LIGHTPATH TECHNOLOGIES INC 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures As of the end of the fiscal year ended June 30, 2023, we carried out an evaluation, under the supervision and with the participation of members of our management, including our CEO and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Our CEO and our CFO have concluded, based on their evaluation, that as of June 30, 2023, our disclosure controls and procedures were effective at the end of the fiscal year to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit with the SEC under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting based on the Internal Control—Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on the results of this assessment, our management concluded that our internal control over financial reporting was effective as of June 30, 2023 based on such criteria. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met under all potential conditions, regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within LightPath have been prevented or detected. Our internal control over financial reporting is designed 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. 38 Table of Contents Auditor’s Report on Internal Control over Financial Reporting This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission (the “SEC”) that permit us to provide only management’s report in this Annual Report. Changes in Internal Controls over Financial Reporting In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes-Oxley Act, we continue to review, test, and improve the effectiveness of our internal controls. In connection with the events that occurred at our Chinese subsidiaries, we have adopted additional policies and procedures designed to improve our internal controls, including, without limitation, revising the reporting structure for our foreign-based finance directors, adopting Codes of Conduct applicable to our subsidiaries’ foreign-based employees, adopting an internal authority approval matrix, and hiring additional staff for our accounting departments at LPOI and LPOIZ to improve segregation of duties, among other items. Other than these modifications, there have not been any significant changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter and since the year ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 39 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance . The information required under this item is incorporated herein by reference to our Proxy Statement for our fiscal year 2024 Annual Stockholders’ Meeting to be filed with the SEC not later than 120 days after the end of fiscal year 2023. Item 11. Executive Compensation . The information required under this item is incorporated herein by reference to our Proxy Statement for our fiscal year 2024 Annual Stockholders’ Meeting to be filed with the SEC not later than 120 days after the end of fiscal year 2023. Item 12. Security Ownership of Certain Beneficial Owners and Management . The information required under this item is incorporated herein by reference to our Proxy Statement for our fiscal year 2024 Annual Stockholders’ Meeting to be filed with the SEC not later than 120 days after the end of fiscal year 2023, with the exception of those items listed below. Securities Authorized for Issuance Under Equity Compensation Plans. The following table sets forth information with respect to compensation plans under which our equity securities are authorized for issuance as of the end of fiscal year 2023: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise and grant price of outstanding options, warrants and rights Number of securities remaining available for future issuance Equity compensation plans approved by security holders 2,232,417 $ 1.66 1,633,538 Equity compensation plans not approved by security holders — — — Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required under this item is incorporated herein by reference to our Proxy Statement for our fiscal year 2024 Annual Stockholders’ Meeting to be filed with the SEC not later than 120 days after the end of fiscal year 2023. Item 14. Principal Accountant Fees and Services . The information required under this item is incorporated herein by reference to our Proxy Statement for our fiscal year 2024 Annual Stockholders’ Meeting to be filed with the SEC not later than 120 days after the end of fiscal year 2023. 40 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules . (a) The following documents are filed as part of this Annual Report on Form 10-K: (1) Financial Statements – See Index on page F-1 of this report (2) Financial Statement Schedules – None (b) The following exhibits are filed herewith as a part of this report Exhibit Number Description 3.1.1 Certificate of Incorporation of LightPath Technologies, Inc., filed June 15, 1992 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.1 to our Annual Report on Form 10-K (File No. 000-25748) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto. 3.1.2 Certificate of Amendment to Certificate of Incorporation of LightPath Technologies, Inc., filed October 2, 1995 with the Secretary of State of Delaware, which was filed as exhibit 3.1.2 to our Annual Report on Form 10-K (File No. 000-25748) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto. 3.1.3 Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of LightPath Technologies, Inc., filed November 9, 1995 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.3 to our Annual Report on Form 10-K (File No. 000-25748) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto. 3.1.4 Certificate of Designation of Series A Preferred Stock of LightPath Technologies, Inc., filed July 9, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.4 to our Annual Report on Form 10-KSB40 filed with the Securities and Exchange Commission on September 11, 1997, and is incorporated herein by reference thereto. 3.1.5 Certificate of Designation of Series B Stock of LightPath Technologies, Inc., filed October 2, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto. 3.1.6 Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed November 12, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto. 3.1.7 Certificate of Designation of Series C Preferred Stock of LightPath Technologies, Inc., filed February 6, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No. 333-47905) filed with the Securities and Exchange Commission on March 13, 1998, and is incorporated herein by reference thereto. 3.1.8 Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc. filed April 29, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 1 to our Registration Statement on Form 8-A (File No. 000-27548) filed with the Securities and Exchange Commission on April 28, 1998, and is incorporated herein by reference thereto. 3.1.9 Certificate of Designation of Series F Preferred Stock of LightPath Technologies, Inc., filed November 2, 1999 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No: 333-94303) filed with the Securities and Exchange Commission on January 10, 2000, and is incorporated herein by reference thereto. 3.1.10 Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed February 28, 2003 with the Secretary of State of Delaware, which was filed as Appendix A to our Proxy Statement (File No. 000-27548) filed with the Securities and Exchange Commission on January 24, 2003, and is incorporated herein by reference thereto. 41 Table of Contents 3.1.11 Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed March 1, 2016 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.11 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on November 14, 2016, and is incorporated herein by reference thereto. 3.1.12 Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto. 3.1.13 Certificate of Amendment of Certificate of Designations of Class A Common Stock and Class E-1 Common Stock, Class E-2 Common Stock, and Class E-3 Common Stock of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto. 3.1.14 Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc., filed January 30, 2018 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 1, 2018, and is incorporated herein by references thereto. 3.2. 1 Second Amended and Restated Bylaws of LightPath Technologies, Inc., which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 2, 2021, and is incorporated herein by reference thereto. 4.1 Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934, as amended.* 10.1 Amended and Restated Omnibus Incentive Plan dated October 15, 2002, as amended, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto. 10.2 LightPath Technologies, Inc. Employee Stock Purchase Plan effective January 30, 2015, which was filed as Appendix A to our Definitive Proxy Statement on Schedule 14A (File No.: 000-27548) filed with the Securities and Exchange Commission on December 19, 2014, and is incorporated herein by reference thereto. 10.3 Sixth Amendment to Lease dated as of July 2, 2014 between LightPath Technologies, Inc. and Challenger Discovery LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on July 8, 2014, and is incorporated herein by reference thereto. 10.4 Amendment No. 8 to the Amended and Restated LightPath Technologies, Inc. Omnibus Incentive Plan dated February 8, 2018, which was filed as Exhibit 10.7 to our Quarterly Report on Form 10-Q (File No.: 000-27548) filed with the Securities and Exchange Commission on February 13, 2018, and is incorporated herein by reference thereto. 10.5 Lease dated April 20, 2018, by and between LightPath Technologies, Inc. and CIO University Tech, LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on April 26, 2018, and is incorporated herein by reference thereto. 10.6 First Amendment to Lease, dated January 9, 2019, by and between LightPath Technologies, Inc. and CIO University Tech, LLC, which was filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q (File No.: 000-27548) filed with the Securities and Exchange Commission on February 7, 2019, and is incorporated herein by reference thereto. 10.7 Loan Agreement dated February 26, 2019 by and between LightPath Technologies, Inc. and BankUnited, N.A., which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 42 Table of Contents 10.8 Term Loan Note dated February 26, 2019 by LightPath Technologies, Inc. in favor of BankUnited, N.A., which was filed as Exhibit 10.2 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.9 Revolving Credit Note dated February 26, 2019 by LightPath Technologies, Inc. in favor of BankUnited, N.A., which was filed as Exhibit 10.3 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.10 Guidance Line Note dated February 26, 2019 by LightPath Technologies, Inc. in favor of BankUnited, N.A., which was filed as Exhibit 10.4 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 21, 2019, and is incorporated herein by reference thereto. 