UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ___________ to ____________
Commission file number
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
(Address of principal executive offices)
(ZIP Code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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_______________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
LIGHTPATH TECHNOLOGIES, INC.
Form 10-Q
Index
| 2 |
| Table of Contents |
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (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 the actual and potential 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, the Russian-Ukraine conflict, and the Hamas/Israel war; the effects of steps that we could take to reduce operating costs; rising inflation and increased interest rates, which diminish capital market cash flow and borrowing power; our inability to sustain profitable sales growth, convert inventory to cash, or reduce our costs to maintain competitive prices for our products; circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives; and those factors detailed by us in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2023. In light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.
| 3 |
| Table of Contents |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(unaudited) | ||||||||
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| September 30, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Restricted cash |
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Trade accounts receivable, net of allowance of $ |
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Inventories, net |
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Prepaid expenses and other assets |
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Other receivables |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Deferred tax assets, net |
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Other assets |
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Total assets |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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Accrued liabilities |
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Accrued payroll and benefits |
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Operating lease liabilities, current |
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Loans payable, current portion |
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Finance lease obligation, current portion |
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Total current liabilities |
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Deferred tax liabilities, net |
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Accrued liabilities, noncurrent |
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Finance lease obligation, less current portion |
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Operating lease liabilities, noncurrent |
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Loans payable, less current portion |
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Total liabilities |
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Commitments and Contingencies |
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Stockholders’ equity: |
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Preferred stock: Series D, $ |
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Common stock: Class A, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 4 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||||||
(unaudited) | ||||||||
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Revenue, net |
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Cost of sales |
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Gross margin |
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Operating expenses: |
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Selling, general and administrative |
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New product development |
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Amortization of intangibles |
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Total operating expenses |
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Operating loss |
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Other income (expense): |
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Interest expense, net |
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Other income, net |
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Total other (expense), net |
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Loss before income taxes |
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Income tax provision |
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Net loss |
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Foreign currency translation adjustment |
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Comprehensive loss |
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Loss per common share (basic) |
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Number of shares used in per share calculation (basic) |
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Loss per common share (diluted) |
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Number of shares used in per share calculation (diluted) |
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The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 5 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||||||||||||||||||
Condensed Consolidated Statements of Changes in Stockholders' Equity | ||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||
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| Accumulated |
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| Additional |
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| Other |
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| Total |
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Balances at June 30, 2023 |
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| $ |
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Issuance of common stock for: |
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Employee Stock Purchase Plan |
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Exercise of Stock Options, RSUs and RSAs, net |
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Issuance of common stock for acquisition of Visimid |
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Stock-based compensation on stock options, RSUs and RSAs |
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Foreign currency translation adjustment |
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| — |
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Net loss |
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| — |
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| ( | ) |
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Balances at September 30, 2023 |
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Balances at June 30, 2022 |
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Issuance of common stock for: |
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Employee Stock Purchase Plan |
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Exercise of Stock Options and RSUs, net |
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Stock-based compensation on stock options and RSUs |
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Foreign currency translation adjustment |
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Net loss |
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Balances at September 30, 2022 |
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The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||||||||||||||||||
| 6 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(unaudited) | ||||||||
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| Three Months Ended September 30, |
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| 2023 |
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| 2022 |
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Cash flows from operating activities: |
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Net loss |
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| $ | ( | ) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Interest from amortization of debt costs |
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Stock-based compensation on stock options, RSUs & RSAs, net |
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Provision for doubtful accounts receivable |
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Change in operating lease assets and liabilities |
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Deferred taxes |
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Changes in operating assets and liabilities: |
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Trade accounts receivable |
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Other receivables |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable and accrued liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Acquisition of Visimid Technologies, net of cash acquired |
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Proceeds from sale-leaseback of equipment |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Proceeds from sale of common stock from Employee Stock Purchase Plan |
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Payments on loans payable |
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Repayment of finance lease obligations |
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Net cash used in financing activities |
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Effect of exchange rate on cash and cash equivalents |
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Change in cash, cash equivalents and restricted cash |
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Cash and cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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Supplemental disclosure of cash flow information: |
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Interest paid in cash |
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Income taxes paid |
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Supplemental disclosure of non-cash investing & financing activities: |
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Purchase of equipment through finance lease arrangements |
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The accompanying notes are an integral part of these condensed consolidated financial statements. | ||||||||
| 7 |
| Table of Contents |
LIGHTPATH TECHNOLOGIES, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation
References in this document to “the Company,” “LightPath,” “we,” “us,” or “our” are intended to mean LightPath Technologies, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.
These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the requirements of Article 8 of Regulation S-X promulgated under the Exchange Act and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, 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, 2023 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, 2023. There have been no material changes to our significant accounting policies during the three months ended September 30, 2023, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
Use of Estimates
Management makes estimates and assumptions during the preparation of our unaudited Condensed Consolidated Financial Statements that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which, in turn, could impact the amounts reported and disclosed herein.
3. Acquisition of Visimid Technologies
In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Acquisition Date”).
Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things (“IOT”) applications. Visimid provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and OEMs for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.
The Company’s unaudited condensed consolidated financial statements reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price included $
| 8 |
| Table of Contents |
The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $
The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets, goodwill and deferred income tax assets are subject to change.
For the three months ended September 30, 2023, the Company incurred approximately $
Prior to the Acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera.
4. Revenue
Product Revenue
We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also provide engineering services and perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies.
Revenue Recognition
Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments.
Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of our performance. Deferred revenue was not significant as of September 30, 2023 and June 30, 2023, 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 for engineering services are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable.
We previously organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements for engineering services were included in specialty products. With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. Assemblies and modules were previously included in PMO, infrared or specialty products, depending on the lens type.
| 9 |
| Table of Contents |
Revenue by product group for the three months ended September 30, 2023 and 2022 was as follows, with 2022 amounts reclassified from those previously reported to conform to current classification:
|
| Three Months Ended September 30, |
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| 2023 |
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| 2022 |
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Infrared components |
| $ |
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| $ |
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Visible components |
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Assemblies and modules |
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Engineering services |
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Total revenue |
| $ |
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| $ |
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5. Inventories
The components of inventories include the following:
|
| September 30, 2023 |
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| June 30, 2023 |
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| Raw materials |
| $ |
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| $ |
| ||
| Work in process |
|
|
|
|
|
| ||
| Finished goods |
|
|
|
|
|
| ||
| Allowance for obsolescence |
|
| ( | ) |
|
| ( | ) |
|
| $ |
|
| $ |
| ||
The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $
6. Property and Equipment
Property and equipment are summarized as follows:
|
| Estimated Lives (Years) |
|
| September 30, 2023 |
|
| June 30, 2023 |
| |||
| Manufacturing equipment |
|
|
| $ |
|
| $ |
| ||||
| Computer equipment and software |
|
|
|
|
|
|
|
| ||||
Furniture and fixtures |
|
|
|
|
|
|
|
| ||||
Leasehold improvements |
|
|
|
|
|
|
|
| ||||
Construction in progress |
|
|
|
|
|
|
|
|
|
| ||
Total property and equipment |
|
|
|
|
|
|
|
|
|
| ||
Less accumulated depreciation and amortization |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Total property and equipment, net |
|
|
|
|
| $ |
|
| $ |
| ||
7. Goodwill and Intangible Assets
The change in the net carrying amount of goodwill during the three months ended September 30, 2023 was as follows:
Goodwill at June 30, 2023 |
| $ |
| |
Acquisition of Visimid |
|
|
| |
Goodwill at September 30, 2023 |
| $ |
|
| 10 |
| Table of Contents |
The increase in goodwill during the three months ended September 30, 2023 was due to the acquisition of Visimid. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurement of goodwill and intangible assets are subject to change. See Note 3, Acquisition of Visimid Technologies, to these unaudited condensed consolidated financial statements, for more information.
Identifiable intangible assets were comprised of:
|
| Useful Lives (Years) |
|
| September 30, 2023 |
|
| June 30, 2023 |
| |||
Customer relationships |
|
|
|
| $ |
|
| $ |
| |||
Trade secrets |
|
|
|
|
|
|
|
|
| |||
Trademarks |
|
|
|
|
|
|
|
|
| |||
Total intangible assets |
|
|
|
|
|
|
|
|
|
| ||
Less accumulated amortization |
|
|
|
|
|
| ( | ) |
|
| ( | ) |
Total intangible assets, net |
|
|
|
|
| $ |
|
| $ |
| ||
Future amortization of identifiable intangibles is as follows:
Fiscal year ending: |
|
|
| |
June 30, 2024 (remaining nine months) |
| $ |
| |
June 30, 2025 |
|
|
| |
June 30, 2026 |
|
|
| |
June 30, 2027 |
|
|
| |
After June 30, 2027 |
|
|
| |
|
| $ |
| |
8. Income Taxes
A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2023 and 2022 is as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Loss before income taxes |
| $ | ( | ) |
| $ | ( | ) |
Income tax provision |
| $ |
|
| $ |
| ||
Effective income tax rate |
|
| - | % |
|
| - | % |
The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia. For the three months ended September 30, 2023 and 2022, 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”), and paid or payable to LightPath, 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, 2023 and June 30, 2023, 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 assets as of September 30, 2023 and June 30, 2023 consist primarily of federal and state tax credits with indefinite carryover periods.
| 11 |
| Table of Contents |
U.S. Federal and State Income Taxes
Our U.S. federal and state statutory income tax rate is estimated to be
Income Tax Law of the People’s Republic of China
Our Chinese 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, 2023, LPOI and LPOIZ were subject to statutory income tax rates of
The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S. parent company. The Company also intends to reinvest a portion of the earnings generated by its foreign subsidiaries. The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $
Law of Corporate Income Tax of Latvia
Our Latvian subsidiary, ISP Optics Latvia, SIA (“ISP Latvia”), is governed by the Law of Corporate Income Tax of Latvia. Effective January 1, 2018, the Republic of Latvia enacted tax reform with the following key provisions: (i) corporations are no longer subject to income tax, but are instead subject to a distribution tax on distributed profits (or deemed distributions, as defined) and (ii) the rate of tax was changed to
9. Stock-Based Compensation
Our directors, officers, and key employees are granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, through our 2018 Stock and Incentive Compensation Plan (the “SICP”). Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The SICP is administered by the Compensation Committee of the Board of Directors. At our 2018 Annual Stockholders Meeting, our stockholders approved the SICP under which an aggregate of
Stock-based compensation expense is based primarily on the fair value of the award as of the grant date, and is recognized as an expense over the requisite service period.
| 12 |
| Table of Contents |
The following table shows total stock-based compensation expense for the three months ended September 30, 2023 and 2022, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Stock options |
| $ |
|
| $ |
| ||
RSAs |
|
|
|
|
| — |
| |
RSUs |
|
|
|
|
|
| ||
Total |
| $ |
|
| $ |
| ||
We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations. A discount of approximately $
Grant Date Fair Values and Underlying Assumptions; Contractual Terms
We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2014 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction.
