What changed in this filing

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Item 1. Financial Statements

2022-02-10 compared with 2021-11-10 · 131 added, 104 removed, 441 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current assets:

31 unchanged sentences

44,500,000 shares authorized;

26,994,534 and 26,985,913 shares issued and outstanding

27,021,875 and 26,985,913

shares issued and outstanding

Additional paid-in capital

5 unchanged sentences

Total liabilities and stockholders’ equity

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

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

LIGHTPATH TECHNOLOGIES, INC.

1 unchanged sentence

Three Months Ended

September 30,

Six Months Ended

Cost of sales

3 unchanged sentences

Amortization of intangibles

Loss (gain) on disposal of property and equipment

Gain on disposal of property and equipment

Total operating expenses

Operating income (loss)

( 1,385,776 )

Other income (expense):

3 unchanged sentences

Income (loss) before income taxes

( 1,019,895 )

( 1,522,119 )

Income tax provision

Net income (loss)

$ ( 1,055,291 )

$ ( 146,545 )

$ ( 1,687,388 )

Foreign currency translation adjustment

1 unchanged sentence

$ ( 1,055,007 )

Earnings (loss) per common share (basic)

$ ( 1,831,278 )

Loss per common share (basic)

Number of shares used in per share calculation (basic)

Earnings (loss) per common share (diluted)

Loss per common share (diluted)

Number of shares used in per share calculation (diluted)

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

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

LIGHTPATH TECHNOLOGIES, INC.

12 unchanged sentences

$ ( 200,879,274 )

Issuance of common stock for:

Settlement of RSUs, net

Stock-based compensation on stock options & RSUs

Foreign currency translation adjustment

( 1,055,291 )

Balances at December 31, 2021

$ 231,761,146

$ ( 201,934,565 )

Balances at June 30, 2020

9 unchanged sentences

$ ( 196,964,858 )

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

Issuance of common stock for:

Exercise of stock options & RSU's, net

Stock-based compensation on stock options & RSUs

Foreign currency translation adjustment

Balances at December 31, 2020

$ 231,014,560

$ ( 197,111,403 )

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

LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities:

Net (loss) income

$ ( 1,687,388 )

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

3 unchanged sentences

Provision for doubtful accounts receivable

Change in operating lease liabilities

Change in operating lease assets and liabilities

Inventory write-offs to allowance

1 unchanged sentence

Trade accounts receivable

( 1,283,594 )

Other receivables

1 unchanged sentence

Accounts payable and accrued liabilities

Net cash (used in) provided by operating activities

( 1,473,498 )

Net cash (used in) provided by operating activities

Cash flows from investing activities:

11 unchanged sentences

Repayment of finance lease obligations

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate on cash and cash equivalents

Change in cash and cash equivalents

( 1,721,939 )

Cash and cash equivalents, beginning of period

18 unchanged sentences

Our significant accounting policies are provided in Note 2, Summary of Significant Accounting Policies , in the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

There have been no material changes to our significant accounting policies during the three months ended September 30, 2021, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

There have been no material changes to our significant accounting policies during the six months ended December 31, 2021, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Use of Estimates

14 unchanged sentences

We record deferred revenue when cash payments are received or due in advance of our performance.

Deferred revenue was not significant as of June 30, 2021 and September 30, 2021.

Deferred revenue was not significant as of June 30, 2021 and December 31, 2021.

Nature of Products

5 unchanged sentences

Revenues from product development agreements are included in specialty products.

Revenue by product group for the three months ended September 30, 2021 and 2020 was as follows:

Revenue by product group for the three and six months ended December 31, 2021 and 2020 was as follows:

Three Months Ended

September 30,

Six Months Ended

Infrared Products

2 unchanged sentences

The components of inventories include the following:

September 30,

Raw materials

4 unchanged sentences

( 1,189,218 )

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 2.0 million at both September 30, 2021 and June 30, 2021.

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 1.9 million and $ 2.0 million as of December 31, 2021 and June 30, 2021, respectively.

Property and Equipment

1 unchanged sentence

Estimated Lives (Years)

September 30, 2021

June 30, 2021

Manufacturing equipment

9 unchanged sentences

Goodwill and Intangible Assets

There were no changes in the net carrying value of goodwill during the three months ended September 30, 2021.

There were no changes in the net carrying value of goodwill during the six months ended December 31, 2021.