10.11 Security Agreement dated February 26, 2019 by LightPath Technologies, Inc. in favor of BankUnited, N.A., and joined by GelTech, Inc. and ISP Optics Corporation, which was filed as Exhibit 10.5 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.12 Guaranty Agreement (Term Loan) dated February 26, 2019 by GelTech Inc., ISP Optics Corporation, LightPath Optical Instrumentation (Shanghai) Co., Ltd., LightPath Optical Instrumentation (Zhenjiang) Co., Ltd., and ISP Optics Latvia, SIA in favor of BankUnited, N.A., which was filed as Exhibit 10.6 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.13 Guaranty Agreement (Revolving Credit) dated February 26, 2019 by GelTech Inc., ISP Optics Corporation, LightPath Optical Instrumentation (Shanghai) Co., Ltd., LightPath Optical Instrumentation (Zhenjiang) Co., Ltd., and ISP Optics Latvia, SIA in favor of BankUnited, N.A., which was filed as Exhibit 10.7 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.14 Guaranty Agreement (Guidance Line) dated February 26, 2019 by GelTech Inc., ISP Optics Corporation, LightPath Optical Instrumentation (Shanghai) Co., Ltd., LightPath Optical Instrumentation (Zhenjiang) Co., Ltd., and ISP Optics Latvia, SIA in favor of BankUnited, N.A., which was filed as Exhibit 10.8 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on March 1, 2019, and is incorporated herein by reference thereto. 10.15 First Amendment to Loan Agreement dated May 6, 2019, and effective February 26, 2019, by and between LightPath Technologies, Inc. and BankUnited, N.A., which was filed as Exhibit 10.10 to our Quarterly Report on Form 10-Q (File No.: 000-27548) filed with the Securities and Exchange Commission on May 9, 2019, and is incorporated herein by reference thereto. 10.16 LightPath Technologies, Inc. 2018 Stock and Incentive Compensation Plan, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on November 8, 2018, and is incorporated herein by reference thereto. 10.17 Employment Agreement between LightPath Technologies, Inc. and Mr. Sam Rubin, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on February 26, 2020, and is incorporated herein by reference thereto. 10.18 Letter Agreement, dated November 13, 2020, by and between the Company and J. James Gaynor which was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q (File No.: 000-27548) filed with the Securities and Exchange Commission on February 3, 2021, and is incorporated herein by reference thereto. 10.19 Employment Agreement between LightPath Technologies, Inc. and Mr. Albert Miranda, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on April 22, 2021, and is incorporated herein by reference thereto. 43 Table of Contents 10.20 Eighth Amendment to Lease Agreement between LightPath Technologies, Inc. and Challenger-Discovery, LLC which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on May 17, 2021, and is incorporated herein by reference thereto. 10.21 Ninth Amendment to Lease dated as of September 21, 2021, between LightPath Technologies, Inc. and Challenger Discovery LLC, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on September 27, 2021, and is incorporated herein by reference thereto. 10.22 Notice of Default and Waiver dated November 8, 2021 between LightPath Technologies, Inc. and BankUnited, N.A., which was filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on November 9, 2021, and is incorporated herein by reference thereto. 10.23 Second Amendment to Loan Agreement dated as of December 20, 2021, between LightPath Technologies, Inc. and BankUnited N.A., which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on December 23, 2021, and is incorporated herein by reference thereto. 10.24 Sales Agreement, dated February 15, 2022, by and between LightPath Technologies, Inc. and A.G.P./Alliance Global Partners, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 16, 222, and is incorporated herein by reference thereto. 10.25 Investor Relations Consulting Agreement, dated April 11, 2022, by and between LightPath Technologies, Inc. and MZHCI, LLC, which was filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on May 12, 2022, and is incorporated herein by reference thereto. 10.26 Third Amendment to Loan Agreement, dated May 11, 2022, by and between LightPath Technologies, Inc. and BankUnited, N.A., which was filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on May 12, 2022, and is incorporated herein by reference thereto. 10.27 Form of Securities Purchase Agreement, dated as of January 12, 2023, between the Company and each purchaser named in the signature pages thereto, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on January 12, 2023, and is incorporated herein by reference thereto. 10.28 Fourth Amendment to Loan Agreement, dated February 7, 2023, by and between LightPath Technologies, Inc. and BankUnited, N.A., filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q, (File No: 000-27548) filed with the Securities and Exchange Commission on February 9, 2023, and is incorporated herein by reference thereto. 10.29 Fifth Amendment to Loan Agreement, dated May 9, 2023, by and between LightPath Technologies, Inc. and BankUnited, N.A., filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q, (File No: 000-27548) filed with the Securities and Exchange Commission on May 11, 2023, and is incorporated herein by reference thereto. 14.1 Code of Business Conduct and Ethics, which was filed as Exhibit 14.1 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on May 3, 2016, and is incorporated herein by reference thereto. 14.2 Code of Business Conduct and Ethics for Senior Financial Officers, which was filed as Exhibit 14.2 to our Current Report on Form 8-K (File No.: 000-27548) filed with the Securities and Exchange Commission on May 3, 2016, and is incorporated herein by reference thereto. 21.1 Subsidiaries of the Registrant.* 23.1 Consent of MSL, P.A.* 24 Power of Attorney.* 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.* 31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.* 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code.* 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code.* 101.INS XBRL Instance Document* 101.SCH XBRL Taxonomy Extension Schema Document* 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* 101.DEF XBRL Taxonomy Extension Definition Linkbase Document* 101.LAB XBRL Taxonomy Extension Label Linkbase Document* 101.PRE XBRL Taxonomy Presentation Linkbase Document* 104 The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023, formatted in iXBRL. *filed herewith Item 16. Form 10-K Summary. None. 44 Table of Contents LightPath Technologies, Inc. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm – MSL, P.A. (MSL PCAOB # 569 ) F-2 Consolidated Financial Statements: Consolidated Balance Sheets as of June 30, 2023 and 2022 F-3 Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2023 and 2022 F-4 Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the years ended June 30, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of LightPath Technologies, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of LightPath Technologies, Inc. (the “Company”) as of June 30, 2023 and 2022, and the related consolidated statements of comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years ended June 30, 2023 and 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years ended June 30, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. Federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate. Inventory Allowance As disclosed in Notes 2 and 4 of the notes to the consolidated financial statements, the Company records an estimated inventory allowance to state the Company’s inventories at the lower of cost or net realizable value. The Company relies on, among other things, past usage, sales experience, recent order and quote activity, future sales forecasts, and its strategic business plan to develop the estimate. As a result of management’s assessment, the Company recorded an inventory allowance of approximately $1,125,000 as of June 30, 2023. Auditing management’s estimate of the inventory allowance involved subjective evaluation and high degree of auditor judgement due to significant assumptions involved in estimating future inventory turnover and sales. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding and evaluated the design of internal controls that address the risks of material misstatement relating to recording inventory at the lower of cost or net realizable value. We tested the accuracy and completeness of the underlying data used in calculating the inventory allowance, including testing of a sample of inventory usage transactions, and recomputed the allowance calculation. We also evaluated the Company’s ability to accurately estimate the assumptions used to develop the estimate by comparing historical allowance amounts to the history of actual inventory write-offs. Furthermore, we reviewed management’s business plan and forecasts of future sales. We have served as the Company’s auditor since 2017. /s/ MSL, P.A. Orlando, Florida September 14, 2023 F-2 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Consolidated Balance Sheets June 30, June 30, Assets 2023 2022 Current assets: Cash and cash equivalents $ 4,687,004 $ 5,507,891 Restricted cash 2,457,486 — Trade accounts receivable, net of allowance of $ 18,502 and $ 36,313 6,634,574 5,211,292 Inventories, net 7,410,734 6,985,427 Prepaid expenses and other assets 570,293 464,804 Total current assets 21,760,091 18,169,414 Property and equipment, net 12,810,930 11,640,463 Operating lease right-of-use assets 9,571,604 10,420,604 Intangible assets, net 3,332,715 4,457,798 Goodwill 5,854,905 5,854,905 Deferred tax assets, net 140,000 143,000 Other assets 65,939 27,737 Total assets $ 53,536,184 $ 50,713,921 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,574,135 $ 3,073,933 Accrued liabilities 662,242 558,750 Accrued payroll and benefits 1,499,896 2,081,212 Operating lease liabilities, current 969,890 965,622 Loans payable, current portion 1,023,814 998,692 Finance lease obligation, current portion 103,646 55,348 Total current liabilities 6,833,623 7,733,557 Deferred tax liabilities, net 465,000 541,015 Finance lease obligation, less current portion 341,201 11,454 Operating lease liabilities, noncurrent 8,393,248 9,478,077 Loans payable, less current