Lightpath Technologies Inc 10-Q for FY2022 Q3
Lightpath Technologies Inc (LPTH)
About this 10-Q
Lightpath Technologies Inc filed this 10-Q on May 12, 2022, covering the quarter ended March 31, 2022 (FY2022 Q3).
Headline figures
Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $8.31M
- down 22.4% from $10.7M a year earlier
- Net loss
- $495K
- compared with a net loss of $222.56K a year earlier
- Diluted EPS
- -$0.02
- compared with -$0.01 a year earlier
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.) |
http://www.lightpath.com
(Address of principal executive offices)
(ZIP Code)
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
|
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).
YES ☒
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
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 March 31, 2022 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, growth, product development, sales, business strategy, statements related to any further expected effects on our business from the coronavirus (“COVID-19”) pandemic, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the continued duration and scope of the COVID-19 pandemic and any impact on the demand for our products; our ability to obtain needed raw materials and components from our suppliers; additional actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions, particularly at our foreign facilities; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that we could take to reduce operating costs; 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, 2021. 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)
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| March 31, |
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| June 30, |
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Assets |
| 2022 |
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| 2021 |
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Current assets: |
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| Cash and cash equivalents |
| $ |
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| $ |
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| Trade accounts receivable, net of allowance of $ |
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| Inventories, net |
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| Other receivables |
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| Prepaid expenses and other assets |
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| Total current assets |
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| Property and equipment, net |
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| Operating lease right-of-use assets |
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| Intangible assets, net |
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| Goodwill |
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| Deferred tax assets, net |
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| Other assets |
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| Total assets |
| $ |
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| $ |
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Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
| $ |
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| $ |
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| Accrued liabilities |
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| Accrued payroll and benefits |
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| Operating lease liabilities, current |
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| Loans payable, current portion |
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| Finance lease obligation, current portion |
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| Total current liabilities |
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| Finance lease obligation, less current portion |
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| Operating lease liabilities, noncurrent |
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| Loans payable, less current portion |
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| Total liabilities |
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| Commitments and Contingencies |
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| Stockholders’ equity: |
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| Preferred stock: Series D, $ |
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| Common stock: Class A, $ |
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| Additional paid-in capital |
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| Accumulated other comprehensive income |
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| Accumulated deficit |
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| Total stockholders’ equity |
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| Total liabilities and stockholders’ equity |
| $ |
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| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
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| Three Months Ended |
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| Nine Months Ended |
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| March 31, |
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| March 31, |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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| Revenue, net |
| $ |
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| $ |
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| $ |
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| $ |
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| Cost of sales |
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| Gross margin |
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Operating expenses: |
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Selling, general and administrative |
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New product development |
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Amortization of intangibles |
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Loss on disposal of property and equipment |
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Total operating expenses |
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Operating income (loss) |
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Other income (expense): |
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| Interest expense, net |
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| Other income (expense), net |
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| Total other income (expense), net |
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| Income (loss) before income taxes |
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| Income tax provision |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Foreign currency translation adjustment |
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| ( | ) |
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| ( | ) |
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| ( | ) |
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Comprehensive income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
Loss per common share (basic) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Number of shares used in per share calculation (basic) |
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Loss per common share (diluted) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Number of shares used in per share calculation (diluted) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
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| Accumulated |
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| Class A |
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| Additional |
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| Other |
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| Total |
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| Common Stock |
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| Paid-in |
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| Comphrehensive |
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| Accumulated |
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| Stockholders’ |
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| Shares |
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| Amount |
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| Capital |
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| Income |
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| Deficit |
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| Equity |
| ||||||
| Balances at June 30, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
| |||||
Issuance of common stock for: |
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Employee Stock Purchase Plan |
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Stock-based compensation on stock options & RSUs |
|
| - |
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Foreign currency translation adjustment |
|
| - |
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| ( | ) |
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| ( | ) | |||
| Net loss |
|
| - |
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| ( | ) |
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| ( | ) | |||
| Balances at September 30, 2021 |
|
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance of common stock for: |
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Settlement of RSUs, net |
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| ( | ) |
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Stock-based compensation on stock options & RSUs |
|
| - |
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Foreign currency translation adjustment |
|
| - |
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| Net loss |
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| - |
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| ( | ) |
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| Balances at December 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance of common stock for: |
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Employee Stock Purchase Plan |
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| |
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Stock-based compensation on stock options & RSUs |
|
| - |
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| |
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| |
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| |
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Foreign currency translation adjustment |
|
| - |
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| |
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| ( | ) |
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| |
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| ( | ) |
| Net loss |
|
| - |
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| ( | ) |
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| ( | ) |
| Balances at March 31, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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| Balances at June 30, 2020 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance of common stock for: |
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Employee Stock Purchase Plan |
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Exercise of stock options, net |
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Stock-based compensation on stock options & RSUs |
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| - |
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Foreign currency translation adjustment |
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| - |
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| Net income |
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| - |
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| Balances at September 30, 2020 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance of common stock for: |
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Exercise of stock options & RSU's, net |
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Stock-based compensation on stock options & RSUs |
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| - |
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Foreign currency translation adjustment |
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| - |
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| Net loss |
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| - |
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| ( | ) |
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| Balances at December 31, 2020 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance of common stock for: |
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Employee Stock Purchase Plan |
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Exercise of stock options & RSUs, net |
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Stock-based compensation on stock options & RSUs |
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| - |
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Foreign currency translation adjustment |
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| - |
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| ( | ) |
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| ( | ) | |||
| Net loss |
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| - |
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| ( | ) |
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| ( | ) | |||
| Balances at March 31, 2021 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
|
| Nine Months Ended March 31, |
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| 2022 |
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| 2021 |
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| Cash flows from operating activities: |
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| Net loss |
| $ | ( | ) |
| $ | ( | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Interest from amortization of debt costs |
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Loss on disposal of property and equipment |
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Stock-based compensation on stock options & RSUs, net |
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Provision for doubtful accounts receivable |
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Change in operating lease assets and liabilities |
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Inventory write-offs to allowance |
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Changes in operating assets and liabilities: |
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Trade accounts receivable |
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Other receivables |
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| ( | ) | |
Inventories |
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| ( | ) | |
Prepaid expenses and other assets |
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Accounts payable and accrued liabilities |
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Net cash provided by operating activities |
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| Cash flows from investing activities: |
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Purchase of property and equipment |
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| ( | ) |
Net cash used in investing activities |
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| Cash flows from financing activities: |
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Proceeds from exercise of stock options |
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Proceeds from sale of common stock from Employee Stock Purchase Plan |
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Loan costs |
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Borrowings on loans payable |
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Payments on loans payable |
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Repayment of finance lease obligations |
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Net cash used in financing activities |
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| ( | ) |
|
| ( | ) |
| Effect of exchange rate on cash and cash equivalents |
|
|
|
|
|
| ||
| Change in cash and cash equivalents |
|
| ( | ) |
|
|
| |
| Cash and cash equivalents, beginning of period |
|
|
|
|
|
| ||
| Cash and cash equivalents, end of period |
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Interest paid in cash |
| $ |
|
| $ |
| ||
Income taxes paid |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited 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.
The accompanying 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, 2021, 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, 2021 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, 2021. There have been no material changes to our significant accounting policies during the nine months ended March 31, 2022, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Use of Estimates
Management makes estimates and assumptions during the preparation of our unaudited Condensed Consolidated Financial Statements that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which, in turn, could impact the amounts reported and disclosed herein.
3. Revenue
Product Revenue
We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies.
Revenue Recognition
Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments.
Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of our performance. Deferred revenue was not significant as of June 30, 2021 and March 31, 2022.
| 8 |
| Table of Contents |
Nature of Products
Revenue from the sale of optical components and assemblies is recognized upon transfer of control, including the risks and rewards of ownership, to the customer. The performance obligations for the sale of optical components and assemblies are satisfied at a point in time. Product development agreements are generally short term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. We have organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements are included in specialty products. Revenue by product group for the three and nine months ended March 31, 2022 and 2021 was as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
| PMO |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| Infrared Products |
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Specialty Products |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
4. Inventories
The components of inventories include the following:
|
| March 31, 2022 |
|
| June 30, 2021 |
| ||
| 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 $
| 9 |
| Table of Contents |
5. Property and Equipment
Property and equipment are summarized as follows:
|
| Estimated Lives (Years) |
|
| March 31, 2022 |
|
| June 30, 2021 |
| |||
| 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 |
|
|
|
|
| $ |
|
| $ |
| ||
6. Goodwill and Intangible Assets
There were no changes in the net carrying value of goodwill during the nine months ended March 31, 2022.
Identifiable intangible assets were comprised of:
|
| Useful Lives (Years) |
|
| March 31, 2021 |
|
| June 30, 2021 |
| |||
| Customer relationships |
|
|
|
| $ |
|
| $ |
| |||
| Trade secrets |
|
|
|
|
|
|
|
|
| |||
| Trademarks |
|
|
|
|
|
|
|
|
| |||
Total intangible assets |
|
|
|
|
|
|
|
|
|
| ||
| Less accumulated amortization |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Total intangible assets, net |
|
|
|
|
| $ |
|
| $ |
| ||
Future amortization of identifiable intangibles is as follows:
| Fiscal year ending: |
|
|
| |
| June 30, 2022 (remaining three months) |
| $ |
| |
| June 30, 2023 |
|
|
| |
| June 30, 2024 |
|
|
| |
| June 30, 2025 |
|
|
| |
| After June 30, 2025 |
|
|
| |
|
| $ |
| |
| 10 |
| Table of Contents |
7. Income Taxes
A summary of our total income tax expense and effective income tax rate for the three and nine months ended March 31, 2022 and 2021 is as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
(Loss) income 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. For the three and nine months ended March 31, 2022 and 2021, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), which dividend will be paid to us, as its parent company.
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 during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of March 31, 2022 and June 30, 2021, we have provided for a valuation allowance against our net deferred tax assets to reduce the net deferred tax assets to the amount we estimate is more-likely-than-not to be realized. Our net deferred tax asset consists primarily of federal and state tax credits with indefinite carryover periods.
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 subsidiaries, LightPath Optical Instrumentation (Shanghai) Co., Ltd. (“LPOI”) and LPOIZ, are governed by the Income Tax Law of the People’s Republic of China. As of March 31, 2022, LPOI and LPOIZ were subject to statutory income tax rates of
During fiscal 2020, the Company began declaring intercompany dividends to remit a portion of the historical earnings of its foreign subsidiaries to the U.S. parent company. The Company intends to reinvest a portion of the more recent earnings generated by its foreign subsidiaries; however, the Company also plans to repatriate a portion of the historical earnings of its subsidiaries. During fiscal 2020, the Company began to accrue for these taxes on the portion of historical earnings that it intends to repatriate.
