named executive officers:

  64. Fiscal 2023 Summary Compensation Table

    | Name and Principal Position(s) | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(3) | Total ($) | | Jeremy R. Whitaker(4) Interim CEO & CFO | 2023 | 255,000 | — | 566,130 | — | — | 2,784 | 823,914 | | | 2022 | 255,000 | — | 252,295 | — | 155,442 | 2,680 | 665,417 | | Roger Holliday VP of Worldwide Sales | 2023 | 251,923 | — | 377,422 | — | — | 4,879 | 634,224 | | | 2022 | 250,000 | — | 183,490 | — | 110,832 | 4,913 | 549,235 | | Eric Bass(5) VP of Engineering | 2023 | 100,962 | — | 720,369 | 230,269 | — | 1,442 | 1,053,042 | | Paul Pickle(4) Former President & CEO | 2023 | 400,000 | — | 943,552 | — | — | 4,950 | 1,348,502 | | | 2022 | 400,000 | — | 389,460 | — | 376,829(6) | 6,156 | 1,172,445 |

  65. Fiscal 2023 Summary Compensation Table

    | (1) The dollar value of stock and option awards shown represents the grant date fair value determined in accordance with FASB ASC Topic 718. For a discussion of the valuation assumptions used in the calculations, see Note 6 of Notes to Consolidated Financial Statements, included in Part IV, Item 15 of our Form 10-K, which was filed with the SEC on September 12, 2023 (or, for awards granted prior to fiscal 2023, the corresponding note in the Form 10-K for that fiscal year). The material terms of these awards are described in the “Equity Awards” section of this proxy statement above. |

  66. Fiscal 2023 Summary Compensation Table

    | (2) A portion of the amounts reported in the “Stock Awards” column for each named executive officer for each fiscal year reflects the grant-date fair value of performance stock units granted to the executives during that fiscal year assuming the target level of performance conditions was achieved. These amounts were based on the probable outcome (as of the grant date) of the performance-based conditions applicable to the awards, as determined under generally accepted accounting principles. The following table presents the aggregate grant-date fair value of these performance-based awards granted in fiscal 2023 and 2022 included in the “Stock Awards” column for those years and the aggregate grant-date fair value of these awards assuming that the highest level of performance conditions was achieved. |

  67. Fiscal 2023 Summary Compensation Table

    | Name | Aggregate Grant Date Fair Value of Performance Awards (Fiscal 2023) | | Aggregate Grant Date Fair Value of Performance Awards (Fiscal 2022) | | | | Based on Probable Outcome as of the Grant Date ($) | Based on Maximum Performance ($) | Based on Probable Outcome as of the Grant Date ($) | Based on Maximum Performance ($) | | Jeremy R. Whitaker | 566,130 | 1,132,260 | 252,295 | 378,443 | | Roger Holliday | 377,422 | 754,844 | 183,490 | 275,235 | | Eric Bass | 426,997 | 853,994 | — | — | | Paul Pickle | 943,552 | 1,887,104 | 389,460 | 584,190 |

  68. Fiscal 2023 Summary Compensation Table

    | (3) The amounts reported for fiscal 2023 in this column for each of the named executive officers represent matching contributions under the Company’s 401(k) plan. |

  69. Fiscal 2023 Summary Compensation Table

    | (4) Mr. Pickle resigned as our President and Chief Executive Officer, effective June 29, 2023, and Mr. Whitaker was appointed Interim Chief Executive Officer, effective June 30, 2023. |

  70. Fiscal 2023 Summary Compensation Table

    | (5) Mr. Bass commenced employment with us on January 30, 2023. |

  71. Fiscal 2023 Summary Compensation Table

    | (6) As described in the proxy statement for our 2022 Annual Meeting of Stockholders, Mr. Pickle requested, and the Compensation Committee agreed, that the amount that would otherwise have been awarded to him under the Bonus Program for fiscal 2022 based on the Company’s financial performance for the year would be reduced by $20,000, and this amount would be reallocated on a discretionary basis to selected non-executive employees of the Company. The amount of $376,829 reported in the “Non-Equity Incentive Plan Compensation” column for fiscal 2022 represents the amount that would have been awarded to Mr. Pickle under the Bonus Program before giving effect to his request. |

  72. Outstanding Equity Awards at 2023 Fiscal Year End

    Outstanding Equity Awards at 2023 Fiscal Year End The following table provides information concerning outstanding equity awards held by our named executive officers as of June 30, 2023.

