lpth_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022

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

For the transition period from ___________ to ____________

Commission file number 000-27548

LIGHTPATH TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0708398

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

http://www.lightpath.com

2603 Challenger Tech Ct. Suite 100

Orlando, Florida 32826

(Address of principal executive offices)

(ZIP Code)

(407) 382-4003

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, par value $0.01		LPTH		The Nasdaq Stock Market, LLC

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

36,662,524 shares of common stock, Class A, $0.01 par value, outstanding as of February 6, 2023.

LIGHTPATH TECHNOLOGIES, INC.

Form 10-Q

Index

Item		Page

Cautionary Note Concerning Forward-Looking Statements		3

Part I	Financial Information

Item 1	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Results of Operations	24
	Liquidity and Capital Resources	27
	Contractual Obligations and Commitments	29
	Off-Balance Sheet Arrangements	29
	Critical Accounting Policies and Estimates	29
	Non-GAAP Financial Measures	32
Item 4	Controls and Procedures	33

Part II	Other Information

Item 1	Legal Proceedings	34
Item 1A	Risk Factors	34
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3	Defaults Upon Senior Securities	34
Item 4	Mine Safety Disclosures	34
Item 5	Other Information	34
Item 6	Exhibits	35

Signatures		37

Table of Contents

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2022 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, growth, product development, sales, business strategy, statements related to any further expected effects on our business from the coronavirus (“COVID-19”) pandemic or rising inflation and interest rates, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the continued duration and scope of the COVID-19 pandemic and any impact on the demand for our products; our ability to obtain needed raw materials and components from our suppliers; additional actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions, particularly at our foreign facilities; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; geopolitical tensions and the Russian-Ukraine conflict; the effects of steps that we could take to reduce operating costs; rising inflation and increased interest rates, which diminish capital market cash flow and borrowing power; our inability to sustain profitable sales growth, convert inventory to cash, or reduce our costs to maintain competitive prices for our products; circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives; and those factors detailed by us in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2022. In light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
	December 31,			June 30,
Assets	2022			2022
Current assets:
Cash and cash equivalents	$	3,793,852		$	5,507,891
Trade accounts receivable, net of allowance of $41,240 and $36,313		4,857,726			5,211,292
Inventories, net		6,914,276			6,985,427
Other receivables		149,775			—
Prepaid expenses and other assets		443,567			464,804
Total current assets		16,159,196			18,169,414

Property and equipment, net		10,978,783			11,640,463
Operating lease right-of-use assets		9,894,925			10,420,604
Intangible assets, net		3,895,256			4,457,798
Goodwill		5,854,905			5,854,905
Deferred tax assets, net		143,000			143,000
Other assets		47,987			27,737
Total assets	$	46,974,052		$	50,713,921
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,366,201		$	3,073,933
Accrued liabilities		775,630			558,750
Accrued payroll and benefits		1,316,103			2,081,212
Operating lease liabilities, current		926,132			965,622
Loans payable, current portion		1,085,103			998,692
Finance lease obligation, current portion		43,123			55,348
Total current liabilities		6,512,292			7,733,557

Deferred tax liabilities, net		521,346			541,015
Finance lease obligation, less current portion		50,460			11,454
Operating lease liabilities, noncurrent		8,921,735			9,478,077
Loans payable, less current portion		2,766,431			3,218,580
Total liabilities		18,772,264			20,982,683

Commitments and Contingencies

Stockholders’ equity:
Preferred stock: Series D, $0.01 par value, voting;
500,000 shares authorized; none issued and outstanding		-			-
Common stock: Class A, $0.01 par value, voting;
44,500,000 shares authorized; 27,275,515 and 27,046,790
shares issued and outstanding		272,755			270,468
Additional paid-in capital		233,104,731			232,315,003
Accumulated other comprehensive income		688,421			935,125
Accumulated deficit		(205,864,119	)		(203,789,358	)
Total stockholders’ equity		28,201,788			29,731,238
Total liabilities and stockholders’ equity	$	46,974,052		$	50,713,921

The accompanying notes are an integral part of these consolidated financial statements.