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 20%; however, distribution amounts are first divided by 0.8 to arrive at the profit before tax amount, resulting in an effective tax rate of 25%. As a transitional measure, distributions of earnings prior to January 1, 2018 are not subject to tax if declared prior to December 31, 2019. ISP Latvia has declared an intercompany dividend to be paid to ISP, its U.S. parent company, for the full amount of earnings accumulated prior to January 1, 2018. Distributions of this dividend will be from earnings prior to January 1, 2018 and, therefore, will not be subject to tax. We currently do not intend to distribute any earnings generated after January 1, 2018. If, in the future, we change such intention, we will accrue distribution taxes, if any, as profits are generated.
| 11 |
| Table of Contents |
8. 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, the 2018 Stock and Incentive Compensation Plan (the “SICP”), including incentive stock options, non-qualified stock options, and restricted stock unit (“RSU”) awards. The 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.
The following table shows total stock-based compensation expense for the three and nine months ended March 31, 2022 and 2021 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Stock options |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
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 $
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 options granted vest ratably over two to four years and are generally exercisable for ten years. The assumed forfeiture rates used in calculating the fair value of RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the nine months ended March 31, 2022 and 2021. The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures. The interest rate used is the U.S. Treasury interest rate for constant maturities.
No stock options were granted during the nine months ended March 31, 2022. For stock options granted in the nine-month period ended March 31, 2021, we estimated the fair value of each stock option as of the date of grant using the following assumptions:
| Weighted-average expected volatility |
|
| % | |
| Dividend yields |
|
| % | |
| Weighted-average risk-free interest rate |
|
| % | |
| Weighted-average expected term, in years |
|
|
|
| 12 |
| Table of Contents |
Information Regarding Current Share-Based Compensation Awards
A summary of the activity for share-based compensation awards in the nine months ended March 31, 2022 is presented below:
|
| Stock Options |
|
| Restricted Stock Units (RSUs) |
| ||||||||||||||
|
|
|
|
| Weighted- |
|
| Weighted- |
|
|
|
|
| Weighted- |
| |||||
|
|
|
|
| Average |
|
| Average |
|
|
|
|
| Average |
| |||||
|
|
|
|
| Exercise |
|
| Remaining |
|
|
|
|
| Remaining |
| |||||
|
| Shares |
|
| Price |
|
| Contract |
|
| Shares |
|
| Contract |
| |||||
| June 30, 2021 |
|
|
|
| $ |
|
|
|
|
|
| 1,761,885 |
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Granted |
|
| - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
| ||
| Exercised |
|
| - |
|
| $ | - |
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| Cancelled/Forfeited |
|
| ( | ) |
| $ |
|
|
|
|
|
|
| ( | ) |
|
|
|
| |
| March 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Awards exercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| vested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Awards unexercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| unvested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March 31, 2022 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
| |||||
|
|
| 409,462 |
|
|
|
|
|
|
|
|
|
|
| 2,097,471 |
|
|
|
|
|
RSU awards vest immediately or from one to four years from the date of grant.
As of March 31, 2022, there was approximately $
| Fiscal Year Ending: |
| Stock Options |
|
| RSUs |
|
| Total |
| |||
June 30, 2022 (remaining three months) |
| $ |
|
| $ |
|
| $ |
| |||
June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
June 30, 2024 |
|
|
|
|
|
|
|
|
| |||
June 30, 2025 |
|
|
|
|
|
|
|
|
| |||
|
| $ |
|
| $ |
|
| $ |
| |||
| 13 |
| Table of Contents |
9. Earnings (Loss) Per Share
Basic earnings 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 per share is computed similarly to basic earnings 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 |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic number of shares |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
RSUs |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Diluted number of shares |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
The following potential dilutive shares were not included in the computation of diluted earnings per share of Class A common stock, as their effects would be anti-dilutive:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
| ||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
10. 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. The operating leases for facilities are non-cancelable operating leases, expiring through 2032. We 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 that option. We currently have obligations under three finance lease agreements, entered into during fiscal 2019, with terms ranging from three to five years. The 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. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. One such lease ends in November 2022 and we do not plan to renew, and the second such lease was amended in April 2021, and subsequently amended in September 2021, to extend the term to 2032 and increase the leased space from 26,000 square feet to approximately 58,500 square feet. Effective in January 2022, our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively.
As most of our 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 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 leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. 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 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
| 14 |
| Table of Contents |
We received tenant improvement allowances for each of our two leases with respect to our facility located in Orlando, Florida (the “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.
The components of lease expense were as follows:
|
| Three Months Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
| 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 leases was as follows:
|
| Classification |
| March 31, 2022 |
|
| June 30, 2021 |
| ||
| 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 |
|
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|
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| ||
|
|
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|
|
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|
|
|
Noncurrent: |
|
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|
|
|
|
|
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 $ |
Lease term and discount rate information related to leases was as follows:
Lease Term and Discount Rate |
| March 31, 2022 |
| |
| Weighted Average Remaining Lease Term (in years) |
| |||
Operating leases |
|
|
| |
Finance leases |
|
|
| |
|
|
|
|
|
| Weighted Average Discount Rate |
|
|
|
|
Operating leases |
|
| % | |
Finance leases |
|
| % | |
| 15 |
| Table of Contents |
Supplemental cash flow information:
|
| Nine Months Ended March 31, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
| 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 March 31, 2022:
| Fiscal year ending: |
| Finance Leases |
|
| Operating Leases |
| ||
June 30, 2022 (remaining three months) |
| $ |
|
| $ |
| ||
June 30, 2023 |
|
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June 30, 2024 |
|
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June 30, 2025 |
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June 30, 2026 |
|
| |
|
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| |
Thereafter |
|
| |
|
|
|
| |
| Total future minimum payments |
|
|
|
|
|
| ||
| Less imputed interest |
|
| ( | ) |
|
| ( | ) |
| Present value of lease liabilities |
| $ |
|
| $ |
| ||
11. Loans Payable
As of March 31, 2022 and June 30, 2021, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A. (“BankUnited”). On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to maximum amount of $2,000,000 (the “BankUnited Revolving Line”), (ii) a term loan in the amount of up to $
On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “First Amendment”). The First Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed.
On September 9, 2021, we entered into a letter agreement with BankUnited (the “Letter Agreement”). The Letter Agreement: (i) reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021; (ii) modified the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited; (iii) terminated the Guidance Line; and (iv) required approval from BankUnited prior to our being able to draw upon the Revolving Line, subject to our compliance with the fixed charge coverage ratio for the quarters ending September 30, 2021 and December 31, 2021. The Letter Agreement also granted us a waiver of default arising prior to the Letter Agreement for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021. Based on the waiver, we were no longer in default of the Amended Loan Agreement as of June 30, 2021. Finally, in connection with the Letter Agreement, we paid BankUnited a fee equal to $
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On November 5, 2021, we entered into a letter agreement with BankUnited (the “Second Letter Agreement”). In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forebearance, or other resolution of the Amended Loan Agreement (as defined below), which resolution would occur on or before December 31, 2021. On December 20, 2021, we entered into the Second Amendment to the Loan Agreement dated February 26, 2019 (the “Second Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Second Amendment, the parties agreed to the following terms, among others: (i) a maturity date of April 15, 2023 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an increased monthly payment amount of $
On May 11, 2022, we entered into the Third Amendment to the Loan Agreement dated February 26, 2019 (the “Third Amendment”; and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i)
We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. For additional information, see Note 14, Liquidity.
BankUnited Revolving Line
Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances under the BankUnited Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed $
BankUnited Term Loan
Pursuant to the Amended Loan Agreement, BankUnited advanced us $
Security and Guarantees
Our obligations under the Amended Loan Agreement are collateralized by a first priority security interest (subject to permitted liens) in all of our assets and the assets of our U.S. subsidiaries, GelTech, Inc. (“GelTech”), and ISP, pursuant to a Security Agreement granted by GelTech, ISP, and us in favor of BankUnited. Our equity interests in, and the assets of, our foreign subsidiaries are excluded from the security interest. In addition, all of our subsidiaries have guaranteed our obligations under the Amended Loan Agreement and related documents, pursuant to Guaranty Agreements executed by us and our subsidiaries in favor of BankUnited.
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General Terms
The Amended Loan Agreement contains customary covenants, including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing our business or permitting a change in control; (iii) limitations on additional indebtedness or encumbrances; (iv) restrictions on distributions; and (v) limitations on certain investments. The Amended Loan Agreement also contains certain financial covenants, including obligations to maintain a
We may prepay any or all of the BankUnited Loans in whole or in part at any time, without penalty or premium. Late payments are subject to a late fee equal to five percent (
Financing costs incurred related to the BankUnited Loans were recorded as a discount on debt and will be amortized over the term. Amortization of approximately $
In December 2020, ISP Latvia entered into an equipment loan with a third party (the “Equipment Loan”), which party is also a significant customer, and which the Equipment Loan is subordinate to the BankUnited Loans, and collateralized by certain equipment. The initial advance under the Equipment Loan was 225,000 EUR (or USD $
Future maturities of loans payable are as follows:
|
| Bank United Term Loan |
|
| Equipment Loan |
|
| Unamortized Debt Costs |
|
| Total |
| ||||
| Fiscal year ending: |
|
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|
|
| ||||
June 30, 2022 (remaining three months) |
| $ |
|
| $ |
|
|
| ( | ) |
| $ |
| |||
June 30, 2023 |
|
|
|
|
|
|
|
| ( | ) |
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| |||
June 30, 2024 |
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June 30, 2025 |
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After June 30, 2025 |
|
| |
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| ||
| Total payments |
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| |||
| Less current portion |
|
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|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
| Non-current portion |
|
|
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|
|
|
|
|
|
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| $ |
| |
12. 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 $
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Our cash and cash equivalents totaled approximately $
Assets and net assets in foreign countries are as follows:
China | Latvia | |||||||
March 31, 2022 | June 30, 2021 | March 31, 2022 | June 30, 2021 | |||||
| Assets | $ | $ | $ | $ | ||||
| Net assets | $ | $ | $ | $ | ||||
13. 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 have incurred various expenses associated with its investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which included legal, consulting and other transitional management fees, totaled $
We also identified a further liability in the amount of $
Knowing that employee transitions in international subsidiaries can lead to lengthy legal proceedings that can interrupt the subsidiary’s ability to operate, compounded by the fact that our officers could not travel to China to oversee the transitions because of the travel restrictions imposed by COVID-19, we chose to enter into severance agreements with certain of the employees at the time of termination. Pursuant to the severance agreements, LPOIZ and LPOI agreed to pay such employees severance of approximately $
We have transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on the ability of those subsidiaries to operate. Management does not expect any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. We expect to incur additional legal fees and consulting expenses in future periods as all legal options and remedies are pursued; however, such future fees are expected to be at lower levels than have been incurred to date.
