UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission file number
(Exact name of registrant as specified in its charter) |
| ||
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(ZIP Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
The |
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.
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).
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 | ☐ |
☒ | 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
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
LIGHTPATH TECHNOLOGIES, INC.
Form 10-Q
Index
| 2 |
| 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 September 30, 2024 (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. These forward-looking statements include, without limitation, statements concerning plans, opinions, expectations, beliefs, objectives, assumptions or projections regarding future events or future results and underlying assumptions and other statements, which are not statements of historical facts. 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. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. 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, our ability to obtain needed raw materials and components from our suppliers; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; geopolitical tensions, the Russian-Ukraine conflict, and the Hamas/Israel war; 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, 2024. 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.
| 3 |
| Table of Contents |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(unaudited) | ||||||||
|
| September 30, |
|
| June 30, |
| ||
Assets |
| 2024 |
|
| 2024 |
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Trade accounts receivable, net of allowance of $ |
|
|
|
|
|
| ||
Inventories, net |
|
|
|
|
|
| ||
Prepaid expenses and deposits |
|
|
|
|
|
| ||
Other current assets |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
Deferred tax assets, net |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ |
|
| $ |
| ||
Accrued liabilities |
|
|
|
|
|
| ||
Accrued payroll and benefits |
|
|
|
|
|
| ||
Operating lease liabilities, current |
|
|
|
|
|
| ||
Loans payable, current portion |
|
|
|
|
|
| ||
Finance lease obligation, current portion |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Deferred tax liabilities, net |
|
|
|
|
|
| ||
Accrued liabilities, noncurrent |
|
|
|
|
|
| ||
Finance lease obligation, less current portion |
|
|
|
|
|
| ||
Operating lease liabilities, noncurrent |
|
|
|
|
|
| ||
Loans payable, less current portion |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock: Series D, $ |
|
|
|
|
|
| ||
Common stock: Class A, $ |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated other comprehensive income |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders’ equity |
|
|
|
|
|
| ||
Total liabilities and stockholders’ equity |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 4 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||||
(unaudited) | ||||||||
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Revenue, net |
| $ |
|
| $ |
| ||
Cost of sales |
|
|
|
|
|
| ||
Gross profit |
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
| ||
New product development |
|
|
|
|
|
| ||
Amortization of intangible assets |
|
|
|
|
|
| ||
Loss on disposal of property and equipment |
|
|
|
|
|
| ||
Total operating expenses |
|
|
|
|
|
| ||
Operating loss |
|
| ( | ) |
|
| ( | ) |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| ( | ) |
|
| ( | ) |
Other income (expense), net |
|
| ( | ) |
|
|
| |
Total other expense, net |
|
| ( | ) |
|
| ( | ) |
Loss before income taxes |
|
| ( | ) |
|
| ( | ) |
Income tax provision |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Foreign currency translation adjustment |
|
|
|
|
| ( | ) | |
Comprehensive loss |
| $ | ( | ) |
| $ | ( | ) |
Loss per common share (basic) |
| $ | ( | ) |
| $ | ( | ) |
Number of shares used in per share calculation (basic) |
|
|
|
|
|
| ||
Loss per common share (diluted) |
| $ | ( | ) |
| $ | ( | ) |
Number of shares used in per share calculation (diluted) |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 5 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Stockholders' Equity | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
| |||||||||||
|
| Class A |
|
| Additional |
|
| Other |
|
|
|
| Total |
| ||||||||||
|
| Common Stock |
|
| Paid-in |
|
| Comprehensive |
|
| Accumulated |
|
| Stockholders’ |
| |||||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income |
|
| Deficit |
|
| Equity |
| ||||||
Balances at June 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Exercise of Stock Options, RSUs & RSAs, net |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||
Issuance of common stock for acquisition of Visimid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation on stock options, RSUs & RSAs |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustment |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net loss |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Balances at September 30, 2024 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Exercise of Stock Options, RSUs & RSAs, net |
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
|
|
|
| |||||
Issuance of common stock for acquisition of Visimid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation on stock options, RSUs & RSAs |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustment |
|
| — |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||
Net loss |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Balances at September 30, 2023 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 6 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Interest from amortization of loan issuance costs |
|
|
|
|
|
| ||
Loss on disposal of property and equipment |
|
|
|
|
|
| ||
Stock-based compensation on stock options, RSUs & RSAs, net |
|
|
|
|
|
| ||
Provision for credit losses |
|
|
|
|
|
| ||
Change in operating lease assets and liabilities |
|
| ( | ) |
|
|
| |
Inventory write-offs to allowance |
|
|
|
|
|
| ||
Deferred taxes |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
| ( | ) |
|
|
| |
Other current assets |
|
|
|
|
| ( | ) | |
Inventories |
|
| ( | ) |
|
|
| |
Prepaid expenses and deposits |
|
| ( | ) |
|
|
| |
Accounts payable and accrued liabilities |
|
| ( | ) |
|
| ( | ) |
Net cash (used in) provided by operating activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| ( | ) |
|
| ( | ) |
Proceeds from sale of equipment |
|
|
|
|
|
| ||
Proceeds from sale-leaseback of equipment |
|
|
|
|
|
| ||
Acquisition of Visimid Technologies, net of cash acquired |
|
| ( | ) |
|
| ( | ) |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock from Employee Stock Purchase Plan |
|
|
|
|
|
| ||
Loan issuance costs |
|
| ( | ) |
|
|
| |
Borrowings on loans payable |
|
|
|
|
|
| ||
Payments on loans payable |
|
| ( | ) |
|
| ( | ) |
Repayment of finance lease obligations |
|
| ( | ) |
|
| ( | ) |
Net cash provided by (used in) financing activities |
|
|
|
|
| ( | ) | |
Effect of exchange rate on cash and cash equivalents |
|
|
|
|
| ( | ) | |
Change in cash, cash equivalents and restricted cash |
|
|
|
|
| ( | ) | |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
| ||
Cash, cash equivalents and restricted cash, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid in cash |
| $ |
|
| $ |
| ||
Income taxes paid |
| $ |
|
| $ |
| ||
Supplemental disclosure of non-cash investing & financing activities: |
|
|
|
|
|
|
|
|
Purchase of equipment through finance lease arrangements |
|
|
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 7 |
| Table of Contents |
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, 2024, 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, 2024 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, 2024. There have been no material changes to our significant accounting policies during the three months ended September 30, 2024, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
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. Acquisition of Visimid Technologies
In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Acquisition Date”).
Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things (“IOT”) applications. Visimid provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and original equipment manufacturers (“OEMs”) for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.
The Company’s unaudited condensed consolidated financial statements reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price included $
| 8 |
| Table of Contents |
The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $
The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date. As part of the valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and trademarks. The customer backlog, customer relationships, trade secrets and trademarks were determined to have estimated values of approximately $
The Company incurred a total of approximately $
Prior to the Acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera.
4. 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 provide engineering services and 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 revenue recognition. Deferred revenue was $
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 for engineering services are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. Visimid has one longer-term order with a defense customer which includes both product development and hardware deliverables where similar revenue recognition criteria will be applied.
| 9 |
| Table of Contents |
We categorize our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services.
Revenue by product group for the three months ended September 30, 2024 and 2023 was as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Infrared components |
| $ |
|
| $ |
| ||
Visible components |
|
|
|
|
|
| ||
Assemblies and modules |
|
|
|
|
|
| ||
Engineering services |
|
|
|
|
|
| ||
Total revenue |
| $ |
|
| $ |
| ||
5. Inventories
The components of inventories include the following:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
Raw materials |
| $ |
|
| $ |
| ||
Work in process |
|
|
|
|
|
| ||
Finished goods |
|
|
|
|
|
| ||
Allowance for obsolescence |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $
6. Property and Equipment
Property and equipment are summarized as follows:
|
| Estimated Lives (Years) |
|
| September 30, 2024 |
|
| June 30, 2024 |
| |||
Manufacturing equipment |
|
|
| $ |
|
| $ |
| ||||
Computer equipment and software |
|
|
|
|
|
|
|
| ||||
Furniture and fixtures |
|
|
|
|
|
|
|
| ||||
Leasehold improvements |
|
|
|
|
|
|
|
| ||||
Construction in progress |
|
|
|
|
|
|
|
|
|
| ||
Total property and equipment |
|
|
|
|
|
|
|
|
|
| ||
Less accumulated depreciation and amortization |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Total property and equipment, net |
|
|
|
|
| $ |
|
| $ |
| ||
| 10 |
| Table of Contents |
7. Goodwill and Intangible Assets
There were no changes in the net carrying value of goodwill during the three months ended September 30, 2024.
Amortizable intangible assets were comprised of:
|
| Useful Lives (Years) |
|
| September 30, 2024 |
|
| June 30, 2024 |
| |||
Customer relationships |
|
|
| $ |
|
| $ |
| ||||
Trade secrets |
|
|
|
|
|
|
|
| ||||
Trademarks |
|
|
|
|
|
|
|
| ||||
Backlog |
|
|
|
|
|
|
|
| ||||
Total intangible assets |
|
|
|
|
|
|
|
|
| |||
Less accumulated amortization |
|
|
|
|
| ( | ) |
|
| ( | ) | |
Total intangible assets, net |
|
|
|
| $ |
|
| $ |
| |||
Future amortization of intangibles is as follows:
Fiscal year ending: |
|
|
| |
June 30, 2025 (nine months remaining) |
| $ |
| |
June 30, 2026 |
|
|
| |
June 30, 2027 |
|
|
| |
June 30, 2028 |
|
|
| |
June 30, 2029 |
|
|
| |
After June 30, 2029 |
|
|
| |
|
| $ |
| |
8. Income Taxes
A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2024 and 2023 is as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Loss before income taxes |
| $ | ( | ) |
| $ | ( | ) |
Income tax provision |
| $ |
|
| $ |
| ||
Effective income tax rate |
|
| - | % |
|
| - | % |
The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia. Effective February 28, 2023, the legal entities of LightPath Optical Instrumentation (Shanghai) Co., Ltd. (“LPOI”) and LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”) were merged, with LPOIZ as the surviving company and the operations of the two companies were merged. For the three months ended September 30, 2024 and 2023, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LPOIZ, and paid or payable to LightPath, its parent company, as well as withholding taxes on payments from LPOIZ to LightPath for administrative services rendered.
We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of September 30, 2024 and June 30, 2024, our net deferred tax assets are related to the U.S. jurisdiction and we have provided a valuation allowance to reduce the deferred tax assets to the net amount we estimate is more-likely-than-not to be realized. Our net deferred tax assets as of September 30, 2024 and June 30, 2024 consist primarily of federal and state tax credits with indefinite carryover periods.
| 11 |
| Table of Contents |
U.S. Federal and State Income Taxes
Our U.S. federal and state statutory income tax rate is estimated to be
Income Tax Law of the People’s Republic of China
Our Chinese subsidiary, LPOIZ, is governed by the Income Tax Law of the People’s Republic of China. As of September 30, 2024, LPOIZ was subject to a statutory income tax rate of
The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S. parent company. The Company also intends to reinvest a portion of the earnings generated by its foreign subsidiaries. The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $
Law of Corporate Income Tax of Latvia
Our Latvian subsidiary, ISP Optics Latvia, SIA (“ISP Latvia”), is governed by the Law of Corporate Income Tax of Latvia. Effective January 1, 2018, the Republic of Latvia enacted tax reform with the following key provisions: (i) corporations are no longer subject to income tax, but are instead subject to a distribution tax on distributed profits (or deemed distributions, as defined) and (ii) the rate of tax was changed to
9. Stock-Based Compensation
Our directors, officers, and key employees are granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, through our 2018 Stock and Incentive Compensation Plan (the “SICP”). Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The SICP is administered by the Compensation Committee of the Board of Directors. At our 2018 Annual Stockholders Meeting, our stockholders approved the SICP under which an aggregate of
Stock-based compensation expense is based primarily on the fair value of the award as of the grant date, and is recognized as an expense over the requisite service period.
| 12 |
| Table of Contents |
The following table shows total stock-based compensation expense for the three months ended September 30, 2024 and 2023, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Stock options |
| $ |
|
| $ |
| ||
RSAs |
|
|
|
|
| |||
RSUs |
|
|
|
|
| |||
Total |
| $ |
|
| $ |
| ||
We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations. A discount of approximately $
Grant Date Fair Values and Underlying Assumptions; Contractual Terms
We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2014 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction.