portion 1,550,587 3,218,580 Total liabilities 17,583,659 20,982,683 Commitments and Contingencies Stockholders’ equity: Preferred stock: Series D, $.01 par value, voting; 500,000 shares authorized; none issued and outstanding — — Common stock: Class A, $.01 par value, voting; 44,500,000 shares authorized; 37,344,739 and 27,046,790 shares issued and outstanding 373,447 270,468 Additional paid-in capital 242,808,771 232,315,003 Accumulated other comprehensive income 606,536 935,125 Accumulated deficit ( 207,836,229 ) ( 203,789,358 ) Total stockholders’ equity 35,952,525 29,731,238 Total liabilities and stockholders’ equity $ 53,536,184 $ 50,713,921 The accompanying notes are an integral part of these consolidated financial statements. F-3 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Consolidated Statements of Comprehensive Income (Loss) Year Ended June 30, 2023 2022 Revenue, net $ 32,933,949 $ 35,559,160 Cost of sales 21,859,126 23,744,524 Gross margin 11,074,823 11,814,636 Operating expenses: Selling, general and administrative 11,437,241 11,221,866 New product development 2,145,413 2,085,686 Amortization of intangibles 1,125,083 1,125,083 (Gain) loss on disposal of property and equipment ( 78,373 ) 9,235 Total operating expenses 14,629,364 14,441,870 Operating loss ( 3,554,541 ) ( 2,627,234 ) Other income (expense): Interest expense, net ( 283,266 ) ( 229,475 ) Other income (expense), net 24,970 177,435 Total other income (expense), net ( 258,296 ) ( 52,040 ) Loss before income taxes ( 3,812,837 ) ( 2,679,274 ) Income tax provision 234,034 862,907 Net loss $ ( 4,046,871 ) $ ( 3,542,181 ) Foreign currency translation adjustment ( 328,589 ) ( 1,181,027 ) Comprehensive loss $ ( 4,375,460 ) $ ( 4,723,208 ) Loss per common share (basic) $ ( 0.13 ) $ ( 0.13 ) Number of shares used in per share calculation (basic) 31,637,445 27,019,534 Loss per common share (diluted) $ ( 0.13 ) $ ( 0.13 ) Number of shares used in per share calculation (diluted) 31,637,445 27,019,534 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Consolidated Statements of Changes in Stockholders' Equity Accumulated Class A Additional Other Total Common Stock Paid-in Comphrehensive Accumulated Stockholders’ Shares Amount Capital Income Deficit Equity Balances at June 30, 2021 26,985,913 $ 269,859 $ 231,438,651 $ 2,116,152 $ ( 200,247,177 ) $ 33,577,485 Issuance of common stock for: Employee Stock Purchase Plan 21,012 210 51,501 — — 51,711 Exercise of Stock Options & RSUs, net 39,865 399 ( 399 ) — — — Stock-based compensation on stock options & RSUs — — 825,250 — — 825,250 Foreign currency translation adjustment — — — ( 1,181,027 ) — ( 1,181,027 ) Net loss — — — — ( 3,542,181 ) ( 3,542,181 ) Balances at June 30, 2022 27,046,790 270,468 232,315,003 935,125 ( 203,789,358 ) 29,731,238 Issuance of common stock for: Employee Stock Purchase Plan 33,523 335 40,045 — — 40,380 Exercise of Stock Options, RSUs & RSAs, net 1,173,516 11,735 34,165 — — 45,900 Issuance of common stock under public equity placement 9,090,910 90,909 9,108,601 — — 9,199,510 Stock-based compensation on stock options, RSAs & RSUs — — 1,310,957 — — 1,310,957 Foreign currency translation adjustment — — — ( 328,589 ) — ( 328,589 ) Net loss — — — — ( 4,046,871 ) ( 4,046,871 ) Balances at June 30, 2023 37,344,739 $ 373,447 $ 242,808,771 $ 606,536 $ ( 207,836,229 ) $ 35,952,525 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Consolidated Statements of Cash Flows Year Ended June 30, 2023 2022 Cash flows from operating activities: Net loss $ ( 4,046,871 ) $ ( 3,542,181 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 3,174,569 3,617,743 Interest from amortization of debt costs 58,774 51,974 (Gain) loss on disposal of property and equipment ( 78,373 ) 9,235 Stock-based compensation on stock options, RSUs & RSAs, net 1,310,957 825,250 Provision for doubtful accounts receivable 8,158 7,713 Change in operating lease assets and liabilities ( 231,561 ) ( 222,047 ) Inventory write-offs to allowance 316,297 456,538 Deferred taxes ( 73,015 ) 545,015 Changes in operating assets and liabilities: Trade accounts receivable ( 1,431,440 ) ( 562,651 ) Other receivables — 137,103 Inventories ( 741,604 ) 1,217,622 Prepaid expenses and other assets ( 97,792 ) 10,560 Accounts payable and accrued liabilities ( 977,622 ) ( 1,087,746 ) Net cash (used in) provided by operating activities ( 2,809,523 ) 1,464,128 Cash flows from investing activities: Purchase of property and equipment ( 3,077,154 ) ( 1,626,614 ) Proceeds from sale of equipment 209,169 — Net cash used in investing activities ( 2,867,985 ) ( 1,626,614 ) Cash flows from financing activities: Proceeds from sale of common stock from Employee Stock Purchase Plan 40,380 51,711 Proceeds from issuance of common stock under public equity placement 9,199,510 — Loan costs — ( 61,223 ) Borrowings on loans payable 141,245 266,850 Payments on loans payable ( 1,852,256 ) ( 681,301 ) Repayment of finance lease obligations ( 73,003 ) ( 212,211 ) Net cash provided by (used in) financing activities 7,455,876 ( 636,174 ) Effect of exchange rate on cash and cash equivalents ( 141,769 ) ( 468,143 ) Change in cash, cash equivalents and restricted cash 1,636,599 ( 1,266,803 ) Cash and cash equivalents, beginning of period 5,507,891 6,774,694 Cash, cash equivalents and restricted cash, end of period $ 7,144,490 $ 5,507,891 Supplemental disclosure of cash flow information: Interest paid in cash $ 221,773 $ 157,407 Income taxes paid $ 428,914 $ 267,585 Supplemental disclosure of non-cash investing & financing activities: Purchase of equipment through finance lease arrangements $ 451,048 $ — Equipment deposit paid in restricted stock $ 45,900 $ — The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements 1. Organization and History LightPath Technologies, Inc. (“LightPath”, the “Company”, “we”, “us” or “our”) was incorporated in Delaware in 1992. It was the successor to LightPath Technologies Limited Partnership formed in 1989, and its predecessor, Integrated Solar Technologies Corporation formed in 1985. The Company completed its initial public offering during fiscal year 1996. On April 14, 2000, the Company acquired Horizon Photonics, Inc. (“Horizon”). On September 20, 2000, the Company acquired Geltech, Inc. (“Geltech”). In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd (“LPOI”), a wholly-owned subsidiary located in Jiading, People’s Republic of China. In December 2013, we formed LightPath Optical Instrumentation (Zhenjiang) Co., Ltd (“LPOIZ”), a wholly-owned subsidiary located in Zhenjiang, Jiangsu Province, People’s Republic of China. In December 2016, we acquired ISP Optics Corporation, a New York corporation (“ISP”), and its wholly-owned subsidiary, ISP Optics Latvia, SIA, a limited liability company founded in 1998 under the Laws of the Republic of Latvia (“ISP Latvia”). LightPath is a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, infrared optics, both molded and diamond-turned, thermal imaging assemblies, and other optical components used in products that manipulate light. LightPath designs, develops, manufactures, and distributes optical components and sub-system level lens assemblies utilizing advanced optical manufacturing processes. LightPath products are incorporated into a variety of applications by customers in many industries, including defense products, medical devices, laser aided industrial tools, automotive safety applications, barcode scanners, optical data storage, hybrid fiber coax datacom, telecommunications, machine vision and sensors, among others. Many of our optical assemblies consist of several products that we manufacture. As used herein, the terms “LightPath,” the “Company,” “we,” “us” or “our,” refer to LightPath individually or, as the context requires, collectively with its subsidiaries on a consolidated basis. 2. Significant Accounting Policies 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. Management estimates. Management makes estimates and assumptions during the preparation of the Company’s Consolidated Financial Statements that affect amounts reported in the 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. Cash and cash equivalents consist of cash in the bank and cash equivalents with maturities of 90 days or less when purchased. The Company maintains its cash accounts in various institutions, generally with high credit ratings. The Company’s domestic cash accounts are maintained in one financial institution, and balances may exceed Federal insured limits at times. The Company’s foreign cash accounts are not insured. Restricted cash consists of amounts held in a restricted account as collateral for a loan agreement. See Note 13, Loans Payable , to these Consolidated Financial Statements for additional information. Our restricted cash is invested in a money market account. Cash and cash equivalents and restricted cash presented in the Consolidated Balance Sheet as of June 30, 2023 are combined in the Consolidated Statement of Cash Flows for the year ended June 30, 2023. The Company did not have any restricted cash as of June 30, 2022. Allowance for accounts receivable is calculated by taking 100% of the total of invoices that are over 90 days past due from the due date and 10% of the total of invoices that are over 60 days past due from the due date for U.S.- and Latvia-based accounts and 100% of invoices that are over 120 days past due for Chinese-based accounts. Accounts receivable are customer obligations due under normal trade terms. The Company performs continuing credit evaluations of its customers’ financial condition. If the Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. F-7 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Inventories , which consist principally of raw materials, tooling, work-in-process and finished lenses, collimators and assemblies are stated at the lower of cost or net realizable value, on a first-in, first-out basis. Inventory costs include materials, labor and manufacturing overhead. Acquisition of goods from our vendors has a purchase burden added to cover customs, shipping and handling costs. Fixed costs related to excess manufacturing capacity are expensed when incurred. The Company looks at the following criteria for parts to consider for the inventory allowance: (i) items that have not been sold in two years and (ii) items that have not been purchased in two years. These items, as identified, are allowed for at 100%, as well as allowing 50% for other items deemed to be slow moving within the last twelve months and allowing 25% for items deemed to have low material usage within the last six months. Items of which we have greater than a two-year supply are also reserved at 25% to 100%, depending on usage rates. The parts identified are adjusted for recent order and quote activity to determine the final inventory allowance. Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets ranging from one to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets using the straight-line method. Construction in process represents the accumulated costs of assets not yet placed in service. As of June 30, 2023, the balance of construction in progress was primarily related to the expansion of our facility in Orlando, Florida. Long-lived assets , such as property, plant, and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company did not record any impairment of long-lived assets during the fiscal years ended June 30, 2023 and 2022. Assets to be disposed of would be separately presented in the Consolidated Balance Sheet and reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the Consolidated Balance Sheet. Goodwill and Intangible Assets acquired in a business combination are recognized at fair value using generally accepted valuation methods appropriate for the type of intangible asset and reported separately from goodwill. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to fifteen years. The Company periodically reassesses the useful lives of its intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate. Definite-lived intangible assets consist primarily of customer relationships, know-how/trade secrets and trademarks. They are generally valued as the present value of estimated cash flows expected to be generated from the asset using a risk-adjusted discount rate. When determining the fair value of our intangible assets, estimates and assumptions about future expected revenue and remaining useful lives are used. Goodwill and intangible assets are tested for impairment on an annual basis and during the period between annual tests if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The Company will assess the qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment analysis. If the Company determines that it is more likely than not that its fair value is less than its carrying amount, then the goodwill impairment test is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further steps are required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. The Company did not record any impairment of goodwill or definite-lived intangible assets during the fiscal years ended June 30, 2023 or 2022. Leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, other current liabilities and operating lease liabilities on the Company's consolidated balance sheet. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt, net of current portion on the consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, the Company uses an estimate of its incremental borrowing rate based on observed market data and other information available at the lease commencement date. The operating lease ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company does not record leases on the consolidated balance sheet with a term of one year or less. The Company does not separate lease and non-lease components but rather accounts for each separate component as a single lease component for all underlying classes of assets. Variable lease payments are expensed as incurred and are not included within the operating lease ROU asset and lease liability calculation. Variable lease payments primarily include reimbursements of costs incurred by lessors for common area maintenance and utilities. Lease expense for minimum operating lease payments is recognized on a straight-line basis over the lease term. F-8 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are computed on the basis of differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based upon enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances have been established to reduce deferred tax assets to the amount expected to be realized. The Company has not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or penalties has not been provided since there has been no unrecognized benefit or penalty. If there were an unrecognized tax benefit or penalty, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files United States (“U.S.”) Federal income tax returns, as well as tax returns in various states and foreign jurisdictions. Open tax years subject to examination by the Internal Revenue Service (“IRS”) generally remain open for three years from the filing date. Tax years subject to examination by the state jurisdictions generally remain open for up to four years from the filing date. In Latvia, tax years subject to examination remain open for up to five years from the filing date and, in China, tax years subject to examination remain open for up to ten years from the filing date. Our cash, cash equivalents and restricted cash totaled approximately $ 7.1 million at June 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. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested. However, during fiscal 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to 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. With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the legal entity must equal at least 50% of the registered capital before any funds can be repatriated. During fiscal years 2023 and 2022, we repatriated approximately $ 1.9 million and $ 2.8 million, respectively, from LPOIZ. As of June 30, 2023, LPOIZ had approximately $ 2.9 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 June 30, 2023. During fiscal year 2020 we began to accrue for the applicable Chinese withholding taxes on the portion of earnings that we intend to repatriate. Beginning in fiscal year 2019, earnings from the Company’s non-U.S. subsidiaries were subject to the global intangible low-taxed income (“GILTI”) inclusion pursuant to U.S. income tax rules. See Note 8, Income Taxes , to these Consolidated Financial Statements for additional information. Revenue recognition – See Note 3, Revenue , to these Consolidated Financial Statements for additional information. VAT is computed on the gross sales price on all sales of the Company’s products sold in the People’s Republic of China and Latvia. The VAT rates range up to 21%, depending on the type of products sold. The VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing or acquiring its finished products. The Company recorded VAT receivables and payables on a net basis in the accompanying Consolidated Financial Statements. These amounts were not significant as of June 30, 2023 and 2022. New product development costs are expensed as incurred. Stock-based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each restricted stock unit or stock option as of the date of grant using the Black-Scholes-Merton pricing model. Our directors, officers, and key employees were granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, the 2018 Stock and Incentive Compensation Plan (the “SICP”). Most options granted under the Omnibus Plan and the SICP vest ratably over two to four years and generally have four to ten-year contract lives. The volatility rate is based on historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding awards. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable, then the compensation expense will be amortized over the remaining vesting period. F-9 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Fair value of financial instruments. The Company accounts for financial instruments in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), which provides a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include accounts receivable, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Company’s finance lease obligations and loans payable approximate their carrying values, based upon current rates available to us. See Note 13, Loans Payable , to these Consolidated Financial Statements for additional information. Management considers these fair value estimates to be level 2 fair value measurements. The Company does not have any other financial or non-financial assets or liabilities that would be characterized as Level 1, Level 2 or Level 3 instruments. Debt issuance costs are recorded as a reduction to the carrying value of the related notes payable, by the same amount, and are amortized ratably over the term of the related note. Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners. Comprehensive income has two components, net income, and other comprehensive income, and is included on the Consolidated Statements of Comprehensive Income. Our other comprehensive income consists of foreign currency translation adjustments made for financial reporting purposes. Business segments. As the Company only operates in principally one business segment, no additional reporting is required. Recent accounting pronouncements. There are no new accounting pronouncements issued by the FASB that are not yet effective for the Company for the year ended June 30, 2023 that are expected to have a material impact on the Consolidated Financial Statements. 3. Revenue Product Revenue The Company manufactures optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared aspheric lenses, and other optical components used to produce products that manipulate light. The Company designs, develops, manufactures, and distributes optical components and assemblies utilizing advanced optical manufacturing processes. The Company also performs 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 the Company expects to receive in exchange for those products or services. The Company generally bears all costs, risk of loss, or damage and retains 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. Revenue is presented net of sales taxes and any similar assessments. F-10 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Customary payment terms are granted to customers, based on credit evaluations. The Company does not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. Deferred revenue is recorded when cash payments are received or due in advance of the Company’s performance. Deferred revenue was not significant as of June 30, 2023 and 2022. Nature of Products Revenue from the sale of optical components and assemblies is recognized upon transfer of control, including the risks and rewards of ownership, to the customer. The performance obligations for the sale of optical components and assemblies are satisfied at a point in time. Product development agreements are generally short term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. The Company has organized its products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements are included in specialty products. The Company’s revenue by product group for the years ended June 30, 2023 and 2022 was as follows: Year Ended June 30, 2023 2022 PMO $ 13,425,643 $ 15,020,542 Infrared Products 16,735,869 18,735,325 Specialty Products 2,772,437 1,803,293 Total revenue $ 32,933,949 $ 35,559,160 4. Inventories, net The components of inventories include the following: June 30, 2023 June 30, 2022 Raw materials $ 2,999,879 $ 3,019,156 Work in process 2,909,439 2,243,907 Finished goods 2,626,106 3,052,001 Allowance for obsolescence ( 1,124,690 ) ( 1,329,637 ) $ 7,410,734 $ 6,985,427 During fiscal years 2023 and 2022, the Company evaluated all allowed items and disposed of approximately $ 316,000 and $ 457,000 , respectively, of inventory parts and wrote them off against the allowance for obsolescence. The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 1.5 million and $ 1.6 million at June 30, 2023 and 2022, respectively. 