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LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)

	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2022			2021			2022			2021
Revenue, net	$	8,472,679		$	9,243,174		$	15,839,580		$	18,346,517
Cost of sales		5,248,334			6,443,328			10,381,323			12,374,736
Gross margin		3,224,345			2,799,846			5,458,257			5,971,781
Operating expenses:
Selling, general and administrative		3,030,653			2,946,998			5,668,826			5,816,044
New product development		466,163			551,960			1,016,044			978,971
Amortization of intangibles		281,271			281,271			562,542			562,542
Loss on disposal of property and equipment		2,742			—			2,742			—
Total operating expenses		3,780,829			3,780,229			7,250,154			7,357,557
Operating loss		(556,484	)		(980,383	)		(1,791,897	)		(1,385,776	)
Other income (expense):
Interest expense, net		(81,241	)		(50,331	)		(151,611	)		(96,080	)
Other income (expense), net		(1,336	)		10,819			25,881			(40,263	)
Total other income (expense), net		(82,577	)		(39,512	)		(125,730	)		(136,343	)
Loss before income taxes		(639,061	)		(1,019,895	)		(1,917,627	)		(1,522,119	)
Income tax provision		55,000			35,396			157,134			165,269
Net loss	$	(694,061	)	$	(1,055,291	)	$	(2,074,761	)	$	(1,687,388	)
Foreign currency translation adjustment		671,125			284			(246,704	)		(143,890	)
Comprehensive loss	$	(22,936	)	$	(1,055,007	)	$	(2,321,465	)	$	(1,831,278	)
Loss per common share (basic)	$	(0.03	)	$	(0.04	)	$	(0.08	)	$	(0.06	)
Number of shares used in per share calculation (basic)		27,172,226			27,008,748			27,121,583			27,001,360
Loss per common share (diluted)	$	(0.03	)	$	(0.04	)	$	(0.08	)	$	(0.06	)
Number of shares used in per share calculation (diluted)		27,172,226			27,008,748			27,121,583			27,001,360

The accompanying notes are an integral part of these consolidated financial statements.

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LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)

	Class A							Accumulated
	Common				Additional			Other						Total
	Stock				Paid-in			Comphrehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Income			Deficit			Equity
Balances at June 30, 2022		27,046,790	$	270,468	$	232,315,003		$	935,125		$	(203,789,358	)	$	29,731,238
Issuance of common stock for:
Employee Stock Purchase Plan		16,287		163		19,707			—			—			19,870
Exercise of Stock Options & RSUs, net		8,852		88		(88	)		—			—			—
Stock-based compensation on stock options & RSUs		—		—		284,598			—			—			284,598
Foreign currency translation adjustment		—		—		—			(917,829	)		—			(917,829	)
Net loss		—		—		—			—			(1,380,700	)		(1,380,700	)
Balances at September 30, 2022		27,071,929	$	270,719	$	232,619,220		$	17,296		$	(205,170,058	)	$	27,737,177
Issuance of common stock for:
Exercise of Stock Options, RSUs & RSAs, net		203,586		2,036		(2,036	)		—			—			—
Stock-based compensation on stock options & RSUs		—		—		487,547			—			—			487,547
Foreign currency translation adjustment		—		—		—			671,125			—			671,125
Net loss		—		—		—			—			(694,061	)		(694,061	)
Balances at December 31, 2022		27,275,515	$	272,755	$	233,104,731		$	688,421		$	(205,864,119	)	$	28,201,788

Balances at June 30, 2021		26,985,913	$	269,859	$	231,438,651		$	2,116,152		$	(200,247,177	)	$	33,577,485
Issuance of common stock for:
Employee Stock Purchase Plan		8,621		86		21,640			—			—			21,726
Exercise of Stock Options & RSUs, net		—		—					—			—			—
Stock-based compensation on stock options & RSUs		—		—		116,591			—			—			116,591
Foreign currency translation adjustment		—		—		—			(144,174	)		—			(144,174	)
Net loss		—		—		—			—			(632,097	)		(632,097	)
Balances at September 30, 2021		26,994,534	$	269,945	$	231,576,882		$	1,971,978		$	(200,879,274	)	$	32,939,531
Issuance of common stock for:
Settlement of RSUs, net		27,341		274		(274	)		—			—			—
Stock-based compensation on stock options & RSUs		—		—		184,538			—			—			184,538
Foreign currency translation adjustment		—		—		—			284			—			284
Net loss		—		—		—			—			(1,055,291	)		(1,055,291	)
Balances at December 31, 2021		27,021,875	$	270,219	$	231,761,146		$	1,972,262		$	(201,934,565	)	$	32,069,062

The accompanying notes are an integral part of these consolidated financial statements.