  73. Outstanding Equity Awards at 2023 Fiscal Year End

    | | Option Awards | | | | | | Stock Awards | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Grant Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Jeremy R. Whitaker | 8/29/2017 | 50,000 | — | 2.16 | 8/29/2024 | 7/27/2021 | 25,229(2) | 106,214 | 16,820(3) | 70,811 | | | 9/14/2016 | 26,348 | — | 1.37 | 9/14/2023 | 7/5/2022 | — | — | 72,993(4) | 307,299 | | Roger Holliday | 2/4/2020 | 83,336 | 16,664(5) | 3.79 | 2/4/2027 | 2/4/2020 | 9,375(6) | 39,469 | — | — | | | — | — | — | — | — | 7/27/2021 | 18,349(2) | 77,249 | 12,233(3) | 51,500 | | | — | — | — | — | — | 7/5/2022 | — | — | 48,662(4) | 204,867 | | Eric Bass | 2/1/2023 | — | 100,000(7) | 4.95 | 2/1/2030 | 2/1/2023 | 59,267(8) | 249,514 | — | — | | | — | — | — | — | — | 2/1/2023 | — | — | 57,471(4) | 241,954 | | Paul Pickle | 4/22/2019 | 480,000 | — | 4.04 | 4/22/2026 | — | — | — | — | — |

  74. Outstanding Equity Awards at 2023 Fiscal Year End

    | (1) In accordance with applicable SEC regulations, the market value of the shares in each of these columns has been determined based on the closing price of our common stock on June 30, 2023, the last trading day of fiscal 2023, which was $4.21. |

  75. Outstanding Equity Awards at 2023 Fiscal Year End

    | (2) This item represents the portion of an award of PSUs granted to the executive during fiscal 2022 that was eligible to vest based on the Company’s performance during fiscal 2023 and reflects the number of PSUs subject to such portion the Compensation Committee determined were eligible to vest based on such performance. These PSUs vested on September 13, 2023. |

  76. Outstanding Equity Awards at 2023 Fiscal Year End

    | (3) This item represents the portion of an award of PSUs granted to the executive during fiscal 2022 that will be eligible to vest based on the Company’s performance during fiscal 2024. The number of PSUs reported in the table reflects one-third of the total target number of shares subject to the award. |

  77. Outstanding Equity Awards at 2023 Fiscal Year End

    | (4) This item represents the portion of an award of PSUs granted to the executive during fiscal 2023 that will be eligible to vest based on the Company’s performance during fiscal 2024 and fiscal 2025. The number of PSUs reported in the table reflects two-thirds of the total target number of shares subject to the award. |

  78. Outstanding Equity Awards at 2023 Fiscal Year End

    | (5) The option will vest according to the following schedule: 25% of the shares subject to the option vest on February 4, 2021, with the remaining shares subject to the option vesting ratably at the beginning of each of the 36 months thereafter, such that 100% of the shares subject to the option will be vested as of February 4, 2024. |

  79. Outstanding Equity Awards at 2023 Fiscal Year End

    | (6) The RSUs will vest according to the following schedule: 25% of the RSUs vest on March 1, 2021, with the remaining RSUs vesting ratably at the beginning of each of the 12 quarters thereafter, such that 100% of the RSUs will be fully vested as of March 1, 2024. |

  80. Outstanding Equity Awards at 2023 Fiscal Year End

    | (7) The option will vest according to the following schedule: 25% of the shares subject to the option vest on February 1, 2024, with the remaining shares subject to the option vesting ratably at the beginning of each of the 36 months thereafter, such that 100% of the shares subject to the option will be vested as of February 1, 2027. |

  81. Outstanding Equity Awards at 2023 Fiscal Year End

    | (8) The RSUs will vest according to the following schedule: 25% of the RSUs vest on March 1, 2024, with the remaining RSUs vesting ratably at the beginning of each of the 12 quarters thereafter, such that 100% of the RSUs will be fully vested as of March 1, 2027. |

  82. Pay Versus Performance

    Pay Versus Performance The following summarizes the relationship between the total compensation paid to our Chief Executive Officer (“CEO”) and our other named executive officers and our financial performance for the fiscal years shown in the table (in this discussion, our CEO is also referred to as our principal executive officer or “PEO”, and our named executive officers other than our CEO are referred to as our “Non-PEO NEOs”):