Most stock 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 RSA and 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 September 30, 2023 and 2022. 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 either of the three-month periods ended September 30, 2023 or September 30, 2022.
Restricted Stock Awards
RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting.
Restricted Stock Units
RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant.
| 13 |
| Table of Contents |
Information Regarding Current Share-Based Compensation Awards
A summary of the activity for share-based compensation awards in the three months ended September 30, 2023 is presented below:
|
| Stock Options |
|
| Restricted Stock Units (RSUs) |
|
| Restricted Stock Awards (RSAs) |
| |||||||||||||||||||
|
|
|
|
| Weighted- |
|
| Weighted- |
|
|
|
|
| Weighted- |
|
|
|
|
| Weighted- |
| |||||||
|
|
|
|
| Average |
|
| Average |
|
|
|
|
| Average |
|
|
|
|
| Average |
| |||||||
|
|
|
|
| Exercise |
|
| Remaining |
|
|
|
|
| Remaining |
|
|
|
|
| Remaining |
| |||||||
|
| Shares |
|
| Price |
|
| Contract |
|
| Shares |
|
| Contract |
|
| Shares |
|
| Contract |
| |||||||
June 30, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
| — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
|
|
| |
Exercised |
|
| — |
|
| $ | — |
|
|
|
|
|
|
| ( | ) |
|
|
|
|
|
| ( | ) |
|
|
|
|
Cancelled/Forfeited |
|
| — |
|
| $ | — |
|
|
|
|
|
|
| — |
|
|
|
|
|
|
| — |
|
|
|
|
|
September 30, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
| 92,746 |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards exercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
vested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards unexercisable/ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
unvested as of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2023 |
|
|
|
| $ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
| 534,462 |
|
|
|
|
|
|
|
|
|
|
| 1,596,222 |
|
|
|
|
|
|
|
|
|
|
|
| |
As of September 30, 2023, there was approximately $
Fiscal Year Ending: |
| Stock Options |
|
| RSAs |
|
| RSUs |
|
| Total |
| ||||
June 30, 2024 (remaining nine months) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2026 |
|
| — |
|
|
| — |
|
|
|
|
|
|
| ||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
| 14 |
| Table of Contents |
10. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares of Class A common stock outstanding, during each period presented. Diluted earnings (loss) per share is computed similarly to basic earnings (loss) per share, except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue shares of Class A common stock were exercised or converted into shares of Class A common stock. The computations for basic and diluted earnings (loss) per share of Class A common stock are described in the following table:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
|
|
|
|
|
| ||
Net loss |
| $ | ( | ) |
| $ | ( | ) |
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic number of shares |
|
|
|
|
|
| ||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Options to purchase common stock |
|
|
|
|
|
| ||
RSUs and RSAs |
|
|
|
|
|
| ||
Diluted number of shares |
|
|
|
|
|
| ||
Loss per common share: |
|
|
|
|
|
|
|
|
Basic |
| $ | ( | ) |
| $ | ( | ) |
Diluted |
| $ | ( | ) |
| $ | ( | ) |
The following potential dilutive shares were not included in the computation of diluted earnings (loss) per share of Class A common stock, as their effects would be anti-dilutive:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Options to purchase common stock |
|
|
|
|
|
| ||
RSUs and RSAs |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
11. Leases
Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms at various times through 2034. We typically include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise such options. We currently have obligations under seven finance lease agreements, entered into during fiscal years 2019, 2023 and 2024, 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 previously had two leases on the premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”). The first lease on the premises comprising our Orlando Facility was
| 15 |
| Table of Contents |
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 assets and the related lease liabilities. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of
We received tenant improvement allowances for each of our two leases with respect to our Orlando Facility. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms. In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $
The components of lease expense were as follows:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Operating lease cost |
| $ |
|
| $ |
| ||
Finance lease cost: |
|
|
|
|
|
|
|
|
Depreciation of lease assets |
|
|
|
|
|
| ||
Interest on lease liabilities |
|
|
|
|
|
| ||
Total finance lease cost |
|
|
|
|
|
| ||
Total lease cost |
| $ |
|
| $ |
| ||
Supplemental balance sheet information related to the leases was as follows:
|
| Classification |
| September 30, 2023 |
|
| June 30, 2023 |
| ||
Assets: |
|
|
|
|
|
|
|
| ||
Operating lease assets |
| Operating lease assets |
| $ |
|
| $ |
| ||
Finance lease assets |
| Property and equipment, net(1) |
|
|
|
|
|
| ||
Total lease assets |
|
|
| $ |
|
| $ |
| ||
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
|
Operating leases |
| Operating lease liabilities, current |
| $ |
|
| $ |
| ||
Finance leases |
| Finance lease liabilities, current |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
|
Operating leases |
| Operating lease liabilities, less current portion |
|
|
|
|
|
| ||
Finance leases |
| Finance lease liabilities, less current portion |
|
|
|
|
|
| ||
Total lease liabilities |
|
|
| $ |
|
| $ |
| ||
(1) | Finance lease assets were recorded net of accumulated depreciation of approximately $ |
| 16 |
| Table of Contents |
Lease term and discount rate information related to leases was as follows:
Lease Term and Discount Rate |
| September 30, 2023 |
| |
Weighted Average Remaining Lease Term (in years) |
| |||
Operating leases |
|
|
| |
Finance leases |
|
|
| |
|
|
|
|
|
Weighted Average Discount Rate |
|
|
|
|
Operating leases |
|
| % | |
Finance leases |
|
| % | |
Supplemental cash flow information:
|
| Three Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash used for operating leases |
| $ |
|
| $ |
| ||
Operating cash used for finance leases |
| $ |
|
| $ |
| ||
Financing cash used for finance leases |
| $ |
|
| $ |
| ||
Future maturities of lease liabilities were as follows as of September 30, 2023:
Fiscal year ending: |
| Finance Leases |
|
| Operating Leases |
| ||
June 30, 2024 (remaining nine months) |
| $ |
|
| $ |
| ||
June 30, 2025 |
|
|
|
|
|
| ||
June 30, 2026 |
|
|
|
|
|
| ||
June 30, 2027 |
|
|
|
|
|
| ||
June 30, 2028 |
|
|
|
|
|
| ||
Thereafter |
|
| — |
|
|
|
| |
Total future minimum payments |
|
|
|
|
|
| ||
Less imputed interest |
|
| ( | ) |
|
| ( | ) |
Present value of lease liabilities |
| $ |
|
| $ |
| ||
12. Loans Payable
As of September 30, 2023 and June 30, 2023, 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 a maximum amount of $
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”). In accordance with the Letter Agreement, the parties agreed to the following terms, among others: (i) we were granted a waiver of default for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021; (ii) certain financial covenant requirements were modified; and (iii) the Guidance Line was terminated.
| 17 |
| Table of Contents |
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 $
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)
On February 7, 2023, we entered into the Fourth Amendment to the Loan Agreement dated February 26, 2019 (the “Fourth Amendment” and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the Second Amendment, and the Third Amendment, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Fourth Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of December 31, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an amended exit fee equal to (a)
On May 9, 2023, we entered into the Fifth Amendment to the Loan Agreement dated February 26, 2019 (the “Fifth Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Fifth Amendment, the parties agreed to the following terms, among others: (i) BankUnited agreed to release its security interest in the collateral securing the BankUnited Loans other than a cash collateral account maintained at BankUnited, initially in the amount of approximately $
BankUnited Revolving Line
Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances to us under the Revolving Line up to a maximum aggregate principal amount outstanding not to exceed $
| 18 |
| Table of Contents |
BankUnited Term Loan
Pursuant to the Amended Loan Agreement, BankUnited advanced the Company $
The Term Loan initially bore interest at a per annum rate equal to
Equal monthly principal payments of approximately $
Security and Guarantees
Our obligations under the Amended Loan Agreement were previously collateralized by a first priority security interest (subject to permitted liens) in all of our assets and the assets of the Company’s U.S. subsidiaries, GelTech, Inc. (“GelTech”), and ISP, pursuant to a Security Agreement granted by GelTech, ISP, and the Company in favor of BankUnited. The Company’s equity interests in, and the assets of, its foreign subsidiaries were excluded from the security interest. Pursuant to the Fifth Amendment, the security interest in the certain of the collateral then securing the BankUnited Loans terminated and was replaced by a security interest in a cash collateral account maintained at BankUnited, initially in the amount of approximately $
General Terms
The Amended Loan Agreement initially contained customary covenants, including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing the Company’s business or permitting a change in control; (iii) limitations on additional indebtedness or encumbrances; (iv) restrictions on distributions; and (v) limitations on certain investments. The Amended Loan Agreement also contains certain financial covenants, including obligations to maintain a
We may prepay any or all of the BankUnited Loans in whole or in part at any time, without penalty or premium, 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 accrue interest at a rate of five percent (5%) above BankUnited’s then prime rate of interest, as adjusted from time to time, applicable immediately prior to the occurrence of the event of default. The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and confidentiality.