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Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the nine-month period ended March 31, 2022, which management anticipates may continue for the next few quarters. The Company has not experienced, nor does management anticipate, any material adverse impact on LPOIZ’s or LPOI’s production and supply of products to its other subsidiaries for their customers.
COVID-19
Our business, results of operations financial condition, cash flows, and the stock price of our Class A common stock can be adversely affected by pandemics, epidemics, or other public health emergencies, such as the recent outbreak of COVID-19, which spread from China to countries across the world, including the United States.
The duration of the COVID-19 pandemic continues to impact global economic conditions, even as restrictions have lifted in many places throughout the world. Currently, China continues to experience rolling COVID-19 lockdowns in efforts to mitigate the spread of COVID-19. These lockdowns are resulting in global supply chain issues. To date, our facilities have not been directly impacted by these lockdowns; however, many of our customers located in China have delayed receipt of orders while the customers are closed for business. Even though these customers have not cancelled any orders with us, the delayed receipt of orders has impacted our revenue and we expect it to continue to impact our revenue in future periods while China has these rolling lockdowns. Additionally, some areas have imposed travel restrictions, which may impact some aspects of our operations that depend on travel, such as recruitment of senior positions, and travel of service providers to maintain our production equipment. Management is actively monitoring this situation and any impact on our financial condition, liquidity, and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2022 or beyond.
Impact of Russian-Ukraine Conflict
In February 2022, Russian military forces invaded Ukraine. This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of the Russian-Ukraine conflict on our financial condition, results of operations or cash flows into the foreseeable future.
14. 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 the BankUnited Term Loan. As discussed in in Note 11, Loans Payable, we have commenced discussions with other lenders, and we anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. We filed a shelf registration statement, effective March 1, 2022, which is available for equity offerings. 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, greater than
If these efforts are not successful, we may need to raise additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.
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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, 2021, 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.
Potential Impact of COVID-19
In March 2020, the World Health Organization (“WHO”) declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. Thereafter, COVID-19 spread throughout world, including the United States. Throughout the COVID-19 pandemic, our manufacturing facilities in China, Latvia, and the United States have continued to operate substantially as normal. Some of our United States- and Latvia-based non-manufacturing employees are continuing to work remotely, either on a full or partial basis. Where possible, we have staggered shifts to reduce contact within shifts and between different shifts, and have minimized interaction and physical proximity between employees working within the same building. Those measures are continuously adjusted in each of our locations, according to local conditions and guidelines.
The duration of the COVID-19 pandemic continues to impact global economic conditions, even as restrictions have lifted in many places throughout the world. Currently, China continues to experience rolling COVID-19 lockdowns in efforts to mitigate the spread of COVID-19. These lockdowns are resulting in global supply chain issues. To date, our facilities have not been directly impacted by these lockdowns; however, many of our customers located in China have delayed receipt of orders while the customers are closed for business. Even though these customers have not cancelled any orders with us, the delayed receipt of orders has impacted our revenue and we expect it to continue to impact our revenue in future periods while China has these rolling lockdowns. Additionally, some areas, such as China, have imposed travel restrictions, which may impact some aspects of our operations that depend on travel, such as recruitment of senior positions, and travel of service providers to maintain our production equipment. Management is actively monitoring this situation and any impact on our financial condition, liquidity, and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2022 and, possibly, beyond.
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.
Our capabilities include precision molded optics, thermal imaging optics, custom designed optics, and the design and manufacturing of optical assemblies and subsystems. These capabilities allow us to manufacture optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared aspheric lenses and other optical materials used to produce products that manipulate light. We design, develop, manufacture and integrate optical components and assemblies utilizing advanced optical manufacturing processes. Product verticals range from consumer (e.g., cameras, cell phones, gaming, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications. As a result, we market our products across a wide variety of customer groups, including laser systems manufacturers, laser OEMs, infrared-imaging systems vendors, industrial laser tool manufacturers, telecommunications equipment manufacturers, medical instrumentation manufacturers and industrial measurement equipment manufacturers, government defense agencies, and research institutions worldwide.
Subsidiaries
In November 2005, we formed LPOI, a wholly-owned subsidiary, located in Jiading, People’s Republic of China. LPOI provides 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.
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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. Historically, ISP’s facility located in Irvington, New York functioned as its global headquarters for operations, while also providing manufacturing capabilities, optical coatings, and optical and mechanical design, assembly, and testing. In June 2019, we completed the relocation of this facility to our existing Orlando Facility and our facility located in Riga, Latvia (the “Riga 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 Riga Facility functions as its manufacturing facility.
For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2021.
Product Groups
Our business is organized in three product groups: PMO, infrared products and specialty products. These product groups are supported by our major product capabilities: molded optics, thermal imaging optics, and custom designed optics. Beginning in late 2019, we implemented a product management function, with a product manager for each of our major product capabilities: molded optics, thermal imaging optics and custom designed optics. Product management is principally a portfolio management process that analyzes products within the product capability areas as defined above. This function has begun to facilitate choosing investment priorities to help strategically align our competencies with strategic industry revenue opportunities. Over the longer term, this function will also help ensure successful product life cycle management.
Our PMO product group consists of visible precision molded optics with varying applications. Our infrared product group is comprised of infrared optics, both molded and diamond-turned, and thermal imaging assemblies. This product group also includes both conventional and CNC ground and polished lenses. Between these two product groups, we have the capability to manufacture lenses from very small (with diameters of sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2000 millimeters. In addition, both product groups offer both catalog and custom designed optics.
Our specialty product group is comprised of value-added products, such as optical subsystems, assemblies, and collimators, and non-recurring engineering (“NRE”) products, consisting of those products we develop pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications for our existing products to fit their particular needs or specifications. The timing and extent of any such product development is outside of our control.
Growth Strategy
Historically, we operated with a focus on optical component manufacturing, and specifically on our leadership position as a precision molded lens manufacturer for visual light applications. While still positioned as a component provider, we expanded our addressable market with the acquisition of ISP, a manufacturer of infrared optical components, in December 2016. Collectively, our operations lacked synergies, maintained a high cost structure, and lacked a defined path for capitalizing on the industry’s evolution and growth opportunities.
In March 2020, our Board of Directors (our “Board”) recruited Mr. Sam Rubin to assume the role of Chief Executive Officer and to develop and implement a new strategy going forward. In the fall of 2020, Mr. Rubin led our Board and the leadership team in collaborative discussions with the purpose of defining a new comprehensive strategy for our business. The collaborative strategic planning process included leaders from across the organization, detailed dialogs with customers, vendors and partners, and an in-depth analysis of the environment we are in, changes and trends in and around the use of photonics, and an analysis of our capabilities, strengths and weaknesses. Throughout the process, we focused on developing a strategy that creates a unique and long-lasting value to our customers, and utilizes our unique capabilities and differentiators, both existing capabilities and differentiators, as well as new capabilities we acquire and develop organically.
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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 become their partner for the optical engine of their system. In our view, as the use of photonics evolves, so do the needs evolve. The 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. We believe such a partnership starts with us, as the supplier. We have in-house domain expertise in photonics, knowledge and experience in the most advanced technologies and the necessary manufacturing techniques. We can then further develop these partnerships by working closely with the customer throughout their design process, designing an optical solution that is tailored to their needs, often times using unique technologies we own, and supplying the customer with the corresponding complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we both currently own, such as optical molding, fabrication, and system design along with other technologies we may acquire or develop in the future to create tailored solutions for our customers, which often are based on proprietary manufacturing technologies.
Providing the 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, without needing to develop subject matter expertise in optics. By providing the bridge into the optical solution world, we partner with our customers on a long-term basis, create value to our customers, and capture that value through the long-term supply relationships we develop.
Further information about our strategic direction can be found in our recent Annual Report on Form 10-K for the fiscal year ended June 30, 2021.
Results of Operations
Revenue
Three months ended March 31, 2022, compared to three months ended March 31, 2021
Revenue for the third quarter of fiscal 2022 was approximately $8.3 million, a decrease of approximately $2.4 million, or 22%, as compared to approximately $10.7 million in the same period of the prior fiscal year. Revenue generated by infrared products was approximately $3.7 million in the third quarter of fiscal 2022, a decrease of approximately $2.7 million, or 42%, as compared to approximately $6.5 million in the same period of the prior fiscal year. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers in the industrial market, for temperature sensing applications, for which demand peaked during the third quarter of fiscal 2021. The decrease is also partially due to lower revenue from a large annual contract which was renewed in the second quarter of fiscal 2022. Revenue generated by PMO products was approximately $4.0 million for the third quarter of fiscal 2022, an increase of approximately $128,000, or 3%, as compared to approximately $3.9 million in the same period of the prior fiscal year. The increase is driven by sales through catalog and distribution channels, as well as increases in sales to customers in the industrial market. Sales of PMO products in China have improved sequentially each quarter of fiscal 2022, driven in part by other telecommunications customers, as well as increased sales to customers in the industrial and commercial industries. This improvement partially offset decreases in sales of PMO products to a large customer beginning in the third quarter of fiscal 2021. Revenue generated by our specialty products was approximately $547,000 in the third quarter of fiscal 2022, an increase of approximately $213,000, or 64%, compared to $334,000 in the same period of the prior fiscal year. This increase is primarily due to NRE projects for customers in the industrial and defense industries during the third quarter of fiscal 2022.
Nine months ended March 31, 2022, compared to nine months ended March 31, 2021
Revenue for the first nine months of fiscal 2022 was approximately $26.7 million, a decrease of approximately $3.5 million, or 12%, as compared to approximately $30.1 million in the same period of the prior fiscal year. Revenue generated by infrared products was approximately $13.7 million in the first nine months of fiscal 2022, a decrease of approximately $2.3 million, or 14%, as compared to approximately $16.0 million in the same period of the prior fiscal year. The decrease in revenue is primarily driven by a decrease in sales to customers in the industrial market. Revenue generated by PMO products was approximately $11.6 million for the first nine months of fiscal 2022, a decrease of approximately $1.3 million, or 10%, as compared to approximately $12.9 million in the same period of the prior fiscal year. As previously discussed, PMO sales for the first nine months of fiscal 2022 demonstrate sequential recovery as compared to the fourth quarter of fiscal 2021. The decreases in telecommunications and other domestic sales in China were partially offset by an increase in sales through catalog and distribution channels, as well as increases in sales to customers in the industrial and commercial industries. Although sales of PMO products in China have improved sequentially each quarter of fiscal 2022, these sales are still lower as compared to the first three quarters of fiscal 2021. Revenue generated by our specialty products was approximately $1.4 million in the first nine months of fiscal 2022, an increase of approximately $158,000, or 13%, compared to $1.2 million in the same period of the prior fiscal year. This increase is primarily driven by an increase in NRE projects for customers in the commercial and defense industries.
