Lightpath Technologies Inc 10-Q for FY2022 Q1
Lightpath Technologies Inc (LPTH)
About this 10-Q
Lightpath Technologies Inc filed this 10-Q on November 10, 2021, covering the quarter ended September 30, 2021 (FY2022 Q1).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $9.1M
- down 4.3% from $9.51M a year earlier
- Net loss
- $632.1K
- compared with net income of $97.07K a year earlier
- Diluted EPS
- -$0.02
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
THE SECURITIES EXCHANGE ACT OF 1934
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 |
|
| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
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
Item |
|
| Page |
|
| 3 |
| ||
|
|
| ||
| 4 |
| ||
|
| 4 |
| |
| Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) |
| 5 |
|
| Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity |
| 6 |
|
|
| 7 |
| |
| Notes to Unaudited Condensed Consolidated Financial Statements |
| 8 |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 20 |
| |
|
| 22 |
| |
|
| 24 |
| |
|
| 25 |
| |
|
| 25 |
| |
|
| 25 |
| |
|
| 28 |
| |
| 29 |
| ||
|
|
|
|
|
|
|
| ||
| 30 |
| ||
| 30 |
| ||
| 30 |
| ||
| 30 |
| ||
| 30 |
| ||
| 30 |
| ||
| 31 |
| ||
|
|
|
|
|
| 33 |
| ||
| 2 |
| Table of Contents |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (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; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; 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) | ||||||||
|
| September 30, |
|
| June 30, |
| ||
|
| 2021 |
|
| 2021 |
| ||
Assets | ||||||||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ |
|
| $ |
| ||
Trade accounts receivable, net of allowance of $ |
|
|
|
|
|
| ||
Inventories, net |
|
|
|
|
|
| ||
Other receivables |
|
|
|
|
|
| ||
Prepaid expenses and other assets |
|
|
|
|
|
| ||
Total current assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
| ||
Operating lease right-of-use assets |
|
|
|
|
|
| ||
Intangible assets, net |
|
|
|
|
|
| ||
Goodwill |
|
|
|
|
|
| ||
Deferred tax assets, net |
|
|
|
|
|
| ||
Other assets |
|
|
|
|
|
| ||
Total assets |
| $ |
|
| $ |
| ||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
| $ |
|
| $ |
| ||
Accrued liabilities |
|
|
|
|
|
| ||
Accrued payroll and benefits |
|
|
|
|
|
| ||
Operating lease liabilities, current |
|
|
|
|
|
| ||
Loans payable, current portion |
|
|
|
|
|
| ||
Finance lease obligation, current portion |
|
|
|
|
|
| ||
Total current liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Finance lease obligation, less current portion |
|
|
|
|
|
| ||
Operating lease liabilities, noncurrent |
|
|
|
|
|
| ||
Loans payable, less current portion |
|
|
|
|
|
| ||
Total liabilities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock: Series D, $ |
|
|
|
|
|
| ||
Common stock: Class A, $ |
|
|
|
|
|
| ||
Additional paid-in capital |
|
|
|
|
|
| ||
Accumulated other comprehensive income |
|
|
|
|
|
| ||
Accumulated deficit |
|
| ( | ) |
|
| ( | ) |
Total stockholders’ equity |
|
|
|
|
|
| ||
Total liabilities and stockholders’ equity |
| $ |
|
| $ |
| ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||||
(unaudited) | ||||||||
|
|
|
|
|
|
| ||
|
| Three Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Revenue, net |
| $ |
|
| $ |
| ||
Cost of sales |
|
|
|
|
|
| ||
Gross margin |
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
|
|
|
| ||
New product development |
|
|
|
|
|
| ||
Amortization of intangibles |
|
|
|
|
|
| ||
Loss (gain) on disposal of property and equipment |
|
|
|
|
| ( | ) | |
Total operating expenses |
|
|
|
|
|
| ||
Operating income (loss) |
|
| ( | ) |
|
|
| |
Other income (expense): |
|
|
|
|
|
|
|
|
Interest expense, net |
|
| ( | ) |
|
| ( | ) |
Other income (expense), net |
|
| ( | ) |
|
| ( | ) |
Total other income (expense), net |
|
| ( | ) |
|
| ( | ) |
Income (loss) before income taxes |
|
| ( | ) |
|
|
| |
Income tax provision |
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( | ) |
| $ |
| |
Foreign currency translation adjustment |
|
| ( | ) |
|
|
| |
Comprehensive income (loss) |
| $ | ( | ) |
| $ |
| |
Earnings (loss) per common share (basic) |
| $ | ( | ) |
| $ |
| |
Number of shares used in per share calculation (basic) |
|
|
|
|
|
| ||
Earnings (loss) per common share (diluted) |
| $ | ( | ) |
| $ |
| |
Number of shares used in per share calculation (diluted) |
|
|
|
|
|
| ||
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) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||
|
| Class A |
|
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| ||||||
|
| Common Stock |
|
|
|
|
| Additional Paid-in |
|
| Other Comphrehensive |
|
| Accumulated |
|
| Total Stockholders’ |
| ||||||
|
| Shares |
|
| Amount |
|
| Capital |
|
| Income |
|
| Deficit |
|
| Equity |
| ||||||
Balances at June 30, 2021 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation on stock options & RSUs |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustment |
|
| — |
|
|
|
|
|
|
|
|
| ( | ) |
|
|
|
|
| ( | ) | |||
Net loss |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
|
| ( | ) | |||
Balances at September 30, 2021 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2020 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
Issuance of common stock for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Stock Purchase Plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Exercise of stock options, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Stock-based compensation on stock options & RSUs |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency translation adjustment |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Net income |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balances at September 30, 2020 |
|
|
|
| $ |
|
| $ |
|
| $ |
|
| $ | ( | ) |
| $ |
| |||||
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) | ||||||||
|
| Three Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net (loss) income |
| $ | ( | ) |
| $ |
| |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
| ||
Interest from amortization of debt costs |
|
| 4,643 |
|
|
|
| |
Gain on disposal of property and equipment |
|
| — |
|
|
| ( | ) |
Stock-based compensation on stock options & RSUs, net |
|
|
|
|
|
| ||
Provision for doubtful accounts receivable |
|
|
|
|
|
| ||
Change in operating lease liabilities |
|
| ( | ) |
|
| ( | ) |
Inventory write-offs to allowance |
|
|
|
|
|
| ||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Trade accounts receivable |
|
| ( | ) |
|
| ( | ) |
Other receivables |
|
|
|
|
|
| ||
Inventories |
|
| ( | ) |
|
| ( | ) |
Prepaid expenses and other assets |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| ( | ) |
|
|
| |
Net cash (used in) provided by operating activities |
|
| ( | ) |
|
|
| |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| ( | ) |
|
| ( | ) |
Net cash used in investing activities |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
| ||
Proceeds from sale of common stock from Employee Stock Purchase Plan |
|
|
|
|
|
| ||
Borrowings on loans payable |
|
|
|
|
|
| ||
Payments on loans payable |
|
| ( | ) |
|
| ( | ) |
Repayment of finance lease obligations |
|
| ( | ) |
|
| ( | ) |
Net cash provided by (used in) financing activities |
|
|
|
|
| ( | ) | |
Effect of exchange rate on cash and cash equivalents |
|
| ( | ) |
|
|
| |
Change in cash and cash equivalents |
|
| (2,797,713 | ) |
|
| (801 | ) |
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 three months ended September 30, 2021, 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 September 30, 2021.