Most stock
No stock options were granted during the three months ended September 30, 2024 or 2023.
Restricted Stock Awards
RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting.
Restricted Stock Units
RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant.
| 13 |
| Table of Contents |
Information Regarding Current Share-Based Compensation Awards
A summary of the activity for share-based compensation awards in the three months ended September 30, 2024 is presented below:
|
| Stock Options |
|
| Restricted Stock Units (RSUs) |
|
| Restricted Stock Awards (RSAs) |
| |||||||||||||||||||
|
|
|
| Weighted- |
|
| Weighted- |
|
|
|
| Weighted- |
|
|
|
| Weighted- |
| ||||||||||
|
|
|
| Average |
|
| Average |
|
|
|
| Average |
|
|
|
| Average |
| ||||||||||
|
|
|
| Exercise |
|
| Remaining |
|
|
|
| Remaining |
|
|
|
| Remaining |
| ||||||||||
|
| Shares |
|
| Price |
|
| Contract |
|
| Shares |
|
| Contract |
|
| Shares |
|
| Contract |
| |||||||
June 30, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
| |||
Cancelled/Forfeited |
|
| ( | ) |
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
| ||
September 30, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Awards exercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards unexercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unvested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2024 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| 524,895 |
|
|
|
|
|
|
|
|
|
|
| 1,250,132 |
|
|
|
|
|
|
| 146,887 |
|
|
|
|
|
As of September 30, 2024, there was approximately $
Fiscal Year Ending: |
| Stock Options |
|
| RSAs |
|
| RSUs |
|
| Total |
| ||||
June 30, 2025 (remaining nine months) |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2027 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 14 |
| Table of Contents |
10. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares of Class A common stock outstanding, during each period presented. Diluted earnings (loss) per share is computed similarly to basic earnings (loss) per share, except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue shares of Class A common stock were exercised or converted into shares of Class A common stock. The computations for basic and diluted earnings (loss) per share of Class A common stock are described in the following table:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic number of shares |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Options to purchase common stock |
|
|
|
|
|
| ||
RSUs and RSAs |
|
|
|
|
|
| ||
Diluted number of shares |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Loss per common share: |
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
The following potential dilutive shares were not included in the computation of diluted earnings (loss) per share of Class A common stock, as their effects would be anti-dilutive:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Options to purchase common stock |
|
|
|
|
|
| ||
RSUs and RSAs |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
11. Leases
Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms at various times through 2034. We typically include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise such options. We currently have twelve finance lease agreements entered into during fiscal years 2023 and 2024 with terms ranging from three to five years. The finance leases are for computer and manufacturing equipment.
Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. One of our operating leases includes renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities.
| 15 |
| Table of Contents |
As most of our operating leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently, none of our operating leases include variable lease payments that are dependent on an index or rate. We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our operating leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU assets and the related lease liabilities. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of
We received tenant improvement allowances for each of our two leases with respect to our Orlando Facility. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms. In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord provided $
The components of lease expense for the three months ended September 30, 2024 and 2023 were as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Operating lease cost |
| $ |
|
| $ |
| ||
Finance lease cost: |
|
|
|
|
|
|
|
|
Depreciation of lease assets |
|
|
|
|
|
| ||
Interest on lease liabilities |
|
|
|
|
|
| ||
Total finance lease cost |
|
|
|
|
|
| ||
Total lease cost |
| $ |
|
| $ |
| ||
Supplemental balance sheet information related to the leases as of September 30, 2024 and June 30, 2024 was as follows:
|
| Classification |
| September 30, 2024 |
|
| June 30, 2024 |
| ||
| Assets: |
|
|
|
|
|
|
|
| ||
Operating lease assets |
| Operating lease assets |
| $ |
|
| $ |
| ||
Finance lease assets |
| Property and equipment, net(1) |
|
|
|
|
|
| ||
| Total lease assets |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
Operating leases |
| Operating lease liabilities, current |
| $ |
|
| $ |
| ||
Finance leases |
| Finance lease liabilities, current |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
Operating leases |
| Operating lease liabilities, less current portion |
|
|
|
|
|
| ||
Finance leases |
| Finance lease liabilities, less current portion |
|
|
|
|
|
| ||
| Total lease liabilities |
|
|
| $ |
|
| $ |
| ||
(1) | Finance lease assets were recorded net of accumulated depreciation of approximately $ |
| 16 |
| Table of Contents |
Lease term and discount rate information related to leases was as follows:
Lease Term and Discount Rate |
| September 30, 2024 |
| |
Weighted Average Remaining Lease Term (in years) |
|
|
| |
Operating leases |
|
|
| |
Finance leases |
|
|
| |
|
|
|
|
|
Weighted Average Discount Rate |
|
|
|
|
Operating leases |
|
| % | |
Finance leases |
|
| % | |
Supplemental cash flow information was as follows for the three months ended September 30, 2024 and 2023:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash used for operating leases |
| $ |
|
| $ |
| ||
Operating cash used for finance leases |
| $ |
|
| $ |
| ||
Financing cash used for finance leases |
| $ |
|
| $ |
| ||
Future maturities of lease liabilities were as follows as of September 30, 2024:
Fiscal year ending: |
| Finance Leases |
|
| Operating Leases |
| ||
June 30, 2025 (remaining nine months) |
| $ |
|
| $ |
| ||
June 30, 2026 |
|
|
|
|
|
| ||
June 30, 2027 |
|
|
|
|
|
| ||
June 30, 2028 |
|
|
|
|
|
| ||
June 30, 2029 |
|
|
|
|
|
| ||
Thereafter |
|
|
|
|
|
| ||
Total future minimum payments |
|
|
|
|
|
| ||
Less imputed interest |
|
| ( | ) |
|
| ( | ) |
Present value of lease liabilities |
| $ |
|
| $ |
| ||
12. Loans Payable
As of September 30, 2024, loans payable consisted of two equipment loans and a bridge promissory note (as described below).