Financing costs incurred related to the BankUnited Loans were recorded as a discount on debt and amortized over the term. Amortization of approximately $
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In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which party is also a significant customer, and which the 2020 Equipment Loan is subordinate to the BankUnited Loans, and collateralized by certain equipment. The initial advance under the 2020 Equipment Loan was 225,000 EUR (or USD $
In May 2023, ISP Latvia entered into an equipment loan with a third party (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advance under the 2023 Equipment Loan was 128,815 EUR (or USD $
In July 2023, the acquisition of Visimid included a promissory note of $
Future maturities of loans payable are as follows:
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13. Foreign Operations
Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $
Our cash, cash equivalents and restricted cash totaled approximately $
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Revenues from and long-lived assets located in foreign countries are as follows:
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14. Contingencies
Legal
The Company, from time to time, is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.
In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement. In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees.
We have incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which include legal, consulting and other transitional management fees, totaled $
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 $
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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 and its lasting impacts.
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 have had travel restrictions in place, including China until recently. Even though China’s travel restrictions are no longer in place, we are required to re-apply for travel visas and approvals which will continue to affect our ability to travel in China. As a result, 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 have been, and will continue to be, adversely impacted. Management is actively monitoring this situation and taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. However, we are not able to precisely estimate the effects of the continuing COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal 2024 or beyond.
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 remnant 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.
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.
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15. Liquidity
We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. We have commenced discussions with prospective lenders regarding the refinancing of our debt obligations prior to the maturity date of the BankUnited Term Loan on December 31, 2024. There can be no assurance that we will be successful in such refinancing or that such refinancing will be available under reasonable commercial terms. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, it may need to raise additional equity financing, source financing through non-commercial lenders or reduce operating expenses and capital expenditures in order to repay the credit facility and all charges related thereto upon its maturity on December 31, 2024.
On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $
On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of
There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, we may identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.
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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, 2023, 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.
Continual 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 as of the date of this Quarterly Report on Form 10-Q. 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. from 2020 to 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.
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 have had travel restrictions in place, including China until recently. Even though China’s travel restrictions are no longer in place, we are required to re-apply for travel visas and approvals which will continue to affect our ability to travel in China. As a result, 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 have been, and will continue to be, adversely impacted. Management is actively monitoring this situation and taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. However, we are not able to precisely estimate the effects of the continuing COVID-19 pandemic on our future results of operations, financials, or liquidity in fiscal 2024 and 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.
In July 2023, we acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”). Visimid is an engineering and design firm specializing in thermal imaging, night vision and IOT applications. Visimid provides design and consulting services for DoD contractors, commercial and industrial customers, and OEMs for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions. Visimid’s facility is located in Plano, TX.
For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2023.
Product Groups
We previously organized our products in three groups: PMO, infrared, and specialty products. Revenues from product development agreements for engineering services were included in specialty products. With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. Assemblies and modules were previously included in infrared or specialty products, depending on the lens type.
Our visible components product group consists of visible precision molded optics with varying applications. Our infrared product group is comprised of infrared optical components, including molded, diamond-turned, or polished lenses. Polished lenses include both conventional and CNC (computer numerical control) ground and polished lenses. Between these two product groups, we have the capability to manufacture lenses from very small (with diameters of a sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2,000 millimeters. In addition, both product groups offer both catalog and custom designed optics.
Our assemblies and modules product group is comprised of value-added engineered solutions, such as infrared cameras, infrared imaging modules and cores, optical assemblies, thermal imaging assemblies, and collimators. Products in this category are typically designed for specific customer needs and requirements, and are sold into OEMs that further integrate them into their systems. We design, build, and sell cameras and optical assemblies in markets for defense use, industrial test and measurement, medical devices, sporting, and communications based on our proprietary technologies. Our solutions and assemblies can vary in complexity level from assemblies of lenses that get mounted on a customer’s camera, laser or detector, to complete imaging systems that generate a processed image electronically.
Our engineering services product group represents services we provide pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications. The timing and extent of any such product development requests are outside of our control, and the related revenue is recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. As we continue down the path of strategic shift into highly engineered solutions, we expect this product group to grow in a similar way as our assemblies and modules business. Furthermore, as the engineering effort precedes the product revenue, the revenue from this product group is often, but not always, a lead indicator to the revenue in assemblies and modules product group.
We believe these four product groups better align with our strategic direction and will allow us to better track the results of our focus on engineered solution and assemblies.
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Growth Strategy
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. Based on the shifts in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty product to being integrated into mainstream industries and applications, we redefined our strategic direction to leverage our strengths and specifically our subject matter expertise in optics, to provide our wide customer base with complete optical and electro-optical solutions, and to become their partner for the optical engine of their systems.
Since 2020, we have focused on developing a strategy and executing a plan that capitalizes on the changing market conditions, creates a unique and long-lasting value to our customers, and utilizes our unique capabilities and differentiators. We intend to use our differentiators to move up the value chain, thereby offering a more comprehensive value proposition to our customers.
Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems. In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with a component oriented supply chain, into a solution-focused industry with the potential for partnerships for solution development and production. Over the last couple of years we have worked to align our organization to this strategy, and leverage our in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities. We have been developing these partnerships by working closely with our customers throughout their design process, designing optical solutions that are tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with 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 Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
Results of Operations
Revenue
Revenue for the first quarter of fiscal 2024 was approximately $8.1 million, an increase of approximately $0.7 million, or 10%, as compared to approximately $7.4 million in the same period of the prior fiscal year, driven by increases in sales of infrared components, assemblies and modules, and engineering services.
Revenue generated by infrared components was approximately $3.8 million in the first quarter of fiscal 2024, an increase of approximately $0.6 million, or 20%, as compared to approximately $3.2 million in the same period of the prior fiscal year. The increase in revenue is primarily due to an increase in shipments against an annual contract for an international military program. Revenue from the visible components product group for the first quarter of fiscal 2024 was $2.7 million, a decrease of 18%, as compared to the same quarter of the prior fiscal year. The decrease in revenue is primarily due to a decrease in sales to customers in the telecommunications industry in China and a decrease in sales through catalog and distribution channels in the U.S. and in Europe. Revenue from assemblies and modules increased by 45%, as compared to the same period of the prior fiscal year. Approximately one-third of this increase is due to the addition of Visimid product sales; the remaining increase is driven by sales to customers in the defense industry, and increased sales of a custom visible lens assembly to a medical customer, for which we have an end of life order in backlog going into fiscal 2025. Revenue from engineering services increased by $253,000, as compared to the same period of the prior fiscal year. The majority of this increase is due to the addition of Visimid sales. The remaining increase is driven by revenue from one of our space-related funded research contracts.
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Cost of Sales and Gross Margin
Gross margin in the first quarter of fiscal 2024 was approximately $2.3 million, an increase of $98,000, or 4%, as compared to the same period of the prior fiscal year. Total cost of sales was approximately $5.7 million for the first quarter of fiscal 2024, compared to approximately $5.1 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 29% for the first quarter of fiscal 2024, compared to 30% for the same period of the prior fiscal year. The decrease in gross margin as a percentage of revenue is due to the decrease in visible components sales, which typically have higher margins than our infrared components product group, which comprised a greater portion of our sales for the first quarter of fiscal 2024.
Selling, General and Administrative
SG&A costs were approximately $2.7 million for the first quarter of fiscal 2024, an increase of approximately $23,000, or 1%, as compared to approximately $2.6 million in the same period of the prior fiscal year. The increase in SG&A costs is primarily due to costs of approximately $83,000 associated with the acquisition of Visimid, which closed in July 2023. These costs were partially offset by a decrease in stock compensation.
New Product Development
New product development costs were approximately $640,000 in the first quarter of fiscal 2024, an increase of approximately $90,000, or 16%, as compared to the same period of the prior fiscal year. The increase is primarily due to materials and outside services utilized for development projects.
Other Income (Expense)
Interest expense, net, was approximately $58,000 for the first quarter of fiscal 2024, as compared to $70,000 for the same period of the prior fiscal year. The decrease in interest expense is primarily due to a decrease in amortization of loan costs of approximately $19,000, as all loan costs have been fully amortized in prior periods. Total debt has decreased 38% as of the quarter ended September 30, 2023, as compared to the quarter ended September 30, 2022, while the interest rate on our largest loan balance has increased from 5% to 8.5% for the same period.
Other income, net, was approximately $5,000 for the first quarter of fiscal 2023, as compared to $27,000 for the same period of the prior fiscal year. Other income and expenses are primarily comprised of net gains and losses on foreign exchange transactions. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. We incurred foreign currency transaction gains of $25,000 and $23,000 during the first quarter of fiscal 2024 and 2023, respectively.
Income Taxes
During the first quarter of fiscal 2024, income tax expense was approximately $40,000, compared to $102,000 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 2024 was approximately $1.3 million, or $0.04 basic and diluted loss per share, compared to $1.4 million, or $0.05 basic and diluted loss per share, for the same quarter of the prior fiscal year.The decrease in net loss of approximately $38,000 for the first quarter of fiscal 2024, as compared to the same period of the prior fiscal year, was primarily attributable to the favorable change in the provision for income taxes.
Weighted-average common shares outstanding were 37,431,748, basic and diluted, in the first quarter of fiscal 2024, compared to 27,070,949, basic and diluted, in the first quarter of fiscal 2023. The increase in the weighted-average basic common shares was due to the sale of an aggregate of 9,090,910 shares of Class A common stock pursuant to a public offering which closed January 17, 2023, as well as the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs and RSAs.