Identifiable intangible assets were comprised of:

September 30,

Useful Lives (Years)

Customer relationships

7 unchanged sentences

Fiscal year ending:

June 30, 2022 (remaining nine months)

June 30, 2022 (remaining six months)

June 30, 2023

2 unchanged sentences

After June 30, 2025

A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2021 and 2020 is as follows:

A summary of our total income tax expense and effective income tax rate for the three and six months ended December 31, 2021 and 2020 is as follows:

Three Months Ended

September 30,

Six Months Ended

(Loss) income before income taxes

$ ( 1,019,895 )

$ ( 1,522,119 )

Income tax provision

1 unchanged sentence

The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia.

For the three months ended September 30, 2021 and 2020, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.

For the three and six months ended December 31, 2021 and 2020, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.

(“LPOIZ”), which dividend will be paid to us, as its parent company.

2 unchanged sentences

We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

As of September 30, 2021 and June 30, 2021, we have provided for a valuation allowance against our net deferred tax assets to reduce the net deferred tax assets to the amount we estimate is more-likely-than-not to be realized.

As of December 31, 2021 and June 30, 2021, we have provided for a valuation allowance against our net deferred tax assets to reduce the net deferred tax assets to the amount we estimate is more-likely-than-not to be realized.

Our net deferred tax asset consists primarily of federal and state tax credits with indefinite carryover periods.

5 unchanged sentences

(“LPOI”) and LPOIZ, are governed by the Income Tax Law of the People’s Republic of China.

As of September 30, 2021, LPOI and LPOIZ were subject to statutory income tax rates of 25 % and 15 %, respectively.

As of December 31, 2021, LPOI and LPOIZ were subject to statutory income tax rates of 25 % and 15 %, respectively.

During fiscal 2020, the Company began declaring intercompany dividends to remit a portion of the historical earnings of its foreign subsidiaries to the U.S.

16 unchanged sentences

The stock-based compensation expense is based primarily on the fair value of the award as of the grant date, and is recognized as an expense over the requisite service period.

The following table shows total stock-based compensation expense for the three months ended September 30, 2021 and 2020 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

Three Months Ended September 30,

The following table shows total stock-based compensation expense for the three and six months ended December 31, 2021 and 2020 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

Three Months Ended December 31,

Six Months Ended December 31,

Stock options

2 unchanged sentences

The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations.

A discount of $ 2,155 and $ 1,091 for the three months ended September 30, 2021 and 2020, respectively, is included in SG&A expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10 % discount given to the employees purchasing stock under the 2014 ESPP.

A discount of $ 2,155 and $ 1,091 for the six months ended December 31, 2021 and 2020, respectively, is included in SG&A expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10 % discount given to the employees purchasing stock under the 2014 ESPP.

Grant Date Fair Values and Underlying Assumptions;

3 unchanged sentences

Most stock options granted vest ratably over two to four years and are generally exercisable for ten years.

The assumed forfeiture rates used in calculating the fair value of RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the three months ended September 30, 2021 and 2020.

The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures.

1 unchanged sentence

Treasury interest rate for constant maturities.

No stock options or RSUs were granted during the three-month periods ended September 30, 2021 and 2020.

No stock options were granted during the six months ended December 31, 2021.

For stock options granted in the six-month period ended December 31, 2020, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

Weighted-average expected volatility

Dividend yields

Weighted-average risk-free interest rate

Weighted-average expected term, in years

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the three months ended September 30, 2021 is presented below:

A summary of the activity for share-based compensation awards in the six months ended December 31, 2021 is presented below:

Stock Options

1 unchanged sentence

June 30, 2021

432,927 $ 2.01 8.8 1,761,885 0.9

Granted - $ - -

Exercised - $ - -

Cancelled/Forfeited

September 30, 2021 424,227 $ 2.01 8.5

December 31, 2021

Awards exercisable/

September 30, 2021

December 31, 2021

Awards unexercisable/

unvested as of

September 30, 2021

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

As of September 30, 2021, there was approximately $ 963,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted.

December 31, 2021

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

As of December 31, 2021, there was approximately $1.4 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted.

We expect to recognize the compensation cost as follows:

1 unchanged sentence

Stock Options

June 30, 2022 (remaining nine months)

June 30, 2022 (remaining six months)

June 30, 2023

6 unchanged sentences

Three Months Ended

September 30,

Net income (loss)

Six Months Ended

$ ( 1,055,291 )

$ ( 146,545 )

$ ( 1,687,388 )

Weighted-average common shares outstanding:

3 unchanged sentences

Diluted number of shares

Earnings (loss) per common share:

Loss per common share:

The following potential dilutive shares were not included in the computation of diluted earnings per share of Class A common stock, as their effects would be anti-dilutive:

Three Months Ended

September 30,

Six Months Ended

Options to purchase common stock

5 unchanged sentences

We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option.