| 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 months ended September 30, 2021 and 2020 was as follows:
|
| Three Months Ended |
| |||||
|
| 2021 |
|
| 2020 |
| ||
PMO |
| $ |
|
| $ |
| ||
Infrared Products |
|
|
|
|
|
| ||
Specialty Products |
|
|
|
|
|
| ||
Total revenue |
| $ |
|
| $ |
| ||
4. Inventories
The components of inventories include the following:
|
| September 30, 2021 |
|
| 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) |
|
| September 30, 2021 |
|
| 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 three months ended September 30, 2021.
Identifiable intangible assets were comprised of:
|
| Useful Lives (Years) |
| September 30, 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 nine 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 months ended September 30, 2021 and 2020 is as follows:
|
| Three Months Ended |
| |||||
|
| 2021 |
|
| 2020 |
| ||
(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 months ended September 30, 2021 and 2020, 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 September 30, 2021 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 September 30, 2021, 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 months ended September 30, 2021 and 2020 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:
|
| Three Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
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 three months ended September 30, 2021 and 2020. 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 or RSUs were granted during the three-month periods ended September 30, 2021 and 2020.
| 12 |
| Table of Contents |
Information Regarding Current Share-Based Compensation Awards
A summary of the activity for share-based compensation awards in the three months ended September 30, 2021 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 | $ | |||||||||||||||||||
| Granted | - | $ | - | |||||||||||||||||
| Exercised | - | $ | - | |||||||||||||||||
| Cancelled/Forfeited | ( | ) | $ | ( | ) | |||||||||||||||
| September 30, 2021 | $ |
|
|
|
|
|
|
| ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards exercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
| — |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards unexercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unvested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
| |||||
|
|
| 424,227 |
|
|
|
|
|
|
|
|
|
|
| 1,756,351 |
|
|
|
|
|
RSU awards vest immediately or from two to four years from the date of grant.
As of September 30, 2021, there was approximately $
Fiscal Year Ending: |
| Stock Options |
|
| RSUs |
|
| Total |
| |||
June 30, 2022 (remaining nine months) |
| $ |
|
| $ |
|
| $ |
| |||
June 30, 2023 |
|
|
|
|
|
|
|
|
| |||
June 30, 2024 |
|
|
|
|
|
|
|
|
| |||
June 30, 2025 |
|
|
|
|
|
|
|
|
| |||
|
| $ |
|
| $ |
|
| $ | 963,138 |
| ||
| 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 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
| ||
Net income (loss) |
| $ | ( | ) |
| $ |
| |
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic number of shares |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Options to purchase common stock |
|
| - |
|
|
|
| |
RSUs |
|
| - |
|
|
|
| |
Diluted number of shares |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Earnings (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 |
| |||||
|
| 2021 |
|
| 2020 |
| ||
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
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.
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 September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
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 |
| September 30, 2021 |
|
| 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 |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
Operating leases |
| Operating lease liabilities, less current portion |
|
|
|
|
|
| ||
Finance leases |
| Finance lease liabilities, less current portion |
|
|
|
|
|
| ||
Total lease liabilities |
|
|
| $ |
|
| $ |
| ||
(1) Finance lease assets were recorded net of accumulated depreciation of approximately $
Lease term and discount rate information related to leases was as follows:
Lease Term and Discount Rate |
| September 30, 2021 |
| |
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:
|
| Three Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash used for operating leases |
| $ |
|
| $ |
| ||
Operating cash used for finance leases |
| $ |
|
| $ |
| ||
Financing cash used for finance leases |
| $ |
|
| $ |
| ||
Future maturities of lease liabilities were as follows as of September 30, 2021:
Fiscal year ending: |
| Finance Leases |
|
| Operating Leases |
| ||
June 30, 2022 (remaining nine months) |
| $ |
|
| $ |
| ||
June 30, 2023 |
|
|
|
|
|
| ||
June 30, 2024 |
|
|
|
|
|
| ||
June 30, 2025 |
|
|
|
|
|
| ||
June 30, 2026 |
|
|
|
|
|
| ||
Thereafter |
|
| — |
|
|
|
| |
Total future minimum payments |
|
|
|
|
|
| ||
Less imputed interest |
|
| ( | ) |
|
| ( | ) |
Present value of lease liabilities |
| $ |
|
| $ |
| ||
11. Loans Payable
As of September 30, 2021 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 $
On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “Amendment” and, together with the Loan Agreement, the “Amended Loan Agreement”). The 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)
| 16 |
| Table of Contents |
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.
