NASDAQ: LTRX

Our Strategy

We focus on three high-potential vertical markets - smart cities, enterprise
and unmanned aerial systems (“UAS”) (drones). We position ourselves in these markets to deliver complete solutions encompassing
our hardware, software, device management, and design services to meet the evolving needs of our customers and address each layer of the
IoT stack. Below are customer examples that highlight our impact:

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

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

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

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

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

Products and Solutions

Embedded IoT Solutions

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

Our latest SIP devices are designed to process multiple media streams using
Computer Vision (CV) technology, enabling sophisticated edge analytics. These modules are remotely managed via Percepxion™, Lantronix’s
Cloud IoT Edge Solution software, offering seamless control and monitoring. Typically embedded into customer product designs, Lantronix’s
IoT compute products provide application processing that enables edge solutions for data transformation, computer vision, machine learning,
augmented/virtual reality, and custom applications.

Our products are designed with customer needs in mind, offering pre-certified
solutions across multiple regions, significantly reducing regulatory certification costs and expediting time-to-market for OEM customers.
Additionally, we provide software tools that further accelerate development, empowering customers to quickly bring their products to market
while enhancing their overall value proposition.

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

IoT System Solutions

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

Our PoE products support remote devices such as cameras and wireless access
points by passing electrical power along with data on Ethernet cabling, eliminating the need for traditional AC/DC electrical power in
hard-to-reach locations. As the adoption of smart city technologies accelerates, our switches provide the critical connectivity, bandwidth,
and power needed to support intelligent transportation systems and surveillance networks that safeguard citizens.

Our products also incorporate features to perform advanced levels of
fault management and diagnostics to troubleshoot networks and proactively fix problems. Our media converters and other customer premise
equipment assist customers in resolving challenges in the areas of bandwidth constraints, security risks and distance limitations as networks
extend from local area to wide area networks and adapt to ever-increasing end-user demands.

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Our smart tracking devices are designed to deliver robust data logging
and positional tracking functionality and reliability for supply chain and logistics solutions. Our Industrial IoT devices are designed
to be flexible in the field while offering a variety of connectivity options to suit customers’ needs across 4G, 5G and LTE cellular
networks. These power-efficient products are designed to support communications across interfaces and industrial protocols for vehicle,
fleet and asset tracking and equipment management. Many of the products are offered with software tools intended to further accelerate
our customers’ time-to-market and increase their value add. Our Industrial IoT products are pre-certified in a number of countries,
significantly reducing our OEM customers’ regulatory certification costs and accelerating their time-to-market.

As Edge Computing deployment accelerates, Out-of-Band (OOB) Management
allows for full comprehension and control of remote information technology (“IT”) infrastructure across a range of sensors
(e.g., temperature, humidity, light, acceleration, open/close, etc.), providing status and alerting while enabling automation and remote
control of devices, servers and end stations. OOB uses a dedicated management network to access critical infrastructure components and
ensure production-independent connectivity. Remote Management allows organizations to effectively monitor and control their enterprise
IT equipment and facilities (environments), either in or out of band, optimizing their IT support resources.

Our Advanced OOB product line includes console management, power management
and IP-connected keyboard-video-mouse (commonly referred to as “IPKVM”) products that provide remote access to IT and networking
infrastructure deployed in test labs, data centers, branch offices, remote sites and server rooms.

Software and Engineering Services

Our Software as a Service (“SaaS”) platform offers comprehensive
single-pane-of-glass management for OOB and IoT deployments. Our platform enables customers to easily deploy, monitor, manage and automate
across their global deployments, all from a single platform login, virtually and seamlessly connected as if located directly on each device.
Our platform eliminates the need to have 24/7 personnel on site and makes it easy to observe and address issues quickly, even in large-scale
deployments.

For OEMs and System Integrators (“SI”) our platform offers
multitenancy functionality for supporting a broad customer base while ensuring customer separation and data security. Over the Air (“OTA”)
updates streamline the process of security patches, firmware upgrades and configuration changes, keeping devices up to date and secure.

We leverage our deep engineering expertise and product development best
practices to deliver high-quality, innovative products cost-effectively and on schedule. Our engineering services model is flexible, offering
either turnkey product development or team augmentation to accelerate complex product development challenges, such as camera tuning, voice
control, machine learning, AI, computer vision, augmented/virtual reality, and more.

In addition to our production-ready edge computing solutions, we offer
experienced multidisciplinary engineering services across complete aspects of IoT product development, including hardware, software, mechanical
engineering, rapid prototyping, and quality assurance. Our specialized services also extend to camera, audio, and AI/machine learning
development, ensuring our customers can bring cutting-edge products to market faster and with greater reliability.

