10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission file number 000-27548

LIGHTPATH TECHNOLOGIES, INC.

 (Exact name of registrant as specified in its charter)

Delaware	86-0708398
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

http://www.lightpath.com

2603 Challenger Tech Ct. Suite 100

Orlando, Florida 32826

(Address of principal executive offices)

(ZIP Code)

(407) 382-4003

(Registrant’s telephone number, including area code)

N/A

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

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

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

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

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

27,082,022 shares of common stock, Class A, $0.01 par value, outstanding as of November 7, 2022.

LIGHTPATH TECHNOLOGIES, INC.

Form 10-Q

Index

Item		Page
Cautionary Note Concerning Forward-Looking Statements		3
Part I Financial Information
Item 1	Financial Statements	4
	Unaudited Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Results of Operations	22
	Liquidity and Capital Resources	24
	Contractual Obligations and Commitments	25
	Off-Balance Sheet Arrangements	25
	Critical Accounting Policies and Estimates	25
	Non-GAAP Financial Measures	29
Item 4	Controls and Procedures	29
Part II Other Information
Item 1	Legal Proceedings	30
Item 1A	Risk Factors	30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3	Defaults Upon Senior Securities	30
Item 4	Mine Safety Disclosures	30
Item 5	Other Information	30
Item 6	Exhibits	31
Signatures		33

2

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

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

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
	September 30,			June 30,
Assets	2022			2022
Current assets:
Cash and cash equivalents	$	4,298,869		$	5,507,891
Trade accounts receivable, net of allowance of $46,691 and $36,313		4,584,019			5,211,292
Inventories, net		7,005,709			6,985,427
Other receivables		82,391			-
Prepaid expenses and other assets		434,601			464,804
Total current assets		16,405,589			18,169,414
Property and equipment, net		10,767,788			11,640,463
Operating lease right-of-use assets		10,095,366			10,420,604
Intangible assets, net		4,176,527			4,457,798
Goodwill		5,854,905			5,854,905
Deferred tax assets, net		143,000			143,000
Other assets		47,066			27,737
Total assets	$	47,490,241		$	50,713,921
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,344,334		$	3,073,933
Accrued liabilities		864,301			558,750
Accrued payroll and benefits		1,888,766			2,081,212
Operating lease liabilities, current		960,331			965,622
Loans payable, current portion		1,091,145			998,692
Finance lease obligation, current portion		21,638			55,348
Total current liabilities		7,170,515			7,733,557
Deferred tax liabilities, net		511,419			541,015
Finance lease obligation, less current portion		8,085			11,454
Operating lease liabilities, noncurrent		9,114,599			9,478,077
Loans payable, less current portion		2,948,446			3,218,580
Total liabilities		19,753,064			20,982,683
Commitments and Contingencies
Stockholders’ equity:
Preferred stock: Series D, $0.01 par value, voting; 500,000 shares authorized; none issued and outstanding		-			—
Common stock: Class A, $0.01 par value, voting; 44,500,000 shares authorized; 27,071,929 and 27,046,790 shares issued and outstanding		270,719			270,468
Additional paid-in capital		232,619,220			232,315,003
Accumulated other comprehensive income		17,296			935,125
Accumulated deficit		(205,170,058	)		(203,789,358	)
Total stockholders’ equity		27,737,177			29,731,238
Total liabilities and stockholders’ equity	$	47,490,241		$	50,713,921

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

4

LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
	Three Months Ended
	September 30,
	2022			2021
Revenue, net	$	7,366,901		$	9,103,343
Cost of sales		5,132,989			5,931,408
Gross margin		2,233,912			3,171,935
Operating expenses:
Selling, general and administrative		2,638,173			2,869,046
New product development		549,881			427,011
Amortization of intangibles		281,271			281,271
Total operating expenses		3,469,325			3,577,328
Operating loss		(1,235,413	)		(405,393	)
Other income (expense):
Interest expense, net		(70,370	)		(45,749	)
Other income (expense), net		27,217			(51,082	)
Total other income (expense), net		(43,153	)		(96,831	)
Loss before income taxes		(1,278,566	)		(502,224	)
Income tax provision		102,134			129,873
Net loss	$	(1,380,700	)	$	(632,097	)
Foreign currency translation adjustment		(917,829	)		(144,174	)
Comprehensive loss	$	(2,298,529	)	$	(776,271	)
Loss per common share (basic)	$	(0.05	)	$	(0.02	)
Number of shares used in per share calculation (basic)		27,070,949			26,993,971
Loss per common share (diluted)	$	(0.05	)	$	(0.02	)
Number of shares used in per share calculation (diluted)		27,070,949			26,993,971

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

5

LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
								Accumulated
	Class A				Additional			Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Income			Deficit			Equity
Balances at June 30, 2022		27,046,790	$	270,468	$	232,315,003		$	935,125		$	(203,789,358	)	$	29,731,238
Issuance of common stock for:
Employee Stock Purchase Plan		16,287		163		19,707			—			—			19,870
Exercise of Stock Options & RSUs, net		8,852		88		(88	)		—			—			—
Stock-based compensation on stock options & RSUs		—		—		284,598			—			—			284,598
Foreign currency translation adjustment		—		—		—			(917,829	)		—			(917,829	)
Net loss		—		—		—			—			(1,380,700	)		(1,380,700	)
Balances at September 30, 2022		27,071,929	$	270,719	$	232,619,220		$	17,296		$	(205,170,058	)	$	27,737,177
Balances at June 30, 2021		26,985,913	$	269,859	$	231,438,651		$	2,116,152		$	(200,247,177	)	$	33,577,485
Issuance of common stock for:
Employee Stock Purchase Plan		8,621		86		21,640			—			—			21,726
Stock-based compensation on stock options & RSUs		—		—		116,591			—			—			116,591
Foreign currency translation adjustment		—		—		—			(144,174	)		—			(144,174	)
Net loss		—		—		—			—			(632,097	)		(632,097	)
Balances at September 30, 2021		26,994,534	$	269,945	$	231,576,882		$	1,971,978		$	(200,879,274	)	$	32,939,531

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

6

LIGHTPATH TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
	Three Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(1,380,700	)	$	(632,097	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		816,334			910,962
Interest from amortization of debt costs		18,560			4,643
Stock-based compensation on stock options & RSUs, net		284,598			116,591
Provision for doubtful accounts receivable		(12,452	)		12,010
Change in operating lease assets and liabilities		(43,531	)		(52,172	)
Inventory write-offs to allowance		-			60,935
Deferred tax benefit		(29,596	)		-
Changes in operating assets and liabilities:
Trade accounts receivable		639,725			(1,283,594	)
Other receivables		(82,391	)		134,860
Inventories		(20,282	)		(109,829	)
Prepaid expenses and other assets		10,874			19,702
Accounts payable and accrued liabilities		(616,494	)		(799,693	)
Net cash used in operating activities		(415,355	)		(1,617,682	)
Cash flows from investing activities:
Purchase of property and equipment		(243,393	)		(1,199,005	)
Net cash used in investing activities		(243,393	)		(1,199,005	)
Cash flows from financing activities:
Proceeds from sale of common stock from Employee Stock Purchase Plan		19,870			21,726
Borrowings on loans payable		-			266,850
Payments on loans payable		(169,902	)		(163,758	)
Repayment of finance lease obligations		(37,079	)		(73,891	)
Net cash (used in) provided by financing activities		(187,111	)		50,927
Effect of exchange rate on cash and cash equivalents		(363,163	)		(31,953	)
Change in cash and cash equivalents		(1,209,022	)		(2,797,713	)
Cash and cash equivalents, beginning of period		5,507,891			6,774,694
Cash and cash equivalents, end of period	$	4,298,869		$	3,976,981
Supplemental disclosure of cash flow information:
Interest paid in cash	$	48,803		$	41,466
Income taxes paid	$	140,756		$	111,535

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

7

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, 2022, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended June 30 and the associated quarters of those fiscal years.

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

2. Significant Accounting Policies

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

Use of Estimates

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

3. Revenue

Product Revenue

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

Revenue Recognition

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

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

8

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, 2022 and 2021 was as follows:

	Three Months Ended September 30,
	2022		2021
PMO	$	3,272,555	$	3,812,950
Infrared Products		3,639,659		4,887,918
Specialty Products		454,687		402,475
Total revenue	$	7,366,901	$	9,103,343

4. Inventories

The components of inventories include the following:

	September 30, 2022			June 30, 2022
Raw materials	$	2,788,577		$	3,019,156
Work in process		2,731,354			2,243,907
Finished goods		2,916,888			3,052,001
Allowance for obsolescence		(1,431,110	)		(1,329,637	)
	$	7,005,709		$	6,985,427

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

5. Property and Equipment

Property and equipment are summarized as follows:

	Estimated Lives (Years)		September 30, 2022			June 30, 2022
Manufacturing equipment	5 - 10		$	21,291,400		$	22,058,636
Computer equipment and software	3 - 5			989,720			978,348
Furniture and fixtures		5		338,819			352,060
Leasehold improvements	5 - 7			2,976,292			3,043,867
Construction in progress				972,199			943,793
Total property and equipment				26,568,430			27,376,704
Less accumulated depreciation and amortization				(15,800,642	)		(15,736,241	)
Total property and equipment, net			$	10,767,788		$	11,640,463

9

6. Goodwill and Intangible Assets

There were no changes in the net carrying value of goodwill during the three months ended September 30, 2022.

Identifiable intangible assets were comprised of:

	Useful Lives (Years)		September 30, 2022			June 30, 2022
Customer relationships		15	$	3,590,000		$	3,590,000
Trade secrets		8		3,272,000			3,272,000
Trademarks		8		3,814,000			3,814,000
Total intangible assets				10,676,000			10,676,000
Less accumulated amortization				(6,499,473	)		(6,218,202	)
Total intangible assets, net			$	4,176,527		$	4,457,798

Future amortization of identifiable intangibles is as follows:

Fiscal year ending:
June 30, 2023 (remaining nine months)		843,812
June 30, 2024		1,125,083
June 30, 2025		658,398
June 30, 2026		239,334
After June 30, 2026		1,309,900
	$	4,176,527

7. Income Taxes

A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2022 and 2021 is as follows:

	Three Months Ended September 30,
	2022			2021
(Loss) income before income taxes	$	(1,278,566	)	$	(502,224	)
Income tax provision	$	102,134		$	129,873
Effective income tax rate		-8	%		-26	%

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, 2022 and 2021, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), which dividend will be paid to us, as its parent company.

We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of September 30, 2022 and June 30, 2022, our net deferred tax assets are related to the U.S. jurisdiction and we have provided for a valuation allowance 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.

10

U.S. Federal and State Income Taxes

Our U.S. federal and state statutory income tax rate is estimated to be 25.5%. Based on our current assessment of the valuation allowance position on our net deferred tax assets, no additional tax expense or benefit is expected to be recorded on pre-tax income or losses generated in the U.S.

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, 2022, LPOI and LPOIZ were subject to statutory income tax rates of 25% and 15%, respectively. The net deferred tax liabilities included in the accompanying unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022 are related to LPOIZ, and primarily consist of timing differences related to depreciation.

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. The Company accrues withholding taxes on the portion of LPOZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $40,000 as of both September 30, 2022 and June 30, 2022. Other than these withholding taxes, these intercompany dividends have no impact on the Consolidated Financial Statements.

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 Optics Corporation (“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.

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, 2022 and 2021 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

	Three Months Ended September 30,
	2022		2021
Stock options	$	58,765	$	24,128
RSUs		225,833		92,463
Total	$	284,598	$	116,591

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 $1,954 and $2,155 for the three months ended September 30, 2022 and 2021, respectively, is included in SG&A expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP.

11

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, 2022 and 2021. The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures. The interest rate used is the U.S. Treasury interest rate for constant maturities.

No stock options were granted during the three months ended September 30, 2022 or during the three months ended September 30, 2021.