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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, 8.1% in 2021, and 3% in 2022. The annual economic growth rate in 2023 is estimated to be 5.1%, 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, 2023, we had working capital of approximately $11.4 million and total cash, cash equivalents and restricted cash of approximately $6.9 million, of which, greater than 25% of our cash and cash equivalents was held by our foreign subsidiaries.
Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. We routinely declare intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we also plan to repatriate a portion of their earnings, and we accrue for these taxes on the portion of earnings that we intend to repatriate.
In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. As of September 30, 2023, LPOIZ had approximately $2.7 million available for repatriation and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2022, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2023.
Loans payable consists of the BankUnited Term Loan, pursuant to the Amended Loan Agreement, two third-party equipment loans, and the ANBTX Note. As of September 30, 2023, the outstanding balance on the BankUnited Term Loan was approximately $2.0 million, the outstanding balance on the equipment loans was approximately $361,000, and the outstanding balance on the ANBTX Loan was $150,000.
Pursuant to that certain Fourth Amendment to the Loan Agreement dated February 7, 2023, the BankUnited Term Loan, the only remaining BankUnited Loan, matures and is due and payable in full on December 31, 2024. The BankUnited Term Loan bears interest at BankUnited’s then prime rate of interest, as adjusted from time to time (8.5% as of September 30, 2023). Monthly payments of $75,000 are due and payable on the first day of each month, and commencing on January 1, 2024 and continuing on the first day of each month thereafter until the maturity date, monthly payments will increase to $100,000, with each such payment applied first to interest, costs and expenses and then to principal. Upon maturity, all principal and interest shall be immediately due and payable. Pursuant to that certain Fifth Amendment to the Loan Agreement dated May 9, 2023, the security interest in certain collateral securing the Term Loan as of such date terminated and was replaced by a security interest in a cash collateral account maintained at BankUnited, initially in the amount of approximately $2,457,000, with a portion of such cash collateral to be released on a quarterly basis equal to 110% of the principal reductions effected during that quarter. The cash collateral is reflected as Restricted Cash in the accompanying unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023. An exit fee equal to 1% of the outstanding principal balance will be due on December 31, 2023 and (b) 4% of the outstanding principal balance on December 31, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).
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On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under the shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. We have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.
On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of 9,090,910 shares of the Company’s Class A common stock, par value $0.01 per share for a purchase price of $1.10 per share and filed a prospectus supplement with the SEC related thereto. The sale of shares pursuant to the Purchase Agreement closed on January 17, 2023, and resulted in net proceeds of approximately $9.2 million after payment of placement agent fees, and certain other costs and expenses of the offering.
There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, we may identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.
Cash Flows – Operating:
Cash provided by operations was approximately $1.1 million for the first three months of fiscal 2024, compared to cash used in operations of approximately $415,000 for the same period of the prior fiscal year.Cash provided by operations for the first three months of fiscal 2024 was largely driven by decrease in accounts receivable, as sales were higher in the fourth quarter of fiscal 2023 than in the first quarter of fiscal 2024. Cash used in operations in the first three months of fiscal 2023 reflects a decrease in accounts payable and accrued liabilities during such period resulting from the payment of certain expenses related to previously disclosed events that occurred at our Chinese subsidiaries, which were accrued in prior periods.
Cash Flows – Investing:
During the first three months of fiscal 2024, we expended approximately $955,000 in investments in capital equipment, compared to approximately $243,000 in the same period of the prior fiscal year. We also expended approximately $572,000, net of cash acquired, to acquire Visimid during the first three months of fiscal 2024, as disclosed in Note 3, Acquisition of Visimid Technologies, in the unaudited Condensed Consolidated Financial Statements. The first three months of fiscal 2024 also reflect proceeds of approximately $365,000 from sale-leasebacks of equipment. The spending in the first three months of fiscal 2024 is largely driven by the Orlando Facility expansion, whereas the majority of our capital expenditures during the first three months of fiscal 2023 reflected only maintenance capital expenditures.As disclosed in Note 11, Leases, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, we constructed additional tenant improvements in our Orlando Facility subject to our continuing lease, of which the landlord agreed to provide $2.4 million in tenant improvement allowances. The balance of the tenant improvement costs is estimated to be $3.8 million. During the first quarter of fiscal 2024, we expended $890,000 toward this project, with the remaining estimated $550,000 expected to be expended during the second quarter of fiscal 2024, pending final construction invoices.
Cash Flows – Financings:
Net cash used in financing activities was approximately $214,000 for the first three months of fiscal 2024, compared to approximately $187,000 in the same period of the prior fiscal year. Cash used in financing activities for the first three months of fiscal 2024 reflects $234,000 in principal payments on our loans and finance leases, offset by approximately $20,000 in proceeds from the sale of Class A common stock under the 2014 ESPP. 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.
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Contractual Obligations and Commitments
As of September 30, 2023, 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 2024 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, 2023.
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, 2023 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, 2023.
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, integrated designs that we call “engineered solutions.” These engineered solutions are often based on existing reference designs we have demonstrated, that then get further customized to the customer’s specific needs. This is followed by “sampling” 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 leverages our engineering capabilities and makes the best use of our production capacity, as compared to the turns business, which is unpredictable and uneven. A key business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:
| · | Maintaining an optical design and new product design and sampling capability, including a high-quality and responsive optical design engineering staff, and proactive design of reference designs or technology demonstrators; |
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| · | The fact that as our customers take products of this nature into higher volume, commercial production (for example, in the case of molded optics, this may be volumes over one million pieces per year) they begin to focus on reducing costs – which often leads them to turn to larger or overseas producers, even if sacrificing quality; and |
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| · | Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures. |
Despite these challenges to winning more “annuity” and “engineered solutions” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering and manufacturing. 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 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, 2023.
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.
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Financial indicators that are considered key and reviewed regularly are as follows:
| · | Sales backlog; |
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| · | Revenue by product group; and |
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| · | Other key indicators. |
These indicators are also used to determine tactical operating actions and changes and are discussed in more detail below. Management continues to evaluate these key indicators as we transition to our new strategic plan, and is implementing certain changes and updates as further described below.
Sales Backlog
We believe our sales growth has been and continues to be our best indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what percent of the backlog is scheduled by the customer for date-certain delivery. We evaluate our total backlog, which includes all firm orders requested by a customer that are reasonably believed to remain in the backlog and be converted into revenues. This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria. Generally, a higher total backlog is better for us.
Our total backlog at September 30, 2023 was approximately $21.3 million, a decrease of 7%, as compared to $23.0 million as of September 30, 2022. Compared to the end of fiscal 2023, our total backlog decreased by 2% during the first three months of fiscal 2024. Backlog change rates for the last five fiscal quarters are:
Quarter |
| Total Backlog ($ 000) |
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| Change From Prior Year End |
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| Change From Prior Quarter End |
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Q1 2023 |
| $ | 22,973 |
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| 29 | % |
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| 29 | % |
Q2 2023 |
| $ | 29,427 |
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| 66 | % |
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| 28 | % |
Q3 2023 |
| $ | 26,620 |
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| 50 | % |
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| -10 | % |
Q4 2023 |
| $ | 21,652 |
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| 22 | % |
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| -19 | % |
Q1 2024 |
| $ | 21,303 |
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| -2 | % |
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| -2 | % |
The decrease in backlog during the first three months of fiscal 2024 is primarily due shipments against several annual and multi-year contract renewals, which orders were added to the backlog in prior periods. Shipments during the first quarter of fiscal 2024 were partially offset by one significant contract renewal for advanced infrared optics for a critical international military program, which renewal represented a 40% increase in dollar value as compared to the previous order. The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders.We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.
Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 and our new BDNL4 materials. With the global supply of germanium currently concentrated in Russia and China, recent global events are generating renewed interest in germanium alternatives such as our proprietary BD6 material, and other materials we are currently developing under an exclusive license with the Naval Research Lab. As we have outlined in our Strategic direction, we do not expect to see significant growth in our visible components product group in the near future. Competition in that product group has grown substantially over the last few years, and some of our new molding capabilities and technologies such as free-form molded optics, might take longer than anticipated to reach full commercialization, depending on economic conditions and technology trends in the area of AR/VR. However, order bookings for both visible and infrared components and assemblies continue to be slow in China. Domestic sales in China have also been adversely impacted by the economic downturn in China, which continues to negatively impact revenue and bookings in that region.
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Revenue by Product Group
We previously organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements for engineering services were included in specialty products. With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. Assemblies and modules were previously included in PMO, infrared or specialty products, depending on the lens type. We also previously presented the number of units sold by product group, however this is no longer a measure that we focus on internally, as our focus moves toward engineered solutions.
The following table sets forth revenue for our four product groups for the three-month periods ended September 30, 2023 and 2022:
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| (unaudited) |
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| Three Months Ended September 30, |
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| 2023 |
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| 2022 |
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Revenue |
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Infrared components |
| $ | 3,834,602 |
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| $ | 3,189,551 |
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Visible components |
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| 2,688,335 |
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| 3,267,658 |
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Assemblies and modules |
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| 1,262,039 |
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| 870,732 |
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Engineering services |
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| 292,272 |
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| 38,960 |
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Total revenue |
| $ | 8,077,248 |
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| $ | 7,366,901 |
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Three months ended September 30, 2023
Our revenue increased by 10% in the first quarter of fiscal 2024, as compared to the same quarter of the prior fiscal year, driven by increases in sales of infrared components, assemblies and modules, and engineering services.
Revenue generated by the infrared components product group for the first quarter of fiscal 2024 was $3.8 million, an increase of 20%, as compared to same quarter of the prior fiscal year. The increase in revenue is primarily due to an increase in shipments against an annual contract for an international military program. This contract was also renewed during the first quarter of fiscal 2024 for a higher dollar value than the previous contract.
Revenue from the visible components product group for the first quarter of fiscal 2024 was $2.7 million, a decrease of 18%, as compared to the same quarter of the prior fiscal year. The decrease in revenue is primarily due to a decrease in sales to customers in the telecommunications industry in China and a decrease in sales of through catalog and distribution channels in the U.S. and in Europe.