BankUnited Revolving Line
Pursuant to the Amended Loan Agreement, BankUnited will make loan advances under the BankUnited Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed $2,000,000, which proceeds will be used for working capital and general corporate purposes. Amounts borrowed under the BankUnited Revolving Line may be repaid and re-borrowed at any time prior to February 26, 2022, at which time all amounts will be immediately due and payable. The advances under the BankUnited Revolving Line bear interest, on the outstanding daily balance, at a per annum rate equal to
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.
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 fixed charge coverage ratio of 1.25 to 1.00 and a total leverage ratio of 4.00 to 1.00. As of September 30, 2021, 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 required covenants, as amended.
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 $
| 17 |
| Table of Contents |
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:
|
| BankUnited Term Loan |
|
| Equipment Loan |
|
| Unamortized Debt Costs |
|
| Total |
| ||||
Fiscal year ending: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2022 (remaining nine months) |
| $ |
|
| $ |
|
|
| ( | ) |
| $ |
| |||
June 30, 2023 |
|
|
|
|
|
|
|
| ( | ) |
|
|
| |||
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
| |||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
After June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total payments |
| $ |
|
| $ |
|
| $ | ( | ) |
|
|
| |||
Less current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ( | ) |
Non-current portion |
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
| |
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 $2.0 million and $2.1 million as of September 30, 2021 and June 30, 2021, respectively. During the three months ended September 30, 2021 and 2020, we recognized net foreign currency transaction losses of approximately $
Our cash and cash equivalents totaled approximately $
Assets and net assets in foreign countries are as follows:
China | Latvia | |||||||
|
| September 30, 2021 |
| June 30, 2021 |
| September 30, 2021 |
| June 30, 2021 |
Assets | $ | $ | $ | $ | ||||
Net assets | $ | $ | $ | $ | ||||
| 18 |
| Table of Contents |
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.
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 periods ended June 30, 2021 and September 30, 2021, which management anticipates may continue for the next one to two 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.
To date, we have not experienced any significant direct financial impact of COVID-19 to our business. However, the COVID-19 pandemic continues to impact economic conditions, which could impact the short-term and long-term demand from customers and, therefore, has the potential to negatively impact our results of operations, cash flows, and financial position in the future. 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.
| 19 |
| Table of Contents |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended June 30, 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.
The discussions of our results as presented in this Quarterly Report include use of the non-GAAP term “gross margin,” as well as other non-GAAP measures discussed in more detail under the heading “Non-GAAP Financial Measures.” Gross margin is determined by deducting the cost of sales from operating revenue. Cost of sales includes manufacturing direct and indirect labor, materials, services, fixed costs for rent, utilities and depreciation, and variable overhead. Gross margin should not be considered an alternative to operating income or net income, which are determined in accordance with GAAP. We believe that gross margin, although a non-GAAP financial measure, is useful and meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates our cost structure and provides funds for our total costs and expenses. We use gross margin in measuring the performance of our business and have historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner.
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. To date, we have not seen any significant direct negative impact of COVID-19 to our business. However, the COVID-19 pandemic continues to impact economic conditions, which could impact the short-term and long-term demand from our customers and, therefore, has the potential to negatively impact our results of operations, cash flows, and financial position in the future. In addition, we have seen some increased demand for thermal imaging assemblies for fever detection applications in response to the pandemic. 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 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.
| 20 |
| Table of Contents |
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.
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.
| 21 |
| Table of Contents |
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
Revenue for the first quarter of fiscal 2022 was approximately $9.1 million, a decrease of approximately $406,000, or 4%, as compared to approximately $9.5 million in the same period of the prior fiscal year. Revenue generated by infrared products was approximately $4.9 million in the first quarter of fiscal 2022, an increase of approximately $163,000, or 3%, as compared to approximately $4.7 million in the same period of the prior fiscal year. The increase in revenue was driven by sales of molded infrared products, primarily to customers in the industrial market. Revenue generated by PMO products was approximately $3.8 million for the first quarter of fiscal 2022, a decrease of approximately $481,000, or 11%, as compared to approximately $4.3 million in the same period of the prior fiscal year. As discussed in our recent two quarters, the decrease in sales of PMO products was a result of both our largest telecommunications customer decreasing their orders, and a temporary decrease in our domestic sales in China due to the transition of our management team in China. While sales of products for the telecommunications market will continue to be lower as we replace them with sales of products for other markets, our domestic sales in China partially recovered during the first quarter of fiscal 2022, as demonstrated by sequential growth of 30% in our PMO sales, as compared to the fiscal 2021 fourth quarter. 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 medical industries. Revenue generated by our specialty products was approximately $402,000 in the first quarter of fiscal 2022, a decrease of approximately $88,000, or 18%, compared to $491,000 in the same period of the prior fiscal year. This decrease is primarily related to sales of custom specialty products during the first quarter of fiscal 2021, which orders did not repeat in the first quarter of fiscal 2022.
Cost of Sales and Gross Margin
Gross margin in the first quarter of fiscal 2022 was approximately $3.2 million, a decrease of 18%, as compared to approximately $3.9 million in the same period of the prior fiscal year. Total cost of sales was approximately $5.9 million for the first quarter of fiscal 2022, compared to approximately $5.7 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 35% for the first quarter of fiscal 2022, compared to 40% for the same period of the prior fiscal year. The decrease in gross margin as a percentage of revenue is primarily due to the mix of products sold in each respective period. Infrared products, which typically have lower margins than our PMO products, comprised 54% of revenue for the first quarter of fiscal 2022, as compared to 50% of revenue for the first quarter of fiscal 2021. Gross margins for newer infrared products improved sequentially, as we move past some of the traditional start-up inefficiencies of new lenses moving into the volume production stage. The yield issues previously experienced in connection with BD6 coatings were resolved during the first quarter of fiscal 2022, which has begun to decrease our costs for those products. We continue to see progress toward bringing our manufacturing efficiencies on these new products to a level similar to our existing products.
| 22 |
| Table of Contents |
Selling, General and Administrative
Selling, general and administrative (“SG&A”) costs were approximately $2.9 million for the first quarter of fiscal 2022, an increase of approximately $429,000, or 18%, as compared to approximately $2.4 million in the same period of the prior fiscal year. The increase is primarily due to approximately $328,000 of expenses incurred associated with the previously described events that occurred at our Chinese subsidiaries, including severance, 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 increase in SG&A costs, as compared to the same period of the prior fiscal year, is due to increases in personnel-related costs associated with a moderate increase in headcount.