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Cost of Sales and Gross Margin
Three months ended March 31, 2022, compared to three months ended March 31, 2021
Gross margin in the third quarter of fiscal 2022 was approximately $3.0 million, a decrease of 22%, as compared to approximately $3.9 million in the same period of the prior fiscal year. Total cost of sales was approximately $5.3 million for the third quarter of fiscal 2022, compared to approximately $6.8 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 37% for the third quarter of fiscal 2022, compared to 36% for the same period of the prior fiscal year. The increase in gross margin as a percentage of revenue is primarily due to the mix of products sold in each respective period. PMO products, which typically have higher margin than infrared products, comprised 49% of revenue for the third quarter of fiscal 2022, as compared to 36% of revenue for the third quarter of fiscal 2021, whereas infrared products comprised 45% of revenue for the third quarter of fiscal 2022, as compared to 60% of revenue for the third quarter of fiscal 2021. This favorable change in mix resulted in slightly higher gross margin as a percentage of revenue, despite the significantly lower revenue level in the third quarter of fiscal 2022, as compared to the third quarter of fiscal 2021.
Nine months ended March 31, 2022, compared to nine months ended March 31, 2021
Gross margin in the first nine months of fiscal 2022 was approximately $9.0 million, a decrease of 21%, as compared to approximately $11.4 million in the same period of the prior fiscal year. Total cost of sales was approximately $17.6 million for the first nine months of fiscal 2022, compared to approximately $18.7 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 34% for the first nine months of fiscal 2022, compared to 38% for the same period of the prior fiscal year. Although the product mix is similar for PMO and infrared products for the first nine months of fiscal 2022, as compared to the first nine months of fiscal 2021, the gross margin as a percentage of revenue is unfavorably impacted by the 12% decrease in revenue, which resulted in under-utilized capacity in some areas. Infrared product margins also reflect increased costs associated with the completion of the coating department in our Riga Facility, which will improve over time as that facility works through the qualification stages and begins to produce at volume.
Selling, General and Administrative
Three months ended March 31, 2022, compared to three months ended March 31, 2021
Selling, general and administrative (“SG&A”) costs were approximately $2.6 million for the third quarter of fiscal 2022, a decrease of approximately $187,000, or 7%, as compared to approximately $2.8 million in the same period of the prior fiscal year. The decrease in SG&A costs is primarily due to a decrease of approximately $149,000 of expenses associated with the previously described events that occurred at our Chinese subsidiaries, including legal and consulting fees. Please refer to Note 13, Contingencies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information. The remaining decrease in SG&A costs, as compared to the same period of the prior fiscal year, is due to decreases in non-recurring personnel-related costs incurred in the third quarter of the prior fiscal year.
Nine months ended March 31, 2022, compared to nine months ended March 31, 2021
For the first nine months of fiscal 2022, SG&A costs were approximately $8.4 million, an increase of approximately $426,000, or 5%, as compared to approximately $8.0 million in the same period of the prior fiscal year. The increase in SG&A costs is primarily due to an increase of approximately $380,000 of expenses incurred associated with the previously described events that occurred at our Chinese subsidiaries, including legal and consulting fees, as compared to the same period of the prior fiscal year. Please refer to Note 13, Contingencies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information. In addition, SG&A costs for the first nine months of fiscal 2022 include certain VAT and related taxes owed by one of our Chinese subsidiaries from prior years, which was identified and settled during the first nine months of fiscal 2022. These increases were partially offset by the absence of approximately $400,000 of non-recurring additional compensation to our former Chief Executive Officer which was included in SG&A for the second quarter of fiscal 2021, and previously disclosed in the Current Report on Form 8-K filed with the SEC on November 18, 2020.
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| Table of Contents |
New Product Development
New product development costs were approximately $590,000 in the third quarter of fiscal 2022, a decrease of approximately $50,000, or 8%, as compared to the same period of the prior fiscal year. For the first nine months of fiscal 2022, new product development costs were approximately $1.6 million, a decrease of $51,000 as compared to the same period of the prior fiscal year. The decreases are primarily due to timing of certain development project expenses, for which costs were higher in the prior fiscal year periods.
Other Income (Expense)
Interest expense, net, was approximately $55,000 for the third quarter of fiscal 2022, as compared to $53,000 for the same period of the prior fiscal year. For the first nine months of fiscal 2022, interest expense, net, was approximately $151,000, as compared to $166,000 for the same period of the prior fiscal year. The decrease in interest expense is due to lower interest rates and a reduction in our total debt of 18% as of the quarter ended March 31, 2022, as compared to the quarter ended March 31, 2021.
Other income, net, was approximately $180,000 for the third quarter of fiscal 2022, as compared to other expense, net, of $29,000 for the same period of the prior fiscal year. For the first nine months of fiscal 2022, other income, net was approximately $140,000, as compared to other expense, net, of $23,000 for the same period of the prior fiscal year. Other expense, net, for the third quarter and the first nine months of fiscal 2022 includes a benefit of $210,000, which represents the reversal of a potential liability related to the actions of the terminated employees of our subsidiaries in China, as previously discussed. This potential liability was accrued as of June 30, 2021, pending further investigation, and it was determined in the third quarter of fiscal 2022 that our Chinese subsidiary would not be responsible for this amount.
The remainder of other income and expenses are primarily comprised of net gains 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. During the third quarter of fiscal 2022, we incurred net foreign currency transaction losses of approximately $67,000, compared to $17,000 for the same period of the prior fiscal year. During the first nine months of fiscal 2022, we incurred net foreign currency transaction losses of $107,000, as compared to $38,000 for the same period of the prior fiscal year.
Income Taxes
During the third quarter of fiscal 2022, income tax expense was approximately $163,000, compared to approximately $308,000 for the same period of the prior fiscal year. During the first nine months of fiscal 2022, income tax expense was approximately $328,000, as compared to $984,000 in the same period of the prior fiscal year. 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. The decrease is due to lower taxable income in that jurisdiction.
Net Loss
Net loss for the third quarter of fiscal 2022 was approximately $495,000, or $0.02 basic and diluted loss per share, compared to $223,000, or $0.01 basic and diluted loss per share, for the third quarter of fiscal 2021. The decrease in net income for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year, was primarily attributable to lower revenue and gross margin, partially offset by lower operating expenses. The resulting decrease in operating income was partially offset by the aforementioned other income item of $210,000, and a decrease in the provision for income taxes of approximately $145,000, as compared to the same period of the prior fiscal year.
Net loss for the first nine months of fiscal 2022 was approximately $2.2 million, or $0.08 basic and diluted loss per share, compared to $272,000, or $0.01 basic and diluted loss per share, for the first nine months of fiscal 2021. The decrease in net income for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year, was primarily attributable to lower revenue and gross margin and increased SG&A expenses, including expenses incurred related to the previously described events that occurred in our Chinese subsidiaries. The resulting decrease in operating income was partially offset by the aforementioned other income item of $210,000, and a decrease in the provision for income taxes of approximately $655,000, as compared to the same period of the prior fiscal year.
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| Table of Contents |
Weighted-average common shares outstanding were 27,033,578, basic and diluted, in the third quarter of fiscal 2022, compared to 26,366,651, basic and diluted, in the third quarter of fiscal 2021. Weighted-average common shares outstanding were 27,011,943, basic and diluted, in the first nine months of fiscal 2022, compared to 26,153,839, basic and diluted, in the first nine months of fiscal 2021. The increase in the weighted-average basic common shares was due to the issuance of shares of Class A common stock (i) under the 2014 ESPP, (ii) upon the exercises of stock options, and (iii) underlying vested RSUs.
Liquidity and Capital Resources
As of March 31, 2022, we had working capital of approximately $11.0 million and total cash and cash equivalents of approximately $5.2 million, of which, greater 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. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested. However, during fiscal 2020, we began declaring 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. During fiscal 2020, we began to 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. We repatriated approximately $2.2 million and $3.0 million from LPOIZ during the nine-month periods ended March 21, 2022 and 2021, respectively. As of March 31, 2022, LPOIZ had approximately $4.8 million available for repatriation and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of March 31, 2022.
Loans payable consists of the BankUnited Term Loan and the BankUnited Revolving Line, both pursuant to the Amended Loan Agreement, and the subordinated Equipment Loan. As of March 31, 2022, the outstanding balance on the BankUnited Term Loan was approximately $4.1 million, and there were no borrowings outstanding on the BankUnited Revolving Line. The outstanding balance on the Equipment Loan was approximately $400,000 as of March 31, 2022.
The Amended Loan Agreement and the Letter Agreement includes certain customary covenants. As of March 31, 2022, we obtained a waiver of compliance for both the fixed charge coverage ratio and total leverage ratio, and we were in compliance with all other covenants, as amended. For additional information, see Note 11, Loans Payable, to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
In February 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 our shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. We have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.
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 the BankUnited Term Loan. We anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. 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. We will also continue efforts to keep costs under control as we seek renewed sales growth. Our efforts are directed toward generating positive cash flow and profitability. If these efforts are not successful, we may need to raise additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.
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Cash Flows – Operating:
Cash provided by operations was approximately $352,000 for the first nine months of fiscal 2022, compared to approximately $3.1 million for the same period of the prior fiscal year. The decrease in cash flows from operations during the first nine months of fiscal 2022 is due to the decrease in net income and a decrease in accounts payable and accrued liabilities, partially offset by a reduction in inventory. The decrease in accounts payable and accrued liabilities was primarily due to the previously described events that occurred at our Chinese subsidiaries, for which certain expenses were accrued as of June 30, 2021, many of which were paid during the first nine months of fiscal 2022, as well as payment of certain bonuses earned by our executive officers and other employees during fiscal 2021 and the first installment payment of payroll taxes deferred in fiscal 2020 under the Coronavirus Aid, Relief, and Economic Security Act.
Cash Flows – Investing:
During the first nine months of fiscal 2021, we expended approximately $1.5 million in investments in capital equipment, compared to approximately $2.7 million in the same period of the prior fiscal year. The majority of our capital expenditures during the first nine months of fiscal 2022 were related to the continued expansion of our infrared coating capacity as well as increasing our lens diamond turning capacity to meet current and forecasted demand. Overall, we anticipate that the level of capital expenditures during fiscal 2022 will be less than fiscal 2021, however, the total amount expended will depend on opportunities and circumstances.