Revenue from assemblies and modules increased by 45%, as compared to the same period of the prior fiscal year. Approximately one-third of this increase is due to the addition of Visimid product sales. The remaining increase is driven by sales to customers in the defense industry, and increased sales of a custom visible lens assembly to a medical customer, for which we have an end of life order in backlog going into fiscal 2025.
Revenue from engineering services increased by $253,000, as compared to the same period of the prior fiscal year. Approximately $175,000 of this increase is due to the addition of Visimid sales. The remaining increase is driven by revenue from one of our space-related funded research contracts.
Other Key Indicators
Other key indicators include various operating metrics, some of which are qualitative and others are quantitative. These indicators change from time to time as the opportunities and challenges in the business change. They are mostly non-financial indicators, such as evaluating the pipeline of sales opportunities, on time delivery trends, production yield rates by major product line, and the output and yield data from significant intermediary manufacturing processes that support the production of the finished shippable product. The data from these reports is used to determine tactical operating actions and changes. Management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP measures. These non-GAAP measures are described in more detail below under the heading “Non-GAAP Financial Measures.”
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Non-GAAP Financial Measures
We report our historical results in accordance with GAAP; however, our management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.
EBITDA
EBITDA is a non-GAAP financial measure used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA, as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not necessarily a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”
We believe EBITDA is helpful for investors to better understand our underlying business operations. The following table adjusts net loss to EBITDA for the three months ended September 30, 2023 and 2022:
|
| (unaudited) |
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| Quarter Ended September 30, |
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| 2023 |
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| 2022 |
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Net loss |
| $ | (1,342,376 | ) |
| $ | (1,380,700 | ) |
Depreciation and amortization |
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| 813,556 |
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| 816,334 |
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Income tax provision |
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| 39,546 |
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| 102,134 |
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Interest expense |
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| 57,611 |
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| 70,370 |
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EBITDA |
| $ | (431,663 | ) |
| $ | (391,862 | ) |
% of revenue |
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| -5 | % |
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| -5 | % |
Our EBITDA for the quarter ended September 30, 2023 was a loss of approximately $432,000, compared to $392,000 for the same period of the prior fiscal year. The decrease in EBITDA in the first quarter of fiscal 2024 was primarily attributable to other income and expenses (non-operating).
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, 2023, 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, 2023 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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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, 2023, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the three months ended September 30, 2023, 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, 2023.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
None
Item 5. Other Information
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits
The following exhibits are filed herewith as a part of this report.
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101.INS | Inline XBRL Instance Document | * |
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101.SCH | Inline XBRL Taxonomy Extension Schema Document | * |
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101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * |
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101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * |
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101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * |
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101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document | * |
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104 | Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101 | * |
*filed herewith
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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. |
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Date: November 9, 2023 | By: | /s/ Shmuel Rubin |
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| Shmuel Rubin President and Chief Executive Officer |
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Date: November 9, 2023 | By: | /s/ Albert Miranda |
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| Albert Miranda Chief Financial Officer |
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| 37 |
EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Shmuel Rubin, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of LightPath Technologies, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2023
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| /s/ Shmuel Rubin |
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| Shmuel Rubin President and Chief Executive Officer |
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EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Albert Miranda, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of LightPath Technologies, Inc.; |
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| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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| 4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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| c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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| d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
| 5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
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| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 9, 2023
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| /s/ Albert Miranda |
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| Albert Miranda Chief Financial Officer |
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EXHIBIT 32.1
Certification of Chief Executive Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of LightPath Technologies, Inc. (the "Company") does hereby certify, to the best of such officer's knowledge, that:
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| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2023 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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| Date: November 9, 2023 |
| /s/ Shmuel Rubin |
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| Shmuel Rubin President and Chief Executive Officer |
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The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LightPath Technologies, Inc. and will be retained by LightPath Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
Certification of Chief Financial Officer
Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of LightPath Technologies, Inc. (the "Company") does hereby certify, to the best of such officer's knowledge, that:
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| 1. | The Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2023 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
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| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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| Date: November 9, 2023 |
| /s/ Albert Miranda |
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| Albert Miranda Chief Financial Officer |
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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.
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Condensed Consolidated Balance Sheets | ||
| Allowance For Doubtful Trade Accounts Receivable | $ 21,089 | $ 18,502 |
| 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 | 37,455,438 | 34,344,739 |
| Common Stock: Class A, Shares Outstanding | 37,455,438 | 34,344,739 |
Basis of Presentation |
3 Months Ended |
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Sep. 30, 2023 | |
| Basis of Presentation | |
| 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.
These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the requirements of Article 8 of Regulation S-X promulgated under the Exchange Act and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023, 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, 2023 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. |
Significant Accounting Policies |
3 Months Ended |
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Sep. 30, 2023 | |
| Significant Accounting Policies | |
| 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, 2023. There have been no material changes to our significant accounting policies during the three months ended September 30, 2023, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
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. |
Acquisition of Visimid Technologies |
3 Months Ended |
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Sep. 30, 2023 | |
| Acquisition of Visimid Technologies | |
| Acquisition of Visimid Technologies | 3. Acquisition of Visimid Technologies
In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Acquisition Date”).
Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things (“IOT”) applications. Visimid provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and OEMs for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.
The Company’s unaudited condensed consolidated financial statements reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price included $1 million in cash, $1,550,000 of restricted stock, $150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract. Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued on four equal installments of $350,000 each on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025. The number of shares is based on the average closing price of the Company’s Class A common stock, as reported by Bloomberg, for the five trading days prior to each stock issuance. The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $2.9 million. Of this amount, $600,000 was paid at closing and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities and Accrued liabilities, noncurrent in the accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2023.
The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets, goodwill and deferred income tax assets are subject to change.
For the three months ended September 30, 2023, the Company incurred approximately $83,000 in acquisition costs which are included in the unaudited Condensed Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.” This is in addition to the previously disclosed $140,000 in acquisition costs which were recorded during the three months ended June 30, 2023.
Prior to the Acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera. |
Revenue |
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| Revenue | 4. Revenue
Product Revenue
We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also provide engineering services and perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies.
Revenue Recognition
Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments.
Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of our performance. Deferred revenue was not significant as of September 30, 2023 and June 30, 2023, 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 for engineering services are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable.
We previously organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements for engineering services were included in specialty products. With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. Assemblies and modules were previously included in PMO, infrared or specialty products, depending on the lens type. Revenue by product group for the three months ended September 30, 2023 and 2022 was as follows, with 2022 amounts reclassified from those previously reported to conform to current classification:
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Inventories |
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| Inventories | 5. Inventories
The components of inventories include the following:
The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $1.4 million and $1.5 million as of September 30, 2023 and June 30, 2023, respectively. |
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Property and Equipment |
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| Property And Equipment | 6. Property and Equipment
Property and equipment are summarized as follows:
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| Goodwill And Intangible Assets | 7. Goodwill and Intangible Assets
The change in the net carrying amount of goodwill during the three months ended September 30, 2023 was as follows:
The increase in goodwill during the three months ended September 30, 2023 was due to the acquisition of Visimid. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurement of goodwill and intangible assets are subject to change. See Note 3, Acquisition of Visimid Technologies, to these unaudited condensed consolidated financial statements, for more information.
Identifiable intangible assets were comprised of:
Future amortization of identifiable intangibles is as follows:
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| Income Taxes | 8. Income Taxes
A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2023 and 2022 is as follows:
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, 2023 and 2022, 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”), and paid or payable to LightPath, 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, 2023 and June 30, 2023, 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 assets as of September 30, 2023 and June 30, 2023 consist 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, 2023, LPOI and LPOIZ were subject to statutory income tax rates of 25% and 15%, respectively. The net deferred tax liabilities included in these unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023 are related to LPOIZ, and primarily consist of timing differences related to depreciation.
The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S. parent company. The Company also intends to reinvest a portion of the earnings generated by its foreign subsidiaries. The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $40,000 as of both September 30, 2023 and June 30, 2023. Other than these withholding taxes, these intercompany dividends have no impact on the unaudited condensed 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 |
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| Stock-based Compensation | 9. Stock-Based Compensation
Our directors, officers, and key employees are granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, through our 2018 Stock and Incentive Compensation Plan (the “SICP”). Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The SICP is administered by the Compensation Committee of the Board of Directors. At our 2018 Annual Stockholders Meeting, our stockholders approved the SICP under which an aggregate of 1,650,870 shares of our Class A common stock were authorized for issuance pursuant to awards granted thereunder. At our 2022 Annual Stockholders Meeting, our stockholders authorized an additional 2,100,000 shares of our Class A common stock for issuance pursuant to awards granted thereunder. As of September 30, 2023, 1,625,538 shares of Class A common stock were authorized and available for issuance pursuant to awards granted under the SICP. The Company’s executive officers are eligible to earn incentive compensation consisting of equity-based awards, as well as cash bonuses, based on the achievement of certain individual and/or Company performance goals set by the Compensation Committee.
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, 2023 and 2022, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):
We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations. A discount of approximately $2,000 for each of the three months ended September 30, 2023 and 2022, respectively, is included in SG&A expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), 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 RSA and 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 September 30, 2023 and 2022. 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 either of the three-month periods ended September 30, 2023 or September 30, 2022.
Restricted Stock Awards
RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting.