Bridge Promissory Note
On August 6, 2024, we entered into a bridge promissory note (the “Bridge Note”) with Lytton-Kambara Foundation (the “Lender”) pursuant to which the Lender extended a loan to the Company in the principal amount of $
The Bridge Note is unsecured, bears interest at the rate of
We may prepay the principal outstanding under the Bridge Note at any time prior to
| 17 |
| Table of Contents |
The Bridge Note contains customary representations, warranties and covenants for agreements of this type and provides for customary events of default, including among other things, failure to make payments when due, breaches of representations and warranties, and certain bankruptcy and insolvency events. Upon an event of default, the Bridge Note’s interest rate shall increase to
Equipment Loans
In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which party is also a significant customer, and which the 2020 Equipment Loan was subordinate to the BankUnited Loans (as defined below), and collateralized by certain equipment. The initial advance under the 2020 Equipment Loan was 225,000 EUR (or USD $
In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advance under the 2023 Equipment Loan was 128,815 EUR (or USD $
Future maturities of loans payable are as follows:
|
| Promissory Note |
|
| Unamortized Loan Issuance Costs |
|
| Equipment Loans |
|
| Total |
| ||||
Fiscal year ending: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2025 (remaining nine months) |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ | ( | ) | ||
June 30, 2026 |
|
|
|
|
| ( | ) |
|
|
|
|
|
| |||
June 30, 2027 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2028 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total payments |
| $ |
|
| $ | ( | ) |
| $ |
|
| $ |
| |||
Less current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
Non-current portion |
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
| |
13. Foreign Operations
Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $
Our cash, cash equivalents and restricted cash totaled approximately $
| 18 |
| Table of Contents |
Revenues from foreign countries for the three months ended September 30, 2024 and 2023 are as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Revenues: |
|
|
|
|
|
| ||
United States |
| $ |
|
| $ |
| ||
Europe |
|
|
|
|
|
| ||
China |
|
|
|
|
|
| ||
Other Asian countries |
|
|
|
|
|
| ||
Rest of world |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
Long-lived assets located in foreign countries as of September 30, 2024 and June 30, 2024 are as follows:
|
| September 30, 2024 |
|
| June 30, 2024 |
| ||
Long-lived assets: |
|
|
|
|
|
| ||
United States |
| $ |
|
| $ |
| ||
Latvia |
|
|
|
|
|
| ||
China |
|
|
|
|
|
| ||
|
| $ |
|
| $ |
| ||
14. Contingencies
Legal
The Company, from time to time, is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.
In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement. In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees. We incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. In December 2023, we recovered approximately $
Potential Impact of Economic Conditions in China
Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. Deteriorating economic conditions in China generally have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall. A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.
| 19 |
| Table of Contents |
Impact of Recent Wars
In February 2022, Russian military forces invaded Ukraine. This war has led to sanctions on Russia, which have had some impacts, though temporary, on our supply chain of raw materials. Separately, Israel declared war on Hamas in October 2023. Initially, this resulted in a temporary increase in our sales, as Israel worked to replace electro-optical systems that in some cases use our materials. However, it is possible that this war will also have a negative impact on our business at some point as a result of the economic impact in Israel. In addition to the significant defense related market in Israel, we also serve many commercial related applications and work with commercial companies in Israel, and the business of those customers may be negatively impacted by the war over time. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of either the Russian-Ukraine conflict or the Israel-Hamas war on our financial condition, results of operations or cash flows into the foreseeable future.
15. Liquidity
We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay our debt.
On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $
On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of
There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, we may identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.
| 20 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended June 30, 2024, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.
Introduction
We were incorporated in Delaware in 1992 as the successor to LightPath Technologies Limited Partnership, a New Mexico limited partnership, formed in 1989, and its predecessor, Integrated Solar Technologies Corporation, a New Mexico corporation, formed in 1985. Today, LightPath is a global company with major facilities in the United States, the People’s Republic of China, and the Republic of Latvia.
Subsidiaries
In November 2005, we formed LPOI, a wholly-owned subsidiary, located in Jiading, People’s Republic of China. LPOI provided sales and support functions. In December 2013, we formed LPOIZ, a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s 55,000 square foot manufacturing facility (the “Zhenjiang Facility”) serves as our primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies. Effective February 28, 2023, LPOI and LPOIZ were merged, with LPOIZ as the surviving company.
In December 2016, we acquired ISP, and its wholly-owned subsidiary, ISP Latvia. ISP is a vertically integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. Since June 2019, ISP’s manufacturing operation has been located at our Orlando Facility. ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s facility in Riga, Latvia (the “Riga Facility”) functions as its manufacturing facility.
In July 2023, we acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”). Visimid is an engineering and design firm specializing in thermal imaging, night vision and IOT applications. Visimid provides design and consulting services for DoD contractors, commercial and industrial customers, and OEMs for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions. Visimid’s facility is located in Plano, TX.
For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2024.
Product Groups
Our infrared components product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. This product group also includes both conventional and computer numerical control (“CNC”) ground and polished lenses. Advances in chalcogenide materials have enabled compression molding for mid-wave (“MWIR”) and long-wave (“LWIR”) optics in a process similar to precision molded lenses. Our molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods. Utilizing precision molded aspheric optics significantly reduces the number of lenses required for typical thermal imaging systems and the cost to manufacture these lenses. Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required.
Our visible components product group consists of visible precision molded optics with varying applications. Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine. Our glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price. Molding is the most consistent and economical way to produce aspheres and we have perfected this method to offer the most precise molded aspheric lenses available.
| 21 |
| Table of Contents |
Between these two component product groups, we have the capability to manufacture lenses from very small (with diameters of a sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2,000 millimeters. In addition, both product groups offer both catalog and custom designed optics.
Our assemblies and modules product group is comprised of other value-added products, including both infrared and visible components, such as mounted lenses, optical assemblies, collimator assemblies, and other custom specialty optics. Collimator assemblies are utilized in applications involving light detection and ranging (“LIDAR”) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment. This continues to be an emerging market with long-term growth potential for us. We also expect growth from medical programs and commercial optical sub-assemblies. We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies.