Cash Flows – Financings:
Net cash used in financing activities was approximately $425,000 for the first nine months of fiscal 2022, compared to approximately $313,000 in the same period of the prior fiscal year. Cash used in financing activities for the first nine months of fiscal 2022 reflects approximately $682,000 in principal payments on our loans and finance leases and loan costs of approximately $61,000 associated with the restructure of the BankUnited Term Loan, offset by proceeds of approximately $267,000 from the Equipment Loan and approximately $52,000 in proceeds from the sale of Class A common stock under the 2014 ESPP. Cash used in financing activities for the first nine months of fiscal 2021 reflects approximately $761,000 in principal payments on our loans and capital leases, offset by proceeds of approximately $275,000 from the Equipment Loan, and approximately $173,000 in proceeds from the exercise of stock options and the sale of Class A common stock under the 2014 ESPP.
Contractual Obligations and Commitments
As of March 31, 2022, our principal commitments consisted of obligations under operating and finance leases, and debt agreements. No material changes occurred during the first nine months of fiscal 2022 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, 2021.
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 nine months ended March 31, 2022 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, 2021.
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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 designs that we call “engineered solutions.” This is followed by “sampling” 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, as compared to the turns business, which is unpredictable and uneven. This annuity revenue stream can also generate low-cost, high-volume type orders. 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 (for example, in the case of molded optics, this may be volumes over one million pieces per year) they begin to focus on reducing costs – which often leads them to turn to larger or overseas producers, even if sacrificing quality; and |
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|
|
| · | 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 merchant market, a market that we believe is underserved in this area of service offering. 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 a critical component from foreign merchant production 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, 2021.
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 dollars and units by product group; and |
|
|
|
| · | Other key indicators. |
These indicators are also used to determine tactical operating actions and changes and are discussed in more detail below. Management is evaluating these key indicators as we transition to our new strategic plan, and is implementing certain changes and updates as further described below.
Sales Backlog
We believe our sales growth has been and continues to be our best 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.
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Our total backlog at March 31, 2022 was approximately $19.7 million, an increase of 1%, as compared to $19.5 million as of March 31, 2021. Compared to the end of fiscal 2021, our total backlog decreased by 8% during the first nine months of fiscal 2022. Backlog change rates for the last five fiscal quarters are:
| Quarter |
| Total Backlog |
|
| Change From Prior Year End |
|
| Change From Prior Quarter End |
| |||
| Q3 2021 |
| $ | 19,498 |
|
|
| -11 | % |
|
| -18 | % |
| Q4 2021 |
| $ | 21,329 |
|
|
| -3 | % |
|
| 9 | % |
| Q1 2022 |
| $ | 19,265 |
|
|
| -10 | % |
|
| -10 | % |
| Q2 2022 |
| $ | 21,929 |
|
|
| 3 | % |
|
| 14 | % |
| Q3 2022 |
| $ | 19,678 |
|
|
| -8 | % |
|
| -10 | % |
The decrease in backlog during the first nine months of fiscal 2022 was largely due to timing of the renewal of a large annual contract for infrared products. Consistent with prior years, we received the renewal of this contract in the fiscal second quarter, and began shipping against this contract in the fiscal third quarter. The timing of other contract renewals may not be as consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and the total backlog is subsequently drawn down as shipments are made against these orders. Our annual and multi-year contracts are expected to renew 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 new BD6 material. With the global supply of germanium currently sourced from Russia and China, recent global events are generating renewed interest in BD6 as an alternative to germanium. We expect to maintain moderate growth in our visible PMO product group by continuing to diversify and offer new applications, with a cost competitive structure; however, we believe that the terminations of certain of our management employees in our China subsidiaries, LPOIZ and LPOI, and transition to new management personnel, has adversely impacted the domestic sales in China of these subsidiaries over the past two quarters, which could continue for a few more quarters, and which would affect potential growth in our PMO lens business for that period. Our former employees, including management personnel, maintained relationships with certain of our customers in China and we expect that until our new sales and management personnel establish relationships with these customers, of which there can be no assurance, domestic sales in China may be adversely impacted. Although the recovery is taking longer than initially expected, we have begun to recapture some customers. Our sales and management team in China was enhanced in October 2021 with two key new hires, and we are beginning to see more progress in this area.
Revenue Dollars and Units by Product Group
The following table sets forth revenue dollars and units for our three product groups for the three and nine-month periods ended March 31, 2022 and 2021:
|
| (unaudited) |
|
|
|
|
| |||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended March 31, |
|
| Quarter |
|
| Year-to-date |
| ||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| % Change |
| ||||||
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
| PMO |
| $ | 4,033,218 |
|
| $ | 3,904,857 |
|
| $ | 11,608,665 |
|
| $ | 12,940,919 |
|
|
| 3 | % |
|
| -10 | % |
| Infrared Products |
|
| 3,725,684 |
|
|
| 6,462,527 |
|
|
| 13,688,770 |
|
|
| 15,995,133 |
|
|
| -42 | % |
|
| -14 | % |
| Specialty Products |
|
| 546,510 |
|
|
| 333,978 |
|
|
| 1,354,494 |
|
|
| 1,196,453 |
|
|
| 64 | % |
|
| 13 | % |
Total revenue |
| $ | 8,305,412 |
|
| $ | 10,701,362 |
|
| $ | 26,651,929 |
|
| $ | 30,132,505 |
|
|
| -22 | % |
|
| -12 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| PMO |
|
| 586,528 |
|
|
| 680,825 |
|
|
| 1,600,836 |
|
|
| 2,816,370 |
|
|
| -14 | % |
|
| -43 | % |
| Infrared Products |
|
| 89,476 |
|
|
| 174,811 |
|
|
| 337,773 |
|
|
| 457,436 |
|
|
| -49 | % |
|
| -26 | % |
| Specialty Products |
|
| 5,075 |
|
|
| 6,742 |
|
|
| 14,869 |
|
|
| 24,079 |
|
|
| -25 | % |
|
| -38 | % |
Total units |
|
| 681,079 |
|
|
| 862,378 |
|
|
| 1,953,478 |
|
|
| 3,297,885 |
|
|
| -21 | % |
|
| -41 | % |
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| Table of Contents |
Three months ended March 31, 2022
Our revenue decreased by approximately $2.4 million, for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year, primarily due to a decrease in infrared product sales, partially offset by an increase in PMO product sales.
Revenue generated by the PMO product group during the third quarter of fiscal 2022 was $4.0 million, an increase of approximately $128,000, or 3%, as compared to the same period of the prior fiscal year. The increase is driven by sales through catalog and distribution channels, as well as increases in sales to customers in the industrial market, partially offset by a reduction in orders from a key customer in the telecommunications market, due to a decrease in that customer’s market share. Sales of PMO units decreased by 14%, as compared to the same period of the prior fiscal year, and average selling prices increased by 20%. The volume decrease was largely driven by a lower mix of telecommunications products, which typically have lower average selling prices. The unit volume for telecommunications products decreased by approximately 44% for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year.
Revenue generated by the infrared product group during the third quarter of fiscal 2022 was $3.7 million, a decrease of approximately $2.7 million, or 42%, as compared to the same period of the prior fiscal year. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers in the industrial market for temperature sensing applications, for which demand peaked during the third quarter of fiscal 2021. During the third quarter of fiscal 2022, sales of infrared units decreased by 49%, as compared to the prior year period. The decrease in units is due primarily due to the mix of products shipped, as the prior year period included more molded infrared lenses which are lower in volume and higher in price than the larger diamond-turned lenses.
In the third quarter of fiscal 2022, our specialty products revenue increased by $213,000, or 64%, as compared to the same period of the prior fiscal year, primarily due to NRE projects for customers in the industrial and defense industries during the third quarter of fiscal 2022.
Nine months ended March 31, 2022
Our revenue decreased by approximately $3.5 million for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year, due to decreases in both PMO and infrared product sales.
Revenue generated by the PMO product group during the first nine months of fiscal 2022 was $11.6 million, a decrease of approximately $1.3 million, or 10%, as compared to the same period of the prior fiscal year. The decrease in revenue is primarily attributed to a reduction in orders from a key customer in the telecommunications market, due to a decrease in that customer’s market share. This decrease was partially offset by an increase in sales through our catalog and distribution channels, as well as increases in sales to customers in the industrial and commercial industries. Sales of PMO units decreased by 43%, as compared to the same period of the prior fiscal year, and average selling prices increased by 58%. The volume decrease was largely driven by a lower mix of telecommunications products, which typically have lower average selling prices. The unit volume for telecommunications products decreased by approximately 60% for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year.
Revenue generated by the infrared product group during the first nine months of fiscal 2022 was $13.7 million, a decrease of approximately $2.3 million, or 14%, as compared to the same period of the prior fiscal year. The decrease in revenue is primarily driven by sales to customers in the industrial market. During the first nine months of fiscal 2022, sales of infrared units decreased by 26%, as compared to the prior year period. The decrease in units is due primarily due to the mix of products shipped, as the prior year period included more molded infrared lenses which are lower in volume and higher in price than the larger diamond-turned lenses. Industrial applications, firefighting cameras, and other public safety applications continue to be the primary drivers of demand for infrared products, including thermal imaging assemblies. During fiscal 2020 and 2021, we saw an increase in demand for medical and temperature sensing applications, such as fever detection. Demand for temperature sensing applications were accelerated by COVID-19, and although the demand has leveled off since the initial spike, it remains elevated.
In the first nine months of fiscal 2022, our specialty products revenue increased by $158,000, or 13%, as compared to the same period of the prior fiscal year, primarily driven by an increase in NRE projects for customers in the commercial and defense industries.
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, units of shippable output by major product line, 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. These indicators can be used to calculate such other related indicators as fully-yielded unit production per-shift, which varies by the particular product and our state of automation in production of that product at any given time. Higher unit production per shift means lower unit cost and, therefore, improved margins or improved ability to compete, where desirable, for price sensitive customer applications. 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.”