Restricted Stock Units
RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant. Information Regarding Current Share-Based Compensation Awards
A summary of the activity for share-based compensation awards in the three months ended September 30, 2023 is presented below:
As of September 30, 2023, there was approximately $535,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options, RSAs and RSUs) granted. We expect to recognize the compensation cost as follows:
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| Earnings (loss) Per Share | 10. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares of Class A common stock outstanding, during each period presented. Diluted earnings (loss) per share is computed similarly to basic earnings (loss) per share, except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue shares of Class A common stock were exercised or converted into shares of Class A common stock. The computations for basic and diluted earnings (loss) per share of Class A common stock are described in the following table:
The following potential dilutive shares were not included in the computation of diluted earnings (loss) per share of Class A common stock, as their effects would be anti-dilutive:
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Leases |
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| Leases | 11. Leases
Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms at various times through 2034. We typically include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise such options. We currently have obligations under seven finance lease agreements, entered into during fiscal years 2019, 2023 and 2024, 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 previously had two leases on the premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”). The first lease on the premises comprising our Orlando Facility was amended in April 2021, and again in September 2021, to expand the space from approximately 26,000 square feet to approximately 58,500 square feet. The lease term was extended from April 30, 2022, to that certain date that is one hundred twenty-seven (127) months after the date the landlord completes certain work to be done at the leased premises. The landlord’s work was completed in August 2023, and accordingly the lease expires on March 31, 2034. In April 2023, we entered into a sublease for 11,156 square feet of this space, as we do not have a current need for the full 58,500 square feet of space. The sublease is for an initial term of five years, ending in April 2029. The second lease on the premises comprising our Orlando Facility was assigned to a third-party and it was agreed that we would vacate the premises, subject to the assigned lease, on November 30, 2022. In December 2022, we entered into an agreement with the assignee of such lease that extended our right to occupy the subject premises until February 28, 2023, in consideration of payments of rent through February 28, 2023, and other amounts to the assignee. In February 2023, the space was vacated and we have no further obligations related to this lease. Effective in January 2022, the terms of 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 assets and the related lease liabilities. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 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. In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $2.4 million in tenant improvement allowances. We are funding the balance of the tenant improvement costs, which we estimate will be approximately $3.8 million, pending final construction invoices.
The components of lease expense were as follows:
Supplemental balance sheet information related to the leases was as follows:
Lease term and discount rate information related to leases was as follows:
Supplemental cash flow information:
Future maturities of lease liabilities were as follows as of September 30, 2023:
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Loans Payable |
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| Loans Payable | 12. Loans Payable
As of September 30, 2023 and June 30, 2023, 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 a 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”). In accordance with the Letter Agreement, the parties agreed to the following terms, among others: (i) we were granted a waiver of default for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021; (ii) certain financial covenant requirements were modified; and (iii) the Guidance Line was terminated. 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 would bear interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time; (iv) the Term Loan would 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 would still be outstanding on such date); 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. Based on the waiver, we were no longer in default of the Amended Loan Agreement.
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).
On February 7, 2023, we entered into the Fourth Amendment to the Loan Agreement dated February 26, 2019 (the “Fourth Amendment” and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the Second Amendment, and the Third Amendment, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Fourth Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of December 31, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an amended exit fee equal to (a) 1% of the outstanding principal balance on December 31, 2023 and (b) 4% of the outstanding principal balance on December 31, 2024 (to the extent the Term Loan is still outstanding on the respective dates); (iii) a principal reduction payment of $1,000,000 on or before February 28, 2023; (iv) commencing on March 1, 2023 and continuing on the first day of each month thereafter until December 31, 2023, monthly payments of $75,000, and commencing on January 1, 2024 and continuing on the first day of each month thereafter until the maturity date, monthly payments of $100,000, with each such payment applied first to interest, costs and expenses and then to principal; (v) commencing on March 1, 2023, each facility will bear interest at BankUnited’s then prime rate of interest, and (vi) BankUnited waived compliance with certain financial covenants until December 31, 2023.
On May 9, 2023, we entered into the Fifth Amendment to the Loan Agreement dated February 26, 2019 (the “Fifth Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Fifth Amendment, the parties agreed to the following terms, among others: (i) BankUnited agreed to release its security interest in the collateral securing the BankUnited Loans other than a cash collateral account maintained at BankUnited, initially in the amount of approximately $2,457,000, with a portion of such cash collateral to be released on a quarterly basis equal to 110% of the principal reductions effected during that quarter, and (ii) certain other requirements and restrictions of the Loan Agreement were removed, including, among others, financial covenants, restrictions on acquisitions, and limitations on other financing sources. The cash collateral is reflected as Restricted Cash in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2023 and June 30, 2023.
BankUnited Revolving Line
Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances to us under the Revolving Line 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. The Revolving Line expired on February 26, 2022. No amounts were outstanding under the BankUnited Revolving Line upon its expiration. BankUnited Term Loan
Pursuant to the Amended Loan Agreement, BankUnited advanced the Company $5,813,500 to satisfy in full the amounts owed to Avidbank and to pay the fees and expenses incurred in connection with the closing of the BankUnited Loan. The Term Loan is for a 5-year term, but co-terminus with the BankUnited Revolving Line should the Revolving Line not be renewed beyond February 26, 2022. Pursuant to the Fourth Amendment, the maturity date of the Term Loan is December 31, 2024.
The Term Loan initially bore interest at a per annum rate equal to 2.75% above the 30-day LIBOR. Pursuant to the Second Amendment, beginning on December 20, 2021, each facility bore interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time. Pursuant to the Fourth Amendment, commencing on March 1, 2023, each facility bears interest at BankUnited’s then prime rate of interest, as adjusted from time to time (8.5% as of September 30, 2023).
Equal monthly principal payments of approximately $48,446, plus accrued interest, were 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, commencing November 1, 2022. Pursuant to the Fourth Amendment, commencing on March 1, 2023 and continuing on the first day of each month thereafter until December 31, 2023, monthly payments were reduced to $75,000, and commencing on January 1, 2024 and continuing on the first day of each month thereafter until the maturity date, monthly payments will increase to $100,000, with each such payment applied first to interest, costs and expenses and then to principal. Upon maturity, all principal and interest shall be immediately due and payable.
Security and Guarantees
Our obligations under the Amended Loan Agreement were previously collateralized by a first priority security interest (subject to permitted liens) in all of our assets and the assets of the Company’s U.S. subsidiaries, GelTech, Inc. (“GelTech”), and ISP, pursuant to a Security Agreement granted by GelTech, ISP, and the Company in favor of BankUnited. The Company’s equity interests in, and the assets of, its foreign subsidiaries were excluded from the security interest. Pursuant to the Fifth Amendment, the security interest in the certain of the collateral then securing the BankUnited Loans terminated and was replaced by a security interest in a cash collateral account maintained at BankUnited, initially in the amount of approximately $2,457,000, with a portion of such cash collateral to be released on a quarterly basis equal to 110% of the principal reductions effected during that quarter. In addition, all of the Company’s subsidiaries have guaranteed the Company’s obligations under the Amended Loan Agreement and related documents, pursuant to Guaranty Agreements executed by the Company and its subsidiaries in favor of BankUnited.
General Terms
The Amended Loan Agreement initially contained customary covenants, including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing the Company’s 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. The Letter Agreement granted us a waiver of default arising prior to the Letter Agreement from its failure to comply with the fixed charge coverage ratio measured on June 30, 2021. The Second Amendment to the Amended Loan Agreement granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) through June 30, 2022. Based on the waivers, we were no longer in default of the Amended Loan Agreement. Pursuant to the Fifth Amendment, certain other requirements and restrictions of the Loan Agreement were removed, including, among others, financial covenants, restrictions on acquisitions, and limitations on other financing sources. As of September 30, 2023, we were in compliance with all required covenants.
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 accrue interest at a rate of five percent (5%) above BankUnited’s then prime rate of interest, as adjusted from time to time, applicable immediately prior to the occurrence of the event of default. The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and confidentiality.
Financing costs incurred related to the BankUnited Loans were recorded as a discount on debt and amortized over the term. Amortization of approximately $19,000 is included in interest expense for the three-month period ended September 30, 2022. There was no amortization for the three-month period ended September 30, 2023, as all costs have been fully amortized in prior periods. In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which party is also a significant customer, and which the 2020 Equipment Loan is subordinate to the BankUnited Loans, and collateralized by certain equipment. The initial advance under the 2020 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 2020 Equipment Loan bears interest at a fixed rate of 3.3%.
In May 2023, ISP Latvia entered into an equipment loan with a third party (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advance under the 2023 Equipment Loan was 128,815 EUR (or USD $141,245), the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. The 2023 Equipment Loan will be payable over 48 months, with monthly installments beginning January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (6.98% as of September 30, 2023).
In July 2023, the acquisition of Visimid included a promissory note of $150,000 in favor of The American National Bank of Texas (the “ANBTX Note”). In conjunction with the acquisition, Visimid and LightPath agreed to collateralize the ANBTX Note with a certificate of deposit for the same amount. The cash collateral is reflected as Restricted Cash in the accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2023. The ANBTX Note bears interest at a fixed rate of 6.15% and has a maturity date of April 14, 2024.
Future maturities of loans payable are as follows:
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| Foreign Operations | 13. Foreign Operations
Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $481,000 and $607,000 as of September 30, 2023 and June 30, 2023, respectively. We also recognized net foreign currency transaction gains of $25,000 and $23,000 during the three months ended September 30, 2023 and 2022, respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”
Our cash, cash equivalents and restricted cash totaled approximately $6.9 million at September 30, 2023. Of this amount, greater than 25% 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, 2023, LPOIZ had approximately $2.7 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2022, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2023. Revenues from and long-lived assets located in foreign countries are as follows:
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| Commitments and Contingencies | |
| Contingencies | 14. Contingencies
Legal
The Company, from time to time, is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.
In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement. In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees.
We have incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which include 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 30, 2023 and 2022, respectively, expenses incurred related to the legal proceedings were immaterial.
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 will 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. 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 and its lasting impacts.
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 have had travel restrictions in place, including China until recently. Even though China’s travel restrictions are no longer in place, we are required to re-apply for travel visas and approvals which will continue to affect our ability to travel in China. As a result, 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 have been, and will continue to be, adversely impacted. Management is actively monitoring this situation and taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally. However, we are not able to precisely estimate the effects of the continuing COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal 2024 or beyond.