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the three months ended September 30, 2022 is presented below:

	Stock Options						Restricted Stock Units (RSUs)
			Weighted-		Weighted-					Weighted-
			Average		Average					Average
			Exercise		Remaining					Remaining
	Shares		Price		Contract		Shares			Contract
June 30, 2022		534,462	$	2.03		7.0		2,079,669			0.9
Granted		-	$	-				8,852
Exercised		-	$	-				(8,852	)
Cancelled/Forfeited		-	$	-				-
September 30, 2022		534,462	$	2.03		6.9		2,079,669			0.9
Awards exercisable/
vested as of
September 30, 2022		246,392	$	1.89		6.6		1,334,978			—
Awards unexercisable/
unvested as of
September 30, 2022		288,070	$	2.15		7.1		744,691			0.9
		534,462						2,079,669

RSU awards vest immediately or from one to four years from the date of grant.

As of September 30, 2022, there was approximately $836,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted. We expect to recognize the compensation cost as follows:

Fiscal Year Ending:	Stock Options		RSUs		Total
June 30, 2023 (remaining nine months)	$	145,557	$	317,172	$	462,729
June 30, 2024		94,196		190,864		285,060
June 30, 2025		33,885		54,308		88,193
	$	273,638	$	562,344	$	835,982

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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 September 30,
	2022			2021
Net loss	$	(1,380,700	)	$	(632,097	)
Weighted-average common shares outstanding:
Basic number of shares		27,070,949			26,993,971
Effect of dilutive securities:
Options to purchase common stock		-			-
RSUs		-			-
Diluted number of shares		27,070,949			26,993,971
Loss per common share:
Basic	$	(0.05	)	$	(0.02	)
Diluted	$	(0.05	)	$	(0.02	)

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 September 30,
	2022		2021
Options to purchase common stock		534,462		427,726
RSUs		2,061,090		1,738,439
		2,595,552		2,166,165

10. Leases

Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida. The operating leases for facilities are non-cancelable operating leases, expiring through 2032. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option. We currently have obligations under two finance lease agreements, entered into during fiscal 2019, with terms ranging from three to five years. The leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. We have had two leases for premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”).  We assigned one of such leases to a third-party and agreed that we would vacate the premises subject to the assigned lease on November 30,2022.  We are in discussions with the third party to extend our occupancy for a limited period of time after November 30, 2022.  If the third party does not agree to extend our occupancy, and we do not vacate the premises on or before November 30, 2022, we may be subject to claims as a result thereof. We amended the second such lease in April 2021, and again in September 2021, to extend the term of such lease to 2032 and increase the leased space from 26,000 square feet to approximately 58,500 square feet. Effective in January 2022, our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively.

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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.

We received tenant improvement allowances for each of our two leases with respect to our Orlando Facility. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms. We are constructing additional tenant improvements in the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $2.4 million in tenant improvement allowances. We will fund the balance of the tenant improvement costs, which we estimate will be approximately $2.5 million.

The components of lease expense were as follows:

	Three Months Ended September 30,
	2022		2021
Operating lease cost	$	231,501	$	172,230
Finance lease cost:
Depreciation of lease assets		34,111		47,354
Interest on lease liabilities		2,683		6,432
Total finance lease cost		36,794		53,786
Total lease cost	$	268,295	$	226,016

Supplemental balance sheet information related to leases was as follows:

	Classification	September 30, 2022		June 30, 2022
Assets:
Operating lease assets	Operating lease assets	$	10,095,366	$	10,420,604
Finance lease assets	Property and equipment, net(1)		28,783		61,566
Total lease assets		$	10,124,149	$	10,482,170
Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	960,331	$	965,622
Finance leases	Finance lease liabilities, current		21,638		55,348
Noncurrent:
Operating leases	Operating lease liabilities, less current portion		9,114,599		9,478,077
Finance leases	Finance lease liabilities, less current portion		8,085		11,454
Total lease liabilities		$	10,104,653	$	10,510,501

⁽¹⁾ Finance lease assets were recorded net of accumulated depreciation of approximately $451,000 and $418,000 as of September 30, 2022 and June 30, 2022, respectively.

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Lease term and discount rate information related to leases was as follows:

Lease Term and Discount Rate	September 30, 2022
Weighted Average Remaining Lease Term (in years)
Operating leases		9.9
Finance leases		1.1
Weighted Average Discount Rate
Operating leases		2.9	%
Finance leases		7.1	%

Supplemental cash flow information:

	Three Months Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	268,580	$	224,402
Operating cash used for finance leases	$	2,683	$	6,432
Financing cash used for finance leases	$	37,079	$	73,891

Future maturities of lease liabilities were as follows as of September 30, 2022:

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2023 (remaining nine months)		19,886		$	523,109
June 30, 2024		11,811			1,103,955
June 30, 2025		—			1,206,658
June 30, 2026		—			1,178,872
June 30, 2027		—			1,151,769
Thereafter		—			6,874,560
Total future minimum payments		31,697			12,038,923
Less imputed interest		(1,974	)		(1,963,993	)
Present value of lease liabilities	$	29,723		$	10,074,930

11. Loans Payable

As of September 30, 2022 and June 30, 2022, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A. (“BankUnited”). On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to maximum amount of $2,000,000 (the “BankUnited Revolving Line”), (ii) a term loan in the amount of up to $5,813,500 (“BankUnited Term Loan”), and (iii) a non-revolving guidance line of credit up to a maximum amount of $10,000,000 (the “Guidance Line” and, together with the BankUnited Revolving Line and BankUnited Term Loan, the “BankUnited Loans”), which Guidance Line has since been terminated. Each of the BankUnited Loans is evidenced by a promissory note in favor of BankUnited (the “BankUnited Notes”).

On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “First Amendment”). The First Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed. On September 9, 2021, we entered into a letter agreement with BankUnited (the “Letter Agreement”). The Letter Agreement: (i) reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021; (ii) modified the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited; (iii) terminated the Guidance Line; and (iv) required approval from BankUnited prior to our being able to draw upon the Revolving Line, subject to our compliance with the fixed charge coverage ratio for the quarters ending September 30, 2021 and December 31, 2021. The Letter Agreement also granted us a waiver of default arising prior to the Letter Agreement for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021. Based on the waiver, we were no longer in default of the Amended Loan Agreement as of June 30, 2021. Finally, in connection with the Letter Agreement, we paid BankUnited a fee equal to $10,000.

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On November 5, 2021, we entered into a letter agreement with BankUnited (the “Second Letter Agreement”). In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forbearance, or other resolution of the Amended Loan Agreement (as defined below), which resolution would occur on or before December 31, 2021. On December 20, 2021, we entered into the Second Amendment to the Loan Agreement dated February 26, 2019 (the “Second Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Second Amendment, the parties agreed to the following terms, among others: (i) a maturity date of April 15, 2023 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an increased monthly payment amount of $100,000 commencing on November 1, 2022; (iii) beginning on December 20, 2021, each facility will bear interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (3.0% as of March 31, 2022), as adjusted from time to time, (iv) the Term Loan will bear a higher interest rate commencing on August 1, 2022; (v) 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 (vi) a fee of $50,000 payable upon execution of the Second Amendment. The Second Amendment also granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) for the periods ended December 31, 2021, March 31, 2022 and June 30, 2022.

On May 11, 2022, we entered into the Third Amendment to the Loan Agreement dated February 26, 2019 (the “Third Amendment”; and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).  Prior to September 30, 2022, BankUnited agreed to defer the exit fee that would have been due on September 30, 2022 to October 30, 2022, and reduce the amount to 1%.

We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. For additional information, see Note 14, Liquidity.

BankUnited Revolving Line

Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances under the BankUnited Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed $2,000,000, which proceeds could have been used for working capital and general corporate purposes. There were no amounts outstanding on the BankUnited Revolving Line as of June 30, 2021 and no amounts were due upon its expiration on February 26, 2022.

BankUnited Term Loan

Pursuant to the Amended Loan Agreement, BankUnited advanced us $5,813,500 to satisfy in full the amounts owed to Avidbank, including the outstanding principal amount and all accrued interest under the acquisition term loan and to pay the fees and expenses incurred in connection with closing of the BankUnited Loans. The Term Loan was for a 5-year term, but co-terminus with the BankUnited Revolving Line should the BankUnited Revolving Line not be renewed beyond February 26, 2022. Pursuant to the Second Amendment, the maturity date of the Term Loan was April 15, 2023, and pursuant to the Third Amendment, the maturity date of the Term Loan is April 15, 2024. The Term Loan initially bore interest at a per annum rate equal to 2.75% above the 30-day LIBOR. However, pursuant to the Second Amendment, beginning on December 20, 2021, each facility bears interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (5.0% as of September 30, 2022), as adjusted from time to time. Equal monthly principal payments of approximately $48,446, plus accrued interest, are due and payable, in arrears, on the first day of each month during the term. Pursuant to the Second Amendment, the monthly payment, including principal and interest,  increased to $100,000 on November 1, 2022. Upon maturity, all principal and interest shall be immediately due and payable.

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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. Pursuant to the Third Amendment, compliance for both the fixed charge coverage ratio and total leverage ratio was waived for the quarter ended September 30, 2022, 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, other than the exit fees, as discussed above. Late payments are subject to a late fee equal to five percent (5%) of the unpaid amount. Amounts outstanding during an event of default were to accrue interest at a rate of five percent (5%) above the 30-day LIBOR applicable immediately prior to the occurrence of the event of default. Pursuant to the Second Amendment, beginning on December 20, 2021, the default rate was converted to five percent (5%) above BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time. The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and others.

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 $18,600 and $4,600 is included in interest expense for the three-month periods ended September 30, 2022 and 2021, respectively.

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 $275,000), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. An additional 225,000 EUR (or USD $267,000) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months. The Equipment Loan bears interest at a fixed rate of 3.3%.

Future maturities of loans payable are as follows:

	BankUnited Term Loan		Equipment Loan		Unamortized Debt Costs			Total
Fiscal year ending:
June 30, 2023 (remaining nine months)	$	734,037	$	71,296		(40,213	)	$	765,120
June 30, 2024		3,044,738		95,062		—			3,139,800
June 30, 2025		—		95,062		—			95,062
June 30, 2026		—		39,609		—			39,609
After June 30, 2026		—		—		—			—
Total payments	$	3,778,775	$	301,029	$	(40,213	)		4,039,591
Less current portion									(1,091,145	)
Non-current portion								$	2,948,446

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12. Foreign Operations

Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $17,300 and $935,000 as of September 30, 2022 and June 30, 2022, respectively. We also recognized net foreign currency transaction gains of $23,000 and losses of $26,000 during the three months ended September 30, 2022 and 2021, respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash and cash equivalents totaled approximately $4.3 million at September 30, 2022. Of this amount, greater than 50% was held by our foreign subsidiaries in China and Latvia. These foreign funds were generated in China and Latvia as a result of foreign earnings. With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the respective subsidiary must equal at least 50% of its registered capital before any funds can be repatriated through dividends. As of September 30, 2022, LPOIZ had approximately $3.3 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2022.

Assets and net assets in foreign countries are as follows:

	China		Latvia
	September 30, 2022	June 30, 2022	September 30, 2022	June 30, 2022
Assets	$18.4 million	$19.6 million	$11.9 million	$12.7 million
Net assets	$14.6 million	$15.7 million	$9.3 million	$10.0 million

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 $718,000 and $400,000 during the years ended June 30, 2021 and 2022, respectively. During the three months ended September, 2022, we incurred an additional $27,000. Such expenses were recorded as SG&A expenses in the accompanying unaudited Condensed Consolidated Statement of Comprehensive Income (Loss).

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 $485,000 in the aggregate, to be paid over a six-month period following the terminations in April 2021. After the execution of the severance agreements, we discovered additional wrongdoing by the terminated employees. As a result, LPOIZ and LPOI have disputed the employees’ rights to such payments and did not immediately begin making the severance payments. However, based on the likelihood that the courts in China would determine that our subsidiaries would ultimately be obligated to pay these amounts, we accrued for these payments as of June 30, 2021 and they remained accrued as of June 30, 2022 and September 30, 2022. Such expenses were recorded as SG&A expenses in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. In October 2022, the severance amounts were paid to the court in accordance with a court order.