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| 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 and nine months ended March 31, 2022 and 2021:
|
| (unaudited) |
| |||||||||||||
|
| Quarter Ended March 31, |
|
| Nine Months Ended March 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
| Net loss |
| $ | (495,003 | ) |
| $ | (222,564 | ) |
| $ | (2,182,391 | ) |
| $ | (272,041 | ) |
| Depreciation and amortization |
|
| 924,219 |
|
|
| 917,308 |
|
|
| 2,763,620 |
|
|
| 2,608,472 |
|
| Income tax provision |
|
| 163,059 |
|
|
| 307,834 |
|
|
| 328,328 |
|
|
| 983,586 |
|
| Interest expense |
|
| 54,984 |
|
|
| 52,795 |
|
|
| 151,064 |
|
|
| 166,491 |
|
| EBITDA |
| $ | 647,259 |
|
| $ | 1,055,373 |
|
| $ | 1,060,621 |
|
| $ | 3,486,508 |
|
| % of revenue |
|
| 8 | % |
|
| 10 | % |
|
| 4 | % |
|
| 12 | % |
Our EBITDA for the three months ended March 31, 2022 was approximately $647,000, compared to earnings of $1.1 million for the same period of the prior fiscal year. The decrease in EBITDA in the third quarter of fiscal 2022 was primarily attributable to lower revenue and gross margin, partially offset by the aforementioned other income item of $210,000.
Our EBITDA for the nine months ended March 31, 2022 was approximately $1.1 million, compared to $3.5 million for the same period of the prior fiscal year. The decrease in EBITDA in the first nine months of fiscal 2022 was primarily attributable to lower revenue and gross margin and increased SG&A expenses, including expenses incurred related to the previously described events that occurred in our Chinese subsidiaries.
| 31 |
| Table of Contents |
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 March 31, 2022, 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 March 31, 2022 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 quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 32 |
| Table of Contents |
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
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, 2021, 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 quarter ended March 31, 2022, 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, 2021, except as follows:
Russia’s ongoing conflict with Ukraine has disrupted the global economy. Our business, financial condition, and results of operations could be adversely affected by continued disruption and global consequences stemming from the conflict. Although we have no direct operations in Russia or Ukraine, the broader consequences of this conflict have negatively affected, and are expected to continue to negatively affect, the global economy, including the imposition of sanctions, cyber incidents or information technology failures, supply disruptions, increases in inflation rates, changes to foreign currency exchange rates, constraints, volatility, or disruption in financial markets, the availability of raw materials, supplies, freight, and labor, and uncertainty about economic and global stability. Historically, we have sourced Germanium from suppliers located in Russia and China. Going forward, we intend to source Germanium from suppliers located in China to the extent the Russian-Ukraine conflict continues. Though we do not anticipate any challenges from sourcing Germanium solely from suppliers in China, we cannot provide any assurances that we will be able to obtain adequate supplies in the future or, if adequate supplies are available, that the timing or costs of obtaining such raw materials will be acceptable to us. Further, some of our major customers in Europe may be directly impacted by the Russian-Ukraine conflict, which could impact the amount and frequency of orders they place with us, as well as impact the timing and ability to pay for products ordered from us. Any material impacts to our customers could have a material adverse effect on our business and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
On May 11, 2022, we entered into the Third Amendment, which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on each of the respective dates and has not been refinanced with another lender). Further, in accordance with the Third Amendment, we paid BankUnited a fee equal to $25,000, and will pay for all attorney fees, costs, and expenses incurred by BankUnited in connection with the Third Amendment.
The foregoing description of the Third Amendment is a summary only and is qualified in its entirety by reference to the complete text of the Third Amendment filed herewith as Exhibit 10.3
| 33 |
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Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
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| 34 |
| Table of Contents |
101.INS | Inline XBRL Instance Document | * |
|
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | * |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * |
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101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | * |
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104 | Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101 | * |
*filed herewith
| 35 |
| 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: May 12, 2022 | By: | /s/ Shmuel Rubin | |
|
| Shmuel Rubin | |
| President and Chief Executive Officer | |||
| Company Name | |||
| Date: May 12, 2022 | By: | /s/ Albert Miranda. | |
|
| Albert Miranda | |
| Chief Financial Officer | |||
| 36 |
New York • Chicago • San Diego • Aliso Viejo • Austin • Minneapolis • Taipei • São Paulo
www.mzgroup.us
INVESTOR RELATIONS CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (“Agreement”) is made this 12th day of April 2022 (the “Effective Date), by and between LightPath Technologies, Inc. (hereinafter referred to as the “Company” or “LPTH”) and MZHCI, LLC, a MZ Group Company (hereinafter referred collectively as the “Consultant” or “MZHCI”).
EXPLANATORY STATEMENT
The Consultant affirms that it has successfully demonstrated financial and public relations consulting expertise, and possesses valuable knowledge, and experience in the areas of business finance and corporate investor/public relations. The Company believes that the Consultant’s knowledge, expertise, and experience would benefit the Company, and the Company desires to retain the Consultant to perform consulting services for the Company under this Agreement.
NOW, THEREFORE, in consideration of their mutual agreements and covenants contained herein, and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in further consideration of the affixation by the parties of their respective signatures below, the parties agree as follows:
Consulting Services
1.1 MZHCI agrees that commencing on the Effective Date, the Consultant will reasonably be available during regular business hours to advise, counsel and inform designated officers and employees of the Company as it relates to services customarily rendered by investor relations consultants within the capital investor and public relations industry more fully described herein.
1.2 MZHCI shall render services to the Company as an independent contractor, and not as an employee. All services rendered by MZHCI on behalf of the Company shall be performed to the best of MZHCI’s ability, in compliance with all laws and in concert with the overall business plan of the Company and the goals and objectives of the Company’s management and Board of Directors, including articulating LPTH’s investment story and highlights; building and maintaining relationships with supporters of the stock, including institutional investors and sell-side analysts; increasing the Company’s participation in investment conferences focused on small-cap companies; achieving a fair market value for the Company’s stock; and significantly increasing the Company’s exposure in the financial market.
1.3 MZHCI agrees: (i) not to disseminate any press release until it has been approved for dissemination by the Company and (ii) to ensure that the Company has filed or has arranged to file the required disclosure on Form 8-K with the Securities and Exchange Commission prior to the dissemination of any and all press releases.
| Page 1 | MZHCI Initial_________ | COMPANY Initial_________ |
I. Scope of Services, Programs and Deliverables
MZHCI will develop, implement, and maintain an ongoing stock market support system for LPTH with the general objective of expanding awareness in LPTH among stockbrokers, analysts, small-cap portfolio/fund managers, market makers, and the appropriate financial & trade publications. All services to be provided by MZHCI shall comply with all applicable laws and shall be performed at the request and direction of the Company.
1. INVESTOR RELATONS
|
| A. | Complete IR Audit (including full review of the investor and shareholder database, IR website and all public documentation) |
|
| B. | Understand the financials and all operating metrics of LPTH in detail, facilitating interactions with new and current investors. |
|
| C. | Senior Account Manager and single point of contact for all investors and streamlining of all communication and IR functionality. |
|
| D. | Develop and Update FAQ |
|
| E. | Create 2-Page Corporate Profile |
|
| F. | PowerPoint Presentation Updates |
|
| G. | Review and provide suggestions for IR website |
|
| H. | Quarterly Conference Call Script and Preparation |
|
| I. | Press Release Input and Dissemination |
|
| J. | Facilitate incoming and outgoing investor/shareholder calls. Screen all parties before allowing communication with management. |
|
| K. | Shareholder Database Management |
|
| L. | Roadshow Management Coaching |
|
| M. | Roadshows with Detailed Follow-Up |
|
| N. | Targeted Sell-Side Research and Financial Media Introductions |
|
| O. | Investor Conference Invites |
2. INVESTMENT AWARENESS AND OUTREACH
A. Consultant will make introductions to investors worldwide utilizing a proprietary, robust database:
|
| i. | Equity Brokers |
|
| ii. | Analysts (both generalists and industry specialists) |
|
| iii. | Portfolio Managers/Institutions |
|
| iv. | High Net Worth Investors & Family Offices |
|
| v. | Market Makers |
|
| vi. | Financial Publication |
| Page 2 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
3. FINANCIAL MEDIA RELATIONS
Targeted media relations offer an important segment to the corporate story. MZHCI will target media opportunities that highlight LPTH’s strategy, growth objectives, board of directors, developments and milestones related to its business. Services include:
|
| A. | Targeted media programs |
|
| B. | Strategic counsel |
|
| C. | Release drafts and media targets |
|
| D. | Q&A to support significant corporate developments |
|
| E. | Feedback after interviews |
Trade Magazines & Journals - Investors, business partners, customers, and business reporters utilize the industry press as a valued source of information. MZHCI will raise awareness for LPTH’s business and technologies, and news events related to growth performance, partnership deals, and significant product advances in qualified trade magazines and journals.
Business & Financial Media – MZHCI will identify the optimal news, corporate, and industry trends that will provide angles in the business/financial media and then actively pursue those opportunities with the appropriate reporter(s).
4. PUBLIC MARKET INSIGHT
MZHCI will counsel and educate the Company’s senior management on the life cycle of the financial markets and most importantly how the Company is impacted directly and indirectly by different variables. The Team at MZHCI leverages its collective expertise on all aspects of strategic financial, corporate, and crisis communications gained through representing over 200 public companies. MZHCI will help the Company set and manage expectations while relaying valuation metrics, perceptions, and methodologies utilized by investment professionals. This consulting aspect of MZHCI’s business is extremely valuable for management to optimize key opportunities and to avoid pitfalls.
As part of its ongoing commitment and partnership with the Company, MZHCI will educate the Company’s senior management on the importance of establishing conservative expectations and how various corporate actions may be perceived and impact the public market.