Our engineering services product group represents services we provide pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications. The purpose of those engineering services that we offer is not only to provide purely engineering services for a customer, but also to engineer new products which we later manufacture for the customer. The timing and extent of any such product development requests are outside of our control, and the related revenue is recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. As we continue a strategic shift into highly engineered solutions, we expect this product group to grow in a similar way as our assemblies and modules business. Furthermore, as the engineering effort precedes the product revenue, the revenue from this product group is often, but not always, a lead indicator to the revenue in assemblies and modules product group.
We believe these four product groups are aligned with our strategic direction and will allow us to better track the results of our focus on engineered solution and assemblies.
Growth Strategy
The optics industry is transforming from a fragmented industry with many component manufacturers into a solution-focused industry with the potential for partnerships for solution development and production. Based on the shifts in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty product to being integrated into mainstream industries and applications, we redefined our strategic direction to leverage our strengths and specifically our subject matter expertise in optics, to provide our wide customer base with complete optical and electro-optical solutions, and to become their partner for the optical engine of their systems.
Since our Chief Executive Officer, Mr. Sam Rubin, joined the Company in 2020, we have been developing a new strategy that will transition the Company from a pure component manufacturer to a supplier of imaging subsystems and systems. Our new strategic direction, which is based on our core technological differentiators such as our BlackDiamond glass (“BlackDiamond”) and proprietary molding technologies, significantly increases our value add to customers. This transition, which is occurring both organically and through acquisitions, such as the July 2023 acquisition of Visimid Technologies, is positioning the Company for significant growth and higher profitability in coming years.
Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems. In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with a component oriented supply chain, into a solution-focused industry with the potential for partnerships for solution development and production. Over the last couple of years we have worked to align our organization to this strategy, and leverage our in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities. We have been developing these partnerships by working closely with our customers throughout their design process, designing optical solutions that are tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with technologies that we acquired through the Visimid acquisition such as video processing, infrared camera integration and more. Continually adding differentiating technologies is key to our strategy and we expect to continue to do so both organically and through acquisitions.
| 22 |
| Table of Contents |
Our domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, freeing them from the need to develop subject matter expertise in optics. By providing the bridge into the optical solution world, we are able to partner with our customers on a long-term basis, create value for our customers, and capture that value through the long-term supply relationships we seek to develop.
Further information about our strategic direction can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Results of Operations
Revenue
Revenue for the first quarter of fiscal 2025 was approximately $8.4 million, an increase of approximately $0.3 million, or 4%, as compared to approximately $8.1 million in the same quarter of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.
Revenue generated by infrared components was approximately $2.6 million in the first quarter of fiscal 2025, a decrease of approximately $1.2 million, or 32%, as compared to the same quarter of the prior fiscal year The decrease in revenue is primarily due to a decrease in sales against a large annual contract for Germanium-based products, which was not renewed in the second quarter of fiscal 2024, as we have decided to reduce the amount of optics we produce from Germanium, both to reduce our risk of supply chain disruption, and more importantly, to work with customers to convert their systems to use optics made of our own BlackDiamond materials. Revenue from the visible components product group for the first quarter of fiscal 2025 was $3.3 million, an increase of approximately $0.6 million, or 23%, as compared to the same quarter of the prior fiscal year. The increase in revenue is primarily due to an increase in sales to customers in the defense and medical industries, as well as sales through catalog and distribution channels. Revenue from assemblies and modules was approximately $1.1 million in the first quarter of fiscal 2025, a decrease of approximately $0.2 million, or 13%, as compared to the same quarter of the prior fiscal year. The majority of the decrease is due to timing of shipments against a multi-year contract with a defense customer, partially offset by an increase in sales of infrared camera cores. Revenue from engineering services increased by $1.1 million, or 378%, for the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, where revenue is generally recognized based on the achievement of milestones.
Gross Profit
Gross profit in the first quarter of fiscal 2025 was approximately $2.8 million, an increase of $0.5 million, or 22%, as compared to the same quarter of the prior fiscal year. Total cost of sales was approximately $5.6 million for the first quarter of fiscal 2025, compared to approximately $5.7 million for the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 34% for the first quarter of fiscal 2025, compared to 29% for the same quarter of the prior fiscal year. The increase in gross margin as a percentage of revenue is primarily due a more favorable product mix, with increases in both visible components sales and engineering services, which typically have higher margins than infrared components.
Selling, General and Administrative
SG&A costs were approximately $3.3 million for the first quarter of fiscal 2025, an increase of approximately $609,000, or 23%, as compared to approximately $2.7 million in the same quarter of the prior fiscal year. The increase in SG&A costs is primarily due to an increase in legal and consulting fees related to business development initiatives. We have also increased our sales and marketing spend to promote new products.
New Product Development
New product development costs were approximately $0.5 million in the first quarter of fiscal 2025, a decrease of approximately $0.2 million, or 26%, as compared to the same quarter of the prior fiscal year. This decrease reflects the shift of engineering resources toward externally funded, rather than internally funded, development projects.
| 23 |
| Table of Contents |
Amortization of Intangibles
Amortization of intangibles increased by $0.1 million for the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, due to the amortization of identifiable intangible assets associated with the Visimid acquisition. See Note 3, Acquisition of Visimid, in the unaudited Condensed Consolidated Financial Statements, for further information.
Other Income (Expense)
Interest expense, net, was approximately $149,000 for the first quarter of fiscal 2025, as compared to $58,000 for the same quarter of the prior fiscal year. The increase in interest expense is due to the interest and amortization of loan issuance costs associated with the Bridge Note which was executed in August 2024.
Other expense, net, was approximately $81,000 for the first quarter of fiscal 2025, as compared to other income, net of $5,000 for the same quarter of the prior fiscal year. Other income (expense) includes net gains and losses on foreign exchange transactions. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. We incurred foreign currency transaction losses of $36,000 and gains of $25,000 for the first quarter of fiscal 2025 and 2024, respectively.