  83. Pay Versus Performance

    | Fiscal Year | Summary Compensation Table Total for CEO #1 ($)(1)(2) | Compensation Actually Paid to CEO #1 ($)(3) | Summary Compensation Table Total for CEO #2 ($)(1)(2) | Compensation Actually Paid to CEO #2 ($)(3) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(1)(2) | Average Compensation Actually Paid to Non-PEO NEOs ($)(3) | Value of Initial Fixed $100 Investment Based On LTRX TSR ($)(4) | LTRX Net Income ($ Millions)(5) | | (a) | (b) | (c) | (b) | (c) | (d) | (e) | (f) | (g) | | 2023 | 1,588,266 | 686,227 | 933,786 | 870,643 | 881,946 | 775,759 | 81.59 | (8.980) | | 2022 | 1,173,445 | 2,106,704 | N/A | N/A | 587,962 | 894,949 | 104.26 | (5.362) |

  84. Pay Versus Performance

    | (1) Mr. Pickle (“CEO #1”) was our CEO for fiscal 2022 and for fiscal 2023 through his resignation on June 29, 2023. Mr. Whitaker (“CEO #2”) was appointed Interim CEO for the remainder of fiscal 2023. For fiscal year 2022, our Non-PEO NEOs were Mr. Whitaker, Mr. Holliday and Fathi Hakam, our former Vice President of Engineering. For fiscal year 2023, our Non-PEO NEOs were Mr. Holliday and Mr. Bass. |

  85. Pay Versus Performance

    | (2) See the Summary Compensation Table above for detail on the Summary Compensation Table total compensation for our CEO for each fiscal year covered in the table. The average compensation for the Non-PEO NEOs for fiscal year 2023 was calculated from the Summary Compensation Table above. The average compensation for the Non-PEO NEOs for fiscal year 2022 was calculated from the Summary Compensation Table as disclosed in the Company’s Proxy Statement filed with the Securities and Exchange Commission in calendar year 2022. |

  86. Pay Versus Performance

    | (3) For purposes of this table, the compensation actually paid (also referred to as “CAP”) to each of our named executive officers (including, for purposes of this table, former named executive officers who are included in the Non-PEO NEO group for the applicable year) means the named executive officer’s total compensation as reflected in the Summary Compensation Table for the applicable fiscal year and adjusted for the following with respect to each named executive officer: |

  87. Pay Versus Performance

    | • | Less the amounts reported in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table for the applicable fiscal year, |

  88. Pay Versus Performance

    | • | Plus the fiscal year-end value of Lantronix option and stock awards granted in the covered fiscal year which were outstanding and unvested at the end of the covered fiscal year, |

  89. Pay Versus Performance

    | • | Plus/(less) the change in value as of the end of the covered fiscal year as compared to the value at the end of the prior fiscal year for Lantronix option and stock awards which were granted in prior fiscal years and were outstanding and unvested at the end of the covered fiscal year, |

  90. Pay Versus Performance

    | • | Plus the vesting date value of Lantronix option and stock awards which were granted and vested during the same covered fiscal year, |

  91. Pay Versus Performance

    | • | Plus/(less) the change in value as of the vesting date as compared to the value at the end of the prior fiscal year for Lantronix option and stock awards which were granted in prior fiscal years and vested in the covered fiscal year, |

  92. Pay Versus Performance

    | • | Less, as to any Lantronix option and stock awards which were granted in prior fiscal years and were forfeited during the covered fiscal year, the value of such awards as of the end of the prior fiscal year, |

  93. Pay Versus Performance

    | • | Plus the dollar value of any dividends or other earnings paid during the covered fiscal year on Lantronix outstanding and unvested stock awards (no dividends or dividend equivalents are credited with respect to Lantronix options and, for other Lantronix awards, the crediting of dividend equivalents has been taken into account in determining the applicable fiscal year-end or vesting date value of the award), |

  94. Pay Versus Performance

    | • | Plus, as to a Lantronix option or stock award that was materially modified during the covered fiscal year, the amount by which the value of the award as of the date of the modification exceeds the value of the original award on the modification date (none of the Lantronix option or stock awards held by the named executive officers were materially modified during the fiscal years covered by the table |

  95. Pay Versus Performance

    In making each of these adjustments, the “value” of an option or stock award is the fair value of the award on the applicable date determined in accordance with FASB ASC Topic 718 using the valuation assumptions we then used to calculate the fair value of our equity awards. For more information on the valuation of our equity awards, please see the notes to our financial statements that appear in our Annual Report on Form 10-K each fiscal year and the footnotes to the Summary Compensation Table that appears in our annual Proxy Statement. The table above reflects the CAP (determined as noted above) for our CEO and, for our Non-PEO NEOs, the average of the CAPs determined for the Non-PEO NEOs for each of the fiscal years shown in the table. The following table provides a reconciliation of the Summary Compensation Table Total to Compensation Actually Paid for our CEO #1.