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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. We have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. We expect to incur minimal additional legal fees and consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies.

Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the fiscal year ended June 30, 2022. 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 COVID-19 pandemic, 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, particularly in China, which has impacted the short-term and long-term demand from customers and, therefore, has negatively impacted our results of operations, cash flows, and financial position in that region. Additionally, some areas still have travel restrictions in place, which has impacted 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 taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to precisely estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2023 or beyond.

Impact of Russian-Ukraine Conflict

In February 2022, Russian military forces invaded Ukraine. This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of the Russian-Ukraine conflict on our financial condition, results of operations or cash flows into the foreseeable future.

Potential Impact of Economic Conditions in China

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. Deteriorating economic conditions in China generally and as a result of China’s zero-COVID strategy, have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall.  A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.

14. Liquidity

We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. As discussed in in Note 11, Loans Payable, we have commenced discussions with other lenders, and we anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. We filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under its shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. As of September 30, 2022, we have not issued any shares of its Class A common stock pursuant to the at-the-market equity program.

There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, greater than 50% of our cash and cash equivalents is held by our foreign subsidiaries and, although we regularly repatriate cash, it may not be readily available to repay liabilities in the U.S. 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 or rates, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended June 30, 2022, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

Potential Impact of COVID-19

In March 2020, the WHO declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 has spread throughout world, including the U.S., and continues to spread as additional variants emerge. As a result of the COVID-19 pandemic, our employees at our facilities in China, Latvia, and the U.S. were subject to stay-at-home orders during a portion of fiscal year 2021, which restrictions have since been lifted. In addition to stay-at-home orders, many jurisdictions also implemented social distancing and other restrictions and measures to slow the spread of COVID-19. These restrictions significantly impacted economic conditions in the U.S. in 2020 and continued into 2021 and 2022. Beginning in the spring of 2021, restrictions began to lift as vaccines became more available. Despite these stay-at-home orders and other measures and restrictions implemented in the areas in which we operate, as a critical supplier to both the medical and defense industries, we were deemed to be an essential business; thus, regardless of the stay-at-home orders, our workforce was permitted to work from our facilities and our business operations have generally continued to operate as normal. Nonetheless, despite the lifting of these stay-at-home orders, out of concern for our workforce, our U.S.- and Latvia-based non-manufacturing employees have continued to work remotely to some extent. To date, we have not seen any significant direct financial impact of COVID-19 to our business. However, the COVID-19 pandemic continues to impact economic conditions, particularly in China, which has impacted the short-term and long-term demand from our customers and, therefore, has negatively impacted our results of operations, cash flows, and financial position in that region. Additionally, some areas still have travel restrictions in place, which has impacted 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 taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. 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, financials, or liquidity in fiscal year 2023 or 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.

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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. Since June 2019, ISP’s manufacturing operation has been located at our Orlando Facility. ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s facility in Riga, Latvia (the “Riga Facility”) functions as its manufacturing facility.

For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2022.

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, with a product manager for each. Product management is principally a portfolio management process that analyzes products within the product capability areas as defined above. This function facilitates 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.

We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies. Many of our optical assemblies consist of several products that we manufacture.

In connection with our new strategic direction and the expanding portfolio of products and services, we are evaluating the ways in which we may optimize the financial reporting of our product groups.

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 had lacked synergies, maintained a high cost structure, and lacked a defined path for capitalizing on the industry’s evolution and growth opportunities.

In March of 2020, our Board of Directors (our “Board”) recruited Mr. Sam Rubin, an industry veteran with a proven track record for delivering high growth through organic and inorganic means, to assume the role of Chief Executive Officer and to develop and implement a new strategy going forward. In the fall of 2020, Mr. Rubin led our Board and the leadership team in collaborative discussions with the purpose of defining a new comprehensive strategy for our business. The collaborative strategic planning process included leaders from across the organization, detailed dialogs with customers, vendors and partners, and an in-depth analysis of the environment we are in, changes and trends in and around the use of photonics, and an analysis of our capabilities, strengths and weaknesses. Throughout the process, we focused on developing a strategy that creates a unique and long-lasting value to our customers, and utilizes our unique capabilities and differentiators, both existing capabilities and differentiators, as well as new capabilities we acquire and develop organically.

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Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems. In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with many component manufacturers into a solution-focused industry with the potential for partnerships for solution development and production. We believe such partnerships can start with us as the supplier. We have in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities. We believe we can 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 that we own, and supplying the customer with a complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we currently own, such as optical molding, fabrication, system design, and proprietary manufacturing technologies, along with other technologies that we may acquire or develop in the future, to create tailored solutions for our customers.

Our domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, freeing them from the need to develop subject matter expertise in optics. By providing the bridge into the optical solution world, we are able to partner with our customers on a long-term basis, create value for our customers, and capture that value through the long-term supply relationships we seek to develop.

Further information about our strategic direction can be found in our recent Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

Results of Operations

Revenue

Revenue for the first quarter of fiscal 2023 was approximately $7.4 million, a decrease of approximately $1.7 million, or 19%, as compared to approximately $9.1 million in the same period of the prior fiscal year. The two main factors contributing to the sales decrease were as follows: (1) decreased demand in the Asia market due to the economic downturn in China; and (2) sales across all product groups were negatively impacted by the unexpected closure of our U.S. facility for the last several days of the fiscal 2023 first quarter due to Hurricane Ian.

Revenue generated by infrared products was approximately $3.6 million in the first quarter of fiscal 2023, a decrease of approximately $1.2 million, or 26%, as compared to approximately $4.9 million in the same period of the prior fiscal year. The decrease in revenue is primarily driven by sales of BD6-based molded infrared products, particularly to customers in the China industrial market. Sales of diamond-turned infrared products also decreased, primarily attributable to customers in the defense and industrial markets.

Revenue generated by PMO products was approximately $3.3 million for the first quarter of fiscal 2023, a decrease of approximately $540,000, or 14%, as compared to approximately $3.8 million in the same period of the prior fiscal year. The decrease in revenue is primarily attributed to decreases in sales through our catalog and distribution channels, as well as sales to commercial customers. The majority of the decrease in sales through our catalog and distribution channels is due to the termination of our distribution agreement in Europe during the third quarter of fiscal 2022. We are no longer accepting new orders through this distributor, and are now soliciting and receiving orders directly from the end customers. This transition will continue through the third quarter of fiscal 2023, as we will continue to ship distribution orders that were in place prior to the contract termination. The remainder of the decrease in PMO product sales is related to customers in China, across all of the industries we serve.

Revenue generated by our specialty products was approximately $455,000 in the first quarter of fiscal 2023, an increase of approximately $52,000, or 13%, compared to $402,000 in the same period of the prior fiscal year. The increase was primarily driven by non-recurring charges billed to a customer during the first quarter of fiscal 2023.

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Cost of Sales and Gross Margin

Gross margin in the first quarter of fiscal 2023 was approximately $2.2 million, a decrease of 30%, as compared to approximately $3.2 million in the same period of the prior fiscal year. Total cost of sales was approximately $5.1 million for the first quarter of fiscal 2023, compared to approximately $5.9 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 30% for the first quarter of fiscal 2023, compared to 35% for the same period of the prior fiscal year. The decrease in gross margin as a percentage of revenue is primarily due to the significantly lower revenue level, with less contribution toward fixed manufacturing costs. Maintaining a gross margin of 30% at this low revenue level reflects the benefit of a number of the operational and cost structure improvements that we have been implementing.

Selling, General and Administrative

SG&A costs were approximately $2.6 million for the first quarter of fiscal 2023, a decrease of approximately $231,000, or 8%, as compared to approximately $2.9 million in the same period of the prior fiscal year. The decrease in SG&A costs is primarily due to a decrease of approximately $300,000 of expenses associated with the previously disclosed events that occurred at our Chinese subsidiaries, including legal and consulting fees. Please refer to Note 13, Contingencies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information.

New Product Development

New product development costs were approximately $550,000 in the first quarter of fiscal 2023, an increase of approximately $123,000, or 29%, as compared to the same period of the prior fiscal year. This increase was primarily due to the re-allocation of personnel resources 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, net, was approximately $70,000 for the first quarter of fiscal 2023, as compared to $46,000 for the same period of the prior fiscal year. The increase in interest expense is due to higher interest rates and increased amortization of loan fees. Total debt has decreased 19% as of the quarter ended September 30, 2022, as compared to the quarter ended September 30, 2021.

Other income, net, was approximately $27,000 for the first quarter of fiscal 2023, as compared to other expense, net, of $51,000 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 2023, we incurred net foreign currency transaction gains of approximately $23,000, compared to losses of approximately $26,000 for the same period of the prior fiscal year.

Income Taxes

During the first quarter of fiscal 2023, income tax expense was approximately $102,000, compared to approximately $130,000 for the same period of the prior fiscal year. Income tax expense is primarily related to income taxes from our operations in China, including estimated Chinese withholding taxes associated with intercompany dividends declared by LPOIZ and payable to us as its parent company. The decrease is due to lower taxable income in that jurisdiction.

Net Loss

Net loss for the first quarter of fiscal 2023 was approximately $1.4 million, or $0.05 basic and diluted loss per share, compared to $632,000, or $0.02 basic and diluted loss per share, for the same quarter of the prior fiscal year. The increase in net loss for the first quarter of fiscal 2023, as compared to the same period of the prior fiscal year, was primarily attributable to lower revenue and gross margin, partially offset by lower operating expenses and income taxes.

Weighted-average common shares outstanding were 27,070,949, basic and diluted, in the first quarter of fiscal 2023, compared to 26,993,971, basic and diluted, in the first quarter of fiscal 2022. The increase in the weighted-average basic common shares was due to the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs.

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Potential Impact of Economic Conditions in China

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. According to the National Bureau of Statistics of China, the annual economic growth rate in China was 6.9% in 2017, 6.8% in 2018, 6.1% in 2019, 2.3% in 2020, and 8.1% in 2021. The annual economic growth rate in 2022 is estimated to be 4.8%, although some analysts have indicated that China’s economic growth could be lower.  Deteriorating economic conditions in China generally and as a result of China’s zero-COVID strategy, have led to lower demand for the Company’s products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall.  A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.

Liquidity and Capital Resources

As of September 30, 2022, we had working capital of approximately $9.2 million and total cash and cash equivalents of approximately $4.3 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. As of September 30, 2022, LPOIZ had approximately $3.3 million available for repatriation and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2022.

Loans payable consists of the BankUnited Term Loan, pursuant to the Amended Loan Agreement, and the subordinated Equipment Loan. As of September 30, 2022, the outstanding balance on the BankUnited Term Loan was approximately $3.8 million. The outstanding balance on the Equipment Loan was approximately $301,000 as of September 30, 2022.

The Amended Loan Agreement and the Letter Agreement includes certain customary covenants. As of September 30, 2022, we obtained a waiver of compliance for both the fixed charge coverage ratio and total leverage ratio, and we were in compliance with all other covenants, as amended. For additional information, see Note 11, Loans Payable, to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

In February 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under our shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. As of September 30, 2022, we have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.

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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 or rates, 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 $415,000 for the first three months of fiscal 2023, compared to approximately $1.6 million for the same period of the prior fiscal year. Cash used in operations for the first three months of fiscal 2023 was less than in the comparable period, with an outflow of approximately $69,000 from the net change in operating assets and liabilities in the first quarter of fiscal 2023, compared to $2 million from the net changes in operating assets and liabilities for the first quarter of fiscal 2022. The amount of cash used in operations in the first fiscal quarter of 2022 resulted from several factors, including a decrease in accounts payable and accrued liabilities during such quarter arising from the payment of certain expenses related to previously disclosed events that occurred at our Chinese subsidiaries which were accrued as of June 30, 2021, and an increase in accounts receivable due to higher sales than the previous sequential quarter.  Cash used in operations in the first three months of fiscal 2023 reflect a decrease in accounts receivable due to lower sales than the previous sequential quarter.