Income Taxes
Income tax expense is primarily related to income taxes from our operations in China, including estimated Chinese withholding taxes associated with intercompany dividends declared by LPOIZ and payable to us as its parent company, as well as withholding taxes on payments from LPOIZ to LightPath for administrative services rendered. Income tax expense was approximately $16,000 for the first quarter of fiscal 2025, as compared to $40,000 for the same period of the prior year. The decrease is due to timing of intercompany dividends.
Net Loss
Net loss for the first quarter of fiscal 2025 was approximately $1.6 million, or $0.04 basic and diluted loss per share, compared to $1.3 million, or $0.04 basic and diluted loss per share, for the same quarter of the prior fiscal year.The increase in net loss of approximately $0.3 million for the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, was primarily attributable to the increased legal and consulting expenses related to business development initiatives.
Weighted-average common shares outstanding were 39,561,480, basic and diluted, in the first quarter of fiscal 2025, compared to 37,431,748, basic and diluted, in the same quarter of fiscal 2024. The increase in weighted-average basic common shares was due to the 585,483 shares issued during the second half of fiscal year 2024 pursuant to the at-the-market equity program, and the shares of Class A common stock issued in conjunction with the acquisition of Visimid. The increase is also attributable to the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs and RSAs. Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for the first quarter of fiscal year 2025 and 2024, as their effects would have been anti-dilutive due to the net loss in those periods.
Potential Impact of Economic Conditions and Policies in China
Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. According to the National Bureau of Statistics of China, the annual economic growth rate in China was 6.9% in 2017, 6.8% in 2018, 6.1% in 2019, 2.3% in 2020, 8.1% in 2021, 3% in 2022, and 5.2% in 2023. The annual economic growth rate in 2024 is projected to be 4.6%, although some analysts have indicated that China’s economic growth could be lower. Deteriorating economic conditions in China generally have led to lower demand for the Company’s products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall. A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.
| 24 |
| Table of Contents |
In addition, on July 4, 2023 China announced export limitations on Germanium and Gallium, two materials that are commonly used in infrared optical components, requiring all international customers to provide an end user statement for approval before receiving an export license. Since that announcement, supply of Germanium has been disrupted, though not completely stopped. As a purchaser of Germanium, we are mostly able to purchase the Germanium we need, though the availability of it and ability to receive export licenses varies amongst vendors. Some of our customers are able to import Germanium from China, while some get denied a license to do so. Yet, even those that are granted a license experience extended material lead times and drastic price increases. We cannot provide any assurance that we will be able to obtain adequate supplies in the future, if adequate supplies will be available, or that the timing or costs of obtaining such raw materials will be acceptable to us. As a precaution to the disruption in the supply chain of Germanium, and in anticipation of customers ordering more optics produced from other materials, primarily our own BlackDiamond materials, we have, in agreement with one key customer, proactively canceled some of our sales orders for optics made of Germanium. This serves to both reduce our exposure to possible shortages in Germanium material supply, as well as to free up capacity for orders for optics made of materials other than Germanium. This also led to us intentionally not renew a large annual customer order for optics made of Germanium from the same customer. This annual order is typically renewed during our second fiscal quarter; the prior renewal was announced in December 2022 for over $5 million. The lack of this renewal has impacted our backlog in the short term; however, the lack of this order booking does not mean that we have lost the customer. Instead, we expect this order to renew in coming months, as the customer completes evaluating, and working toward transitioning to optics made of our BlackDiamond materials.
Liquidity and Capital Resources
As of September 30, 2024, we had working capital of approximately $7.1 million and total cash and cash equivalents of approximately $4.3 million, of which, less than 50% of our cash and cash equivalents was held by our foreign subsidiaries.
Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. We routinely declare intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we also plan to repatriate a portion of their earnings, and we accrue for these taxes on the portion of earnings that we intend to repatriate.
In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. As of September 30, 2024, LPOIZ had approximately $1.6 million available for repatriation and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2023, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2024.
As of September 30, 2024, loans payable consists of two third-party equipment loans and the Bridge Note. See Note 12, Loans Payable, in the unaudited Condensed Consolidated Financial Statements, for further information.
On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under the shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. During the year ended June 30, 2024, we issued 585,483 shares of our Class A common stock pursuant to the at-the-market equity program. No additional shares were issued under this program during the three months ended September 30, 2024.
On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of 9,090,910 shares of the Company’s Class A common stock, par value $0.01 per share for a purchase price of $1.10 per share and filed a prospectus supplement with the SEC related thereto. The sale of shares pursuant to the Purchase Agreement closed on January 17, 2023, and resulted in net proceeds of approximately $9.2 million after payment of placement agent fees, and certain other costs and expenses of the offering.
There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, we may identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.
| 25 |
| Table of Contents |
Cash Flows – Operating:
Cash used in operations was approximately $1.7 million for the first quarter of fiscal 2025, compared to cash provided by operations of approximately $1.1 million for the same period of the prior fiscal year.Cash used in operations for the first quarter of fiscal 2025 was primarily due to payments against accounts payable and accrued liabilities, as well as an increase in accounts receivable driven by higher sales in the first quarter of fiscal 2025 than in the preceding quarter. Cash provided by operations for the first quarter of fiscal 2024 was largely driven by decrease in accounts receivable, as sales were higher in the fourth quarter of fiscal 2023 than in the first quarter of fiscal 2024.
Cash Flows – Investing:
During the first quarter of fiscal 2025, we expended approximately $0.1 million in investments in capital equipment, compared to approximately $1.0 million in the same period of the prior fiscal year. The capital spending in the first quarter of fiscal 2024 was largely driven by the Orlando Facility expansion. As disclosed in Note 11, Leases, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, we constructed additional tenant improvements in our Orlando Facility subject to our continuing lease, of which the landlord agreed to provide $2.4 million in tenant improvement allowances. We funded the balance of the tenant improvement costs of $3.7 million over fiscal years 2023 and 2024. We also expended approximately $0.1 million during the first quarter of fiscal 2025, compared to $0.6 million during the same quarter of the prior fiscal year, to acquire Visimid, net of cash acquired, as disclosed in Note 3, Acquisition of Visimid Technologies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The first quarter of fiscal 2024 also reflected proceeds of approximately $365,000 from sale-leasebacks of equipment.