New Product Development
New product development costs were approximately $427,000 in the first quarter of fiscal 2022, a decrease of approximately $23,000, or 5%, as compared to the same period of the prior fiscal year. This decrease was primarily due to the restructuring of certain positions among our new product development and manufacturing engineering departments, the latter of which is included in cost of goods sold.
Other Income (Expense)
Interest expense was approximately $46,000 for the first quarter of fiscal 2022, as compared to $59,000 for the same period of the prior fiscal year. The decrease in interest expense is due to lower interest rates and a 12% reduction in our total debt for the quarter ended September 30, 2021, as compared to the quarter ended September 30, 2020.
Other expense, net, was approximately $51,000 for the first quarter of fiscal 2022, as compared to $88,000 for the same period of the prior fiscal year. 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 first quarter of fiscal 2022, we incurred net foreign currency transaction losses of approximately $26,000, compared to $98,000 for the same period of the prior fiscal year.
Income Taxes
During the first quarter of fiscal 2022, income tax expense was approximately $130,000, compared to approximately $435,000 for the same period of the prior fiscal year, 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.
Net Income (Loss)
Net loss for the first quarter of fiscal 2022 was approximately $632,000, or $0.02 basic and diluted loss per share, compared to net income of $97,000, or $0.00 basic and diluted earnings per share, for the first quarter of fiscal 2021. The decrease in net income for the first quarter of fiscal 2022, as compared to the same period of the prior fiscal year, was primarily attributable to lower gross margin and increased SG&A expenses, including approximately $328,000 of expenses incurred related to the previously described events that occurred in our Chinese subsidiaries. The resulting decrease in operating income was partially offset by a decrease in the provision for income taxes of approximately $305,000, as compared to the same period of the prior fiscal year.
Weighted-average common shares outstanding were 26,993,971, basic and diluted, in the first quarter of fiscal 2022, compared to 25,982,260 and 28,432,275, basic and diluted, respectively in the first quarter 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.
| 23 |
| Table of Contents |
Liquidity and Capital Resources
As of September 30, 2021, we had working capital of approximately $11.3 million and total cash and cash equivalents of approximately $4.0 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 $1 million from LPOIZ during the each of the three-month periods ended September 30, 2021 and 2020. As of September 30, 2021, LPOIZ had approximately $4.6 million available for repatriation and LPOI did not have any earnings available for repatriation, based on undistributed earnings accumulated through the end of the most recent statutory tax year.
Loans payable consists of the BankUnited Term Loan and the BankUnited Revolving Line, both pursuant to the Amended Loan Agreement and the Letter Agreement, and the subordinated Equipment Loan. As of September 30, 2021, the outstanding balance on the BankUnited Term Loan was approximately $4.4 million, and there were no borrowings outstanding on the BankUnited Revolving Line. The outstanding balance on the Equipment Loan was approximately $476,000 as of September 30, 2021.
The Amended Loan Agreement and the Letter Agreement includes certain customary covenants. As of September 30, 2021, 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.
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.
Cash Flows – Operating:
Cash used in operations was approximately $1.6 million for the first three months of fiscal 2022, compared to cash provided by operations of approximately $662,000 for the same period of the prior fiscal year. The decrease in cash flows from operations during the first three months of fiscal 2022 is due to the decrease in net income, an increase in accounts receivable, and a decrease in accounts payable and accrued liabilities. The increase in accounts receivable is primarily due to the increase in revenues for the three months ended September 30, 2021 as compared to the preceding quarter ended June 30, 2021. 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 three months ended September 30, 2021. We anticipate improvement in our cash flows provided by operations in future quarters, based on our forecasted sales growth and anticipated margin improvements, with improvements in working capital, partially offset by marginal increases in sales and marketing, and new product development expenditures.
Cash Flows – Investing:
During the first three months of fiscal 2021, we expended approximately $1.2 million in investments in capital equipment, approximately the same as in the same period of fiscal 2020. The majority of our capital expenditures during the first three 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.
| 24 |
| Table of Contents |
Cash Flows – Financings:
Net cash provided by financing activities was approximately $51,000 for the first three months of fiscal 2022, compared to net cash used in financing activities approximately $176,000 in the same period of the prior fiscal year. Cash provided by financing activities for the first three months of fiscal 2022 reflects approximately $238,000 in principal payments on our loans and finance leases, offset by proceeds of approximately $267,000 from the Equipment Loan, and approximately $22,000 in proceeds from the sale of Class A common stock under the 2014 ESPP. Cash used in financing activities for the first three months of fiscal 2021 reflects approximately $313,000 in principal payments on our loans and capital leases, net of approximately $137,000 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 September 30, 2021, our principal commitments consisted of obligations under operating and finance leases, and debt agreements. No material changes occurred during the first three months of fiscal 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 three months ended September 30, 2021 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.
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 |
|
|
|
| · | 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. |
| 25 |
| Table of Contents |
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.
Our total backlog at September 30, 2021 was approximately $19.3 million, a decrease of 8%, as compared to $20.9 million as of September 30, 2020. Compared to the end of fiscal 2021, our total backlog decreased by 10% during the first quarter of fiscal 2022. Backlog change rates for the last five fiscal quarters are:
Quarter |
| Total Backlog ($ 000) |
|
| Change From Prior Year End |
|
| Change From Prior Quarter End |
| |||
Q1 2021 |
| $ | 20,866 |
|
|
| -5 | % |
|
| -5 | % |
Q2 2021 |
| $ | 23,835 |
|
|
| 9 | % |
|
| 14 | % |
Q3 2021 |
| $ | 19,498 |
|
|
| -11 | % |
|
| -18 | % |
Q4 2021 |
| $ | 21,329 |
|
|
| -3 | % |
|
| 9 | % |
Q1 2022 |
| $ | 19,265 |
|
|
| -10 | % |
|
| -10 | % |
The decrease in backlog during the first quarter of fiscal 2022 is due to shipments against annual contracts, while no major contracts renewed during the quarter. In addition, we received fewer new orders from a large telecommunications customer, which orders are typically renewed each quarter. Historically, it is in the second quarter of each fiscal year that we receive the renewal of a large annual contract for infrared products, which we typically begin shipping against in the fiscal third quarter. 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.
| 26 |
| Table of Contents |
We continue to experience a 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. 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 one to two 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.
Revenue Dollars and Units by Product Group
The following table sets forth revenue dollars and units for our three product groups for the three-month periods ended September 30, 2021 and 2020:
|
| (unaudited) |
|
|
|
| ||||||
|
| Three Months Ended |
|
| Quarter |
| ||||||
|
| 2021 |
|
| 2020 |
|
| % Change |
| |||
Revenue |
|
|
|
|
|
|
|
|
| |||
PMO |
| $ | 3,812,950 |
|
| $ | 4,293,603 |
|
|
| -11 | % |
Infrared Products |
|
| 4,887,918 |
|
|
| 4,724,504 |
|
|
| 3 | % |
Specialty Products |
|
| 402,475 |
|
|
| 490,865 |
|
|
| -18 | % |
Total revenue |
| $ | 9,103,343 |
|
| $ | 9,508,972 |
|
|
| -4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
Units |
|
|
|
|
|
|
|
|
|
|
|
|
PMO |
|
| 494,307 |
|
|
| 1,126,777 |
|
|
| -56 | % |
Infrared Products |
|
| 144,447 |
|
|
| 178,922 |
|
|
| -19 | % |
Specialty Products |
|
| 5,262 |
|
|
| 9,633 |
|
|
| -45 | % |
Total units |
|
| 644,016 |
|
|
| 1,315,332 |
|
|
| -51 | % |
Our revenue decreased by approximately $406,000 for the first quarter of fiscal 2022, as compared to the same period of the prior fiscal year, primarily due to a decrease in PMO product sales, partially offset by an increase in infrared product sales.
Revenue generated by the PMO product group during the first quarter of fiscal 2022 was $3.8 million, a decrease of approximately $481,000, or 11%, 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 medical industries. Sales of PMO units decreased by 56%, as compared to the same period of the prior fiscal year, and average selling prices increased by 102%. 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 76% for the first quarter of fiscal 2022, as compared to the same period of the prior fiscal year.
Revenue generated by the infrared product group during the first quarter of fiscal 2022 was $4.9 million, an increase of approximately $163,000, or 3%, as compared to the same period of the prior fiscal year. The increase in revenue is driven by sales of molded infrared products, primarily to customers in the industrial market. During the first quarter of fiscal 2022, sales of infrared units decreased by 19%, as compared to the prior year period, and average selling prices increased 28%. The increase in average selling prices is due primarily due to the mix of products shipped for molded infrared products, including some new thermal imaging assemblies which are lower in volume and higher in price. Industrial applications, firefighting cameras, and other public safety applications continue to be the primary drivers of the increased 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 have been accelerated by COVID-19, and although the demand has leveled off since the initial spike, it remains elevated.
| 27 |
| Table of Contents |
In the first quarter of fiscal 2022, our specialty products revenue decreased by $88,000, or 18%, as compared to the same period of the prior fiscal year, primarily related to sales of custom specialty products during the first quarter of fiscal 2021, which orders did not repeat in the first quarter of fiscal 2022.
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.”
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.”
| 28 |
| Table of Contents |
We believe EBITDA is helpful for investors to better understand our underlying business operations. The following table adjusts net income (loss) to EBITDA for the three months ended September 30, 2021 and 2020:
|
| (unaudited) |
| |||||
|
| Quarter Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Net income (loss) |
| $ | (632,097 | ) |
| $ | 97,068 |
|
Depreciation and amortization |
|
| 910,962 |
|
|
| 826,308 |
|
Income tax provision |
|
| 129,873 |
|
|
| 434,640 |
|
Interest expense |
|
| 45,749 |
|
|
| 58,549 |
|
EBITDA |
| $ | 454,487 |
|
| $ | 1,416,565 |
|
% of revenue |
|
| 5 | % |
|
| 15 | % |
Our EBITDA for the three months ended September 30, 2021 was approximately $454,000, compared to $1.4 million for the same period of the prior fiscal year. The decrease in EBITDA in the first quarter of fiscal 2022 was primarily attributable to lower gross margin and increased SG&A expenses, including approximately $328,000 of expenses incurred related to the previously described events that occurred in our Chinese subsidiaries.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2021, the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2021 in reporting on a timely basis information required to be disclosed by us in the reports we file or submit under the Exchange Act.
In connection with the events that occurred at our Chinese subsidiaries, we have adopted additional policies and procedures designed to improve our internal controls, including, without limitation, revising the reporting structure for our foreign-based finance directors, adopting Codes of Conduct applicable to our subsidiaries’ foreign-based employees, adopting an internal authority approval matrix, and hiring additional staff for our accounting departments at LPOI and LPOIZ to improve segregation of duties, among other items. Other than these modifications, 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 and since the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 29 |
| Table of Contents |
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
None.