Cash Flows – Investing:

During the first three months of fiscal 2023, we expended approximately $243,000 in investments in capital equipment, compared to approximately $1.2 million in the same period of the prior fiscal year. The first three months of fiscal 2023 reflects only maintenance capital expenditures, whereas 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 2023 will be greater than fiscal 2022, however, the total amount expended will depend on opportunities and circumstances.

Cash Flows – Financings:

Net cash used in financing activities was approximately $187,000 for the first three months of fiscal 2023, compared to cash provided by financing activities of approximately $51,000 in the same period of the prior fiscal year. Cash used in financing activities for the first three months of fiscal 2023 reflects approximately $207,000 in principal payments on our loans and finance leases offset by approximately $20,000 in proceeds from the sale of Class A common stock under the 2014 ESPP. 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.

Contractual Obligations and Commitments

As of September 30, 2022, 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 2023 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, 2022.

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, 2022 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended June 30, 2022.

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How We Operate

We have continuing sales of two basic types: sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and the more challenging and potentially more rewarding business of customer product development. In this latter type of business, we work with customers to help them determine optical specifications and even create certain optical designs for them, including complex multi-component designs that we call “engineered solutions.” This is followed by “sampling” small numbers of the product for the customers’ test and evaluation. Thereafter, should a customer conclude that our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket purchase order” type or a supply agreement. The strategy is to create an annuity revenue stream that makes the best use of our production capacity, as compared to the turns business, which is unpredictable and uneven. This annuity revenue stream can also generate low-cost, high-volume type orders. A key business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:

· Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff;

· The fact that as our customers take products of this nature into higher volume, commercial production (for example, in the case of molded optics, this may be volumes over one million pieces per year) they begin to focus on reducing costs – which often leads them to turn to larger or overseas producers, even if sacrificing quality; and

· Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures.

Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the merchant market, a market that we believe is underserved in this area of service offering. Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of a critical component from foreign merchant production sources. For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in our Annual Report on Form 10-K dated June 30, 2022.

Our Key Performance Indicators:

Typically, on a weekly basis, management reviews a number of performance indicators, both qualitative and quantitative. These indicators change from time to time as the opportunities and challenges in the business change. These indicators are used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted, are proprietary information.

Financial indicators that are considered key and reviewed regularly are as follows:

· Sales backlog;

· Revenue dollars and units by product group; and

· Other key indicators.

These indicators are also used to determine tactical operating actions and changes and are discussed in more detail below. Management is evaluating these key indicators as we transition to our new strategic plan, and is implementing certain changes and updates as further described below.

Sales Backlog

We believe our sales growth has been and continues to be our best indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what percent of the backlog is scheduled by the customer for date-certain delivery. We evaluate our total backlog, which includes all firm orders requested by a customer that are reasonably believed to remain in the backlog and be converted into revenues. This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria. Generally, a higher total backlog is better for us.

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Our total backlog at September 30, 2022 was approximately $23.0 million, an increase of 19%, as compared to $19.3 million as of September 30, 2022. Compared to the end of fiscal 2022, our total backlog increased by 29% during the first three months of fiscal 2023. 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 2022	$	19,265		-10	%		-10	%
Q2 2022	$	21,929		3	%		14	%
Q3 2022	$	19,678		-8	%		-10	%
Q4 2022	$	17,767		-17	%		-10	%
Q1 2023	$	22,973		29	%		29	%

The increase in backlog during the first three months of fiscal 2023 was largely due to a $4 million supply agreement with a long time European customer of precision motion control systems and OEM assemblies. The new supply agreement will go into effect in the second half of our fiscal year 2023 and is expected to run for around 12-18 months. In addition, orders were received for several other significant long-term projects with customers in the U.S and in Europe.

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. The timing of other contract renewals may not be as consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and the total backlog is subsequently drawn down as shipments are made against these orders. Our annual and multi-year contracts are expected to renew in future quarters.

Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 material. With the global supply of germanium currently concentrated in Russia and China, recent global events are generating renewed interest in BD6 as an alternative to germanium. We expect to maintain moderate growth in our visible PMO product group by continuing to diversify and offer new applications, with a cost competitive structure. However, order bookings for both PMO and Infrared products continue to be slow in China. During fiscal 2022, we believe the terminations of certain of our management employees in our China subsidiaries, LPOIZ and LPOI, and transition to new management personnel, adversely impacted the domestic sales in China of these subsidiaries. Although our new sales and management personnel have begun to establish relationships with customers, domestic sales in China have also been adversely impacted by the economic downturn in China, which we expect to continue to negatively impact fiscal 2023 revenue in that region.

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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, 2022 and 2021:

	(unaudited)
	Three Months Ended September 30,				Quarter
	2022			2021	% Change
Revenue
PMO	$	3,272,555	$	3,812,950		-14	%
Infrared Products		3,639,659		4,887,918		-26	%
Specialty Products		454,687		402,475		13	%
Total revenue	$	7,366,901	$	9,103,343		-19	%
Units
PMO		447,486		494,307		-9	%
Infrared Products		45,375		144,447		-69	%
Specialty Products		29,966		5,262		469	%
Total units		522,827		644,016		-19	%

Three months ended September 30, 2022

Our revenue decreased by 19% in the first quarter of fiscal 2023, as compared to the same quarter of the prior fiscal year, driven by decreases in both PMO and Infrared products. The two main factors contributing to the sales decrease were as follows: (1) decreased demand in the Asia market due to the economic downturn in China; and (2) sales across all product groups were negatively impacted by the unexpected closure of our U.S. facility for the last several days of the fiscal 2023 first quarter due to Hurricane Ian.

Revenue from the PMO product group for the first quarter of fiscal 2023 was $3.3 million, a decrease of 14%, as compared to the same quarter of the prior fiscal year. The decrease in revenue is primarily attributed to decreases in sales through our catalog and distribution channels, as well as sales to commercial customers. The majority of the decrease in sales through our catalog and distribution channels is due to the termination of our distribution agreement in Europe during the third quarter of fiscal 2022. We are no longer accepting new orders through this distributor, and are now soliciting and receiving orders directly from the end customers. This transition will continue through the third quarter of fiscal 2023, as we will continue to ship distribution orders that were in place prior to the contract termination. The remainder of the decrease in PMO product sales is related to customers in China, across all of the industries we serve.

Revenue generated by the infrared product group for the first quarter of fiscal 2023 was $3.6 million, a decrease of 26%, as compared to same quarter of the prior fiscal year. The decrease in revenue is primarily driven by sales of BD6-based molded infrared products, particularly to customers in the China industrial market. Sales of diamond-turned infrared products also decreased, primarily attributable to customers in the defense and industrial markets.

Our specialty products revenue increased by 13%, as compared to the same period of the prior fiscal year, and represented 6% and 4% of total revenue for the first quarters of fiscal 2023 and 2022, respectively. The increase was primarily driven by non-recurring charges billed to a customer during the first quarter of fiscal 2023.

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.”

28

Non-GAAP Financial Measures

We report our historical results in accordance with GAAP; however, our management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

EBITDA

EBITDA is a non-GAAP financial measure used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA, as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not necessarily a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”

We believe EBITDA is helpful for investors to better understand our underlying business operations. The following table adjusts net loss to EBITDA for the quarters ended September 30, 2022 and 2021:

	(unaudited)
	Quarter Ended September 30,
	2022			2021
Net loss	$	(1,380,700	)	$	(632,097	)
Depreciation and amortization		816,334			910,962
Income tax provision		102,134			129,873
Interest expense		70,370			45,749
EBITDA	$	(391,862	)	$	454,487
% of revenue		-5	%		5	%

Our EBITDA for the quarter ended September 30, 2022 was a loss of approximately $392,000, compared to earnings of $454,000 for the same period of the prior fiscal year. The decrease in EBITDA in the first quarter of fiscal 2023 was primarily attributable to lower revenue and gross margin, partially offset by lower operating costs.

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, 2022, the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2022 in reporting on a timely basis information required to be disclosed by us in the reports we file or submit under the Exchange Act.

There have not been any significant changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

29

PART II OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A. Risk Factors

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2022, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the quarter ended September 30, 2022, there have been no material changes from the risk factors previously disclosed under Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2022.

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

None

30

Item 6. Exhibits

The following exhibits are filed herewith as a part of this report.

Exhibit Number		Description
3.1.1	Certificate of Incorporation of LightPath Technologies, Inc., filed June 15, 1992 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.1 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.
3.1.2	Certificate of Amendment to Certificate of Incorporation of LightPath Technologies, Inc., filed October 2, 1995 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.2 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.
3.1.3	Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of LightPath Technologies, Inc., filed November 9, 1995 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.3 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.
3.1.4	Certificate of Designation of Series A Preferred Stock of LightPath Technologies, Inc., filed July 9, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.4 to our Annual Report on Form 10-KSB40 filed with the Securities and Exchange Commission on September 11, 1997, and is incorporated herein by reference thereto.
3.1.5	Certificate of Designation of Series B Stock of LightPath Technologies, Inc., filed October 2, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto.
3.1.6	Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed November 12, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto.
3.1.7	Certificate of Designation of Series C Preferred Stock of LightPath Technologies, Inc., filed February 6, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No. 333-47905) filed with the Securities and Exchange Commission on March 13, 1998, and is incorporated herein by reference thereto.
3.1.8	Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc. filed April 29, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 1 to our Registration Statement on Form 8-A (File No. 000-27548) filed with the Securities and Exchange Commission on April 28, 1998, and is incorporated herein by reference thereto.
3.1.9	Certificate of Designation of Series F Preferred Stock of LightPath Technologies, Inc., filed November 2, 1999 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No: 333-94303) filed with the Securities and Exchange Commission on January 10, 2000, and is incorporated herein by reference thereto.
3.1.10	Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed February 28, 2003 with the Secretary of State of Delaware, which was filed as Appendix A to our Proxy Statement (File No. 000-27548) filed with the Securities and Exchange Commission on January 24, 2003, and is incorporated herein by reference thereto.
3.1.11	Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed March 1, 2016 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.11 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on November 14, 2016, and is incorporated herein by reference thereto.
3.1.12	Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto.
3.1.13	Certificate of Amendment of Certificate of Designations of Class A Common Stock and Class E-1 Common Stock, Class E-2 Common Stock, and Class E-3 Common Stock of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto.
3.1.14	Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc., filed January 30, 2018 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 1, 2018, and is incorporated herein by references thereto.
3.2.1	Second Amended and Restated Bylaws of LightPath Technologies, Inc., which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 3, 2021, and is incorporated herein by reference thereto.

31

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

101.INS	Inline XBRL Instance Document	*
101.SCH	Inline XBRL Taxonomy Extension Schema Document	*
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	*
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	*
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document	*
104	Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101	*

*filed herewith

32

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 10, 2022	By:	/s/ Shmuel Rubin
		Shmuel Rubin
		President and Chief Executive Officer

Date: November 10, 2022	By:	/s/ Albert Miranda
		Albert Miranda
		Chief Financial Officer

33

EX-31.1

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 10, 2022	By:	/s/ Shmuel Rubin
		Shmuel Rubin
		President and Chief Executive Officer

EX-31.2

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 10, 2022

By:	/s/ Albert Miranda
	Albert Miranda
	Chief Financial Officer

EX-32.1

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, 2022 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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 10, 2022	By:	/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.

EX-32.2

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, 2022 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
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 10, 2022	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.