We currently have obligations under four finance lease agreements, entered into during fiscal years 2018 and 2019, with terms ranging from three to five years .

We currently have obligations under three finance lease agreements, entered into during fiscal 2019, with terms ranging from three to five years .

The leases are for computer and manufacturing equipment.

14 unchanged sentences

The components of lease expense were as follows:

Three Months Ended September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Operating lease cost

6 unchanged sentences

Classification

September 30, 2021

June 30, 2021

Operating lease assets

12 unchanged sentences

Total lease liabilities

(1) Finance lease assets were recorded net of accumulated depreciation of approximately $ 1.2 million as of both September 30, 2021 and June 30, 2021.

Finance lease assets were recorded net of accumulated depreciation of approximately $ 398,000 and $ 1.2 million as of December 31, 2021 and June 30, 2021, respectively.

During the three months ended December 31, 2021, we executed a purchase option at the end of one of our finance leases, therefore the related asset and accumulated depreciation were reclassified from finance lease assets.

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

Lease Term and Discount Rate

September 30, 2021

Weighted Average Remaining Lease Term (in years)

5 unchanged sentences

Supplemental cash flow information:

Three Months Ended September 30,

Six Months Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Financing cash used for finance leases

Future maturities of lease liabilities were as follows as of September 30, 2021:

Future maturities of lease liabilities were as follows as of December 31, 2021:

Fiscal year ending:

Finance Leases

Operating Leases

June 30, 2022 (remaining nine months)

June 30, 2022 (remaining six months)

June 30, 2023

4 unchanged sentences

Less imputed interest

( 1,765,939 )

Present value of lease liabilities

Loans Payable

As of September 30, 2021 and June 30, 2021, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A.

As of December 31, 2021 and June 30, 2021, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A.

(“BankUnited”).

2 unchanged sentences

Simultaneously with the execution of the Loan Agreement, we used the proceeds from the BankUnited Term Loan to pay in full, all outstanding amounts owed to Avidbank Corporate Finance, a division of Avidbank (“Avidbank”) pursuant to an acquisition term loan.

On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “Amendment” and, together with the Loan Agreement, the “Amended Loan Agreement”).

The Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed.

On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “First Amendment”).

The First Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed.

On September 9, 2021, we entered into a letter agreement with BankUnited (the “Letter Agreement”).

The Letter Agreement:

(i) reduces the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021 ;

(ii) modifies the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited;

(iii) terminates the Guidance Line;

(i) reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021;

(ii) modified the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited;

(iii) terminated the Guidance Line;

and (iv) requires approval from BankUnited prior to our being able to draw upon the Revolving Line, subject to our compliance with the fixed charge coverage ratio for the quarters ending September 30, 2021 and December 31, 2021.

The Letter Agreement also granted us a waiver of default arising prior to the Letter Agreement for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021.

Based on the waiver, we are no longer in default of the Amended Loan Agreement.

Based on the waiver, we were no longer in default of the Amended Loan Agreement as of June 30, 2021.

Finally, in connection with the Letter Agreement, we paid BankUnited a fee equal to $ 10,000 .

On November 5, 2021, we entered into a letter agreement with BankUnited (the “Second Letter Agreement”).

In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forbearance, or other resolution of the Amended Loan Agreement (the “Proposed Restructuring Agreement”), which closing will occur on or before December 31, 2021.

The Second Letter Agreement contemplates that the Proposed Restructuring Agreement will include the following terms, among others:

(i) a maturity date of April 15, 2023 with respect to the Term Loan;

In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forebearance, or other resolution of the Amended Loan Agreement (as defined below), which resolution would occur on or before December 31, 2021.

On December 20, 2021, we entered into the Second Amendment to the Loan Agreement dated February 26, 2019 (the “Second Amendment”;

and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended that certain Loan Agreement, dated February 26, 2019, 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) the Term Loan will bear a higher interest rate commencing on August 1, 2022;

(iv) an exit fee equal to 4 % of the outstanding principal balance of the term loan on April 15, 2023 to the extent the Term Loan is still outstanding on such date and has not been refinanced with another lender;

and (v) a fee of $ 50,000 payable upon execution of the Proposed Restructuring Agreement.