ONGOING – These services will be provided ongoing with a summary included in each semi-annual update
| A. | Respond to all investor requests and calls in a timely manner to facilitate the distribution of corporate information. Focus on educating shareholders, with the premise that an informed investor will become a longer-term investor. |
| B. | Continually update the database to ensure that all press releases are e-mailed to all interested professionals. This includes the input of notes to keep track of all investor correspondence and reminder calls to all investor prior to earnings conference calls. |
| C. | Provide consulting services to LPTH management on the public markets. |
| D. | Provide progress reports to senior management and evaluate achievements with a quarterly summary of activities and a detailed report every six months. |
Many of the above items will occur simultaneously but certain items will have chronological priority over others. As LPTH grows, MZHCI will recommend changes to the agenda that complement its growth. As the Company continues to execute its strategic plan by winning new customers and expanding its base of business, MZHCI will target an expanded universe of institutional investors. At each stage of growth, the appropriate approach to the market will be incorporated into the agenda for optimal results.
| Page 3 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
Assuming that management’s efforts are leading ultimately to success and great profitability, the end results of this financial communication and awareness campaign should be:
| A. | An increase in the number of financial professionals (including brokers, institutions, and analysts) and individual investors well educated and knowledgeable about LPTH: including senior management, the company’s products, and its current financial condition & growth opportunities. |
| B. | An increase in the number of articles printed in both trade and financial publications. |
| C. | An increase in the liquidity of the common stock. |
| D. | An increase in LPTH market capitalization coupled with a broader, more diverse shareholder base. |
| E. | Suitable and better access to the capital markets, which will facilitate future acquisitions and working capital needs. |
II. Agenda
|
| Timeline |
|
|
|
|
| FIRST 30 DAYS |
|
| A. | Spend adequate time with management to understand the business/growth plan, financial forecasts, capital expenditure, and cash flow projections. | |
|
| B. | Create a two-page Corporate Profile, which clearly articulates LPTH’s current business and financial position, as well as its strategy for future growth. This is an important marketing piece for investors to quickly learn about the Company. | |
|
| C. | Review and update PowerPoint presentation. MZHCI will utilize proprietary research, feedback from conversations and meetings to incorporate and improve the Investor PowerPoint and message delivery. UPDATED AT LEAST ONE TIME PER QUARTER. | |
|
| D. | Assist and provide input for all corporate press releases including both creation and ongoing revisions. We will assist by providing additional fact finding and other market research which will help the context and delivery of the message. | |
|
| E. | Counsel senior management on all aspects of the capital markets and most importantly how LPTH is impacted directly and indirectly by different economic variables. The goal is to enable management to optimize key opportunities and to avoid pitfalls, both of which have long-term positive implications. | |
|
| F. | Host Virtual Road Show for management with goal of having at least 100-150 new investment professionals joining. Alternate schedules between these events and traditional Road Shows to continue growing a pipeline of new and interested investors. | |
|
| G. | Develop initial target list while seeding and confirming meetings for upcoming Road Shows. Practice and refine presentation with management team. | |
|
|
| i. | Target brokers, fund managers, Buy and Sell Side Analysts, and high net worth investors which follow companies with a similar profile to LPTH. |
|
| H. |
| Provide a detailed description of each contact prior to each meeting. During the meetings and/or conference calls a member of MZHCI will be available to facilitate the correspondence and assist with due diligence. Management will be provided with a summary of feedback including MZHCI’s suggestions for improvements on both the context and delivery of the Company’s story. |
| Page 4 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
DAYS 30-60
|
| A. | Target brokerage firms who hold conferences which would be applicable for LPTH. Establish a goal of having management present in at least 3 new conferences. These would be non-paid for and have high institutional attendance, in addition to high net worth investors. Additionally, MZHCI will seek opportunities to present to brokers directly at firms for both teach-ins and small events. |
|
| B. | Formalize a Press Release calendar (queue) for coming three months. Create and release accordingly to the market and simultaneously to current and prospective investors inboxes. |
|
| C. | Include LPTH where applicable in interviews with all financial online sites. Review and create media target list. Begin to make introductions and follow-up. |
|
| D. | Include LPTH in all presentations where MZHCI representatives will speak on LPTH’s industry topics. |
|
| E. | Continue outreach and road shows. |
DAYS 60-90
|
| A. | Formalize and continually update the database to ensure that all press releases are e-mailed to all interested professionals. |
|
| B. | Target newsletter editors and publishers for favorable recommendations. Focus on Business Publications for appropriate stories on LPTH roll-out, unique model, and key competitive advantages to investors and industry players. Follow-up accordingly with all interested parties with a goal of receiving a new piece of media coverage at least 1x per quarter. |
|
| C. | Schedule and book out Road Shows. |
III. Term
This Agreement becomes effective on the Effective Date and shall remain effective for a period of twelve (12) months. At the six (6) month anniversary of the Effective Date, either party may terminate this Agreement with thirty (30) days’ prior written notice to the other. If not terminated at the six (6) month anniversary of the Effective Date, this Agreement shall continue for the remainder of the twelve (12) month term and shall automatically renew every twelve (12) months thereafter unless either party delivers thirty (30) days’ written notice of termination prior to the end of the then-current term to the other party.
| Page 5 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
IV. Compensation
| Cash |
| $5,400 USD per month payable on the 1st day of each month. |
|
|
|
|
| Equities
|
| The Company will issue a non-qualified stock option to purchase 125,000 shares of LightPath Technologies, Inc. Class A common stock within ten (10) days of the signing of this Agreement. The stock options will have a cashless exercise provision and an exercise price equal one hundred fifteen percent (115%) of the closing price of the Class A common stock on the trading day prior to the Execution Date. The stock options will expire five (5) years from the issuance date. The shares of Class A common stock underlying the stock options shall vest one-twelfth (1/12th) on a monthly basis, with the first one-twelfth (1/12th) vesting on the issuance date.
At each fiscal quarter end (i.e., March 31st, June 30th, September 30th, December 31st), the Company will issue LightPath Technologies, Inc. restricted stock units (“RSUs”), with a fair market value equal to $10,800 USD, to MZHCI. The RSUs will be issued to MZHCI within ten (10) days of the fiscal quarter end and will vest immediately. The fair market value of the RSUs will be based on the closing price of the Class A common stock on the last trading day of the Company’s fiscal quarter end.
The shares of Class A common stock underlying the RSUs and stock options will bear a restrictive legend when issued. MZHCI agrees that it will not sell, assign, pledge, give, transfer, or otherwise dispose of the shares of Class A common stock, or make any offer or attempt to do any of the foregoing, except pursuant to an effective registration statement under, and in compliance with the requirements of, the Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and in compliance with any applicable state and federal securities laws.
All RSUs and options shall be deemed earned and non-forfeitable upon vesting, as described herein. Accordingly, the Company specifically agrees that the options and RSUs earned as described herein will be issued pursuant to the terms hereof (without delay). Upon exercise of the options issued hereunder in accordance with the terms thereof, and payment of the exercise price therefor, including by cashless exercise as permitted therein, the shares issued upon such exercise shall be fully paid and non-forfeitable. The Company shall disclose its entry into this Agreement in the Company’s 10-Q for the quarter ended March 31, 2022. |
|
|
|
|
| Expense Reimbursement |
| Only expenses that would ordinarily be incurred by the Company will be billed back on a monthly basis. Applicable reimbursements would include creation, printing and postage for investor packages, fees for news wire services. Any packages requiring additional photocopying/ printing will be billed back to the Company at cost (with no mark-up). Any extraordinary items, such as broker lunch presentations, air travel, hotel, ground transportation or media campaigns, etc. shall be paid by the Company, only with Company authorization prior to incurring any expenses. |
| Page 6 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
V. Insider Information
MZHCI acknowledges that pursuant to this Agreement, it may receive confidential insider information about the Company and/or its subsidiaries. MZHCI agrees not to disclose such information to anyone, including, but not limited to, MZHCI’s family, friends, business associates, or affiliates, until such information has been approved for release by the Company and is released to the general public. MZHCI shall not use such confidential insider information to arrange for or solicit to buy or sell shares of the Company either directly or indirectly through any person, until such information has been approved for release by the Company and is released to the general public. MZHCI agrees to adopt, implement and enforce appropriate policies to ensure compliance with insider trading laws and this provision by its owners, officers, directors, employees, and agents. MZHCI agrees to indemnify and hold the Company harmless from any damages, costs, expenses, fines, penalties, or liabilities incurred or suffered by the Company as a result of any breach of this provision or any violation of insider trading laws by MZHCI or any of its owners, officers, directors, employees, or agents.
VI. Prior Restriction
MZHCI represents to the Company that it is not subject to, or bound by, any agreement which sets forth or contains any provision, the existence or enforcement of which would in any way restrict or hinder MZHCI from performing the services on behalf of the Company that MZHCI is herein agreeing to perform.
VII. Assignment
This Agreement is personal to MZHCI and may not be assigned in any way by MZHCI without the prior written consent of the Company. Subject to the foregoing, the rights and obligations under this Agreement shall inure to the benefit of, and shall be binding upon, the heirs, legatees, successors, and permitted assigns of MZHCI and upon the successors and assigns of the Company.
VIII. Confidentiality
Except as required by law or court order, MZHCI will keep confidential any trade secrets or confidential or proprietary information of the Company which are now known to MZHCI or which hereinafter may become known to MZHCI and MZHCI shall not at any time directly or indirectly disclose or permit to be disclosed any such information to any person, firm, or corporation or other entity, or use the same in any way other than in connection with the business of the Company and in any case only with prior written permission of LPTH. For purposes of this Agreement, “trade secrets or confidential or proprietary information” includes information unique to or about the Company including but not limited to its business and that is not known or generally available to the public. It is understood and agreed that MZHCI’s obligations pursuant to this section survive termination of this Agreement.
MZHCI shall return to the Company all information and property of the Company promptly upon termination or expiration of this Agreement. This includes but is not limited to, stockholder lists, investor packages, annual reports, annual budgets, and any other documentation that was generated by or for the Company during the term of this Agreement.
| Page 7 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
IX. Default
| 1. | In the event MZHCI commits any material breach of any provision of this Agreement, as determined by the Company in good faith, the Company may, by injunctive action, compel MZHCI to comply with, or restrain MZHCI from violating, such provision, and, in addition, and not in the alternative, the Company shall be entitled to declare MZHCI in default hereunder and to terminate this Agreement and any further payments hereunder. |
| 2. | Since MZHCI must at all times rely upon the accuracy and completeness of information supplied to it by the Company’s officers, directors, agents, and employees, the Company agrees to indemnify, hold harmless, and defend MZHCI, its officers, agents, and employees at the Company’s expense, against any proceeding or suit which may arise out of and/or be due to any material misrepresentation in such information supplied by the Company to MZHCI (or any material omission by the Company that caused such supplied information to be materially misleading). |
| 3. | MZHCI agrees to indemnify, hold harmless and defend the Company, its officers, directors, employees and agents from and against any and all claims, actions, proceedings, losses, liabilities, costs and expenses (including without limitation reasonable attorney’s fees) incurred by any of them in connection with, as a result of, and or due to any actions or inactions or misstatements by MZHCI, its officers, agents, or employees regarding or on behalf of the Company whether as a result of rendering services under this Agreement or otherwise. |
X. Severability and Reformation
If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future law, invalid or unenforceable provision were never a part hereof, and the remaining provisions shall remain in full force and shall not be affected by the illegal, invalid, or unenforceable provision, or by its severance; but in any such event this Agreement shall be construed to give effect to the severed provision to the extent legally permissible.
XI. Notices
Any notices required by this Agreement shall (i) be made in writing and delivered to the party to whom it is addressed by hand delivery, by certified mail, return receipt requested, with adequate postage prepaid, or by courier delivery service (including major overnight delivery companies such as Federal Express and UPS), (ii) be deemed given when received, and (iii) in the case of the Company, be mailed to its principal office at LightPath Technologies, Inc., 2603 Challenger Tech Ct. Suite 100, Orlando, Florida 32826; and in the case of MZHCI, be mailed to MZHCI, LLC, 5055 Avenida Encinas, Suite 130, Carlsbad, CA 92008.