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 remnant 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.
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. |
Liquidity |
3 Months Ended |
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Sep. 30, 2023 | |
| Liquidity | |
| Liquidity | 15. Liquidity
We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. We have commenced discussions with prospective lenders regarding the refinancing of our debt obligations prior to the maturity date of the BankUnited Term Loan on December 31, 2024. There can be no assurance that we will be successful in such refinancing or that such refinancing will be available under reasonable commercial terms. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, it may need to raise additional equity financing, source financing through non-commercial lenders or reduce operating expenses and capital expenditures in order to repay the credit facility and all charges related thereto upon its maturity on December 31, 2024.
On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under the shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. We have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.
On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of 9,090,910 shares of the Company’s Class A common stock, par value $0.01 per share for a purchase price of $1.10 per share and filed a prospectus supplement with the SEC related thereto. The sale of shares pursuant to the Purchase Agreement closed on January 17, 2023, and resulted in net proceeds of approximately $9.2 million after payment of placement agent fees, and certain other costs and expenses of the offering.
There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, we may identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions. |
Significant Accounting Policies (Policies) |
3 Months Ended |
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Sep. 30, 2023 | |
| 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. |
Revenue (Tables) |
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Property and Equipment (Tables) |
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| Schedule Of Property And Equipment |
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Goodwill and Intangible Assets (Tables) |
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| Schdule Of goodwill |
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| Intangible Assets |
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| Schdule Of Intangible Assets Future Amortization |
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Income Taxes (Tables) |
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StockBased Compensation (Tables) |
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| StockBased Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Stock-based Compensation Expense |
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| Summary Of Activity Of Share Based Compensation Awards |
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| Schedule Of Share-based Compensation Future Cost To Be Recognized |
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Earnings (Loss) Per Share (Tables) |
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| Schedule Of The Computations For Basic And Diluted Earnings (loss) Per Common Share |
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| Schedule Of Potential Dilutive Shares Were Not Included In The Computation Of Diluted Earnings (loss) Per Common Share |
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Leases (Tables) |
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| Supplemental Lease Information |
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Loans Payable (Tables) |
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| Future Maturities Of Loans Payable |
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Foreign Operations (Tables) |
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| Foreign Assets |
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Acquisition of Visimid Technologies (Details Narrative) - Acquisition of Visimid Technologies [Member] - USD ($) |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Jul. 31, 2023 |
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Acquisition price of company in cash | $ 1,000,000 | ||
| Bank debt | 150,000 | ||
| Purchase acquisition of restricted stock | $ 1,550,000 | ||
| Description of restricted stock installments | the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued on four equal installments of $350,000 each on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025 | ||
| Purchase price net acquisition cost | $ 2,900,000 | $ 83,000 | $ 140,000 |
| Acquisition payment amount at the closing period | $ 600,000 | ||
Revenue (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenues | $ 8,077,248 | $ 7,366,901 |
| Infrared Components [Member] | ||
| Revenues | 3,834,602 | 3,189,551 |
| Visible Components [Member] | ||
| Revenues | 2,688,335 | 3,267,658 |
| Assemblies and Modules [Member] | ||
| Revenues | 1,262,039 | 870,732 |
| Engineering Services [Member] | ||
| Revenues | $ 292,272 | $ 38,960 |
Inventories (Details) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Inventories | ||
| Raw materials | $ 3,125,473 | $ 2,999,879 |
| Work in process | 2,783,997 | 2,909,439 |
| Finished goods | 2,855,851 | 2,626,106 |
| Allowance for obsolescence | 1,261,825 | 1,124,690 |
| Inventories, net | $ 7,503,496 | $ 7,410,734 |
Inventories (Details Narrative) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Raw materials | $ 3,125,473 | $ 2,999,879 |
| Inventory - Tooling | ||
| Raw materials | $ 140,000 | $ 150,000 |
Goodwill and Intangible Assets (Details) |
3 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Goodwill and Intangible Assets | |
| Goodwill at June 30, 2023 | $ 5,854,905 |
| Goodwill at September 30, 2023 | 8,915,637 |
| Acquisition of Visimid | $ 3,060,732 |
Goodwill and Intangible Assets (Details 1) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Intangible Assets, Gross | $ 10,676,000 | $ 10,676,000 |
| Less Accumulated Amortization | (7,624,556) | (7,343,285) |
| Intangible Assets, Net | 3,051,444 | 3,332,715 |
| 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 |
Goodwill and Intangible Assets (Details 2) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Intangible Assets, Net | $ 3,051,444 | $ 3,332,715 |
| Intangible Assets [Member] | ||
| June 30, 2024 (remaining nine months) | 843,812 | |
| June 30, 2025 | 658,398 | |
| June 30, 2026 | 239,334 | |
| June 30, 2027 | 239,334 | |
| After June 30, 2027 | $ 1,070,566 |
Income Taxes (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Taxes | ||
| Income (loss) before income taxes | $ (1,302,830) | $ (1,278,566) |
| Income tax provision | $ 39,546 | $ 102,134 |
| Effective income tax rate | (3.00%) | (8.00%) |
Income Taxes (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Effective tax rate | 25.00% | |
| Change in statutory income tax rate | 20.00% | |
| Unpaid withholding tax | $ 40,000 | $ 40,000 |
| CHINA | L P O I | ||
| Statutory income tax rate | 25.00% | |
| CHINA | L P O I Z | ||
| Statutory income tax rate | 15.00% | |
| U.S. Federal and State | ||
| Statutory income tax rate | 25.50% |
StockBased Compensation (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Total | $ 240,075 | $ 284,598 |
| Restricted Stock Units | ||
| Total | 22,387 | 0 |
| Restricted Stock Awards | ||
| Total | 186,210 | 225,833 |
| Stock Options | ||
| Total | $ 31,478 | $ 58,765 |
StockBased Compensation (Details 2) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Stock Options | $ 95,844 |
| Restricted Stock Units | 380,790 |
| Restricted Stock Awards | 58,075 |
| Total Unrecognized Compensation Cost | 534,709 |
| Year Ending June 30, 2024 | |
| Stock Options | 61,959 |
| Restricted Stock Units | 230,372 |
| Restricted Stock Awards | 34,357 |
| Total Unrecognized Compensation Cost | 326,688 |
| Year Ending June 30, 2025 | |
| Stock Options | 33,885 |
| Restricted Stock Units | 130,589 |
| Restricted Stock Awards | 23,718 |
| Total Unrecognized Compensation Cost | 188,192 |
| Year Ending June 30, 2026 | |
| Stock Options | 0 |
| Restricted Stock Units | 19,829 |
| Restricted Stock Awards | 0 |
| Total Unrecognized Compensation Cost | $ 19,829 |
StockBased Compensation (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Discount On Employee Stock Purchase Plan | $ 2,000 | $ 2,000 |
| Discount On Employee Stock Purchase Plan, Percentage | 10.00% | |
| Total Unrecognized Compensation Cost | $ 534,709 | |
| SICP (or Omnibus Plan) | Class A common stock | ||
| Award shares, authorized | 1,625,538 | |
| SICP (or Omnibus Plan) | 2018 Annual Stockholders Meeting | Class A common stock | ||
| Award shares, authorized | 1,650,870 | |
| SICP (or Omnibus Plan) | 2022 Annual Stockholders Meeting | Class A common stock | ||
| Award shares, authorized | 2,100,000 | |
| Stock options, RSAs and RSUs | ||
| Total Unrecognized Compensation Cost | $ 535,000 | |
Earnings (Loss) Per Share (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Earnings (Loss) Per Share | ||
| Net loss | $ (1,342,376) | $ (1,380,700) |
| Weighted Average Number Of Shares Outstanding | ||
| Basic number of shares | 37,431,748 | 27,070,949 |
| Effect of dilutive securities: | ||
| Options To Purchase Common Stock | $ 0 | $ 0 |
| RSUs and RSAs | $ 0 | $ 0 |
| Diluted number of shares | 37,431,748 | 27,070,949 |
| Loss per common share: | ||
| Basic | $ (0.04) | $ (0.05) |
| Diluted | $ (0.04) | $ (0.05) |
Earnings (Loss) Per Share (Details 1) - shares |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Antidilutive Securities | 2,223,528 | 2,595,552 |
| Restricted Stock Units | ||
| Antidilutive Securities | 1,689,066 | 2,061,090 |
| Stock Options | ||
| Antidilutive Securities | 534,462 | 534,462 |