The Second Letter Agreement also granted us a waiver of default arising prior to the Second Letter Agreement for our failure to comply with the fixed charge coverage ratio and total leverage ratio measured on September 30, 2021.

Based on the Second Letter Agreement and the waiver, we are no longer in default of the Amended Loan Agreement.

Additionally, the Second Letter Agreement states that BankUnited will waive compliance for the fixed charge coverage ratio and the total leverage ratio for the quarters ended December 31, 2021, March 31, 2022 and June 30, 2022, which waivers will be included in the Proposed Restructuring Agreement.

Finally, in accordance with the Second Letter Agreement, we paid BankUnited a deposit equal to $ 25,000 to be used in connection with BankUnited’s legal fees, costs and expenses in connection with the Second Letter Agreement and the Proposed Restructuring Agreement.

(iii) beginning on December 20, 2021, each facility will bear interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points ( 2.75 % as of December 31, 2021), as adjusted from time to time, (iv) the Term Loan will bear a higher interest rate commencing on August 1, 2022;

(v) an exit fee equal to 4 % of the outstanding principal balance of the Term Loan on April 15, 2023 (to the extent the Term Loan is still outstanding on such date and has not been refinanced with another lender);

and (vi) a fee of $ 50,000 payable upon execution of the Second Amendment.

The Second Amendment also granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) for the periods ended December 31, 2021, March 31, 2022 and June 30, 2022.

We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance.

If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures.

For additional information, see Note 14, Liquidity .

BankUnited Revolving Line

3 unchanged sentences

Interest payments are due and payable, in arrears, on the first day of each month.

There were no borrowings under the BankUnited Revolving Line as of September 30, 2021.

There were no borrowings under the BankUnited Revolving Line as of December 31, 2021.

BankUnited Term Loan

1 unchanged sentence

The BankUnited Term Loan was for a 5 -year term, but co-terminus with the BankUnited Revolving Line should the BankUnited Revolving Line not be renewed beyond February 26, 2022.

Pursuant to the Second Letter Agreement, the maturity date of the Term Loan will be amended to April 15, 2023.

The BankUnited Term Loan bears interest at a per annum rate equal to 2.75 % above the 30-day LIBOR.

Pursuant to the Second Amendment, the maturity date of the Term Loan is April 15, 2023.

The BankUnited Term Loan initially bore interest at a per annum rate equal to 2.75% above the 30-day LIBOR.

However, pursuant to the Second Amendment, beginning on December 20, 2021, each facility bears interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (2.75% as of December 31, 2021), as adjusted from time to time.

Equal monthly principal payments of approximately $ 48,446 , plus accrued interest, are due and payable, in arrears, on the first day of each month during the term.

Pursuant to the Second Amendment, the monthly payment, including principal and interest, will increase to $100,000, commencing November 1, 2022.

Upon maturity, all principal and interest shall be immediately due and payable.

As of September 30, 2021, the applicable interest rate was 2.84 %.

For additional information, see Note 14, Liquidity .

Security and Guarantees

12 unchanged sentences

The Amended Loan Agreement also contains certain financial covenants, including obligations to maintain a fixed charge coverage ratio of 1.25 to 1.00 and a total leverage ratio of 4.00 to 1.00.

As of September 30, 2021, we obtained a waiver of compliance for both the fixed charge coverage ratio and total leverage ratio, and we were in compliance with all other required covenants, as amended.

Pursuant to the Second Amendment, compliance for both the fixed charge coverage ratio and total leverage ratio was waived for the quarter ended December 31, 2021 , and we were in compliance with all other required covenants, as amended.

We may prepay any or all of the BankUnited Loans in whole or in part at any time, without penalty or premium.

1 unchanged sentence

Amounts outstanding during an event of default accrue interest at a rate of five percent ( 5 %) above the 30-day LIBOR applicable immediately prior to the occurrence of the event of default.

Pursuant to the Second Amendment, beginning on December 20, 2021, the default rate was converted to five percent (5%) above BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time.

The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and confidentiality.

Financing costs incurred related to the BankUnited Loans were recorded as a discount on debt and will be amortized over the term.

Amortization of approximately $ 4,600 is included in interest expense for the each of the three months ended September 30, 2021 and 2020, respectively.