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
Entry Into a Material Definitive Agreement Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of Registrant
On November 5, 2021, we entered into the Second Letter Agreement with BankUnited. In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forbearance, or other resolution of the Amended Loan Agreement, which closing will occur on or before December 31, 2021. The Proposed Restructuring Agreement will include the following terms, among others: (i) a maturity date of April 15, 2023 with respect to the Term Loan; (ii) an increased monthly payment amount of $100,000 commencing on November 1, 2022; (iii) the Term Loan will bear a higher interest rate commencing on August 1, 2022; (iv) an exit fee equal to 4% of the outstanding principal balance of the Term Loan on April 15, 2023 to the extent the Term Loan is still outstanding on such date and has not been refinanced with another lender; and (v) a fee of $50,000 payable upon execution of the Proposed Restructuring Agreement. The Second Letter Agreement also granted us a waiver of default arising prior to the Second Letter Agreement for our failure to comply with the fixed charge coverage ratio and total leverage ratio measured on September 30, 2021. Based on the Second Letter Agreement and the waiver, we are no longer in default of the Amended Loan Agreement. Additionally, the Second Letter Agreement states that BankUnited will waive compliance for the fixed charge coverage ratio and the total leverage ratio for the quarters ended December 31, 2021, March 31, 2022 and June 30, 2022, which waivers will be included in the Proposed Restructuring Agreement. Finally, in accordance with the Second Letter Agreement, we paid BankUnited a deposit equal to $25,000 to be used in connection with BankUnited’s legal fees, costs and expenses in connection with the Second Letter Agreement and the Proposed Restructuring Agreement.
The foregoing description of the Second Letter Agreement is a summary only and is qualified in its entirety by reference to the complete text of the Second Letter Agreement filed herewith as Exhibit 10.2.
| 30 |
| Table of Contents |
Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
Exhibit Number |
| Description |
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
|
| 31 |
| Table of Contents |
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
| ||
|
|
|
101.INS |
| XBRL Instance Document * |
|
|
|
101.SCH |
| XBRL Taxonomy Extension Schema Document * |
|
|
|
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document * |
|
|
|
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document * |
|
|
|
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document * |
|
|
|
101.PRE XBRL |
| Taxonomy Presentation Linkbase Document * |
|
|
|
104 |
| Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101 * |
*filed herewith
| 32 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC. | |||
| Date: November 9, 2021 | By: | /s/ Shmuel Rubin | |
|
| Shmuel Rubin | |
President and Chief Executive Officer | |||
Date: November 9, 2021 | By: | /s/ Albert Miranda. |
|
|
| Albert Miranda |
|
|
| Chief Financial Officer |
|
| 33 |
EXHIBIT 10.2
November 5, 2021
This letter replaces and supersedes our prior discussion of yesterday.
LightPath Technologies, Inc
2603 Challenger Tech Court
Suite 100
Orlando, Florida 32826
Attention: Sam Rubin, President and CEO
|
| Re: | Loan Agreement dated February 26, 2019 by and between LightPath Technologies, Inc. et. Al. and BankUnited, N.A. as amended (the “Loan Agreement”) |
Dear Mr. Rubin:
The Lender, and LightPath Technologies, Inc. (sometimes together, the "Parties and the Parties other than Lender, sometimes together the "Borrower Parties") desire to initiate discussions and other communications, whether written or oral (collectively, the "Discussions") about: (a) the Parties' rights, obligations, and performance under the Loan Documents; (b) a possible modification, forbearance, or other resolution of the Loan (a "Workout"); and (c) Lender's goals or requirements for any Workout. The Parties wish to pursue Discussions without litigation, and to assure that Discussions will not affect any future litigation. Lender would not participate in Discussions unless the Parties signed this letter agreement (the “Letter Agreement”). To facilitate and to induce Lender to commence Discussions, the Parties enter into this Letter Agreement. Definitions in the Loans apply in this Letter Agreement, except where this Letter Agreement redefines any term.
No Party is under any obligation to agree to any Workout. Any Party may, with or without notice, terminate Discussions at any time, for any reason or no reason, in its sole discretion, with no liability. An oral agreement provisionally reached may ultimately not become effective, for example because a Party fails to obtain any necessary internal approvals, the Parties fail to agree on the form of written documents or, for any reason or no reason, a Party changes its mind. The Parties may reach agreement on some points, but not all. In these circumstances, and any other circumstances (similar or dissimilar, foreseen or unforeseen), even though the Parties may reach an oral understanding on any issue(s), no Party shall be bound by any oral agreement.
No party shall have any rights or liabilities, either express or implied, on account of (i) the commencement, continuation, or termination of Discussions; or (ii) any oral understanding, unless and until the Parties have (in their sole and absolute discretion) approved, signed, and exchanged a forbearance and restructuring agreement (as evidence of a Workout), and all required consents have been obtained (a "Restructuring Agreement"). Until then, no Party shall rely on the pendency of Discussions or the possibility or hope of a Workout.
| 1 |
The terms described below are for discussion purposes only. Neither the terms set forth below nor those terms set forth in any other term sheet nor the preparation, distribution, response, or failure to respond to same shall constitute Lender's offer, agreement, or commitment to enter into a Workout.
The terms set forth below and those included in any term sheet, and any Discussions, including any statement that is or could be deemed an admission of any fact, liability, or other matter, or of the satisfaction of any condition, except as this Letter Agreement expressly states, shall: (a) constitute settlement discussions; (b) not be discoverable or disclosable; (c) not be admissible in evidence for any purpose; (d) not be deemed an admission; and (e) not affect the Parties' rights and obligations.
The following terms and conditions are proposed for the Restructuring Agreement:
|
| 1. | The maturity date for Loan Number 8405 shall be April 15, 2023 subject to acceleration should a further default occur under the Restructuring Agreement. |
|
|
|
|
|
| 2. | Commencing November 1, 2022 and continuing monthly thereafter until maturity, the Borrower shall make equal monthly payments of $100,000 with payments applied first to interest, costs and expenses and then to principal. |
|
|
|
|
|
| 3. | Contractual rate of interest will accrue during the term of the Restructuring Agreement as long as no additional event of default occurs up until August 1, 2022; following August 1, 2022 (or prior thereto if an additional default occurs), default interest shall accrue. |
|
|
|
|
|
| 4. | Upon execution of the Restructuring Agreement, Borrower shall pay the Bank a fee of $50,000.00. |
|
|
|
|
|
| 5. | The Lender will waive compliance for the Fixed Charge Coverage Ratio (as defined in the Loan Agreement) covenant for the period ending September 30, 2021, December 31, 2021, March 31, 2022 and June 30, 2022 and waive the maximum Total Leverage Ratio of 4.00 to 1.00 for the same period ending September 30, 2021, December 31, 2021, March 31, 2022 and June 30, 2022. Bank Waiver letter for the September 30, 2021 will be issued within 1 business day upon the execution of this Letter Agreement but no later than Tuesday, November 9th at 2:00 p.m. The proposed covenant waivers for December 31, 2021, March 31, 2022 and June 30, 2022 will be included in the Restructure Agreement. |
|
|
|
|
|
| 6. | Borrower will execute two ACH Processing and Security Attachment forms concurrently upon the signing of the Letter Agreement. Borrower’s intraday credit exposure will be changed to a prefunding status up to $500,000 which will be immediately effective. |
|
|
|
|
|
| 7. | Borrower will send a Corporate Credit Card cancellation letter to the Bank on or before 1/31/2022 which will direct the Bank to terminate the Corporate Credit cards usage and availability of $300,000. |
| 2 |
|
| 8. | All Loans will mature and be fully due and payable on April 15, 2023. After which a 4% exit fee will be earned on the outstanding principal balance due on all Loans due as of April 15, 2023. |
|
|
|
|
|
| 9. | Borrower Parties shall acknowledge itemized balances outstanding and waive and release all defenses, setoffs and counterclaims against the Lender. |
|
|
|
|
|
| 10. | Borrower Parties will execute and deliver all documents deemed necessary by the Lender or its legal counsel and must close on or before December 31, 2021. |
|
|
|
|
|
| 11. | Borrower Parties will be responsible for payment of all fees, costs and expenses in connection with this Letter Agreement and the Restructuring Agreement, including, but not limited to, Lender’s legal fees and costs, third party appraisals, costs of searches and diligence. |
The Discussions are subject to the following conditions (collectively, the "Conditions"):
No representation, offer, concession or statement of any kind made by any person or party during the course of the Discussions shall constitute a waiver by any party of any claims, rights, remedies, or defenses such party may have, or shall in any manner modify, terminate or otherwise affect the Loans or the relationship between or among the parties under the Loans or otherwise, or result in an admission against interest or be evidence of any kind or otherwise be binding upon any party, unless hereafter memorialized in the Restructuring Agreement and other documents executed in connection therewith (collectively, “Restructuring Documents”). The Discussions shall be deemed to be discussions in the nature of settlement negotiations and shall not be admitted into evidence in any litigation or proceeding among any of the parties to this Letter Agreement, and no statement made by anyone during the course of the Discussions shall be deemed an admission or evidence of any kind.
Lender (i) is not precluded or estopped from the immediate enforcement of any of its remedies under the Loans, at law or in equity, (ii) does not hereby, and is in no way obligated to, forbear from the immediate enforcement of any of its remedies under the Loans, at law or in equity, and (iii) does not hereby, and is in no way obligated to, waive any default or event of default (whether now existing or hereafter arising and whether asserted or unasserted) or any of Lender’s rights or remedies, legal or equitable.
No agreements, representations, statements, warranties or any other understandings made or reached during or emanating from the Discussions shall be utilized for any purpose whatsoever or be binding to any extent unless and until memorialized in the formal Restructuring Documents and signed by the parties thereto.
Neither this Letter Agreement nor the Discussions shall be construed as in any manner modifying the Loans or the rights or obligations of the parties thereunder or relating thereto. Without limiting the foregoing, neither the execution of this Letter Agreement nor conducting the Discussions shall: (i) relieve Borrower Parties from any obligations they may have under the Loans; (ii) provide Borrower Parties with any claims arising out of the Discussions or with defenses to any actions or proceedings of Lender, or (iii) provide Lender with any claims arising out of the Discussions or any defenses to any actions or proceedings initiated by Borrower Parties.
| 3 |
Unless otherwise expressly provided in the signed Restructuring Documents, the acceptance of any payment by Lender with respect to or in connection with the Loans shall not constitute (i) a modification of the Loans (or any of the documents set forth in the Loans), (ii) a waiver of any default or event of default, or (iii) a waiver of any of Lender’s rights and remedies under the Loans, at law or in equity.
This Letter Agreement is solely for the benefit of the parties hereto and no other person or entity shall have any rights or claims of any kind by reason of the Discussions or the execution of this Letter. Lender may (in its sole discretion) terminate the Discussions at any time without cause and without notice and without incurring any liability whatsoever, whether before or after formal Lender approval.
This Letter Agreement shall be governed by and construed in accordance with the laws of the State of Florida without regard to principles of conflicts of law.
Upon execution of the Letter Agreement, we shall present this Proposal to the Lender. If approved, the Borrower Parties agree to enter into a Restructuring Agreement which shall contain the terms described herein as well as any and all other terms of a forbearance deemed necessary by the Lender or its legal counsel including, but not limited to, Borrower Parties' acknowledgment of adequate consideration and that all modifications to the Loans and any payments made under the Restructuring Agreement constitute fair and adequate consideration. Should the Lender approve the above transaction, the Lender will direct its legal counsel to prepare the Restructuring Documents and will proceed with a closing which must be finalized and executed on or before December 31, 2021 at 3:00 p.m. Notwithstanding the foregoing, as noted above, the Lender reserves all of its rights and remedies unless and until the Restructuring Documents are signed by the parties.