Our engineering design services are a key component of our business model,
enabling clients to accelerate product development and market readiness. The services focus on designing and developing high-quality,
innovative IoT and embedded solutions. We leverage extensive expertise in hardware and software engineering to provide custom designs
for complex applications, helping customers reduce costs and time-to-market while improving performance and reliability.

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

This strategy positions us as a go-to partner for companies needing specialized
engineering capabilities for industrial, automotive, medical, and other high-tech applications.

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Net Revenue by Product Line

We have one operating and reportable business segment. A summary of our
net revenue by product line is found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
included in Part II, Item 7 of this Report, which is incorporated herein by reference. A discussion of factors potentially affecting our
net revenue and other operating results is set forth in “Risk Factors” included in Part I, Item 1A of this Report, which is
incorporated herein by reference.

Sales Cycle

Our embedded IoT solutions are typically designed into products by OEMs,
original design manufacturers (“ODMs”) and contract manufacturers. OEMs design and sell products under their own brand that
are either manufactured by the OEM in-house or by third-party contract manufacturers. ODMs design and manufacture products for third parties,
which then sell those products under the third parties’ brands. The design cycles using our embedded solutions typically range from
nine to 24 months and can generate revenue for the entire life cycle of an end user’s product.

Our IoT System Solutions are typically sold to end users through value-added
resellers (“VARs”), systems integrators, distributors, online retailers and, to a lesser extent, OEMs. The design cycles for
these products typically range from three to 18 months and are often project-based.

Sales Channels

Distributors

A majority of our sales are made through distributors. Distributors resell
our products to a wide variety of resellers and end customers including OEMs, ODMs, VARs, systems integrators, consumers, online retailers,
IT resellers, corporate customers and government entities.

Resellers

Our products are sold by industry-specific system integrators and VARs,
who often obtain our products from our distributors. Additionally, our products are sold by direct market resellers such as CDW, ProVantage,
and Amazon.com.

Direct Sales

We sell products directly to larger OEMs and end users. We also maintain
an e-commerce site for direct sales.

Sales and Marketing

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

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Manufacturing

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

Our contract manufacturers source raw materials, components and
integrated circuits, in accordance with our specifications and forecasts, and perform printed circuit board assembly, final assembly,
functional testing and quality control. Our products are manufactured and tested to our specifications with standard and custom components.
Many of these components are available from multiple vendors. However, we have several single-sourced supplier relationships, either because
alternative sources are not available or because the relationship is advantageous to us.

Research and Development

Our research and development efforts are focused on the development of
hardware and software technology to differentiate our products and enhance our competitive position in the markets we serve. Product research
and development is primarily performed in-house and supplemented with outsourced resources.

Competition

Our industry is highly competitive and characterized by rapid technological
advances and evolving industry standards. The market can be affected significantly by new product introductions and marketing activities
of industry participants. We believe that we compete for customers based on product features, software capabilities, company reputation,
brand recognition, technical support, relationships with partners, quality, reliability, product development capabilities, price and availability.
A discussion of factors potentially affecting our ability to compete in the markets in which we operate is set forth in “Risk Factors”
included in Part I, Item 1A of this Report, which is incorporated herein by reference.

Intellectual Property Rights

We believe that a considerable portion of our value resides in our intellectual
property. We have developed proprietary methodologies, tools, processes and software in connection with delivering our products and services.
We protect our intellectual property through a combination of patents, copyrights, trademarks, trade secrets, licenses, non-disclosure
agreements and contractual provisions. We enter into a non-disclosure and confidentiality agreement with each of our employees, consultants
and third parties that have access to our proprietary technology. Pursuant to assignment of inventions agreements, all of our employees
and consultants assign to us all intellectual property rights for the relevant inventions created in connection with their employment
or contract with us. We currently hold U.S. and international patents covering various aspects of our products, with additional patent
applications pending.

U.S. and Foreign Government Regulation

Many of our products are subject to certain mandatory regulatory approvals
in the regions in which our products are deployed. In particular, wireless products must be approved by the relevant government authority
prior to these products being offered for sale. In addition, certain jurisdictions have regulations requiring products to use environmentally
friendly components. Some of our products employ security technology, which is subject to various U.S. export restrictions.

Employees

As of August 19, 2025, we had 352 total employees including 351 full
time employees, none of whom is represented by a labor union. We have not experienced any labor problems resulting in a work stoppage
and believe we have good relationships with our employees.