Leases (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Leases | ||
| Operating lease cost | $ 205,023 | $ 231,501 |
| Finance lease cost, depreciation of lease assets | 19,915 | 34,111 |
| Finance lease cost, interest on lease liabilities | 7,536 | 2,683 |
| Total finance lease cost | 27,451 | 36,794 |
| Total lease cost | $ 232,474 | $ 268,295 |
Leases (Details 1) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Jun. 30, 2023 |
|
| Assets | |||
| Operating lease assets | $ 7,571,878 | $ 9,571,604 | |
| Finance lease assets | 637,581 | 542,105 | |
| Total lease assets | 8,209,459 | 10,113,709 | |
| Liabilities | |||
| Operating leases, current | 1,016,940 | 969,890 | |
| Finance leases, current | 112,352 | 103,646 | |
| Operating leases, noncurrent | 8,773,442 | 8,393,248 | |
| Finance leases, noncurrent | 340,716 | 341,201 | |
| Total lease liabilities | $ 10,243,450 | $ 9,807,985 | |
| Weighted average remaining lease term (in years), operating leases | 10 years 1 month 6 days | ||
| Weighted average remaining lease term (in years), finance leases | 4 years 2 months 12 days | ||
| Weighted average discount rate, operating leases | 2.90% | ||
| Weighted average discount rate, finance leases | 5.70% | ||
| Operating cash used for operating leases | $ 180,077 | $ 268,580 | |
| Operating cash used for finance leases | 7,536 | 2,683 | |
| Financing cash used for finance leases | $ 27,062 | $ 37,079 | |
Leases (Details 2) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Finance Lease - Fiscal year ending September 30, | |
| June 30, 2024 (remaining nine months) | $ 106,949 |
| June 30, 2025 | 130,447 |
| June 30, 2026 | 108,132 |
| June 30, 2027 | 89,371 |
| June 30, 2028 | 82,466 |
| Thereafter | 0 |
| Total future minimum payments | 517,365 |
| Less imputed interest | (64,297) |
| Present value of lease liabilities | 453,068 |
| Operating Lease - Fiscal Year ending September 30, | |
| June 30, 2024 (remaining nine months) | 794,979 |
| June 30, 2025 | 1,125,653 |
| June 30, 2026 | 1,097,131 |
| June 30, 2027 | 1,125,616 |
| June 30, 2028 | 1,154,784 |
| Thereafter | 6,751,714 |
| Total future minimum payments | 12,049,877 |
| Less imputed interest | (2,259,495) |
| Present value of lease liabilities | $ 9,790,382 |
Leases (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Leases | ||
| Finance Lease Assets, Accumulated Depreciation | $ 92,000 | $ 72,000 |
| Lease term | 12 years | |
| Operating Lease Expiry Year | 2034 | |
| Description of leased space | amended in April 2021, and again in September 2021, to expand the space from approximately 26,000 square feet to approximately 58,500 square feet. The lease term was extended from April 30, 2022, to that certain date that is one hundred twenty-seven (127) months after the date the landlord completes certain work to be done at the leased premises. The landlord’s work was completed in August 2023, and accordingly the lease expires on March 31, 2034. In April 2023, we entered into a sublease for 11,156 square feet of this space, as we do not have a current need for the full 58,500 square feet of space. The sublease is for an initial term of five years, ending in April 2029. The second lease on the premises comprising our Orlando Facility was assigned to a third-party and it was agreed that we would vacate the premises, subject to the assigned lease, on November 30, 2022. In December 2022, we entered into an agreement with the assignee of such lease that extended our right to occupy the subject premises until February 28, 2023, in consideration of payments of rent through February 28, 2023, and other amounts to the assignee. In February 2023, the space was vacated and we have no further obligations related to this lease. Effective in January 2022, the terms of our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively | |
| Tenant improvement allowances | $ 2,400,000 | |
| Estimated cost of Tenant improvement allowances | $ 3,800,000 |
Loans Payable (Details) - USD ($) |
Sep. 30, 2023 |
Jun. 30, 2023 |
|---|---|---|
| Fiscal year ending June 30, | ||
| June 30, 2024 (remaining nine months) | $ 959,175 | |
| June 30, 2025 | 1,413,881 | |
| June 30, 2026 | 77,246 | |
| June 30, 2027 | 36,464 | |
| After June 30, 2027 | 19,207 | |
| Total Payments | 2,505,973 | |
| Less current portion | (1,269,340) | $ (1,023,814) |
| Non-current portion | 1,236,633 | |
| 2020 Equipment Loan | ||
| Fiscal year ending June 30, | ||
| June 30, 2024 (remaining nine months) | 92,874 | |
| June 30, 2025 | 135,486 | |
| June 30, 2026 | 77,246 | |
| June 30, 2027 | 36,464 | |
| After June 30, 2027 | 19,207 | |
| Total Payments | 361,277 | |
| ANBTX Note | ||
| Fiscal year ending June 30, | ||
| June 30, 2024 (remaining nine months) | 150,000 | |
| June 30, 2025 | 0 | |
| June 30, 2026 | 0 | |
| June 30, 2027 | 0 | |
| After June 30, 2027 | 0 | |
| Total Payments | 150,000 | |
| BankUnited Term Loan | ||
| Fiscal year ending June 30, | ||
| June 30, 2024 (remaining nine months) | 716,301 | |
| June 30, 2025 | 1,278,395 | |
| June 30, 2026 | 0 | |
| June 30, 2027 | 0 | |
| After June 30, 2027 | 0 | |
| Total Payments | $ 1,994,696 |
Loans Payable (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
May 09, 2023 |
May 31, 2023 |
Sep. 30, 2021 |
Dec. 31, 2020 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Feb. 07, 2023 |
Feb. 26, 2022 |
Feb. 26, 2019 |
|
| Total Payments | $ 2,505,973 | ||||||||
| Interest expense | 57,611 | $ 70,370 | |||||||
| BankUnited [Member] | |||||||||
| Revolving Line Maximum Credit Limit | $ 2,000,000 | ||||||||
| Term Loan | 5,813,500 | ||||||||
| Non Revolving Maximum Credit Limit | $ 10,000,000 | ||||||||
| Bank United Revolving Line [Member] | |||||||||
| Revolving Line Maximum Credit Limit | $ 2,000,000 | ||||||||
| November 5, 2021 [Member] | Second Letter Agreement [Member] | |||||||||
| Fees Payable | $ 50,000 | ||||||||
| Interest Rate On Borrowing | 4.00% | 1.00% | |||||||
| Monthly loan amount payable | $ 100,000 | ||||||||
| May 11, 2022 [Member] | Third Amendment [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) | ||||||||
| February 7, 2023 [Member] | Fourth Amendment [Member] | |||||||||
| Principal reduction payment | $ 1,000,000 | ||||||||
| Monthly loan amount payable | $ 75,000 | ||||||||
| Interest Rate On Borrowing | 4.00% | ||||||||
| Fee Paid | $ 100,000 | ||||||||
| May 9, 2023 [Member] | Fifth Amendment [Member] | |||||||||
| Security interest amount | $ 2,457,000 | $ 2,457,000 | |||||||
| Interest Rate On Borrowing | 110.00% | ||||||||
| ANBTX Note | |||||||||
| Interest Rate On Borrowing | 6.15% | ||||||||
| Maturity date | Apr. 14, 2024 | ||||||||
| Total Payments | $ 150,000 | ||||||||
| 2020 Equipment Loan | |||||||||
| Interest Rate On Borrowing | 3.30% | ||||||||
| Installment Term | 52 years | 60 months | |||||||
| Advances | $ 267,000 | $ 275,000 | |||||||
| 2023 Equipment Loan | |||||||||
| Interest Rate On Borrowing | 6.98% | ||||||||
| Installment Term | 48 years | ||||||||
| Advances | $ 141,245 | ||||||||
| BankUnited Term Loan | |||||||||
| Monthly loan amount payable | $ 75,000 | ||||||||
| Term Loan | $ 5,813,500 | ||||||||
| Interest Rate On Borrowing | 2.75% | ||||||||
| Term Loan Tenure | 5 years | ||||||||
| Maturity date | Dec. 31, 2024 | ||||||||
| Total Payments | $ 1,994,696 | ||||||||
| Equal Monthly Principal Payment | $ 48,446 | ||||||||
| Late payment fee | 8.25% | ||||||||
| 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 | ||||||||
| Interest expense | $ 19,000 | ||||||||
| Fee Paid | $ 100,000 | ||||||||
Foreign Operations (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Jun. 30, 2023 |
|
| Revenue, net | $ 8,077,248 | $ 7,366,901 | |
| Long-lived assets | 35,339,984 | $ 31,776,093 | |
| CHINA | |||
| Revenue, net | 500,138 | 827,940 | |
| Long-lived assets | 3,039,911 | 3,157,434 | |
| LATVIA | |||
| Revenue, net | 0 | 738,612 | |
| Long-lived assets | 4,954,923 | 5,282,596 | |
| Other European countries | |||
| Revenue, net | 2,523,545 | 2,136,229 | |
| Other Asian countries | |||
| Revenue, net | 562,399 | 449,888 | |
| Rest of world | |||
| Revenue, net | 197,772 | 248,937 | |
| United States | |||
| Revenue, net | 4,293,394 | $ 2,965,295 | |
| Long-lived assets | $ 27,345,150 | $ 23,336,063 | |
Foreign Operations (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Gain (loss) On Foreign Currency | $ 25,000 | $ 23,000 | ||
| Cumulative Gain | 481,000 | $ 607,000 | ||
| Cash And Cash Equivalents | $ 6,859,958 | $ 4,298,869 | 7,144,490 | $ 5,507,891 |
| Percentage Of Amount Held For Foreign Subsidiaries | 50.00% | |||
| Accumulated earnings | $ (209,178,605) | $ (207,836,229) | ||
| L P O I Z | ||||
| Cash And Cash Equivalents | 6,900,000 | |||
| Accumulated earnings | $ 2,700,000 | |||
Contingencies (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Commitments and Contingencies | ||
| Contingent Liability Pursuant To Severance Agreements | $ 485,000 | |
| Related expenses | $ 718,000 | 400,000 |
| Legal, consulting and other transitional management fees | $ 718,000 | $ 400,000 |
Liquidity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | |||
|---|---|---|---|---|
Jan. 12, 2023 |
Feb. 16, 2022 |
Sep. 30, 2023 |
Jun. 30, 2023 |
|
| Offering Price | $ 7,580 | |||
| Revised Offering Price | 2,520 | |||
| Decrease in Aggregate Offering Price | $ 5,060 | |||
| Common stock, par value | $ 0.01 | $ 0.01 | ||
| Common stock, shares Issued | 37,455,438 | 34,344,739 | ||
| Securities Purchase Agreement | ||||
| Common stock, par value | $ 0.01 | |||
| Common stock, shares Issued | 9,090,910 | |||
| Purchase Price, per share | $ 1.10 | |||
| Description of securities purchase agreement | The sale of shares pursuant to the Purchase Agreement closed on January 17, 2023, and resulted in net proceeds of approximately $9.2 million after payment of placement agent fees, and certain other costs and expenses of the offering |