This Letter Agreement may be executed in counterparts, each of which together or separately shall constitute an original and, when taken together, shall be considered one and the same agreement. Delivery of an executed counterpart of this Letter Agreement by facsimile or electronic mail shall be equally as effective as delivery of an original executed counterpart of this Letter Agreement.
This Letter Agreement shall: (a) fully apply to all Discussions whether or not they refer to this Letter Agreement; (b) survive termination of Discussions; (c) bind and benefit the Parties and their successors and assigns; (d) constitute the entire agreement about Discussions; and (e) not be construed more strictly against the drafter. Each Party executing this Letter Agreement represents that it has the full authority and legal power to do so.
Each Party confirms that it: (a) is represented by legal counsel of its choice (or has consciously made a decision not to consult with legal counsel), (b) has consulted with counsel about this Letter Agreement; (c) is fully aware of the terms of this Letter Agreement; and (d) has entered into this Letter Agreement voluntarily and without coercion or duress of any kind.
| 4 |
If this Letter Agreement correctly reflects your understanding, please sign this Letter Agreement where indicated and return it to the Bank, along with a $25,000.00 payment done via an email authorization to debit the Borrower's account with the Bank, representing a good faith deposit, which will be non-refundable and applied towards the Bank's legal fees incurred. Acceptance of the outlined proposal along with submission of a good faith deposit in the amount of $25,000 must be submitted to the Lender on or before Monday November 8, 2021 at 11:00 a.m.
If you have any questions regarding the above, please call me at (305) 569-3423.
| Respectfully, | ||
| /s/ Monica Antongeorgi | ||
| Monica Antongeorgi Senior Vice President | ||
| Agreed: |
| |
|
|
|
|
| LightPath Technologies, Inc. |
| |
| By: | /s/ Sam Rubin |
|
|
| Sam Rubin, CEO |
|
| 5 |
EXHIBIT 10.3
|
| BankUnited, N.A. 7815 NW 148th Street Miami Lakes, FL33016 T877 779 2265 www.bankunited.com |
November 8, 2021
LightPath Technologies, Inc.
2603 Challenger Tech Court
Suite 100
Orlando, Florida 32826
Attention: Sam Rubin, President and CEO
|
| Re: | Loan Agreement dated February 26, 2019 by and between LightPath Technologies, Inc. et. al. and Bank United, N.A. as amended (the “Loan Agreement”) |
NOTICE OF DEFAULT AND WAIVER
Dear Mr. Rubin:
Under the terms of the referenced Loan Agreement LightPath Technologies, Inc. (“Borrower”) is required to maintain a minimum Fixed Charge Coverage Ratio and Total Leverage Ratio (as defined in the Loan Agreement) to be tested quarterly. As of September 30, 2021 you were not in compliance with those covenants (“Covenant Defaults”).
Bank:United, N.A. (“Lender”) is waiving the September 30, 2021 covenant non- compliance.
The Lender will waive compliance for the Fixed Charge Coverage Ratio and the Maximum Total Leverage Ratio covenant (as defined in the Loan Agreement) for the period ending September 30, 2021.
The foregoing waiver is without prejudice to all of the rights and remedies afforded Lender in the Loan Agreement and the related loan documents (the “Loan Documents”) for any other breach thereof, all of which rights and remedies are hereby expressly reserved.
The Covenant Default described herein does not necessarily constitute all of the defaults or Events of Default which currently may exist under the Loan Documents, and the specific reference to the Covenant Default is not intended to, nor shall, be a waiver or implied waiver thereof.
| 1 |
In no event and under no circumstance shall this letter or the prior or future collection of any principal, interest or fees by Lender be construed to: (i) cure any Covenant Default or any other default or Event of Default (whether described or referred to herein or otherwise), (ii) waive, limit, prejudice, condition or otherwise adversely affect any rights, remedies, privileges or powers of Lender under the Loan Documents or applicable law (including, without limitation, Lender’s right to foreclosure on any and all collateral covered by the Loan Documents), all of which are hereby expressly reserved, (iii) cause a modification or amendment of the Loan Documents, except as expressly set forth herein, (iv) modify, change, diminish, postpone or release any of Borrower’s obligations or liabilities Wider the Loan Documents or any other liability Borrower may have to Lender, or (v) limit Lender’s right to demand any and all sums which are or may hereafter become due and payable Wider the Loan Documents or otherwise including, without limitation, collection costs and attorney’s fees.
This letter is not intended to establish a custom or course of dealing between Borrower and Lender. The delivery by Lender of this letter shall not constitute or create a right to notice or demand on any future occasion that is not otherwise required Wider the Loan Documents.
| Very truly yours, | ||
| /s/ Monica Antongeorgi | ||
|
| Senior Vice President |
| 2 |
Agreed:
LightPath Technologies, Inc.
___________________________
By:/s/Sam Rubin
Sam Rubin
| 3 |
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.; |
|
|
|
| 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; |
|
|
|
| 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; |
|
|
|
| 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: |
|
| 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; |
|
|
|
|
|
| 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; |
|
|
|
|
|
| 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 |
|
|
|
|
|
| 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 |
| 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): |
|
| 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 |
|
|
|
|
|
| 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: November 9, 2021 | /s/ Shmuel Rubin | ||
|
|
| 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.; |
|
|
|
| 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; |
|
|
|
| 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; |
|
|
|
| 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: |
|
| 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; |
|
|
|
|
|
| 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; |
|
|
|
|
|
| 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 |
|
|
|
|
|
| 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 |
| 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): |
|
| 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 |
|
|
|
|
|
| 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: November 9, 2021 | /s/ Albert Miranda | ||
|
|
| 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:
|
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2021 (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 |
|
|
|
|
|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 9, 2021 | /s/ Shmuel Rubin | ||
|
|
| 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:
|
| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2021 (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 |
|
|
|
|
|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 9, 2021 | By: | /s/ Albert Miranda | |
|
|
| 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.