XII. Miscellaneous
| 1. | This Agreement may not be amended, except by a written instrument signed and delivered by each of the parties hereto. |
| 2. | This Agreement constitutes the entire understanding between the parties hereto with respect to the subject matter hereof, and all other agreements relating to the subject matter hereof are hereby superseded. |
| 3. | This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, USA, without regard to the principles of conflicts of law thereof. With respect to any suit, action, or proceeding relating to this Agreement, the parties irrevocably submit to the jurisdiction of the federal or state courts located in Orange County, Florida, which submission shall be exclusive unless none of such courts has lawful jurisdiction over such proceedings. |
| 4. | This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Signatures delivered by email delivery of a “.pdf” format data file, shall be given the same legal force and effect as original signatures. |
| Page 8 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
In Witness Whereof, the parties have executed this Investor Relations Consulting Agreement as of the day and year first above written.
AGREED:
| MZHCI, LLC | LightPath Technologies, Inc. | ||||
|
|
|
|
|
|
|
| By: | /s/ Ted Haberfield |
| By: | /s/ Sam Rubin | |
|
| Ted Haberfield, | ||||
|
| Chairman & President | President & CEO | |||
|
|
|
|
|
|
|
| Date: | 4/12/2022 |
| Date: | 4/12/2022 |
|
| Page 9 of 9 | MZHCI Initial:_________ | COMPANY Initial:_________ |
EXHIBIT 10.3
THIRD AMENDMENT
TO
LOAN AGREEMENT
Dated February 26, 2019
Between
LIGHTPATH TECHNOLOGIES, INC.,
a Delaware corporation
and
BANKUNITED, N.A.,
a national banking association
Dated as of May 11, 2022
THIRD AMENDMENT TO
LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (“Third Amendment”) is made as of May, 2022, by and between LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation, (“Borrower”), and BANKUNITED, N.A., a national banking association (“Lender”).
RECITALS
A. Borrower and Lender are parties to a Loan Agreement dated as of February 26, 2019 as amended by First Amendment to Loan Agreement dated as of May 6, 2019, but effective as of February 26, 2019 (the “First Amendment”), and by Second Amendment to Loan Agreement dated as of December 20, 2021 (the “Second Amendment”) (collectively the “Loan Agreement”).
B. Borrower and Lender have elected to further modify the terms and conditions of the Loan Agreement as more particularly set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Recitals; Defined Terms. The Recitals set forth above are true and correct and are incorporated herein by reference. Unless otherwise defined, all initially capitalized terms in this Third Amendment shall be as defined in the Loan Agreement.
2. Extended Maturity Date; Fee. The Maturity Date of Term Loan Facility is extended from April 15, 2023 to April 15, 2024.
3. Extension and Exit Fees. As a condition of such extension Borrower shall pay an extension fee of two percent (2%) of the then existing principal balance if the Term Loan Facility remains outstanding as of September 30, 2022, an extension fee of one percent (1%) if the Term Loan Facility remains outstanding as of December 31, 2022, an extension fee of one percent (1%) if the Term Loan Facility remains outstanding as of March 31, 2023, and an exit fee of four percent (4%) of the Term Loan Facility remains outstanding on April 15, 2024.
4. Financial Covenant Waivers. Lender waives compliance with (but not the reporting of) the Financial Covenants set forth in Section 6.8 of the Loan Agreement until December 31, 2022.
5. Modification Fees and Expenses. Concurrently with the execution of this Third Amendment Borrower shall pay Lender a Twenty Five Thousand Dollar ($25,000.00) modification fee, together with all fees, costs and expenses incurred by Lender in connection herewith, including, but not limited to, Lender’s legal fees and costs, third party appraisals and costs of searches and due diligence expenses. Lender is authorized to debit Borrower’s operating account for such fees and expenses.
6. Ratification of Guaranties. As a material inducement to Lender to enter into this Third Amendment, each Guarantor hereby agrees as follows:
(a) Guarantor acknowledges the continuing validity and effectiveness of the Guaranty Agreement and any other agreements, documents, or instruments securing or otherwise relating to the Guaranties previously executed and delivered by Guarantor (including without limitation any environmental indemnity agreement);
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(b) Guarantor hereby joins in this Third Amendment for the purpose of consenting to: (i) this Third Amendment and all other matters, terms and conditions stated in this Third Amendment, and any other agreement, instrument or document executed simultaneously herewith;
(c) No offsets, defenses or counterclaims exist with respect to Guarantor’s obligations under the Guaranty Agreement;
(d) Guarantor, to the fullest extent permitted by law, hereby waives any claim or other right which Guarantor might now have or hereafter may acquire against Borrower, which arises from the existence or performance of Guarantors’ liability or other obligations under each Guaranty Agreement which Guarantors have executed in favor of Lender, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, and any right to participate in any claim or remedy of Lender against Borrower or any of the Collateral or any other property securing the Loan, whether or not such claim, remedy, or right arises in equity, or under contract, statute, or common law; and
(e) The execution, delivery, and performance by Guarantor of this Third Amendment and all documents and agreements of Guarantor relating hereto (i) are within the duly authorized power of Guarantor, (ii) have been duly authorized by all requisite action, and (iii) will not violate any provision of law, any order of any court or other agency of government, or the terms and provisions of any court or other agency of government, or the terms and provisions of any agreement with any third party or any instrument under which Guarantor is organized and constituted.
7. Affirmation of Loan Documents. Borrower further hereby affirms each of its covenants and obligations under the Loan Documents and acknowledges that Lender has fully complied with each of its covenants and obligations under the Loan Documents. Borrower acknowledges that it has no defenses, set offs or counterclaims to its obligations under any of the Loan Documents.
8. Events of Default. Failure to comply in any respect with any term, condition or undertaking contained in this Third Amendment shall constitute an event of default by Borrower under this Third Amendment and each of the Loan Documents, as applicable.
9. Release.
(a) As a material inducement to Lender to enter into this Third Amendment, each of Borrower and Guarantors (each an “Obligor”) hereby releases and discharges Lender and each of its agents, employees, directors, officers, attorneys, accountants, affiliates, representatives, receivers, trustees, subsidiaries, predecessors, successors and assigns (collectively, the “Released Parties”) from all claims, damages, losses, demands, liabilities, obligations, actions and causes of action whatsoever (whether arising in contract or in tort, and whether at law or in equity), which each Obligor may now have or claim to have against the Released Parties, whether known or unknown, matured or contingent, liquidated or unliquidated, arising from, in connection with, or in any way concerning or relating to (i) the Loan (ii) the Loan Documents (iii) this Third Amendment, or (iv) any action or inaction of any person or entity released hereunder with respect to the Loan, the Loan Documents, and this Third Amendment (collectively “Claims”), except to the extent resulting from acts first arising after the execution and delivery of this Third Amendment and which are caused solely by Lender’s gross negligence or willful misconduct.
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(b) In connection herewith, each Obligor hereby acknowledge that factual matters now unknown to it may have given or may hereafter give rise to Claims which are presently unknown, unanticipated and unsuspected, and it further agrees, represents and warrants that this release has been negotiated and agreed upon in light of that realization and that it nevertheless hereby intends to release, discharge and acquit the Released Parties from any such unknown Claims.
(c) Each Obligor represents and warrants that it has not heretofore assigned or transferred, or purported to assign or to transfer, to any person any Claim released hereunder or any portion thereof or interest therein, and each Obligor agrees to indemnify, defend and hold the Released Parties harmless from and against any and all claims based on or arising out of any such assignment or transfer or purported assignment or transfer.
10. Waiver of Jury Trial. EACH OBLIGOR AND LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT, POWER, OR REMEDY UNDER OR IN CONNECTION WITH THIS THIRD AMENDMENT OR ANY LOAN DOCUMENT OR UNDER OR IN CONNECTION WITH ANY AMENDMENT, INSTRUMENT, DOCUMENT, OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH THIS THIRD AMENDMENT OR ANY LOAN DOCUMENT, AND AGREE THAT ANY SUCH ACTION SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE TERMS AND PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS THIRD AMENDMENT.
Except as amended hereby the Loan Agreement remains in full force and effect.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF the parties have executed this Third Amendment as of the date first written above.
| BORROWER: | |||
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| LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation |
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| By: | /s/ Sam Rubin | ||
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| Sam Rubin, President | |
| LENDER: | |||
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| BANKUNITED, N.A., a national banking association |
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| By: | /s/ Monica Antongeorgi |
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| Monica Antongeorgi, SVP |
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| The following Guarantors acknowledge and consent to this Third Amendment as of the date first written above. |
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| GUARANTORS: |
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| GELTECH INC., a Delaware corporation |
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| By: | /s/ Sam Rubin |
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| Sam Rubin, President |
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| ISP OPTICS CORPORATION, a New York corporation |
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| By: | /s/ Sam Rubin |
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| Sam Rubin, President |
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| LIGHTPATH OPTICAL INSTRUMENTATION (SHANGHAI) CO., LTD., a company formed under the law of the People’s Republic of China |
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| By: | /s/ Sam Rubin |
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| LIGHTPATH OPTICAL INSTRUMENTATION (ZHENJIANG) CO., LTD., a company formed under the law of the People’s Republic of China |
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| By: | /s/ Sam Rubin |
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| ISP OPTICS LATVIA, SIA, a company formed under the law of the Republic of Latvia |
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| By: | /s/ Sam Rubin |
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EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Shmuel Rubin, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of LightPath Technologies, Inc.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 12, 2022 |
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| /s/ Shmuel Rubin | |||
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| Shmuel Rubin | |
| President and Chief Executive Officer |
EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Albert Miranda, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of LightPath Technologies, Inc.; | |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
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| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: | |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): | |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: May 12, 2022 |
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| /s/ Albert Miranda | |||
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| Albert Miranda | |
| Chief Financial Officer |
EXHIBIT 32.1
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of LightPath Technologies, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
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| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 12, 2022 | |||
| /s/ Shmuel Rubin | |||
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| Shmuel Rubin | |
| President and Chief Executive Officer | |||
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LightPath Technologies, Inc. and will be retained by LightPath Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of LightPath Technologies, Inc. (the “Company”) does hereby certify, to the best of such officer’s knowledge, that:
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| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: May 12, 2022 | |||
| /s/ Albert Miranda | |||
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| Albert Miranda | |
| Chief Financial Officer |
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LightPath Technologies, Inc. and will be retained by LightPath Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.