  96. Pay Versus Performance

    | Reconciliation of Summary Compensation Table Total to Compensation Actually Paid for CEO #1 | Fiscal Year 2023 ($) | Fiscal Year 2022 ($) | | Summary Compensation Table Total | 1,588,266 | 1,173,445 | | Grant Date Fair Value of Option and Stock Awards Granted in Fiscal Year | (943,552) | (389,460) | | Fair Value at Fiscal Year-End of Outstanding and Unvested Option and Stock Awards Granted in Fiscal Year | 0 | 488,902 | | Change in Fair Value of Outstanding and Unvested Option and Stock Awards Granted in Prior Fiscal Years | 0 | 35,591 | | Fair Value at Vesting of Option and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | 0 | 0 | | Change in Fair Value as of Vesting Date of Option and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | 464,354 | 798,226 | | Fair Value as of Prior Fiscal Year-End of Option and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | (422,841) | 0 | | Compensation Actually Paid | 686,227 | 2,106,704 |

  97. Pay Versus Performance

    The following table provides a reconciliation of the Summary Compensation Table Total to Compensation Actually Paid for our CEO #2.

  98. Pay Versus Performance

    | Reconciliation of Summary Compensation Table Total to Compensation Actually Paid for CEO #2 | Fiscal Year 2023 ($) | Fiscal Year 2022 ($) | | Summary Compensation Table Total | 933,786 | N/A | | Grant Date Fair Value of Option and Stock Awards Granted in Fiscal Year | (566,130) | N/A | | Fair Value at Fiscal Year-End of Outstanding and Unvested Option and Stock Awards Granted in Fiscal Year | 527,422 | N/A | | Change in Fair Value of Outstanding and Unvested Option and Stock Awards Granted in Prior Fiscal Years | (62,759) | N/A | | Fair Value at Vesting of Option and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | 0 | N/A | | Change in Fair Value as of Vesting Date of Option and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | 38,324 | N/A | | Fair Value as of Prior Fiscal Year-End of Option and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | 0 | N/A | | Compensation Actually Paid | 870,643 | N/A |

  99. Pay Versus Performance

    The following table provides a reconciliation of the average of the Summary Compensation Table Total for the Non-PEO NEOs for a fiscal year to the average of the Compensation Actually Paid for the Non-PEO NEOs for that fiscal year.

  100. Pay Versus Performance

    | Reconciliation of Average Summary Compensation Table Total to Average Compensation Actually Paid for Non-PEO NEOs | Fiscal Year 2023 ($) | Fiscal Year 2022 ($) | | Summary Compensation Table Total | 881,946 | 587,962 | | Grant Date Fair Value of Option and Stock Awards Granted in Fiscal Year | (664,030) | (206,425) | | Fair Value at Fiscal Year-End of Outstanding and Unvested Option and Stock Awards Granted in Fiscal Year | 627,287 | 259,130 | | Change in Fair Value of Outstanding and Unvested Option and Stock Awards Granted in Prior Fiscal Years | (38,865) | 53,743 | | Fair Value at Vesting of Option and Stock Awards Granted in Fiscal Year That Vested During Fiscal Year | 0 | 0 | | Change in Fair Value as of Vesting Date of Option and Stock Awards Granted in Prior Fiscal Years For Which Applicable Vesting Conditions Were Satisfied During Fiscal Year | (30,579) | 200,539 | | Fair Value as of Prior Fiscal Year-End of Option and Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year | 0 | 0 | | Compensation Actually Paid | 775,759 | 894,949 |

  101. Pay Versus Performance

    | (4) LTRX TSR represents cumulative total stockholder return on a fixed investment of $100 in the Company’s common stock for the period beginning on the last trading day of fiscal year 2021 through the end of the applicable fiscal year, and is calculated assuming the reinvestment of dividends. The following chart illustrates the CAP for our CEO and the average CAP for our Non-PEO NEOs for each of the last two fiscal years against the Company’s total stockholder return (calculated as described above) over that period of time. |

  102. Pay Versus Performance

    | (5) This column shows the Company’s net income for each fiscal year covered by the table. The following chart illustrates the CAP for our CEO and the average CAP for our Non-PEO NEOs for each of the last two fiscal years against the Company’s net income for each of those years. |