XML

Cover - shares	3 Months Ended
	Sep. 30, 2022	Nov. 07, 2022
Cover [Abstract]
Entity Registrant Name	LIGHTPATH TECHNOLOGIES, INC.
Entity Central Index Key	0000889971
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2022
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Entity Common Stock Shares Outstanding		27,082,022
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-27548
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	86-0708398
Entity Address Address Line 1	2603 Challenger Tech Ct
Entity Address Address Line 2	Suite 100
Entity Address City Or Town	Orlando
Entity Address State Or Province	FL
Entity Address Postal Zip Code	32826
City Area Code	407
Local Phone Number	382-4003
Security 12b Title	Class A Common Stock, par value $0.01
Trading Symbol	LPTH
Security Exchange Name	NASDAQ
Entity Interactive Data Current	Yes

XML

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Current assets:
Cash and cash equivalents	$ 4,298,869	$ 5,507,891
Trade accounts receivable, net of allowance of $46,691 and $36,313	4,584,019	5,211,292
Inventories, net	7,005,709	6,985,427
Other receivables	82,391	0
Prepaid expenses and other assets	434,601	464,804
Total current assets	16,405,589	18,169,414
Property and equipment, net	10,767,788	11,640,463
Operating lease right-of-use assets	10,095,366	10,420,604
Intangible assets, net	4,176,527	4,457,798
Goodwill	5,854,905	5,854,905
Deferred tax assets, net	143,000	143,000
Other assets	47,066	27,737
Total assets	47,490,241	50,713,921
Current liabilities:
Accounts payable	2,344,334	3,073,933
Accrued liabilities	864,301	558,750
Accrued payroll and benefits	1,888,766	2,081,212
Operating lease liabilities, current	960,331	965,622
Loans payable, current portion	1,091,145	998,692
Finance lease obligation, current portion	21,638	55,348
Total current liabilities	7,170,515	7,733,557
Deferred tax liabilities, net	511,419	541,015
Finance lease obligation, less current portion	8,085	11,454
Operating lease liabilities, noncurrent	9,114,599	9,478,077
Loans payable, less current portion	2,948,446	3,218,580
Total liabilities	19,753,064	20,982,683
Stockholders' equity:
Preferred stock: Series D, $.01 par value, voting; 500,000 shares authorized; none issued and outstanding	0	0
Common stock: Class A, $.01 par value, voting; 44,500,000 shares authorized; 27,071,929 and 27,046,790 shares issued and outstanding	270,719	270,468
Additional paid-in capital	232,619,220	232,315,003
Accumulated other comprehensive income	17,296	935,125
Accumulated deficit	(205,170,058)	(203,789,358)
Total stockholders' equity	27,737,177	29,731,238
Total liabilities and stockholders' equity	$ 47,490,241	$ 50,713,921

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Condensed Consolidated Balance Sheets
Allowance For Doubtful Trade Accounts Receivable	$ 46,691	$ 36,313
Preferred Stock: Series D, Par Value	$ 0.01	$ 0.01
Preferred Stock: Series D, Shares Authorized	500,000	500,000
Preferred Stock: Series D, Shares Issued	0	0
Preferred Stock: Series D, Shares Outstanding	0	0
Common Stock: Class A, Par Value	$ 0.01	$ 0.01
Common Stock: Class A, Shares Authorized	44,500,000	44,500,000
Common Stock: Class A, Shares Issued	27,071,929	27,046,790
Common Stock: Class A, Shares Outstanding	27,071,929	27,046,790

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Revenue, net	$ 7,366,901	$ 9,103,343
Cost of sales	5,132,989	5,931,408
Gross margin	2,233,912	3,171,935
Operating expenses:
Selling, general and administrative	2,638,173	2,869,046
New product development	549,881	427,011
Amortization of intangibles	281,271	281,271
Total operating expenses	3,469,325	3,577,328
Operating loss	(1,235,413)	(405,393)
Other income (expense):
Interest expense, net	(70,370)	(45,749)
Other income (expense), net	27,217	(51,082)
Total other income (expense), net	(43,153)	(96,831)
Loss before income taxes	(1,278,566)	(502,224)
Income tax provision	102,134	129,873
Net loss	(1,380,700)	(632,097)
Foreign currency translation adjustment	(917,829)	(144,174)
Comprehensive loss	$ (2,298,529)	$ (776,271)
Loss per common share (basic)	$ (0.05)	$ (0.02)
Number of shares used in per share calculation (basic)	27,070,949	26,993,971
Loss per common share (diluted)	$ (0.05)	$ (0.02)
Number of shares used in per share calculation (diluted)	27,070,949	26,993,971

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Total	Class A Common Stock	Additional Paid-In Capital	Accumulated other comprehensive loss	Retained Earnings (Accumulated Deficit)
Balance, shares at Jun. 30, 2021		26,985,913
Balance, amount at Jun. 30, 2021	$ 33,577,485	$ 269,859	$ 231,438,651	$ 2,116,152	$ (200,247,177)
Employee Stock Purchase Plan, shares		8,621
Employee Stock Purchase Plan, amount	21,726	$ 86	21,640	0	0
Stock-based compensation on stock options & RSUs	116,591	0	116,591	0	0
Foreign currency translation adjustment	(144,174)	0	0	(144,174)	0
Net loss	(632,097)	0	0	0	(632,097)
Balance, amount at Sep. 30, 2021	32,939,531	$ 269,945	231,576,882	1,971,978	(200,879,274)
Balance, share at Sep. 30, 2021		26,994,534
Balance, shares at Jun. 30, 2022		27,046,790
Balance, amount at Jun. 30, 2022	29,731,238	$ 270,468	232,315,003	935,125	(203,789,358)
Employee Stock Purchase Plan, shares		16,287
Employee Stock Purchase Plan, amount	19,870	$ 163	19,707	0	0
Stock-based compensation on stock options & RSUs	284,598	0	284,598	0	0
Foreign currency translation adjustment	(917,829)	0	0	(917,829)	0
Net loss	(1,380,700)	$ 0	0	0	(1,380,700)
Exercise of Stock Options & RSUs, net,share		8,852
Exercise of Stock Options & RSUs, net,amount	0	$ 88	(88)	0	0
Balance, amount at Sep. 30, 2022	$ 27,737,177	$ 270,719	$ 232,619,220	$ 17,296	$ (205,170,058)
Balance, share at Sep. 30, 2022		27,071,929

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net loss	$ (1,380,700)	$ (632,097)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	816,334	910,962
Interest from amortization of debt costs	18,560	4,643
Stock-based compensation on stock options & RSUs, net	284,598	116,591
Provision for doubtful accounts receivable	(12,452)	12,010
Change in operating lease assets and liabilities	(43,531)	(52,172)
Inventory write-offs to allowance	0	60,935
Deferred tax benefit	(29,596)	0
Changes in operating assets and liabilities:
Trade accounts receivable	639,725	(1,283,594)
Other receivables	(82,391)	134,860
Inventories	(20,282)	(109,829)
Prepaid expenses and other assets	10,874	19,702
Accounts payable and accrued liabilities	(616,494)	(799,693)
Net cash used in operating activities	(415,355)	(1,617,682)
Cash flows from investing activities:
Purchase of property and equipment	(243,393)	(1,199,005)
Net cash used in investing activities	(243,393)	(1,199,005)
Cash flows from financing activities:
Proceeds from sale of common stock from Employee Stock Purchase Plan	19,870	21,726
Borrowings on loans payable	0	266,850
Payments on loans payable	(169,902)	(163,758)
Repayment of finance lease obligations	(37,079)	(73,891)
Net cash (used in) provided by financing activities	(187,111)	50,927
Effect of exchange rate on cash and cash equivalents	(363,163)	(31,953)
Change in cash and cash equivalents	(1,209,022)	(2,797,713)
Cash and cash equivalents, beginning of period	5,507,891	6,774,694
Cash and cash equivalents, end of period	4,298,869	3,976,981
Supplemental disclosure of cash flow information:
Interest paid in cash	48,803	41,466
Income taxes paid	$ 140,756	$ 111,535

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Basis of Presentation

3 Months Ended

Sep. 30, 2022

Basis of Presentation

1. Basis Of Presentaion

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, 2022, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended June 30 and the associated quarters of those fiscal years.

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

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Significant Accounting Policies

3 Months Ended

Sep. 30, 2022

Significant Accounting Policies

2. Significant Accounting Policies

2. Significant Accounting Policies

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

Use of Estimates

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

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Revenue

3 Months Ended

Sep. 30, 2022

Revenue

3. Revenue

3. Revenue

Product Revenue

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

Revenue Recognition

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

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

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, 2022 and 2021 was as follows:

	Three Months Ended September 30,
	2022		2021
PMO	$	3,272,555	$	3,812,950
Infrared Products		3,639,659		4,887,918
Specialty Products		454,687		402,475
Total revenue	$	7,366,901	$	9,103,343

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Inventories

3 Months Ended

Sep. 30, 2022

Inventories

4. Inventories

4. Inventories

The components of inventories include the following:

	September 30, 2022			June 30, 2022
Raw materials	$	2,788,577		$	3,019,156
Work in process		2,731,354			2,243,907
Finished goods		2,916,888			3,052,001
Allowance for obsolescence		(1,431,110	)		(1,329,637	)
	$	7,005,709		$	6,985,427

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

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Property and Equipment

3 Months Ended

Sep. 30, 2022

Property and Equipment

5. Property And Equipment

5. Property and Equipment

Property and equipment are summarized as follows:

	Estimated Lives (Years)		September 30, 2022			June 30, 2022
Manufacturing equipment	5 - 10		$	21,291,400		$	22,058,636
Computer equipment and software	3 - 5			989,720			978,348
Furniture and fixtures		5		338,819			352,060
Leasehold improvements	5 - 7			2,976,292			3,043,867
Construction in progress				972,199			943,793
Total property and equipment				26,568,430			27,376,704
Less accumulated depreciation and amortization				(15,800,642	)		(15,736,241	)
Total property and equipment, net			$	10,767,788		$	11,640,463

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Goodwill and Intangible Assets

3 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets

6. Goodwill And Intangible Assets

6. Goodwill and Intangible Assets

There were no changes in the net carrying value of goodwill during the three months ended September 30, 2022.

Identifiable intangible assets were comprised of:

	Useful Lives (Years)		September 30, 2022			June 30, 2022
Customer relationships		15	$	3,590,000		$	3,590,000
Trade secrets		8		3,272,000			3,272,000
Trademarks		8		3,814,000			3,814,000
Total intangible assets				10,676,000			10,676,000
Less accumulated amortization				(6,499,473	)		(6,218,202	)
Total intangible assets, net			$	4,176,527		$	4,457,798

Future amortization of identifiable intangibles is as follows:

Fiscal year ending:
June 30, 2023 (remaining nine months)		843,812
June 30, 2024		1,125,083
June 30, 2025		658,398
June 30, 2026		239,334
After June 30, 2026		1,309,900
	$	4,176,527

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Income Taxes

3 Months Ended

Sep. 30, 2022

Income Taxes

7. Income Taxes

7. Income Taxes

A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2022 and 2021 is as follows:

	Three Months Ended September 30,
	2022			2021
(Loss) income before income taxes	$	(1,278,566	)	$	(502,224	)
Income tax provision	$	102,134		$	129,873
Effective income tax rate		-8	%		-26	%

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, 2022 and 2021, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), which dividend will be paid to us, as its parent company.

We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of September 30, 2022 and June 30, 2022, our net deferred tax assets are related to the U.S. jurisdiction and we have provided for a valuation allowance 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 25.5%. Based on our current assessment of the valuation allowance position on our net deferred tax assets, no additional tax expense or benefit is expected to be recorded on pre-tax income or losses generated in the U.S.

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, 2022, LPOI and LPOIZ were subject to statutory income tax rates of 25% and 15%, respectively. The net deferred tax liabilities included in the accompanying unaudited Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022 are related to LPOIZ, and primarily consist of timing differences related to depreciation.

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. The Company accrues withholding taxes on the portion of LPOZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $40,000 as of both September 30, 2022 and June 30, 2022. Other than these withholding taxes, these intercompany dividends have no impact on the Consolidated Financial Statements.