5. Property and Equipment, net Property and equipment consist of the following: Estimated Lives (Years) June 30, 2023 June 30, 2022 Manufacturing equipment 5 - 10 $ 22,296,320 $ 22,058,636 Computer equipment and software 3 - 5 973,549 978,348 Furniture and fixtures 5 350,289 352,060 Leasehold improvements 5 - 7 2,742,344 3,043,867 Construction in progress 3,067,896 943,793 Total property and equipment 29,430,398 27,376,704 Less accumulated depreciation and amortization ( 16,619,468 ) ( 15,736,241 ) Total property and equipment, net $ 12,810,930 $ 11,640,463 F-11 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 6. Goodwill and Intangible Assets In connection with the December 2016 acquisition of ISP, the Company identified intangible assets, which were recorded at fair value and are being amortized on a straight-line basis over their useful lives. The excess purchase price over the fair values of all identified assets and liabilities was recorded as goodwill, attributable primarily to expected synergies and the assembled workforce of ISP. There were no changes in the net carrying value of goodwill during the years ended June 30, 2023 and 2022, and there have been no events or changes in circumstances that indicate the carrying value of goodwill or definite-lived intangible assets may not be recoverable. Identifiable intangible assets were comprised of: Useful Lives (Years) June 30, 2023 June 30, 2022 Customer relationships 15 $ 3,590,000 $ 3,590,000 Trade secrets 8 3,272,000 3,272,000 Trademarks 8 3,814,000 3,814,000 Total intangible assets 10,676,000 10,676,000 Less accumulated amortization ( 7,343,285 ) ( 6,218,202 ) Total intangible assets, net $ 3,332,715 $ 4,457,798 Future amortization of identifiable intangibles is as follows: Fiscal year ending: June 30, 2024 $ 1,125,083 June 30, 2025 658,398 June 30, 2026 239,334 June 30, 2027 239,334 After June 30, 2027 1,070,566 $ 3,332,715 7. Stockholders’ Equity The Company’s authorized capital stock consists of 55,000,000 shares, comprised of 50,000,000 shares of common stock, par value $ 0.01 per share, and 5,000,000 shares of preferred stock, par value $ 0.01 per share. Of the 5,000,000 shares of preferred stock authorized, the board of directors has previously designated: · 250 shares of preferred stock as Series A Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; · 300 shares of preferred stock as Series B Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; · 500 shares of preferred stock as Series C Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued; · 500,000 shares of preferred stock as Series D Preferred Stock, none of which have been issued; and · 500 shares of our preferred stock as Series F Preferred Stock, all previously outstanding shares of which have been previously redeemed or converted into shares of our Class A common stock and may not be reissued. Of the 50,000,000 shares of common stock authorized, the board of directors has previously designated 44,500,000 shares authorized as Class A common stock. The stockholders of Class A common stock are entitled to one vote for each share held. The remaining 5,500,000 shares of authorized common stock were designated as Class E-1 common stock, Class E-2 common stock, or Class E-3 common stock, all previously outstanding shares of which have been previously redeemed or converted into shares of Class A common stock. F-12 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 8. Income Taxes For financial reporting purposes, income (loss) before income taxes includes the following components: Year Ended June 30, 2023 2022 Pretax income (loss): United States $ ( 5,697,853 ) $ ( 5,129,955 ) Foreign 1,885,016 2,450,681 Loss before income taxes $ ( 3,812,837 ) $ ( 2,679,274 ) The components of the provision for income taxes are as follows: Year Ended June 30, 2023 2022 Current: Federal tax $ - $ - State 3,799 3,829 Foreign 303,235 314,063 Total current 307,034 317,892 Deferred: Federal tax 3,000 4,000 State - - Foreign ( 76,000 ) 541,015 Total deferred (73,000 ) 545,015 Total income tax provision $ 234,034 $ 862,907 The reconciliation of income tax computed at the U.S. federal statutory rates to the total income tax provision is as follows: Year Ended June 30, 2023 2022 U.S. federal statutory tax rate 21.0 % 21.0 % Income tax provision reconciliation: Tax at statutory rate: $ ( 800,696 ) $ ( 562,648 ) Net foreign income subject to lower tax rate ( 396,742 ) ( 297,049 ) State income taxes, net of federal benefit ( 303,366 ) ( 159,950 ) Valuation allowance ( 3,331,277 ) ( 1,255,273 ) NOL expiration and adjustments 4,015,752 2,550,645 GILTI 192,452 138,611 Federal research and development and other credits 491,112 ( 121,990 ) Stock-based compensation ( 34,976 ) 20,472 Other permanent differences ( 57,762 ) 11,387 Other, net 459,537 538,702 $ 234,034 $ 862,907 F-13 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law, which, among other things, is intended to provide emergency assistance to qualifying businesses and individuals. The Company elected to utilize the payroll tax deferral under the CARES Act, resulting in cash savings of approximately $ 325,000 , accrued as of June 30, 2021. Half of this amount was remitted on December 31, 2021, with the remainder remitted on December 31, 2022. Income Tax Law of the People’s Republic of China The Company’s Chinese subsidiaries, LPOI and LPOIZ, are governed by the Income Tax Law of the People’s Republic of China concerning the privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25 % on income reported in the statutory financial statements after appropriate tax adjustments. For both the years ended June 30, 2023 and 2022, the tax rate for LPOIZ was 15 %, in accordance with an incentive program for technology companies. Prior to fiscal year 2022, no deferred tax provision was recorded for LPOIZ. However, during the year ended June 30, 2022, as a result of audits performed by the Chinese taxing authorities, and the Chinese subsidiaries’ statutory audits, it was determined that a net deferred tax liability was required. Accordingly, a net deferred tax liability of approximately $ 541,000 , related to LPOIZ, was recorded in the Company’s Consolidated Financial Statements as of and for the year ended June 30, 2022. As of June 30, 2023, the net deferred tax liability for LPOIZ is approximately $ 465,000 . Historically, the Company considered unremitted earnings held by its foreign subsidiaries to be permanently reinvested. However, during fiscal year 2020, the Company began declaring intercompany dividends to remit a portion of the historical earnings of its foreign subsidiaries to the U.S. parent company. It is still the Company’s intent to reinvest a significant portion of the more recent earnings generated by its foreign subsidiaries, however the Company also plans to repatriate a portion of the historical earnings of its subsidiaries. Based on its previous intent, the Company had not historically provided for future Chinese withholding taxes on the related earnings. However, during fiscal year 2020 the Company began to accrue for these taxes on the portion of historical earnings that it intends to repatriate. During the years ended June 30, 2023 and 2022, the Company declared and paid intercompany dividends of $ 1.9 million and $ 2.8 million, respectively, from LPOIZ, payable to the Company as its parent company. Accordingly, the Company paid Chinese withholding taxes of $ 210,000 and $ 280,000 associated with these dividends during fiscal years 2023 and 2022, respectively. Income tax expense associated with these dividends was $ 210,000 and $ 208,000 for fiscal years 2023 and 2022, respectively. Accrued and unpaid withholding taxes were approximately $ 40,000 as of both June 30, 2023 and 2022. Other than these withholding taxes, these intercompany dividends have no impact on the Consolidated Financial Statements. Law of Corporate Income Tax of Latvia The Company’s Latvian subsidiary, ISP Latvia, is governed by the Law of Corporate Income Tax of Latvia. Until December 31, 2017, ISP Latvia was subject to a statutory income tax rate of 15 %. 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 tax rate was changed to 20 %; however, distribution amounts are first divided by 0.8 to arrive at the taxable amount of profit, resulting in an effective tax rate of 25 %. As a transitional measure, distributions made from earnings prior to January 1, 2018, distributed prior to December 31, 2019, are not subject to tax if declared prior to December 31, 2019. ISP Latvia has declared an intercompany dividend to be paid to ISP, its U.S. parent company, for the full amount of earnings accumulated prior to January 1, 2018. Distributions of this dividend will be from earnings prior to January 1, 2018 and, therefore, will not be subject to tax. The Company currently does not intend to distribute any current earnings generated after January 1, 2018. If, in the future, the Company changes such intention, distribution taxes, if any, will be accrued as profits are generated. F-14 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows at June 30: Year Ended June 30, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 9,243,000 $ 12,197,277 Stock-based compensation 340,000 536,000 R&D and other credits 1,787,000 2,279,000 Capitalized R&D expenses 763,000 371,000 Inventories 200,000 263,973 Accrued expenses and other 15,000 267,000 Gross deferred tax assets 12,348,000 15,914,250 Valuation allowance for deferred tax assets ( 11,057,000 ) ( 14,388,277 ) Total deferred tax assets 1,291,000 1,525,973 Deferred tax liabilities: Depreciation and other ( 740,000 ) ( 763,988 ) Intangible assets ( 876,000 ) ( 1,160,000 ) Total deferred tax liabilities ( 1,616,000 ) ( 1,923,988 ) Net deferred tax assets (liabilities) $ ( 325,000 ) $ ( 398,015 ) In assessing the potential future recognition of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not 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. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $ 37 million prior to the expiration of federal NOL carry-forwards from 2023 through 2037. Based on the level of historical taxable income, management has provided for a valuation adjustment against the deferred tax assets of approximately $ 11.1 million at June 30, 2023, a decrease of approximately $ 3.3 million as compared to June 30, 2022. The decrease in the valuation allowance for deferred tax assets as compared to the prior year is primarily the result of the various movements in the current year deferred items. The U.S. net deferred tax asset of $ 140,000 results from federal and state tax credits with indefinite carryover periods. State income tax expense disclosed on the effective tax rate reconciliation above includes state deferred taxes that are offset by a full valuation allowance. At June 30, 2023, in addition to net operating loss carry forwards, the Company also has research and development and other credit carry forwards of approximately $ 1.5 million, which will expire from 2024 through 2043 . A portion of the NOL carry forwards may be subject to certain limitations of the Internal Revenue Code Sections 382 and 383, which would restrict the annual utilization in future periods due principally to changes in ownership in prior periods. 9. Compensatory Equity Incentive Plan and Other Equity Incentives Share-based payment arrangements — The Company’s directors, officers, and key employees were granted stock-based compensation through the Omnibus Plan, through October 2018 and after that date, the SICP. The awards include incentive stock options, non-qualified stock options and restricted stock unit (“RSU”) awards. The LightPath Technologies, Inc. Employee Stock Purchase Plan (“2014 ESPP”) was adopted by the Company’s board of directors on October 30, 2014 and approved by the Company’s stockholders on January 29, 2015. The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, which may not exceed 15% of an employee’s compensation, at a price not less than 85% of the market value of the Class A common stock on specified dates (June 30 and December 31) . In no event can any participant purchase more than $ 25,000 worth of shares of Class A common stock in any calendar year and an employee cannot purchase more than 8,000 shares on any purchase date within an offering period of 12 months and 4,000 shares on any purchase date within an offering period of six months. This discount of approximately $ 4,000 and $ 5,000 for fiscal years 2023 and 2022, respectively, is included in the selling, general and administrative expense in the accompanying Consolidated Statements Comprehensive Income (Loss), which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP. F-15 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) These plans are summarized below: Equity Compensation Arrangement Award Shares Authorized Outstanding at June 30, 2023 Available for Issuance at June 30, 2023 SICP (or Omnibus Plan) 7,215,625 2,232,417 1,633,538 2014 ESPP 400,000 — 243,920 7,615,625 2,232,417 1,877,458 Grant Date Fair Values and Underlying Assumptions; Contractual Terms — The Company estimates the fair value of each equity option as of the date of grant. The Company uses the Black-Scholes-Merton pricing model. The 2014 ESPP fair value is the amount of the discount the employee obtains at the date of the purchase transaction. Most stock options granted vest ratably over two to four years and are generally exercisable for ten years. The assumed forfeiture rates used in calculating the fair value of RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the years ended June 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 the year ended June 30, 2023. For stock options granted in the year ended June 30, 2022, the Company estimated the fair value of each stock award as of the date of grant using the following assumptions: Year Ended June 30, 2022 Weighted-average expected volatility 80.8 % Dividend yields 0 % Weighted-average risk-free interest rate 2.09 % Weighted-average expected term, in years 3.75 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. F-16 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Information Regarding Current Share-Based Payment Awards — A summary of the activity for share-based payment awards in the years ended June 30, 2023 and 2022 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, 2021 432,927 $ 2.01 8.8 1,761,885 0.9 — Granted 125,000 $ 2.02 368,461 1.2 — Exercised - $ - ( 45,143 ) — Cancelled/Forfeited ( 23,465 ) $ 1.67 ( 5,534 ) — June 30, 2022 534,462 $ 2.03 7.0 2,079,669 0.9 — Granted - $ - 611,386 246,942 Exercised - $ - ( 1,068,291 ) ( 145,209 ) Cancelled/Forfeited - $ - ( 26,542 ) — June 30, 2023 534,462 $ 2.03 6.1 1,596,222 1.1 101,733 0.7 Awards exercisable/ vested as of June 30, 2023 396,202 $ 1.96 5.8 938,817 — — Awards unexercisable/ unvested as of June 30, 2023 138,260 $ 2.21 7.1 657,405 1.1 101,733 0.7 534,462 1,596,222 101,733 The intrinsic and fair values for share-based payment awards exercised and vested in the years ended June 30, 2023 and 2022 are presented below: Year Ended June 30, 2023 2022 Intrinsic Value - Exercised RSUs $ 1,648,874 $ 77,284 RSAs 190,720 - Fair Value - Vested Stock Options 6,500 24,000 RSUs 793,880 395,223 RSAs 189,473 - No stock options were exercised during the years ended June 30, 2023 and 2022. F-17 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) The intrinsic values of share-based payment awards outstanding and exercisable as of June 30, 2023 and 2022 are presented below: As of June 30, 2023 2022 Stock options $ 2,430 $ 42,463 RSUs 1,267,403 1,642,023 None of the outstanding RSAs were exercisable as of June 30, 2023, and there were no outstanding RSAs as of June 30, 2022. As of June 30, 2023, there was approximately $776,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, including share options and RSUs, granted under the Omnibus Plan, through October 2018 and after that date, the SICP. The expected compensation cost to be recognized is as follows: Fiscal Year Ending: Stock Options RSAs RSUs Total June 30, 2024 94,196 56,744 416,582 567,522 June 30, 2025 33,885 23,718 130,589 188,192 June 30, 2026 — — 19,829 19,829 $ 128,081 $ 80,462 $ 567,000 $ 775,543 The table above does not include shares under the Company’s 2014 ESPP, which has purchase settlement dates in the second and fourth fiscal quarters. The Company issues new shares of Class A common stock upon the exercise of stock options and upon vesting of RSUs and RSAs, unless the recipient has elected to defer receipt of shares under the applicable IRS rules. The following table is a summary of the number and weighted-average grant date fair values, estimated using the Black-Scholes-Merton pricing model, regarding the Company’s unexercisable/unvested awards as of June 30, 2023 and 2022 and changes during the two years then ended: Unexercisable/Unvested Awards Stock Options Shares RSU Shares RSA Shares Total Shares Weighted-Average Grant Date Fair Values (per share) June 30, 2021 321,984 598,587 - 920,571 $ 1.59 Granted 125,000 368,461 - 493,461 $ 1.74 Vested ( 118,696 ) ( 216,823 ) - ( 335,519 ) $ 1.42 Cancelled/Forfeited ( 8,967 ) ( 5,534 ) - ( 14,501 ) $ 1.97 June 30, 2022 319,321 744,691 - 1,064,012 $ 1.71 Granted - 611,386 246,942 858,328 $ 1.24 Vested ( 181,061 ) ( 672,130 ) ( 145,209 ) ( 998,400 ) $ 1.52 Cancelled/Forfeited - ( 26,542 ) - ( 26,542 ) $ - June 30, 2023 138,260 657,405 101,733 897,398 $ 1.40 Acceleration of Vesting — The Company does not generally accelerate the vesting of any stock options, RSUs or RSAs, however in the case of retirements, the Board of Directors may accelerate vesting. Financial Statement Effects and Presentation — The following table shows total stock-based compensation expense for the years ended June 30, 2023 and 2022, which is included in selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss): Year Ended June 30, 2023 2022 Stock options $ 200,854 $ 144,682 RSAs 168,673 — RSUs 941,430 680,568 Total $ 1,310,957 $ 825,250 F-18 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 10. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (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 are described in the following table: Year Ended June 30, 2023 2022 Net loss $ ( 4,046,871 ) $ ( 3,542,181 ) Weighted-average common shares outstanding: Basic number of shares 31,637,445 27,019,534 Effect of dilutive securities: Options to purchase common stock - - RSUs and RSAs - - Diluted number of shares 31,637,445 27,019,534 Loss per common share: Basic $ ( 0.13 ) $ ( 0.13 ) Diluted $ ( 0.13 ) $ ( 0.13 ) The following weighted-average potential dilutive shares were not included in the computation of diluted earnings per share, as their effects would be anti-dilutive: Year Ended June 30, 2023 2022 Options to purchase common stock 534,462 445,397 RSUs and RSAs 2,013,276 1,944,737 2,547,738 2,390,134 11. Defined Contribution Plan The Company provides retirement benefits to its U.S.