Cash Flows – Financings:
Net cash provided by financing activities was approximately $2.6 million for the first quarter of fiscal 2025, compared to cash used in financing activities of approximately $0.2 million in the same period of the prior fiscal year. Cash provided by financing activities for the first quarter of fiscal 2025 primarily reflects the $2.7 million in net proceeds from the Bridge Note, plus approximately $10,000 in proceeds from the sale of Class A common stock under the 2014 ESPP, offset by approximately $94,000 in principal payments on our loans and finance leases. Cash used in financing activities for the first quarter of fiscal 2024 reflects $234,000 in principal payments on our loans and finance leases, offset by approximately $20,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.
Contractual Obligations and Commitments
As of September 30, 2024, our principal commitments consisted of obligations under operating and finance leases, and debt agreements. No material changes occurred during the first three months of fiscal 2025 in our contractual cash obligations to repay debt or to make payments under operating and finance leases, or in our contingent liabilities as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024.
Off Balance Sheet Arrangements
We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.
Critical Accounting Policies and Estimates
There have been no material changes to our critical accounting policies and estimates during the three months ended September 30, 2024 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended June 30, 2024.
| 26 |
| Table of Contents |
How We Operate
We have continuing sales of two basic types: sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and the more challenging and potentially more rewarding business of customer product development. In this latter type of business, we work with customers to help them determine optical specifications and even create certain optical designs for them, including complex, multi-component, optical system or sub-system designs that we call “engineered solutions.” These engineered solutions are often based on existing reference designs we have demonstrated, that then get further customized to the customer’s specific needs. This is followed by “sampling” or “prototyping” small numbers of the product for the customers’ test and evaluation. Thereafter, should a customer conclude that our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket purchase order” type or a supply agreement. The strategy is to create an annuity revenue stream that makes the best use of our production capacity and longer-term revenue planning, as compared to the turns business, which is unpredictable and uneven. A key business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:
| · | Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff; |
|
|
|
| · | The fact that as our customers take products of this nature into higher volume, commercial production they begin to work seriously to reduce costs – which may lead them to turn to larger producers, domestic or overseas, even if sacrificing quality; and |
|
|
|
| · | Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures. |
Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the market to our current and potential customers looking for specific solutions to their needs. Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of critical component(s) from foreign sources. For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in our Annual Report on Form 10-K dated June 30, 2024.
Our Key Performance Indicators:
Typically, on a weekly basis, management reviews a number of performance indicators, both qualitative and quantitative. These indicators change from time to time as the opportunities and challenges in the business change. These indicators are used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted, are proprietary information.
Financial indicators that are considered key and reviewed regularly are as follows:
| · | Sales backlog; |
|
|
|
| · | Revenue by product group; |
|
|
|
| · | EBITDA; and |
|
|
|
| · | Other key indicators. |
These indicators are also used to determine tactical operating actions and changes and are discussed in more detail below. Management continues to evaluate these key indicators as we refine our strategic plan to determine whether any changes or updates to our key indicators are warranted.
Sales Backlog
We believe our sales activity has been and continues to be a key indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what percent of the backlog is scheduled by the customer for date-certain delivery. We evaluate our total backlog, which includes all firm orders requested by a customer that are reasonably believed to remain in the backlog and be converted into revenues. This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria. Generally, a higher total backlog is better for us.
| 27 |
| Table of Contents |
Our total backlog at September 30, 2024 was approximately $21.0 million, a decrease of 4%, as compared to $21.3 million as of September 30, 2023. Compared to the end of fiscal 2024, our total backlog increased by 7% during the first quarter of fiscal 2025. Backlog change rates for the last five fiscal quarters are:
Quarter |
| Total Backlog ($ 000) |
|
| Change From Prior Year End |
|
| Change From Prior Quarter End |
| |||
Q1 2024 |
| $ | 21,303 |
|
|
| -2 | % |
|
| -2 | % |
Q2 2024 |
| $ | 21,220 |
|
|
| -2 | % |
|
| 0 | % |
Q3 2024 |
| $ | 21,967 |
|
|
| 1 | % |
|
| 4 | % |
Q4 2024 |
| $ | 19,268 |
|
|
| -11 | % |
|
| -12 | % |
Q1 2025 |
| $ | 20,542 |
|
|
| 7 | % |
|
| 7 | % |
The increase in backlog during the first quarter of fiscal 2025 is primarily due to a significant contract renewal for advanced infrared optics for a critical international military program, with a small increase over the previous renewal in the same quarter of the prior fiscal year. Also contributing to the increase is a $0.5 million low-rate initial production order for thermal imaging assemblies with a new tier-1 defense customer. These significant bookings were partially offset by shipments against prior period backlog under other annual and multi-year contracts. The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders.We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.
Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 and our new BDNL-4 materials. With the global supply of germanium currently concentrated in Russia and China, recent global events are generating renewed interest in germanium alternatives such as our proprietary BlackDiamond materials, and other materials we are currently developing under an exclusive license with the Naval Research Lab.
As we have outlined in our strategic direction, we do not expect to see significant growth in our visible components product group in the near future. Competition in that product line has grown substantially over the last few years, and some of our new molding capabilities and technologies such as free-form molded optics, might take longer than anticipated to reach full commercialization, depending on economic conditions and technology trends in the area of AR\VR.
In addition, order bookings for both visible and infrared components and assemblies continue to be slow in China. Domestic sales in China have also been adversely impacted by the economic downturn in China, which continues to negatively impact revenue and bookings in that region.
| 28 |
| Table of Contents |
Revenue by Product Group
The following table sets forth revenue for our four product groups for the three-month periods ended September 30, 2024 and 2023:
|
| (unaudited) |
|
|
|
| ||||||
|
| Three Months Ended September 30, |
|
|
|
| ||||||
|
| 2024 |
|
| 2023 |
|
| % Change |
| |||
Revenue |
|
|
|
|
|
|
|
|
| |||
Infrared components |
| $ | 2,610,884 |
|
| $ | 3,834,602 |
|
|
| -32 | % |
Visible components |
|
| 3,299,878 |
|
|
| 2,688,335 |
|
|
| 23 | % |
Assemblies and modules |
|
| 1,093,668 |
|
|
| 1,262,039 |
|
|
| -13 | % |
Engineering services |
|
| 1,395,951 |
|
|
| 292,272 |
|
|
| 378 | % |
Total revenue |
| $ | 8,400,381 |
|
| $ | 8,077,248 |
|
|
| 4 | % |
Our revenue increased by 4% in the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.