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 Optics Corporation (“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.

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StockBased Compensation

3 Months Ended

Sep. 30, 2022

StockBased Compensation

8. Stock-based Compensation

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, 2022 and 2021 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

	Three Months Ended September 30,
	2022		2021
Stock options	$	58,765	$	24,128
RSUs		225,833		92,463
Total	$	284,598	$	116,591

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 $1,954 and $2,155 for the three months ended September 30, 2022 and 2021, respectively, is included in SG&A expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP.

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, 2022 and 2021. The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures. The interest rate used is the U.S. Treasury interest rate for constant maturities.

No stock options were granted during the three months ended September 30, 2022 or during the three months ended September 30, 2021.

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the three months ended September 30, 2022 is presented below:

	Stock Options						Restricted Stock Units (RSUs)
			Weighted-		Weighted-					Weighted-
			Average		Average					Average
			Exercise		Remaining					Remaining
	Shares		Price		Contract		Shares			Contract
June 30, 2022		534,462	$	2.03		7.0		2,079,669			0.9
Granted		-	$	-				8,852
Exercised		-	$	-				(8,852	)
Cancelled/Forfeited		-	$	-				-
September 30, 2022		534,462	$	2.03		6.9		2,079,669			0.9
Awards exercisable/
vested as of
September 30, 2022		246,392	$	1.89		6.6		1,334,978			—
Awards unexercisable/
unvested as of
September 30, 2022		288,070	$	2.15		7.1		744,691			0.9
		534,462						2,079,669

RSU awards vest immediately or from one to four years from the date of grant.

As of September 30, 2022, there was approximately $836,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted. We expect to recognize the compensation cost as follows:

Fiscal Year Ending:	Stock Options		RSUs		Total
June 30, 2023 (remaining nine months)	$	145,557	$	317,172	$	462,729
June 30, 2024		94,196		190,864		285,060
June 30, 2025		33,885		54,308		88,193
	$	273,638	$	562,344	$	835,982

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Earnings (Loss) Per Share

3 Months Ended

Sep. 30, 2022

Earnings (Loss) Per Share

9. Earnings (loss) Per Share

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 September 30,
	2022			2021
Net loss	$	(1,380,700	)	$	(632,097	)
Weighted-average common shares outstanding:
Basic number of shares		27,070,949			26,993,971
Effect of dilutive securities:
Options to purchase common stock		-			-
RSUs		-			-
Diluted number of shares		27,070,949			26,993,971
Loss per common share:
Basic	$	(0.05	)	$	(0.02	)
Diluted	$	(0.05	)	$	(0.02	)

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 September 30,
	2022		2021
Options to purchase common stock		534,462		427,726
RSUs		2,061,090		1,738,439
		2,595,552		2,166,165

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Leases

3 Months Ended

Sep. 30, 2022

Leases

10. Leases

10. Leases

Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida. The operating leases for facilities are non-cancelable operating leases, expiring through 2032. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option. We currently have obligations under two finance lease agreements, entered into during fiscal 2019, with terms ranging from three to five years. The leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. We have had two leases for premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”).  We assigned one of such leases to a third-party and agreed that we would vacate the premises subject to the assigned lease on November 30,2022.  We are in discussions with the third party to extend our occupancy for a limited period of time after November 30, 2022.  If the third party does not agree to extend our occupancy, and we do not vacate the premises on or before November 30, 2022, we may be subject to claims as a result thereof. We amended the second such lease in April 2021, and again in September 2021, to extend the term of such lease to 2032 and increase the leased space from 26,000 square feet to approximately 58,500 square feet. Effective in January 2022, our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively.

As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently, none of our leases include variable lease payments that are dependent on an index or rate. We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

We received tenant improvement allowances for each of our two leases with respect to our Orlando Facility. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms. We are constructing additional tenant improvements in the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $2.4 million in tenant improvement allowances. We will fund the balance of the tenant improvement costs, which we estimate will be approximately $2.5 million.

The components of lease expense were as follows:

	Three Months Ended September 30,
	2022		2021
Operating lease cost	$	231,501	$	172,230
Finance lease cost:
Depreciation of lease assets		34,111		47,354
Interest on lease liabilities		2,683		6,432
Total finance lease cost		36,794		53,786
Total lease cost	$	268,295	$	226,016

Supplemental balance sheet information related to leases was as follows:

	Classification	September 30, 2022		June 30, 2022
Assets:
Operating lease assets	Operating lease assets	$	10,095,366	$	10,420,604
Finance lease assets	Property and equipment, net(1)		28,783		61,566
Total lease assets		$	10,124,149	$	10,482,170
Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	960,331	$	965,622
Finance leases	Finance lease liabilities, current		21,638		55,348
Noncurrent:
Operating leases	Operating lease liabilities, less current portion		9,114,599		9,478,077
Finance leases	Finance lease liabilities, less current portion		8,085		11,454
Total lease liabilities		$	10,104,653	$	10,510,501

⁽¹⁾ Finance lease assets were recorded net of accumulated depreciation of approximately $451,000 and $418,000 as of September 30, 2022 and June 30, 2022, respectively.

Lease term and discount rate information related to leases was as follows:

Lease Term and Discount Rate	September 30, 2022
Weighted Average Remaining Lease Term (in years)
Operating leases		9.9
Finance leases		1.1
Weighted Average Discount Rate
Operating leases		2.9	%
Finance leases		7.1	%

Supplemental cash flow information:

	Three Months Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	268,580	$	224,402
Operating cash used for finance leases	$	2,683	$	6,432
Financing cash used for finance leases	$	37,079	$	73,891

Future maturities of lease liabilities were as follows as of September 30, 2022:

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2023 (remaining nine months)		19,886		$	523,109
June 30, 2024		11,811			1,103,955
June 30, 2025		—			1,206,658
June 30, 2026		—			1,178,872
June 30, 2027		—			1,151,769
Thereafter		—			6,874,560
Total future minimum payments		31,697			12,038,923
Less imputed interest		(1,974	)		(1,963,993	)
Present value of lease liabilities	$	29,723		$	10,074,930

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Loans Payable

3 Months Ended

Sep. 30, 2022

Loans Payable

11. Loans Payable

11. Loans Payable

As of September 30, 2022 and June 30, 2022, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A. (“BankUnited”). On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to maximum amount of $2,000,000 (the “BankUnited Revolving Line”), (ii) a term loan in the amount of up to $5,813,500 (“BankUnited Term Loan”), and (iii) a non-revolving guidance line of credit up to a maximum amount of $10,000,000 (the “Guidance Line” and, together with the BankUnited Revolving Line and BankUnited Term Loan, the “BankUnited Loans”), which Guidance Line has since been terminated. Each of the BankUnited Loans is evidenced by a promissory note in favor of BankUnited (the “BankUnited Notes”).

On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “First Amendment”). The First Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed. On September 9, 2021, we entered into a letter agreement with BankUnited (the “Letter Agreement”). The Letter Agreement: (i) reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021; (ii) modified the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited; (iii) terminated the Guidance Line; and (iv) required approval from BankUnited prior to our being able to draw upon the Revolving Line, subject to our compliance with the fixed charge coverage ratio for the quarters ending September 30, 2021 and December 31, 2021. The Letter Agreement also granted us a waiver of default arising prior to the Letter Agreement for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021. Based on the waiver, we were no longer in default of the Amended Loan Agreement as of June 30, 2021. Finally, in connection with the Letter Agreement, we paid BankUnited a fee equal to $10,000.

On November 5, 2021, we entered into a letter agreement with BankUnited (the “Second Letter Agreement”). In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forbearance, or other resolution of the Amended Loan Agreement (as defined below), which resolution would occur on or before December 31, 2021. On December 20, 2021, we entered into the Second Amendment to the Loan Agreement dated February 26, 2019 (the “Second Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Second Amendment, the parties agreed to the following terms, among others: (i) a maturity date of April 15, 2023 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an increased monthly payment amount of $100,000 commencing on November 1, 2022; (iii) beginning on December 20, 2021, each facility will bear interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (3.0% as of March 31, 2022), as adjusted from time to time, (iv) the Term Loan will bear a higher interest rate commencing on August 1, 2022; (v) 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 (vi) a fee of $50,000 payable upon execution of the Second Amendment. The Second Amendment also granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) for the periods ended December 31, 2021, March 31, 2022 and June 30, 2022.

On May 11, 2022, we entered into the Third Amendment to the Loan Agreement dated February 26, 2019 (the “Third Amendment”; and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).  Prior to September 30, 2022, BankUnited agreed to defer the exit fee that would have been due on September 30, 2022 to October 30, 2022, and reduce the amount to 1%.

We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. For additional information, see Note 14, Liquidity.

BankUnited Revolving Line

Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances under the BankUnited Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed $2,000,000, which proceeds could have been used for working capital and general corporate purposes. There were no amounts outstanding on the BankUnited Revolving Line as of June 30, 2021 and no amounts were due upon its expiration on February 26, 2022.

BankUnited Term Loan

Pursuant to the Amended Loan Agreement, BankUnited advanced us $5,813,500 to satisfy in full the amounts owed to Avidbank, including the outstanding principal amount and all accrued interest under the acquisition term loan and to pay the fees and expenses incurred in connection with closing of the BankUnited Loans. The Term Loan was for a 5-year term, but co-terminus with the BankUnited Revolving Line should the BankUnited Revolving Line not be renewed beyond February 26, 2022. Pursuant to the Second Amendment, the maturity date of the Term Loan was April 15, 2023, and pursuant to the Third Amendment, the maturity date of the Term Loan is April 15, 2024. The Term Loan initially bore interest at a per annum rate equal to 2.75% above the 30-day LIBOR. However, pursuant to the Second Amendment, beginning on December 20, 2021, each facility bears interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (5.0% as of September 30, 2022), as adjusted from time to time. Equal monthly principal payments of approximately $48,446, plus accrued interest, are due and payable, in arrears, on the first day of each month during the term. Pursuant to the Second Amendment, the monthly payment, including principal and interest,  increased to $100,000 on November 1, 2022. Upon maturity, all principal and interest shall be immediately due and payable.

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. Pursuant to the Third Amendment, compliance for both the fixed charge coverage ratio and total leverage ratio was waived for the quarter ended September 30, 2022, 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, other than the exit fees, as discussed above. Late payments are subject to a late fee equal to five percent (5%) of the unpaid amount. Amounts outstanding during an event of default were to accrue interest at a rate of five percent (5%) above the 30-day LIBOR applicable immediately prior to the occurrence of the event of default. Pursuant to the Second Amendment, beginning on December 20, 2021, the default rate was converted to five percent (5%) above BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time. The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and others.

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 $18,600 and $4,600 is included in interest expense for the three-month periods ended September 30, 2022 and 2021, respectively.

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 $275,000), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. An additional 225,000 EUR (or USD $267,000) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months. The Equipment Loan bears interest at a fixed rate of 3.3%.

Future maturities of loans payable are as follows:

	BankUnited Term Loan		Equipment Loan		Unamortized Debt Costs			Total
Fiscal year ending:
June 30, 2023 (remaining nine months)	$	734,037	$	71,296		(40,213	)	$	765,120
June 30, 2024		3,044,738		95,062		—			3,139,800
June 30, 2025		—		95,062		—			95,062
June 30, 2026		—		39,609		—			39,609
After June 30, 2026		—		—		—			—
Total payments	$	3,778,775	$	301,029	$	(40,213	)		4,039,591
Less current portion									(1,091,145	)
Non-current portion								$	2,948,446

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Foreign Operations

3 Months Ended

Sep. 30, 2022

Foreign Operations

12. Foreign Operations

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 $17,300 and $935,000 as of September 30, 2022 and June 30, 2022, respectively. We also recognized net foreign currency transaction gains of $23,000 and losses of $26,000 during the three months ended September 30, 2022 and 2021, respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash and cash equivalents totaled approximately $4.3 million at September 30, 2022. Of this amount, greater than 50% was held by our foreign subsidiaries in China and Latvia. These foreign funds were generated in China and Latvia as a result of foreign earnings. With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the respective subsidiary must equal at least 50% of its registered capital before any funds can be repatriated through dividends. As of September 30, 2022, LPOIZ had approximately $3.3 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2022.