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Customer and Geographic Concentrations

We conduct our business globally and manage our sales teams by three
geographic regions: the Americas; EMEA; and APJ. A discussion of sales to our significant customers and sales within geographic regions
is set forth in Notes 2 and 11 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Report, which is incorporated
herein by reference. A discussion of factors potentially affecting our customer and geographic concentrations is set forth in “Risk
Factors” included in Part I, Item 1A of this Report, which is incorporated herein by reference.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, Proxy Statements on Schedule 14A and other reports and information that we file or furnish pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) are available free of charge on our website at www.lantronix.com as
soon as reasonably practicable after filing or furnishing such reports with the Securities and Exchange Commission (the “SEC”).
The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding
issuers that file electronically. The contents of our website are not incorporated by reference into this Report. References to our website
address in this Report are inactive textual references only.

Information About Our Executive Officers

Executive officers serve at the discretion of our board of directors (the
“Board”). There are no family relationships between any of our directors or executive officers. The following table presents
the names, ages, and positions held by our executive officers as of the date of this Report:

Name

Age

Position

Saleel Awsare

60

President and Chief Executive Officer

Brent Stringham

47

Chief Financial Officer

Mathi Gurusamy

54

Chief Product and Strategy Officer

Kurt Hoff

68

Chief Revenue Officer

SALEEL AWSARE has served as our President and Chief Executive Officer,
and as a member of our Board, since November 2023. Mr. Awsare served as Senior Vice President and General Manager of the Enterprise and
Mobile Division of Synaptics Incorporated, a developer of human interface hardware and software, from September to November 2023. Prior
to that, Mr. Awsare served as Senior Vice President and General Manager of the PC and Peripherals Unit of Synaptics from August 2020 to
September 2023; Senior Vice President and General Manager of Synaptics’s IoT Division from April 2019 to July 2020; and Senior Vice
President of Corporate Marketing & Investor Relations at Synaptics from October 2018 until April 2019. Prior to joining Synaptics
as Corporate Vice President and General Manager of Audio & Imaging Products in August 2017, Mr. Awsare was President of Conexant Systems,
LLC, a software developer and fabless semiconductor company, from March 2016 until Conexant’s acquisition by Synaptics in August
2017, and Conexant’s Senior Vice President & General Manager of Audio & Imaging from April 2012 to March 2016. Prior to
joining Conexant, Mr. Awsare served as President of U.S. Operations and General Manager of Audio & Voice Solutions of Nuvoton Technology
Corporation, a Taiwan-based semiconductor company, from December 2008 to March 2012.

BRENT STRINGHAM has served as our Chief Financial Officer since January
2025. Mr. Stringham joined Lantronix in 2012 and previously served as the Company’s interim Chief Financial Officer and Chief Accounting
Officer since September 2024. Prior to that, he served as our Senior Director of Finance and Corporate Controller beginning in February
2012. Previously, Mr. Stringham served as Controller at Iteris, Inc., a provider of software, hardware and services for smart mobility
infrastructure management, from January 2009 to February 2012, and Netlist, Inc., a developer and manufacturer of computer memory subsystems,
from March 2007 to January 2009. Mr. Stringham was an Audit Manager at Ernst & Young LLP from 2000 to 2007.

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MATHI GURUSAMY has served as our Chief Product and Strategy Officer since
April 2025. Previously Mr. Gurusamy served as our Chief Strategy Officer since May 2024. Prior to joining Lantronix, Mr. Gurusamy served
as Chief Operating Officer at Ikotek USA, Inc., a global provider of original design manufacturing for IoT, from November 2023 to May
2024. Mr. Gurusamy served as President at Telit Cinterion, an end-to-end IoT solutions enabler, from October 2022 to October 2023, and
previously served at Telit as Chief Operating Officer from January 2010 to March 2016 and as Global VP – Operations & Supply
Chain from June 2008 to December 2009. He also served as President and Chief Operating Officer of Mobilogix, a startup company specializing
in custom IoT solutions, from April 2016 to June 2018 and as Chief Executive Officer and President from June 2018 until Mobilogix’s
acquisition by Telit in September 2022.

KURT HOFF has served as our Chief Revenue Officer since April 2025. Previously
Mr. Hoff served as our Vice President of Worldwide Sales since March 2024. Prior to joining Lantronix, Mr. Hoff served as Vice President
of Global Sales at MYTHIC AI, a venture-backed AI processor company, from May 2022 to December 2022. Previously, Mr. Hoff served as Senior
Vice President of Worldwide Sales at Synaptics Inc., a developer of human interface hardware and software, from July 2017 to July 2020,
and at Conexant Systems, Inc., a software developer and fabless semiconductor company, from November 2015 until Conexant’s acquisition
by Synaptics in July 2017. He served as Senior Vice President of Worldwide Sales at Silicon Laboratories Inc. from July 2007 until November
2015.