-based employees through a defined contribution retirement plan. Until February 24, 2023, these benefits were offered under the Insperity 401(k) plan (the “Insperity Plan”). The Insperity Plan was a defined 401(k) contribution plan that all U.S. employees, over the age of 21, are eligible to participate in after three months of employment. Under the Insperity Plan, the Company matched 100% of the first 2% of employee contributions. Effective February 24, 2023, all plan assets were transferred to the LightPath Technologies Inc. 401(k) plan (the “LightPath Plan”). The LightPath Plan is adefined 401(k) contribution plan, administered by a third party, that all U.S. employees, over the age of 21, are eligible to participate in after three months of employment. Under the LightPath Plan, the Company matches 100% of the first 2% of employee contributions. As of June 30, 2023, there were 57 employees enrolled in this plan . The Company made matching contributions of approximately $ 121,000 and $ 123,000 during the years ended June 30, 2023 and 2022, respectively. F-19 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 12. Leases The Company has operating leases for its manufacturing and office space. As of June 30, 2022, the Company had two lease agreements for its corporate headquarters and manufacturing facilities in Orlando, Florida. The first lease (the “Orlando Lease”) was amended effective April 30, 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. Minimum rental rates for the extension term were established based on annual increases of approximately three percent ( 3 %). Additionally, there is one five-year extension option exercisable by the Company. The minimum rental rates for such additional extension option will be determined at the time an option is exercised and will be based on a “fair market rental rate,” as determined in accordance with the Orlando Lease, as amended. The second lease was entered into in April 2018 for 12,378 square feet in Orlando, Florida (the “Orlando Lease II”), which provided additional manufacturing and office space near the Company’s corporate headquarters. The commencement date of the Orlando Lease II was December 1, 2018, and it had a four-year original term with one renewal option for an additional five-year term. In October 2021, the Company assigned such lease to a third-party and agreed that the premises would be vacated, subject to the assigned lease, on November 30, 2022. In December 2022, the Company entered into an agreement with the assignee of such lease that extended its 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 the Company has no further obligations related to this lease. As of June 30, 2022, the Company, through its wholly-owned subsidiary, LPOI, had a lease agreement for an office facility in Shanghai, China (the “Shanghai Lease”) for 1,900 square feet. The Shanghai Lease commenced in October 2015. During fiscal 2020, the Shanghai Lease was renewed for an additional three-year term, which expired in October 2022 and was not renewed. As of June 30, 2023, the Company, through its wholly-owned subsidiary, LPOIZ, has a lease agreement for a manufacturing and office facility in Zhenjiang, China for an aggregate of 55,000 square feet (the “Zhenjiang Lease”), which expires December 31, 2024 . At June 30, 2023, the Company, through ISP’s wholly-owned subsidiary ISP Latvia, had two lease agreements for a manufacturing and office facility in Riga, Latvia for an aggregate of 29,000 square feet, which leases expire December 31, 2030 . The Company’s facility leases are classified as operating leases, and the Company also has finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable, expiring in 2024 to 2034 . The Company includes options to renew (or terminate) in the lease term, and as part of the ROU assets and lease liabilities, when it is reasonably certain that the Company will exercise that option. At June 30, 2023, the Company also has obligations under five finance lease agreements, entered into during fiscal years 2019 and 2023, with terms ranging from three to five years. The leases are for computer and manufacturing equipment. The finance leases for equipment on Riga, Latvia include financial covenants specific to ISP Latvia. The Company’s 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. As most of the Company’s leases do not provide an implicit rate, the Company used its collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently, none of the Company’s leases include variable lease payments that are dependent on an index or rate. The Company is responsible for payment of certain real estate taxes, insurance and other expenses on certain of its leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. The Company generally accounts for non-lease components, such as maintenance, separately from lease components. The Company’s 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 Consolidated Balance Sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. The Company received tenant improvement allowances for the Orlando Lease and for Orlando Lease II. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances were amortized over the corresponding lease terms, and were fully amortized as of June 30, 2023. F-20 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) The components of lease expense were as follows: Year Ended June 30, 2023 2022 Operating lease cost $ 875,454 $ 668,054 Finance lease cost: Depreciation of lease assets 71,326 162,057 Interest on lease liabilities 7,590 19,571 Total finance lease cost 78,916 181,628 Total lease cost $ 954,370 $ 849,682 Supplemental balance sheet information related to leases was as follows: Classification June 30, 2023 June 30, 2022 Assets: Operating lease assets Operating lease assets $ 9,571,604 $ 10,420,604 Finance lease assets Property and equipment, net (1) 542,105 61,566 Total lease assets $ 10,113,709 $ 10,482,170 Liabilities: Current: Operating leases Operating lease liabilities, current $ 969,890 $ 965,622 Finance leases Finance lease liabilities, current 103,646 55,348 Noncurrent: Operating leases Operating lease liabilities, less current portion 8,393,248 9,478,077 Finance leases Finance lease liabilities, less current portion 341,201 11,454 Total lease liabilities $ 9,807,985 $ 10,510,501 (1) Finance lease assets are recorded net of accumulated depreciation of approximately $ 72,000 and $ 418,000 as of June 30, 2023 and 2022, respectively. Lease term and discount rate information related to leases was as follows: Lease Term and Discount Rate June 30, 2023 Weighted Average Remaining Lease Term (in years) Operating leases 9.2 Finance leases 4.5 Weighted Average Discount Rate Operating leases 2.9 % Finance leases 6.4 % Supplemental cash flow information: Year Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash used for operating leases $ 1,020,992 $ 638,943 Operating cash used for finance leases $ 7,590 $ 16,070 Financing cash used for finance leases $ 73,003 $ 172,344 F-21 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Future maturities of lease liabilities were as follows as of June 30, 2023: Fiscal year ending: Finance Leases Operating Leases June 30, 2024 $ 128,828 $ 1,025,294 June 30, 2025 117,016 1,167,096 June 30, 2026 94,701 1,140,297 June 30, 2027 85,144 1,169,757 June 30, 2028 85,144 1,200,291 Thereafter — 5,583,700 Total future minimum payments 510,833 11,286,435 Less imputed interest ( 65,986 ) ( 1,923,297 ) Present value of lease liabilities $ 444,847 $ 9,363,138 13. Loans Payable BankUnited Loans On February 26, 2019, the Company entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to maximum amount of $ 2,000,000 (the “Revolving Line”), (ii) a term loan in the amount of up to $ 5,813,500 (“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 Revolving Line and Term Loan, the “BankUnited Loans”), as evidenced by promissory notes the Company executed in favor of BankUnited (the “BankUnited Notes”). On May 6, 2019, the Company entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “Amendment” and, together with the Loan Agreement, the “Amended Loan Agreement”). The Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed. On September 9, 2021, the Company 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) the Company was granted a waiver of default for its 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, the Company 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, the Company 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 had 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. Based on the waiver, the Company was no longer in default of the Amended Loan Agreement. On May 11, 2022, the Company entered into the Third Amendment to the Loan Agreement dated February 26, 2019 (the “Third Amendment”; and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4 % of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender). F-22 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) On February 7, 2023, the Company 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); and (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 and has not been refinanced with another lender); (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 has waived compliance with certain financial covenants until December 31, 2023. On May 9, 2023, the Company 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 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 balance sheet as of June 30, 2023. BankUnited Revolving Line Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances to the Company 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 closing of the BankUnited Loans. 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 (8.25% as of June 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. F-23 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Security and Guarantees The Company’s obligations under the Amended Loan Agreement were previously collateralized by a first priority security interest (subject to permitted liens) in all of its assets and the assets of the Company’s U.S. subsidiaries, 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 the Company 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 the Company a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) through June 30, 2022. Based on the waivers, the Company was 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 June 30, 2023, the Company was 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 the 30-day LIBOR 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 related to the BankUnited Loans were recorded as a discount on debt and are being amortized over the term. Amortization of approximately $ 59,000 and $ 52,000 for each the years ended June 30, 2023 and 2022, respectively, is included in interest expense. Equipment Loans In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which is also a significant customer. 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. The 2020 Equipment Loan bears interest at a fixed rate of 3.3 %. 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. 