Assets and net assets in foreign countries are as follows:

	China		Latvia
	September 30, 2022	June 30, 2022	September 30, 2022	June 30, 2022
Assets	$18.4 million	$19.6 million	$11.9 million	$12.7 million
Net assets	$14.6 million	$15.7 million	$9.3 million	$10.0 million

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Contingencies

3 Months Ended

Sep. 30, 2022

Contingencies

13. Contingencies

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 $718,000 and $400,000 during the years ended June 30, 2021 and 2022, respectively. During the three months ended September, 2022, we incurred an additional $27,000. Such expenses were recorded as SG&A expenses in the accompanying unaudited Condensed Consolidated Statement of Comprehensive Income (Loss).

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 $485,000 in the aggregate, to be paid over a six-month period following the terminations in April 2021. After the execution of the severance agreements, we discovered additional wrongdoing by the terminated employees. As a result, LPOIZ and LPOI have disputed the employees’ rights to such payments and did not immediately begin making the severance payments. However, based on the likelihood that the courts in China would determine that our subsidiaries would ultimately be obligated to pay these amounts, we accrued for these payments as of June 30, 2021 and they remained accrued as of June 30, 2022 and September 30, 2022. Such expenses were recorded as SG&A expenses in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. In October 2022, the severance amounts were paid to the court in accordance with a court order.

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. We have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. We expect to incur minimal additional legal fees and consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies.

Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the fiscal year ended June 30, 2022. 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 COVID-19 pandemic, 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, particularly in China, which has impacted the short-term and long-term demand from customers and, therefore, has negatively impacted our results of operations, cash flows, and financial position in that region. Additionally, some areas still have travel restrictions in place, which has impacted 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 taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to precisely estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2023 or beyond.

Impact of Russian-Ukraine Conflict

In February 2022, Russian military forces invaded Ukraine. This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of the Russian-Ukraine conflict on our financial condition, results of operations or cash flows into the foreseeable future.

Potential Impact of Economic Conditions in China

Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. Deteriorating economic conditions in China generally and as a result of China’s zero-COVID strategy, have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall.  A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.

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Liquidity

3 Months Ended

Sep. 30, 2022

Liquidity

14. Liquidity

14. Liquidity

We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. As discussed in in Note 11, Loans Payable, we have commenced discussions with other lenders, and we anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. We filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under its shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. As of September 30, 2022, we have not issued any shares of its Class A common stock pursuant to the at-the-market equity program.

There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, greater than 50% of our cash and cash equivalents is held by our foreign subsidiaries and, although we regularly repatriate cash, it may not be readily available to repay liabilities in the U.S. 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 or rates, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.

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Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2022

Significant Accounting Policies

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.

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Revenue (Tables)

3 Months Ended

Sep. 30, 2022

Revenue

Disaggregation Of Revenue

	Three Months Ended September 30,
	2022		2021
PMO	$	3,272,555	$	3,812,950
Infrared Products		3,639,659		4,887,918
Specialty Products		454,687		402,475
Total revenue	$	7,366,901	$	9,103,343

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Inventories (Tables)

3 Months Ended

Sep. 30, 2022

Inventories (Tables)

Inventories

	September 30, 2022			June 30, 2022
Raw materials	$	2,788,577		$	3,019,156
Work in process		2,731,354			2,243,907
Finished goods		2,916,888			3,052,001
Allowance for obsolescence		(1,431,110	)		(1,329,637	)
	$	7,005,709		$	6,985,427

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Property and Equipment (Tables)

3 Months Ended

Sep. 30, 2022

Property and Equipment

Schedule Of Property And Equipment

	Estimated Lives (Years)		September 30, 2022			June 30, 2022
Manufacturing equipment	5 - 10		$	21,291,400		$	22,058,636
Computer equipment and software	3 - 5			989,720			978,348
Furniture and fixtures		5		338,819			352,060
Leasehold improvements	5 - 7			2,976,292			3,043,867
Construction in progress				972,199			943,793
Total property and equipment				26,568,430			27,376,704
Less accumulated depreciation and amortization				(15,800,642	)		(15,736,241	)
Total property and equipment, net			$	10,767,788		$	11,640,463

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets

Schdule Of Intangible Assets Future Amortization

Fiscal year ending:
June 30, 2023 (remaining nine months)		843,812
June 30, 2024		1,125,083
June 30, 2025		658,398
June 30, 2026		239,334
After June 30, 2026		1,309,900
	$	4,176,527

Intangible Assets

	Useful Lives (Years)		September 30, 2022			June 30, 2022
Customer relationships		15	$	3,590,000		$	3,590,000
Trade secrets		8		3,272,000			3,272,000
Trademarks		8		3,814,000			3,814,000
Total intangible assets				10,676,000			10,676,000
Less accumulated amortization				(6,499,473	)		(6,218,202	)
Total intangible assets, net			$	4,176,527		$	4,457,798

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Income Taxes (Tables)

3 Months Ended

Sep. 30, 2022

Income Taxes

Income Tax Expense And Effective Income Tax Rate

	Three Months Ended September 30,
	2022			2021
(Loss) income before income taxes	$	(1,278,566	)	$	(502,224	)
Income tax provision	$	102,134		$	129,873
Effective income tax rate		-8	%		-26	%

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StockBased Compensation (Tables)

3 Months Ended

Sep. 30, 2022

StockBased Compensation

Schedule Of Stock-based Compensation Expense

	Three Months Ended September 30,
	2022		2021
Stock options	$	58,765	$	24,128
RSUs		225,833		92,463
Total	$	284,598	$	116,591

Summary Of Activity Of Share Based Compensation Awards

	Stock Options						Restricted Stock Units (RSUs)
			Weighted-		Weighted-					Weighted-
			Average		Average					Average
			Exercise		Remaining					Remaining
	Shares		Price		Contract		Shares			Contract
June 30, 2022		534,462	$	2.03		7.0		2,079,669			0.9
Granted		-	$	-				8,852
Exercised		-	$	-				(8,852	)
Cancelled/Forfeited		-	$	-				-
September 30, 2022		534,462	$	2.03		6.9		2,079,669			0.9
Awards exercisable/
vested as of
September 30, 2022		246,392	$	1.89		6.6		1,334,978			—
Awards unexercisable/
unvested as of
September 30, 2022		288,070	$	2.15		7.1		744,691			0.9
		534,462						2,079,669

Schedule Of Share-based Compensation Future Cost To Be Recognized

Fiscal Year Ending:	Stock Options		RSUs		Total
June 30, 2023 (remaining nine months)	$	145,557	$	317,172	$	462,729
June 30, 2024		94,196		190,864		285,060
June 30, 2025		33,885		54,308		88,193
	$	273,638	$	562,344	$	835,982

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Earnings (Loss) Per Share (Tables)

3 Months Ended

Sep. 30, 2022

Earnings (Loss) Per Share

Schedule Of The Computations For Basic And Diluted Earnings (loss) Per Common Share

	Three Months Ended September 30,
	2022			2021
Net loss	$	(1,380,700	)	$	(632,097	)
Weighted-average common shares outstanding:
Basic number of shares		27,070,949			26,993,971
Effect of dilutive securities:
Options to purchase common stock		-			-
RSUs		-			-
Diluted number of shares		27,070,949			26,993,971
Loss per common share:
Basic	$	(0.05	)	$	(0.02	)
Diluted	$	(0.05	)	$	(0.02	)

Schedule Of Potential Dilutive Shares Were Not Included In The Computation Of Diluted Earnings (loss) Per Common Share

	Three Months Ended September 30,
	2022		2021
Options to purchase common stock		534,462		427,726
RSUs		2,061,090		1,738,439
		2,595,552		2,166,165

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Leases (Tables)

3 Months Ended

Sep. 30, 2022

Leases

Lease Costs

	Three Months Ended September 30,
	2022		2021
Operating lease cost	$	231,501	$	172,230
Finance lease cost:
Depreciation of lease assets		34,111		47,354
Interest on lease liabilities		2,683		6,432
Total finance lease cost		36,794		53,786
Total lease cost	$	268,295	$	226,016

Supplement Balance Sheet Classification Information

	Classification	September 30, 2022		June 30, 2022
Assets:
Operating lease assets	Operating lease assets	$	10,095,366	$	10,420,604
Finance lease assets	Property and equipment, net(1)		28,783		61,566
Total lease assets		$	10,124,149	$	10,482,170
Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	960,331	$	965,622
Finance leases	Finance lease liabilities, current		21,638		55,348
Noncurrent:
Operating leases	Operating lease liabilities, less current portion		9,114,599		9,478,077
Finance leases	Finance lease liabilities, less current portion		8,085		11,454
Total lease liabilities		$	10,104,653	$	10,510,501

Lease Term And Discount Rate

Lease Term and Discount Rate	September 30, 2022
Weighted Average Remaining Lease Term (in years)
Operating leases		9.9
Finance leases		1.1
Weighted Average Discount Rate
Operating leases		2.9	%
Finance leases		7.1	%

Supplemental Lease Information

	Three Months Ended September 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	268,580	$	224,402
Operating cash used for finance leases	$	2,683	$	6,432
Financing cash used for finance leases	$	37,079	$	73,891

Future Maturities Of Lease Liabilities

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2023 (remaining nine months)		19,886		$	523,109
June 30, 2024		11,811			1,103,955
June 30, 2025		—			1,206,658
June 30, 2026		—			1,178,872
June 30, 2027		—			1,151,769
Thereafter		—			6,874,560
Total future minimum payments		31,697			12,038,923
Less imputed interest		(1,974	)		(1,963,993	)
Present value of lease liabilities	$	29,723		$	10,074,930

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Loans Payable (Tables)

3 Months Ended

Sep. 30, 2022

Loans Payable

Future Maturities Of Loans Payable

	BankUnited Term Loan		Equipment Loan		Unamortized Debt Costs			Total
Fiscal year ending:
June 30, 2023 (remaining nine months)	$	734,037	$	71,296		(40,213	)	$	765,120
June 30, 2024		3,044,738		95,062		—			3,139,800
June 30, 2025		—		95,062		—			95,062
June 30, 2026		—		39,609		—			39,609
After June 30, 2026		—		—		—			—
Total payments	$	3,778,775	$	301,029	$	(40,213	)		4,039,591
Less current portion									(1,091,145	)
Non-current portion								$	2,948,446

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Foreign Operations (Tables)

3 Months Ended

Sep. 30, 2022

Foreign Operations

Foreign Assets

	China		Latvia
	September 30, 2022	June 30, 2022	September 30, 2022	June 30, 2022
Assets	$18.4 million	$19.6 million	$11.9 million	$12.7 million
Net assets	$14.6 million	$15.7 million	$9.3 million	$10.0 million

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Revenue (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Revenues	$ 7,366,901	$ 9,103,343
PMO
Revenues	3,272,555	3,812,950
Speciality Products [Member]
Revenues	454,687	402,475
Infrared Products
Revenues	$ 3,639,659	$ 4,887,918

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Inventories (Details) - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Inventories
Raw materials	$ 2,788,577	$ 3,019,156
Work in process	2,731,354	2,243,907
Finished goods	2,916,888	3,052,001
Allowance for obsolescence	(1,431,110)	(1,329,637)
Inventories, net	$ 7,005,709	$ 6,985,427

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Inventories (Details Narrative) - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Raw materials	$ 2,788,577	$ 3,019,156
Inventory - Tooling
Raw materials	$ 1,500,000	$ 1,600,000