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LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
	Six Months Ended December 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(2,074,761	)	$	(1,687,388	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,580,882			1,839,401
Interest from amortization of debt costs		37,120			14,854
Loss on disposal of property and equipment		2,742			—
Stock-based compensation on stock options, RSUs & RSAs, net		772,145			301,129
Provision for doubtful accounts receivable		(11,421	)		12,010
Change in operating lease assets and liabilities		(70,153	)		(123,534	)
Inventory write-offs to allowance		2,233			105,993
Deferred tax benefit		(19,669	)		—
Changes in operating assets and liabilities:
Trade accounts receivable		364,987			(311,150	)
Other receivables		(149,775	)		(130,222	)
Inventories		68,918			1,238,529
Prepaid expenses and other assets		987			56,504
Accounts payable and accrued liabilities		(1,255,961	)		(1,473,498	)
Net cash used in operating activities		(751,726	)		(157,372	)

Cash flows from investing activities:
Purchase of property and equipment		(411,551	)		(1,317,373	)
Net cash used in investing activities		(411,551	)		(1,317,373	)

Cash flows from financing activities:
Proceeds from sale of common stock from Employee Stock Purchase Plan		19,870			21,726
Loan costs		—			(61,223	)
Borrowings on loans payable		—			266,850
Payments on loans payable		(405,498	)		(336,985	)
Repayment of finance lease obligations		(57,140	)		(133,298	)
Net cash used in financing activities		(442,768	)		(242,930	)
Effect of exchange rate on cash and cash equivalents		(107,994	)		(4,264	)
Change in cash and cash equivalents		(1,714,039	)		(1,721,939	)
Cash and cash equivalents, beginning of period		5,507,891			6,774,694
Cash and cash equivalents, end of period	$	3,793,852		$	5,052,755

Supplemental disclosure of cash flow information:
Interest paid in cash	$	106,394		$	81,533
Income taxes paid	$	218,367		$	197,103
Supplemental disclosure of non-cash investing & financing activities:
Purchase of equipment through capital lease arrangements	$	83,921			—

The accompanying notes are an integral part of these consolidated financial statements.

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LIGHTPATH TECHNOLOGIES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation

References in this document to “the Company,” “LightPath,” “we,” “us,” or “our” are intended to mean LightPath Technologies, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the requirements of Article 8 of Regulation S-X promulgated under the Exchange Act and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended June 30 and the associated quarters of those fiscal years.

These Condensed Consolidated Financial Statements are unaudited, but include all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. The Consolidated Balance Sheet as of June 30, 2022 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the year as a whole. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

2. Significant Accounting Policies

Our significant accounting policies are provided in Note 2, Summary of Significant Accounting Policies, in the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022. There have been no material changes to our significant accounting policies during the six months ended December 31, 2022, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Use of Estimates

Management makes estimates and assumptions during the preparation of our unaudited Condensed Consolidated Financial Statements that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which, in turn, could impact the amounts reported and disclosed herein.

3. Revenue

Product Revenue

We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies.

Revenue Recognition

Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments.

Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of our performance. Deferred revenue was not significant as of June 30, 2022 and December 31, 2022, respectively.

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Nature of Products

Revenue from the sale of optical components and assemblies is recognized upon transfer of control, including the risks and rewards of ownership, to the customer. The performance obligations for the sale of optical components and assemblies are satisfied at a point in time. Product development agreements are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. We have organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements are included in specialty products. Revenue by product group for the three and six months ended December 31, 2022 and 2021 was as follows:

	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
PMO	$	3,876,627	$	3,762,497	$	7,149,182	$	7,575,447
Infrared Products		4,024,591		5,075,168		7,664,250		9,963,086
Specialty Products		571,461		405,509		1,026,148		807,984
Total revenue	$	8,472,679	$	9,243,174	$	15,839,580	$	18,346,517

4. Inventories

The components of inventories include the following:

	December 31, 2022			June 30, 2022
Raw materials	$	2,938,153		$	3,019,156
Work in process		2,818,906			2,243,907
Finished goods		2,802,771			3,052,001
Allowance for obsolescence		(1,645,554	)		(1,329,637	)
	$	6,914,276		$	6,985,427

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $1.5 million and $1.6 million as of December 31, 2022 and June 30, 2022, respectively.

5. Property and Equipment

SEC Form 10-Q filed by LightPath Technologies Inc.