Revenue generated by the infrared components product group for the first quarter of fiscal 2025 was $2.6 million, a decrease of 32%, as compared to same quarter of the prior fiscal year. The decrease in revenue is primarily due to a decrease in sales against a large annual contract for Germanium-based products, which was not renewed in the second quarter of fiscal 2024, as we have decided to reduce the amount of optics we produce from Germanium, both to reduce our risk of supply chain disruption, and more importantly, to work with customers to convert their systems to use optics made of our own BlackDiamond materials. We continue to work with this customer, as well as other customers to convert their systems to use BlackDiamond optics. During the first quarter of fiscal 2025, we announced that a current key defense customer using Germanium lenses successfully completed the qualification and evaluation of new optics made from our proprietary BlackDiamond chalcogenide-based glass.
Revenue from the visible components product group for the first quarter of fiscal 2025 was $3.3 million, an increase of 23%, as compared to the same quarter of the prior fiscal year. The increase in revenue is primarily due to an increase in sales to customers in the defense and medical industries, as well as sales through catalog and distribution channels. The quarter-over-quarter increase was largely due to timing; we generally do not expect growth in our visible components product group.
Revenue from assemblies and modules decreased by 13% for the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year. The majority of the decrease is due to timing of shipments against a multi-year contract with a defense customer, partially offset by increased sales of infrared camera cores. During the first quarter of fiscal 2025, we announced the global launch of a new version of the Mantis™ camera, specifically designed for monitoring high-temperature processes inside boilers and furnaces in power plants, and the first commercial order for furnace inspection for a customer in the southeastern U.S., as well as a new Optical Gas Imaging (“OGI”) camera platform to detect fugitive gas emissions for oil and gas applications.
Revenue from engineering services increased by $1.1 million, or 378%, for the first quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, where revenue is generally recognized based on the achievement of milestones. During the first quarter of fiscal 2025, we received qualification of our advanced thermal camera system by Lockheed Martin as part of its bid to produce the design of a major missile program for the U.S. Army. LightPath will now start delivering flightworthy hardware for implementation into Lockheed Martin's initial live test units.
Other Key Indicators
Other key indicators include various operating metrics, some of which are qualitative and others are quantitative. These indicators change from time to time as the opportunities and challenges in the business change. They are mostly non-financial indicators, such as evaluating the pipeline of sales opportunities, on time delivery trends, production yield rates by major product line, and the output and yield data from significant intermediary manufacturing processes that support the production of the finished shippable product. The data from these reports is used to determine tactical operating actions and changes. Management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP measures. These non-GAAP measures are described in more detail below under the heading “Non-GAAP Financial Measures.”
| 29 |
| Table of Contents |
Non-GAAP Financial Measures
We report our historical results in accordance with GAAP; however, our management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.
EBITDA
EBITDA is a non-GAAP financial measure used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA, as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not necessarily a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”
We believe EBITDA is helpful for investors to better understand our underlying business operations. The following table adjusts net loss to EBITDA for the three months ended September 30, 2024 and 2023:
LIGHTPATH TECHNOLOGIES, INC. |
| |||||||
Reconciliation of Non-GAAP Financial Measures and Regulation G Disclosure |
| |||||||
|
|
|
|
|
|
| ||
|
| (unaudited) |
| |||||
|
| Three Months Ended September 30, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net loss |
| $ | (1,622,745 | ) |
| $ | (1,342,376 | ) |
Depreciation and amortization |
|
| 989,562 |
|
|
| 813,556 |
|
Income tax provision |
|
| 15,636 |
|
|
| 39,546 |
|
Interest expense |
|
| 149,360 |
|
|
| 57,611 |
|
EBITDA |
| $ | (468,187 | ) |
| $ | (431,663 | ) |
% of revenue |
|
| -6 | % |
|
| -5 | % |
Our EBITDA for the quarter ended September 30, 2024 was a loss of approximately $0.5 million, compared to $0.4 million for the same quarter of the prior fiscal year. The decrease in EBITDA in the first quarter of fiscal 2025 was primarily attributable to the additional legal and consulting expenses related to business development initiatives.
| 30 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Because we are allowed to comply with the disclosure obligations applicable to a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, with respect to this Quarterly Report on Form 10-Q, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2024, the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 in reporting on a timely basis information required to be disclosed by us in the reports we file or submit under the Exchange Act.
There have not been any significant changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 31 |
| Table of Contents |
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject, from time to time, to various legal proceedings that are incidental to the conduct of its business. The Company is not involved in any pending legal proceeding that it believes would reasonably be expected to have a material adverse effect on its financial condition or results of operations.
Item 1A. Risk Factors
Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2024, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the three months ended September 30, 2024, there have been no material changes from the risk factors previously disclosed under Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
| 32 |
| Table of Contents |
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
Exhibit Number |
| Description | ||||||
|
|
| ||||||
| ||||||||
|
|
| ||||||
| ||||||||
|
|
| ||||||
| ||||||||
|
|
| ||||||
| ||||||||
|
|
| ||||||
| ||||||||
|
|
| ||||||
101.INS |
| Inline XBRL Instance Document * | ||||||
|
|
| ||||||
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document * | ||||||
|
|
| ||||||
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document * | ||||||
|
|
| ||||||
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document * | ||||||
|
|
| ||||||
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document * | ||||||
|
|
| ||||||
101.PRE |
| Inline XBRL Taxonomy Presentation Linkbase Document * | ||||||
|
|
| ||||||
104 |
| Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101 * | ||||||
*filed herewith
**furnished, not filed
| 33 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC. | |||
Date: November 7, 2024 | By: | /s/ Shmuel Rubin | |
|
| Shmuel Rubin | |
President and Chief Executive Officer | |||
|
|
|
|
Date: November 7, 2024 | By: | /s/ Albert Miranda |
|
|
| Albert Miranda |
|
|
| Chief Financial Officer |
|
| 34 |