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 % ( 6.75 % as of June 30, 2023). F-24 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) Future maturities of loans payable are as follows: Bank United Term Loan Equipment Loans Total Fiscal year ending: June 30, 2024 $ 901,078 $ 122,736 $ 1,023,814 June 30, 2025 1,273,533 139,966 1,413,499 June 30, 2026 - 79,761 79,761 June 30, 2027 - 37,571 37,571 After June 30, 2027 - 19,756 19,756 Total payments $ 2,174,611 $ 399,790 2,574,401 Less current portion ( 1,023,814 ) Non-current portion $ 1,550,587 Liquidity The Company generally relies on cash from operations and equity offerings, and commercial debt, to the extent available, to satisfy its liquidity needs and to meet its payment obligations, including payments due under the Term Loan. The Company has commenced discussions with prospective lenders regarding the refinancing of its debt obligations prior to the maturity date of the 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 the Company is 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. In February 2022, the Company filed a shelf registration statement to facilitate the issuance of its Class A common stock, warrants exercisable for shares of its 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, the Company also included a prospectus supplement relating to an at-the-market equity program under which the Company may issue and sell shares of its Class A common stock up to an aggregate offering price of $ 25.2 million from time to time, decreasing the aggregate offering price available under its shelf registration statement to $ 50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. The Company has not issued any shares of its 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. Based on the capital raise that was completed in January 2023, the Company does not expect to need additional equity capital for the foreseeable future. However, 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 25 % of the Company’s cash, cash equivalents and restricted cash is held by its foreign subsidiaries and, although the Company regularly repatriates cash, it may not be readily available to repay its liabilities in the U.S. The Company will also continue efforts to keep costs under control as it seeks renewed sales growth. The Company’s efforts are directed toward generating positive cash flow and profitability. If these efforts are not successful, the Company may need to raise additional capital. Should capital not be available to the Company at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include 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. F-25 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 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, the Company terminated several employees of its 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, the Company’s China subsidiaries have engaged in certain legal proceedings with the terminated employees. The Company has incurred various expenses associated with its investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which included legal, consulting and other transitional management fees, totaled $ 718,000 during the year ended June 30, 2021. During the year ended June 30, 2022, approximately $ 400,000 of related expenses were incurred. Such expenses were recorded as “Selling, general and administrative” expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss). The Company also identified a further liability in the amount of $ 210,000 , which may be incurred in the future due to the actions of these employees. This amount has been accrued as of June 30, 2021, pending further investigation, and included in “Other Expense, net” in the accompanying Consolidated Statement of Comprehensive Income (Loss). During fiscal year 2022 it was determined that LPOIZ would not be responsible for this amount, and the accrual was reversed with the benefit included in “Other income (expense), net” in the accompanying Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2022. 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, the Company 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. After the execution of the severance agreements, we discovered additional wrongdoing by the terminated employees. 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 the Company’s subsidiaries will ultimately be obligated to pay these amounts, we have accrued for these payments as of June 30, 2021. Such expenses were recorded as “Selling, general and administrative” expenses in the accompanying Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. As of June 30, 2022, approximately $430,000 was accrued. The Chinese Labor Court ruled in favor of the former employees, as expected, and these severance payments were paid out during the first half of fiscal year 2023. The Company continues to have litigation pending in the Chinese court system related to these matters, but there has been little activity during fiscal year 2023. The Company has transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on the ability of those subsidiaries to operate. Management has not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. The Company expects to incur additional legal fees and consulting expenses in future periods as all legal options and remedies are pursued; however, such future fees are expected to be at lower levels than have been incurred to date. Although the Company has taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, the Company 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, which continued throughout fiscal year 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. F-26 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) COVID-19 The Company’s business, results of operations financial condition, cash flows, and the stock price of its Class A common stock can be adversely affected by pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic. To date, the Company has not experienced any significant direct financial impact of COVID-19 to its 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, those outside of China 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 fiscal 2024 and beyond. Impact of Russian-Ukraine Conflict In February 2022, Russian military forces invaded Ukraine. This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impact of the Russian-Ukraine conflict on its financial condition, results of operations or cash flows into the foreseeable future. 15. 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 $ 607,000 and $ 935,000 as of June 30, 2023 and 2022, respectively. During the years ended June 30, 2023 and 2022, we also recognized net foreign currency transaction losses of approximately $ 37,000 and $ 3,000 , respectively, included in the Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.” Revenues from and long-lived assets located in foreign countries are as follows: Year Ended June 30, 2023 2022 Revenues: United States $ 16,327,295 $ 13,722,533 Latvia 2,677,113 2,480,635 China 2,629,684 5,850,994 Other European countries 8,664,338 10,826,224 Other Asian countries 1,463,343 1,594,247 Rest of world 1,172,176 1,084,527 $ 32,933,949 $ 35,559,160 June 30, 2023 2022 Long-lived assets: United States $ 23,336,063 $ 23,228,612 Latvia 5,282,596 5,226,811 China 3,157,434 4,089,084 $ 31,776,093 $ 32,544,507 F-27 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Consolidated Financial Statements (continued) 16. Supplier and Customer Concentrations The Company utilizes a number of glass compositions in manufacturing its molded glass aspheres and lens array products. These glasses or equivalents are available from a large number of suppliers, including CDGM Glass Company Ltd., Ohara Corporation, and Sumita Optical Glass, Inc. Base optical materials, used in certain of the Company’s specialty products, are manufactured and supplied by a number of optical and glass manufacturers. The Company also utilizes major infrared material suppliers located around the globe for a broad spectrum of infrared crystal and glass. The Company believes that a satisfactory supply of such production materials will continue to be available, however, at higher, inflationary prices largely due to the war in the Ukraine, although there can be no assurance in this regard. In fiscal year 2023, the Company had sales to three customers that comprised an aggregate of approximately 24 % of its annual revenue, and 25 % of its June 30, 2023 accounts receivable. Sales to these customers as a percentage of our fiscal year 2023 revenue include one customer at 11 %, another customer at 7 %, and the third customer at 6 %. One of these customers comprised 12 % of accounts receivable, a second customer comprised 9 % of accounts receivable and a third customer comprised 5 % of the accounts receivable balance as of June 30, 2023. In fiscal year 2022, the Company had sales to three customers that comprised an aggregate of approximately 35 % of its annual revenue, and 13 % of its June 30, 2022 accounts receivable. Sales to these customers as a percentage of our fiscal year 2022 revenue include one customer at 19 %, another customer at 9 %, and the third customer at 7 %. One of these customers comprised 7 % of accounts receivable, a second customer comprised 6 % of accounts receivable and the other customer had no accounts receivable balance as of June 30, 2022. The loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect the Company’s revenues. In fiscal year 2023, 50% of the Company’s net revenue was derived from sales outside of the U.S., with 93 % of foreign sales derived from customers in Europe and Asia. In fiscal year 2022, 61 % of the Company’s net revenue was derived from sales outside of the U.S., with 95 % of foreign sales derived from customers in Europe and Asia. 16. Subsequent Event In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to the 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. The Company believes that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions. The Company’s consolidated financial statements will reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price includes $ 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. For the year ended June 30, 2023, the Company incurred approximately $ 140,000 in acquisition costs which are included in the consolidated statements of comprehensive income in the line item entitled “Selling, general and administrative.” End of Consolidated Financial Statements F-28 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. LIGHTPATH TECHNOLOGIES, INC. Date: September 14, 2023 By: /s/ Shmuel Rubin Shmuel Rubin President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ SHMUEL RUBIN September 14, 2023 /s/ ALBERT MIRANDA September 14, 2023 Shmuel Rubin Albert Miranda President & Chief Executive Officer Chief Financial Officer (Principal Executive Officer) (Principal Financial Officer) /s/ M. SCOTT FARIS September 14, 2023 /s/ JOSEPH MENAKER September 14, 2023 M. Scott Faris Joseph Menaker Director (Chairman of the Board) Director /s/ LOUIS LEEBURG September 14, 2023 /s/ DARCIE PECK September 14, 2023 Louis Leeburg Darcie Peck Director Director /s/ S. ERIC CREVISTON September 14, 2023 S. Eric Creviston Director S-1