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Property and Equipment (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Total property and equipment, gross	$ 26,568,430	$ 27,376,704
Less accumulated depreciation and amortization	(15,800,642)	(15,736,241)
Total property and equipment, net	10,767,788	11,640,463
Manufacturing Equipment
Total property and equipment, gross	$ 21,291,400	22,058,636
Manufacturing Equipment | Minimum [Member]
Estimated life	5 years
Manufacturing Equipment | Maximum [Member]
Estimated life	10 years
Computer Equipment And Software
Total property and equipment, gross	$ 989,720	978,348
Computer Equipment And Software | Minimum [Member]
Estimated life	3 years
Computer Equipment And Software | Maximum [Member]
Estimated life	5 years
Furniture And Fixtures
Total property and equipment, gross	$ 338,819	352,060
Estimated life	5 years
Leasehold Improvements
Total property and equipment, gross	$ 2,976,292	3,043,867
Leasehold Improvements | Minimum [Member]
Estimated life	5 years
Leasehold Improvements | Maximum [Member]
Estimated life	7 years
Construction In Progress
Total property and equipment, gross	$ 972,199	$ 943,793

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Goodwill and Intangible Assets (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Intangible Assets, Gross	$ 10,676,000	$ 10,676,000
Less Accumulated Amortization	6,499,473	6,218,202
Intangible Assets, Net	4,176,527	4,457,798
Trade Secrets
Intangible Assets, Gross	$ 3,272,000	3,272,000
Useful Life	8 years
Trademark
Intangible Assets, Gross	$ 3,814,000	3,814,000
Useful Life	8 years
Customer Relationships
Intangible Assets, Gross	$ 3,590,000	$ 3,590,000
Useful Life	15 years

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Goodwill and Intangible Assets (Details 1) - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Intangible Assets, Net	$ 4,176,527	$ 4,457,798
Intangible Assets [Member]
Fiscal Year Ended:
June 30, 2023 (remaining nine months)	843,812
June 30, 2024	1,125,083
June 30, 2025	658,398
June 30, 2026	239,334
After June 30, 2026	$ 1,309,900

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Income Taxes (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Income Taxes
Income (loss) before income taxes	$ (1,278,566)	$ (502,224)
Income tax provision	$ 102,134	$ 129,873
Effective income tax rate	(8.00%)	(26.00%)

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Change in statutory income tax rate	20.00%
Statutory income tax rate	25.00%
Unpaid withholding tax	$ 40,000	$ 40,000
U.S. Federal and State
Statutory income tax rate	25.50%
L P O I Z | CHINA
Statutory income tax rate	15.00%
L P O I | CHINA
Statutory income tax rate	25.00%

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StockBased Compensation (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Total	$ 284,598	$ 116,591
Restricted Stock Units
Total	225,833	92,463
Stock Options
Total	$ 58,765	$ 24,128

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StockBased Compensation (Details 1)	3 Months Ended
	Sep. 30, 2022 $ / shares shares
Stock Options
Stock Option Balance, Beginning, Shares	534,462
Stock Options Balance Ending, Shares	534,462
Exercisable And Vested, Shares	246,392
Unexercisable And Unvested, Shares	288,070
Weighted Average Exercise Price - Stock Options
Balance Beginning | $ / shares	$ 2.03
Balance Ending | $ / shares	2.03
Exercisable And Vested | $ / shares	1.89
Unexercisable/unvested | $ / shares	$ 2.15
Weighted Average Remaining Contract Life - Stock Options
Balance, Beginning	7 years
Balance, Ending	6 years 10 months 24 days
Exercisable/vested	6 years 7 months 6 days
Unexercisable/unvested	7 years 1 month 6 days
Rsu Shares
Balance, Beginning, Shares	2,079,669
Granted, Shares	8,852
Exercised, Shares	(8,852)
Balance, Ending, Shares	2,079,669
Exercisable And Vested, Shares	1,334,978
Unexercisable And Unvested, Shares	744,691
Weighted Average Remaining Contract Life - Rsus
Balance, Beginning	10 months 24 days
Balance, Ending	10 months 24 days
Unexercisable/unvested	10 months 24 days

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StockBased Compensation (Details 2)	Mar. 31, 2022 USD ($)
Stock Options	$ 273,638
Restricted Stock Units	562,344
Total Unrecognized Compensation Cost	835,982
2023
Stock Options	145,557
Restricted Stock Units	317,172
Total Unrecognized Compensation Cost	462,729
2024
Stock Options	94,196
Restricted Stock Units	190,864
Total Unrecognized Compensation Cost	285,060
2025
Stock Options	33,885
Restricted Stock Units	54,308
Total Unrecognized Compensation Cost	$ 88,193

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StockBased Compensation (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Mar. 31, 2022
Discount On Employee Stock Purchase Plan	$ 1,954	$ 2,155
Discount On Employee Stock Purchase Plan, Percentage	10.00%
Total Unrecognized Compensation Cost			$ 835,982
Stock Options and Restricted Stock Units
Total Unrecognized Compensation Cost	$ 836,000

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Earnings (Loss) Per Share (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Earnings (Loss) Per Share
Net loss	$ (1,380,700)	$ (632,097)
Weighted Average Number Of Shares Outstanding
Basic number of shares	27,070,949	26,993,971
Effect of dilutive securities:
Options To Purchase Common Stock	$ 0	$ 0
Diluted number of shares	27,070,949	26,993,971
Loss per common share:
Basic	$ (0.05)	$ (0.02)
Diluted	$ (0.05)	$ (0.02)

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Earnings (Loss) Per Share (Details 1) - shares	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Antidilutive Securities	534,462	427,726
Restricted Stock Units
Antidilutive Securities	2,061,090	1,738,439
Stock Options
Antidilutive Securities	2,595,552	2,166,165

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Leases (Details) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Leases
Operating lease cost	$ 231,501	$ 172,230
Finance lease cost, depreciation of lease assets	34,111	47,354
Finance lease cost, interest on lease liabilities	2,683	6,432
Total finance lease cost	36,794	53,786
Total lease cost	$ 268,295	$ 226,016

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Leases (Details 1) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Assets
Operating lease assets	$ 10,095,366		$ 10,420,604
Finance lease assets	28,783		61,566
Total lease assets	10,124,149		10,482,170
Liabilities
Operating leases, current	960,331		965,622
Finance leases, current	21,638		55,348
Operating leases, noncurrent	9,114,599		9,478,077
Finance leases, noncurrent	8,085		11,454
Total lease liabilities	$ 10,104,653		$ 10,510,501
Weighted average remaining lease term (in years), operating leases	9 years 10 months 24 days
Weighted average remaining lease term (in years), finance leases	1 year 1 month 6 days
Weighted average discount rate, operating leases	2.90%
Weighted average discount rate, finance leases	7.10%
Operating cash used for operating leases	$ 268,580	$ 224,402
Operating cash used for finance leases	2,683	6,432
Financing cash used for finance leases	$ 37,079	$ 73,891

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Leases (Details 2)	Sep. 30, 2022 USD ($)
Finance Lease - Fiscal year ending September 30,
June 30, 2023 (remaining nine months)	$ 19,886
June 30, 2024	11,811
June 30, 2025	0
June 30, 2026	0
June 30, 2027	0
Thereafter	0
Total future minimum payments	31,697
Less imputed interest	(1,974)
Present value of lease liabilities	29,723
Operating Lease - Fiscal Year ending September 30,
June 30, 2023 (remaining nine months)	523,109
June 30, 2024	1,103,955
June 30, 2025	1,206,658
June 30, 2026	1,178,872
June 30, 2027	1,151,769
Thereafter	6,874,560
Total future minimum payments	12,038,923
Less imputed interest	(1,963,993)
Present value of lease liabilities	$ 10,074,930

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Leases (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Leases
Finance Lease Assets, Accumulated Depreciation	$ 451,000	$ 418,000
Lease term	12 years
Tenant improvement allowances	$ 2,400,000
Description of leased space	the second such lease in April 2021, and again in September 2021, to extend the term of such lease to 2032 and increase the leased space from 26,000 square feet to approximately 58,500 square feet. Effective in January 2022, our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively
Operating Lease Expiry Year	2032
Estimated cost of Tenant improvement allowances	$ 2,500,000

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Loans Payable (Details) - USD ($)	Sep. 30, 2022	Jun. 30, 2022
Fiscal year ending June 30,
June 30, 2024	$ 3,139,800
June 30, 2025	95,062
June 30, 2026	39,609
After June 30, 2026	0
Total Payments	4,039,591
Less current portion	(1,091,145)	$ (998,692)
Non-current portion	2,948,446
June 30, 2023	765,120
Unamortized Debt Cost
Fiscal year ending June 30,
June 30, 2024	0
June 30, 2025	0
June 30, 2026	0
After June 30, 2026	0
June 30, 2023	40,213
Total payments	(40,213)
Equipment Loan
Fiscal year ending June 30,
June 30, 2024	95,062
June 30, 2025	95,062
June 30, 2026	39,609
After June 30, 2026	0
Total Payments	301,029
June 30, 2023	71,296
BankUnited Term Loan
Fiscal year ending June 30,
June 30, 2024	3,044,738
June 30, 2025	0
June 30, 2026	0
After June 30, 2026	0
Total Payments	3,778,775
June 30, 2023	$ 734,037

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Loans Payable (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended		12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2021	Feb. 26, 2019
Cash and cash equivalents			5.00%
Interest expense			$ 70,370	$ 45,749	$ 215,354
Equipment Loan
Interest Rate On Borrowing			3.30%
Installment Term	52 years	60 years
Advances	$ 267,000	$ 275,000
BankUnited [Member]
Revolving Line Maximum Credit Limit						$ 2,000,000
Term Loan						5,813,500
Non Revolving Maximum Credit Limit						$ 10,000,000
Interest Rate On Borrowing			3.00%
Letter Agreement [Member]
Fixed Charge Coverage Ratio	reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021
Fee Paid			$ 100,000
November 5, 2021 [Member] | Second Letter Agreement [Member]
Fee Percentage			4.00%
Fees Payable			$ 50,000	$ 4,600
May 11, 2022 [Member] | Third Agreement [Member]
Amendment Description	an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).
BankUnited Term Loan
Interest expense			18,600
Term Loan			$ 5,813,500
Interest Rate On Borrowing			3.00%			2.75%
Term Loan Tenure			5 years
Equal Monthly Principal Payment			$ 48,446
Late payment fee			5.00%
Increase in monthly payment			$ 100,000
Fixed Charge Coverage Ratio			fixed charge coverage ratio of 1.25 to 1.00 and a total leverage ratio of 4.00 to 1.00

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Foreign Operations (Details) - USD ($) $ in Millions	Sep. 30, 2022	Jun. 30, 2022
CHINA
Assets	$ 18.4	$ 19.6
Net Assets	14.6	15.7
LATVIA
Assets	11.9	12.7
Net Assets	$ 9.3	$ 10.0

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Foreign Operations (Details Narrative) - USD ($)	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Gain (loss) On Foreign Currency	$ 23,000	$ 26,000
Cumulative Gain	$ 17,300		$ 935,000,000,000
Percentage Of Amount Held For Foreign Subsidiaries	50.00%
Cash And Cash Equivalents	$ 4,298,869	$ 3,976,981	5,507,891	$ 6,774,694
Retained Earning	(205,170,058)		$ (203,789,358)
L P O I Z
Cash And Cash Equivalents	4,300,000
Retained Earning	$ 3,300,000

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Contingencies (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Jun. 30, 2021
Contingencies
Contingent Liability			$ 210,000
Contingent Liability Pursuant To Severance Agreements			485,000
Additional expense	$ 27,000
Related expenses		$ 400,000
Legal, consulting and other transitional management fees			$ 718,000
Accrued Expenses		$ 430,000

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Liquidity (Details Narrative) $ in Millions	3 Months Ended
	Sep. 30, 2022 USD ($)
Liquidity
Cash And Cash Equivalents Held By Foreign Subsidiaries	50.00%
Offering Price	$ 75.8
Revised Offering Price	25.2
Decrease in Aggregate Offering Price	$ 50.6