Amortization of approximately $14,900 and $9,300 is included in interest expense for the six-month periods ended December 31, 2021 and 2020, respectively.

In December 2020, ISP Latvia entered into an equipment loan with a third party (the “Equipment Loan”), which party is also a significant customer, and which the Equipment Loan is subordinate to the BankUnited Loans, and collateralized by certain equipment.

3 unchanged sentences

Future maturities of loans payable are as follows:

BankUnited Term Loan

Equipment Loan

Unamortized Debt Costs

Fiscal year ending:

June 30, 2022 (remaining nine months)

June 30, 2022 (remaining six months)

June 30, 2023

10 unchanged sentences

operation, where the functional currency is other than the U.S.

dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $2.0 million and $2.1 million as of September 30, 2021 and June 30, 2021, respectively.

During the three months ended September 30, 2021 and 2020, we recognized net foreign currency transaction losses of approximately $ 26,000 and $ 98,000 , respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash and cash equivalents totaled approximately $ 4.0 million at September 30, 2021.

dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $ 2 .0 million and $2.1 million as of December 31, 2021 and June 30, 2021, respectively.

We also recognized net foreign currency transaction losses of $ 14,000 and net foreign currency transaction gains of $ 77,000 during the three months ended December 31, 2021 and 2020, respectively.

During the six months ended December 31, 2021 and 2020, we recognized net foreign currency transaction losses of approximately $ 40,000 and $ 21,000 , respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash and cash equivalents totaled approximately $ 5.1 million at December 31, 2021.

Of this amount, greater than 50% was held by our foreign subsidiaries in China and Latvia.

1 unchanged sentence

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, 2021, LPOIZ had approximately $ 4.6 million available for repatriation and LPOI did not have any earnings available for repatriation, based on undistributed earnings accumulated through the end of the most recent statutory tax year.

As of December 31, 2021, LPOIZ had approximately $ 5.2 million in retained earnings that can be used for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of December 31, 2021.

Assets and net assets in foreign countries are as follows:

September 30, 2021

June 30, 2021

September 30, 2021

June 30, 2021

$ 19.6 million

13 unchanged sentences

These expenses, which included legal, consulting and other transitional management fees, totaled $ 718,000 during the year ended June 30, 2021.

During the three months ended September 30, 2021, we incurred an additional $ 328,000 .

During the three and six months ended December 31, 2021, we incurred an additional $ 153,000 and $ 481,000 , respectively.

Such expenses were recorded as SG&A expenses in the accompanying unaudited Condensed Consolidated Statement of Comprehensive Income (Loss).

1 unchanged sentence

This amount was accrued as of June 30, 2021, pending further investigation, and was included in “Other Expense, net” in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021.

This amount remains accrued as of September 30, 2021.

This amount remains accrued as of December 31, 2021.

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.

2 unchanged sentences

As a result, LPOIZ and LPOI have not yet paid the severance payments and have disputed the employees’ rights to such payments.

However, based on the likelihood that the courts in China will determine that our subsidiaries will ultimately be obligated to pay these amounts, we have accrued for these payments as of June 30, 2021.

However, based on the likelihood that the courts in China will determine that our subsidiaries will ultimately be obligated to pay these amounts, we accrued for these payments as of June 30, 2021.

Such expenses were recorded as SG&A expenses in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021.

This amount remains accrued as of September 30, 2021.

This amount remains accrued as of December 31, 2021.

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.

2 unchanged sentences

however, such future fees are expected to be at lower levels than have been incurred to date.

Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month periods ended June 30, 2021 and September 30, 2021, which management anticipates may continue for the next one to two quarters.

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 six-month period ended December 31, 2021, which management anticipates may continue for the next few quarters.

The Company has not experienced, nor does management anticipate, any material adverse impact on LPOIZ’s or LPOI’s production and supply of products to its other subsidiaries for their customers.

5 unchanged sentences

However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2022 or beyond.

We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan.

As discussed in in Note 11, Loans Payable , we have commenced discussions with other lenders, and we anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances.

Our plans may include potentially filing a shelf registration statement to be available for equity offerings.

There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs.

In addition, greater than 50 % of our cash and cash equivalents is held by our foreign subsidiaries and, although we regularly repatriate cash, it may not be readily available to repay liabilities in the U.S.

We will also continue efforts to keep costs under control as we seek renewed sales growth.

Our efforts are directed toward generating positive cash flow and profitability.

If these efforts are not successful, we may need to raise additional capital.

Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales.

These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements