What changed in this filing

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Item 1. Financial Statements

2024-02-08 compared with 2023-11-09 · 152 added, 116 removed, 539 unchanged (33% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current assets:

3 unchanged sentences

Inventories, net

Prepaid expenses and other assets

Other receivables

Prepaid expenses and deposits

Other current assets

Total current assets

26 unchanged sentences

Class A, $ 0.01 par value, voting;

44,500,000 shares authorized;

44,500,000 shares authorized as of December 31, 2023 and June 30, 2023;

37,549,378 and 34,344,739 shares issued and outstanding

6 unchanged sentences

Total liabilities and stockholders’ equity

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

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

LIGHTPATH TECHNOLOGIES, INC.

1 unchanged sentence

Three Months Ended

September 30,

Six Months Ended

Cost of sales

3 unchanged sentences

Amortization of intangibles

Loss on disposal of property and equipment

Total operating expenses

2 unchanged sentences

( 3,033,951 )

( 1,791,897 )

Other income (expense):

Interest expense, net

Other income, net

Total other (expense), net

Other income (expense), net

Total other income (expense), net

Loss before income taxes

1 unchanged sentence

( 2,940,435 )

( 1,917,627 )

Income tax provision

1 unchanged sentence

$ ( 694,061 )

$ ( 3,056,039 )

$ ( 2,074,761 )

Foreign currency translation adjustment

2 unchanged sentences

$ ( 2,921,274 )

$ ( 2,321,465 )

Loss per common share (basic)

2 unchanged sentences

Number of shares used in per share calculation (diluted)

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

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

LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

Comphrehensive

Comprehensive

Stockholders’

4 unchanged sentences

Employee Stock Purchase Plan

Exercise of Stock Options, RSUs and RSAs, net

Exercise of Stock Options, RSUs & RSAs, net

Issuance of common stock for acquisition of Visimid

Stock-based compensation on stock options, RSUs and RSAs

Stock-based compensation on stock options, RSUs & RSAs

Foreign currency translation adjustment

4 unchanged sentences

$ ( 209,178,605 )

Issuance of common stock for:

Exercise of Stock Options, RSUs & RSAs, net

Stock-based compensation on stock options, RSUs & RSAs

Foreign currency translation adjustment

( 1,713,663 )

Balances at December 31, 2023

$ 243,475,209

$ ( 210,892,268 )

Balances at June 30, 2022

3 unchanged sentences

Employee Stock Purchase Plan

Exercise of Stock Options and RSUs, net

Stock-based compensation on stock options and RSUs

Exercise of Stock Options & RSUs, net

Stock-based compensation on stock options & RSUs

Foreign currency translation adjustment

4 unchanged sentences

$ ( 205,170,058 )

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

Issuance of common stock for:

Exercise of Stock Options, RSUs & RSAs, net

Stock-based compensation on stock options, RSUs & RSAs

Foreign currency translation adjustment

Balances at December 31, 2022

$ 233,104,731

$ ( 205,864,119 )

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

LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

Three Months Ended September 30,

Six Months Ended December 31,

Cash flows from operating activities:

4 unchanged sentences

Interest from amortization of debt costs

Loss on disposal of property and equipment

Stock-based compensation on stock options, RSUs & RSAs, net

1 unchanged sentence

Change in operating lease assets and liabilities

Inventory write-offs to allowance

Deferred taxes

1 unchanged sentence

Trade accounts receivable

Other receivables

Prepaid expenses and other assets

Other current assets

Prepaid expenses and deposits

Accounts payable and accrued liabilities

( 1,255,961 )

Net cash provided by (used in) operating activities

1 unchanged sentence

Purchase of property and equipment

( 1,484,401 )

Acquisition of Visimid Technologies, net of cash acquired

4 unchanged sentences

Proceeds from sale of common stock from Employee Stock Purchase Plan

Borrowings on loans payable

Payments on loans payable

4 unchanged sentences

( 1,262,288 )

Cash and cash equivalents and restricted cash, beginning of period

( 1,714,039 )

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

4 unchanged sentences

Purchase of equipment through finance lease arrangements

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

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

LIGHTPATH TECHNOLOGIES, INC.

12 unchanged sentences

Our significant accounting policies are provided in Note 2, Summary of Significant Accounting Policies , in the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

There have been no material changes to our significant accounting policies during the three months ended September 30, 2023, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

There have been no material changes to our significant accounting policies during the six months ended December 31, 2023, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Use of Estimates

5 unchanged sentences

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 provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and original equipment manufacturers (“OEMs”) for original new products.

Visimid’s core competency is developing and producing custom thermal and night vision cores.

2 unchanged sentences

The purchase price included $ 1 million in cash, $ 1,550,000 of restricted stock, $ 150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract.

Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued on four equal installments of $350,000 each on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025 .

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 in four equal installments of $350,000 each, on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025 .

The number of shares is based on the average closing price of the Company’s Class A common stock, as reported by Bloomberg, for the five trading days prior to each stock issuance.

The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $ 2.9 million.

Of this amount, $ 600,000 was paid at closing and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities and Accrued liabilities, noncurrent in the accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2023.

The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $ 2.7 million, based on present values as of the Acquisition Date.

Of this amount, $ 600,000 was paid at closing, $ 150,000 cash was paid in October 2023 per the terms of the purchase agreement, and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities and Accrued liabilities, noncurrent in the accompanying unaudited Condensed Consolidated Balance Sheet as of December 31, 2023.

The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date.

The Company is in the process of obtaining third-party valuations of certain intangible assets;

thus, the provisional measurements of intangible assets, goodwill and deferred income tax assets are subject to change.

For the three months ended September 30, 2023, the Company incurred approximately $ 83,000 in acquisition costs which are included in the unaudited Condensed Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.” This is in addition to the previously disclosed $ 140,000 in acquisition costs which were recorded during the three months ended June 30, 2023.

The Company is in the process of finalizing third-party valuations of certain intangible assets;

thus, the provisional measurements of intangible assets and goodwill are subject to change.

As part of the preliminary valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and trademarks.

The customer backlog, customer relationships, trade secrets and trademarks were determined to have estimated values of approximately $ 464,000 , $ 122,000 , $ 925,000 and $ 442,000 , respectively, and estimated useful lives of 1 year for customer backlog, and 10 years for customer relationships, trade secrets and trademarks.

The estimated fair value of identifiable intangible assets is determined primarily using the “income approach”, which requires a forecast of all future cash flows.

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Visimid.

The goodwill is expected to be deductible for income tax purposes.

As of December 31, 2023, an adjustment of $ 2.2 million was made to decrease the initially recognized amount of goodwill to reflect changes in the estimated fair value of the identifiable intangible assets purchased in the acquisition.

For the three and six months ended December 31, 2023, the Company incurred approximately $ 13,000 and $ 97,000 , respectively, in acquisition costs which are included in the unaudited Condensed Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.” This is in addition to the previously disclosed $ 140,000 in acquisition costs which were recorded during the three months ended June 30, 2023.

Prior to the Acquisition, the Company had a preexisting relationship with Visimid.

13 unchanged sentences

We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event.

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

Deferred revenue was not significant as of September 30, 2023 and June 30, 2023, respectively.

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

Deferred revenue was $ 759,000 and $ 314,000 as of December 31, 2023 and June 30, 2023, respectively, and is included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Nature of Products

2 unchanged sentences

Product development agreements for engineering services are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable.

Visimid has one longer-term order with a customer which includes both product development and hardware deliverables where similar revenue recognition criteria will be applied.

We previously organized our products in three groups:

4 unchanged sentences

Assemblies and modules were previously included in PMO, infrared or specialty products, depending on the lens type.

Revenue by product group for the three months ended September 30, 2023 and 2022 was as follows, with 2022 amounts reclassified from those previously reported to conform to current classification:

Three Months Ended

September 30,

Revenue by product group for the three and six months ended December 31, 2023 and 2022 was as follows, with 2022 amounts reclassified from those previously reported to conform to current classification:

Three Months Ended December 31,

Six Months Ended December 31,

Infrared components

4 unchanged sentences

The components of inventories include the following:

September 30,

Raw materials

4 unchanged sentences

( 1,124,690 )

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 1.4 million and $ 1.5 million as of September 30, 2023 and June 30, 2023, respectively.

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 1.4 million and $ 1.5 million as of December 31, 2023 and June 30, 2023, respectively.

Property and Equipment

1 unchanged sentence

Estimated Lives (Years)

September 30, 2023

December 31, 2023

June 30, 2023

10 unchanged sentences

Goodwill and Intangible Assets

The change in the net carrying amount of goodwill during the three months ended September 30, 2023 was as follows:

The change in the net carrying amount of goodwill during the six months ended December 31, 2023 was as follows:

Goodwill at June 30, 2023

Acquisition of Visimid

Goodwill at September 30, 2023

The increase in goodwill during the three months ended September 30, 2023 was due to the acquisition of Visimid.

The Company is in the process of obtaining third-party valuations of certain intangible assets;

Goodwill at December 31, 2023

The increase in goodwill during the six months ended December 31, 2023 was due to the acquisition of Visimid.

The Company is in the process of finalizing third-party valuations of certain intangible assets;

thus, the provisional measurement of goodwill and intangible assets are subject to change.

2 unchanged sentences

Useful Lives (Years)

September 30,

December 31, 2023

June 30, 2023

Customer relationships

7 unchanged sentences

Fiscal year ending:

June 30, 2024 (remaining nine months)

June 30, 2024 (remaining six months)

June 30, 2025

2 unchanged sentences

After June 30, 2027

A summary of our total income tax expense and effective income tax rate for the three months ended September 30, 2023 and 2022 is as follows:

Three Months Ended

September 30,

A summary of our total income tax expense and effective income tax rate for the three and six months ended December 31, 2023 and 2022 is as follows:

Three Months Ended December 31,

Six Months Ended December 31,

Loss before income taxes

1 unchanged sentence

$ ( 639,061 )

$ ( 2,940,435 )

$ ( 1,917,627 )

Income tax provision

1 unchanged sentence

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

For the three months ended September 30, 2023 and 2022, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.

For the three and six months ended December 31, 2023 and 2022, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.

(“LPOIZ”), and paid or payable to LightPath, its parent company.

2 unchanged sentences

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

As of September 30, 2023 and June 30, 2023, our net deferred tax assets are related to the U.S.

As of December 31, 2023 and June 30, 2023, our net deferred tax assets are related to the U.S.

jurisdiction and we have provided for a valuation allowance to reduce the net deferred tax assets to the amount we estimate is more-likely-than-not to be realized.

Our net deferred tax assets as of September 30, 2023 and June 30, 2023 consist primarily of federal and state tax credits with indefinite carryover periods.

Our net deferred tax assets as of December 31, 2023 and June 30, 2023 consist primarily of federal and state tax credits with indefinite carryover periods.

Federal and State Income Taxes

4 unchanged sentences

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

As of September 30, 2023, LPOI and LPOIZ were subject to statutory income tax rates of 25 % and 15 %, respectively.

The net deferred tax liabilities included in these unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and June 30, 2023 are related to LPOIZ, and primarily consist of timing differences related to depreciation.

As of December 31, 2023, LPOI and LPOIZ were subject to statutory income tax rates of 25 % and 15 %, respectively.

The net deferred tax liabilities included in these unaudited Condensed Consolidated Balance Sheets as of December 31, 2023 and June 30, 2023 are related to LPOIZ, and primarily consist of timing differences related to depreciation.

The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S.

2 unchanged sentences

The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate.

Accrued and unpaid withholding taxes were approximately $ 40,000 as of both September 30, 2023 and June 30, 2023.

Accrued and unpaid withholding taxes were approximately $ 40,000 as of both December 31, 2023 and June 30, 2023.

Other than these withholding taxes, these intercompany dividends have no impact on the unaudited condensed consolidated financial statements.

16 unchanged sentences

At our 2022 Annual Stockholders Meeting, our stockholders authorized an additional 2,100,000 shares of our Class A common stock for issuance pursuant to awards granted thereunder.

As of September 30, 2023, 1,625,538 shares of Class A common stock were authorized and available for issuance pursuant to awards granted under the SICP.

As of December 31, 2023, 1,488,881 shares of Class A common stock were authorized and available for issuance pursuant to awards granted under the SICP.

The Company’s executive officers are eligible to earn incentive compensation consisting of equity-based awards, as well as cash bonuses, based on the achievement of certain individual and/or Company performance goals set by the Compensation Committee.

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

The following table shows total stock-based compensation expense for the three months ended September 30, 2023 and 2022, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):

Three Months Ended September 30,

The following table shows total stock-based compensation expense for the three and six months ended December 31, 2023 and 2022, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss):

Three Months Ended December 31,

Six Months Ended December 31,

Stock options

2 unchanged sentences

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

A discount of approximately $ 2,000 for each of the three months ended September 30, 2023 and 2022, respectively, is included in SG&A expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), which represents the value of the 10 % discount given to the employees purchasing stock under the 2014 ESPP.

A discount of approximately $ 2,000 for each of the six months ended December 31, 2023 and 2022, respectively, is included in SG&A expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), which represents the value of the 10 % discount given to the employees purchasing stock under the 2014 ESPP.

Grant Date Fair Values and Underlying Assumptions;

3 unchanged sentences

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

The assumed forfeiture rates used in calculating the fair value of RSA and RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the three months September 30, 2023 and 2022.

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

1 unchanged sentence

Treasury interest rate for constant maturities.

No stock options were granted during either of the three-month periods ended September 30, 2023 or September 30, 2022.

No stock options were granted during either of the six-month periods ended December 31, 2023 or December 31, 2022.

Restricted Stock Awards

5 unchanged sentences

Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the three months ended September 30, 2023 is presented below:

A summary of the activity for share-based compensation awards in the six months ended December 31, 2023 is presented below:

Stock Options

3 unchanged sentences

Cancelled/Forfeited

September 30, 2023

December 31, 2023

Awards exercisable/

September 30, 2023

December 31, 2023

Awards unexercisable/

unvested as of

September 30, 2023

As of September 30, 2023, there was approximately $ 535,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options, RSAs and RSUs) granted.

December 31, 2023

As of December 31, 2023, there was approximately $ 483,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options, RSAs and RSUs) granted.

We expect to recognize the compensation cost as follows:

1 unchanged sentence

Stock Options

June 30, 2024 (remaining nine months)

June 30, 2024 (remaining six months)

June 30, 2025

June 30, 2026

June 30, 2027

Earnings (Loss) Per Share

2 unchanged sentences

The computations for basic and diluted earnings (loss) per share of Class A common stock are described in the following table:

Three Months Ended

September 30,

Three Months Ended December 31,

Six Months Ended December 31,

$ ( 1,713,663 )

$ ( 694,061 )

$ ( 3,056,039 )

$ ( 2,074,761 )

Weighted-average common shares outstanding:

6 unchanged sentences

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

Three Months Ended

September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Options to purchase common stock

6 unchanged sentences

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

We currently have obligations under seven finance lease agreements, entered into during fiscal years 2019, 2023 and 2024, with terms ranging from three to five years.

We currently have obligations under nine finance lease agreements, entered into during fiscal years 2019, 2023 and 2024, with terms ranging from three to five years.

The leases are for computer and manufacturing equipment.

22 unchanged sentences

The balances are being amortized over the corresponding lease terms.

In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $ 2.4 million in tenant improvement allowances.

In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord provided $ 2.4 million in tenant improvement allowances.

We are funding the balance of the tenant improvement costs, which we estimate will be approximately $ 3.7 million, pending final construction invoices.

The components of lease expense were as follows:

Three Months Ended September 30,

Three Months Ended December 31,

Six Months Ended December 31,

Operating lease cost

6 unchanged sentences

Classification

September 30, 2023

December 31, 2023

June 30, 2023

13 unchanged sentences

Total lease liabilities

Finance lease assets were recorded net of accumulated depreciation of approximately $ 92,000 and $ 72,000 as of September 30, 2023 and June 30, 2023, respectively.

Finance lease assets were recorded net of accumulated depreciation of approximately $ 106,000 and $ 72,000 as of December 31, 2023 and June 30, 2023, respectively.

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

Lease Term and Discount Rate

September 30,

December 31, 2023

Weighted Average Remaining Lease Term (in years)

5 unchanged sentences

Supplemental cash flow information:

Three Months Ended September 30,

Six Months Ended December 31,

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

2 unchanged sentences

Financing cash used for finance leases

Future maturities of lease liabilities were as follows as of September 30, 2023:

Future maturities of lease liabilities were as follows as of December 31, 2023:

Fiscal year ending:

1 unchanged sentence

Operating Leases

June 30, 2024 (remaining nine months)

June 30, 2024 (remaining six months)

June 30, 2025

7 unchanged sentences

Loans Payable

As of September 30, 2023 and June 30, 2023, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A.

As of December 31, 2023 and June 30, 2023, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A.

(“BankUnited”).

On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to a maximum amount of $ 2,000,000 (the “BankUnited Revolving Line”), (ii) a term loan in the amount of up to $ 5,813,500 (“BankUnited Term Loan”), and (iii) a non-revolving guidance line of credit up to a maximum amount of $ 10,000,000 (the “Guidance Line” and, together with the BankUnited Revolving Line and BankUnited Term Loan, the “BankUnited Loans”), which Guidance Line has since been terminated.

On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to a maximum amount of $ 2,000,000 (the “ Revolving Line”), (ii) a term loan in the amount of up to $ 5,813,500 (“BankUnited Term Loan”), and (iii) a non-revolving guidance line of credit up to a maximum amount of $ 10,000,000 (the “Guidance Line” and, together with the Revolving Line and BankUnited Term Loan, the “BankUnited Loans”), which the Revolving Line and Guidance Line have since been terminated.

Each of the BankUnited Loans is evidenced by a promissory note in favor of BankUnited (the “BankUnited Notes”).

33 unchanged sentences

(i) BankUnited agreed to release its security interest in the collateral securing the BankUnited Loans other than a cash collateral account maintained at BankUnited, initially in the amount of approximately $ 2,457,000 , with a portion of such cash collateral to be released on a quarterly basis equal to 110 % of the principal reductions effected during that quarter, and (ii) certain other requirements and restrictions of the Loan Agreement were removed, including, among others, financial covenants, restrictions on acquisitions, and limitations on other financing sources.

The cash collateral is reflected as Restricted Cash in the accompanying unaudited condensed consolidated balance sheets as of September 30, 2023 and June 30, 2023.

BankUnited Revolving Line

Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances to us under the Revolving Line up to a maximum aggregate principal amount outstanding not to exceed $ 2,000,000 , which proceeds could have been used for working capital and general corporate purposes.

The Revolving Line expired on February 26, 2022.

No amounts were outstanding under the BankUnited Revolving Line upon its expiration.

The cash collateral is reflected as Restricted Cash in the accompanying unaudited condensed consolidated balance sheets as of December 31, 2023 and June 30, 2023.

BankUnited Term Loan

Pursuant to the Amended Loan Agreement, BankUnited advanced the Company $ 5,813,500 to satisfy in full the amounts owed to Avidbank and to pay the fees and expenses incurred in connection with the closing of the BankUnited Loan.

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

The Term Loan is for a 5 -year term, but co-terminus with the 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 .

1 unchanged sentence

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

Pursuant to the Fourth Amendment, commencing on March 1, 2023, each facility bears interest at BankUnited’s then prime rate of interest, as adjusted from time to time (8.5% as of September 30, 2023).

Pursuant to the Fourth Amendment, commencing on March 1, 2023, each facility bears interest at BankUnited’s then prime rate of interest, as adjusted from time to time ( 8.5 % as of December 31, 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.

7 unchanged sentences

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.

Pursuant to the Fifth Amendment, the security interest in 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.

11 unchanged sentences

Pursuant to the Fifth Amendment, certain other requirements and restrictions of the Loan Agreement were removed, including, among others, financial covenants, restrictions on acquisitions, and limitations on other financing sources.

As of September 30, 2023, we were in compliance with all required covenants.

As of December 31, 2023, we were in compliance with all required covenants.

We may prepay any or all of the BankUnited Loans in whole or in part at any time, without penalty or premium, other than the exit fees, as discussed above.

3 unchanged sentences

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

Amortization of approximately $ 19,000 is included in interest expense for the three-month period ended September 30, 2022.

There was no amortization for the three-month period ended September 30, 2023, as all costs have been fully amortized in prior periods.

Amortization of approximately $ 19,000 and $ 37,100 is included in interest expense for the three and six months ended December 31, 2022, respectively.

There was no amortization for the three and six-month periods ended December 31, 2023, as all costs have been fully amortized in prior periods.

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

4 unchanged sentences

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.

Through December 31, 2023, ISP Latvia has received two advances under the 2023 Equipment Loan totaling 260,258 EUR (or USD $ 284,000 ), the proceeds of which were used to make installment payments to a vendor for equipment to be delivered at a future date.

The 2023 Equipment Loan will be payable over 48 months, with monthly installments beginning January 1, 2024.

The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% ( 6.98 % as of September 30, 2023).

The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% ( 6.98 % as of December 31, 2023).

In July 2023, the acquisition of Visimid included a promissory note of $ 150,000 in favor of The American National Bank of Texas (the “ANBTX Note”).

In conjunction with the acquisition, Visimid and LightPath agreed to collateralize the ANBTX Note with a certificate of deposit for the same amount.

The cash collateral is reflected as Restricted Cash in the accompanying unaudited Condensed Consolidated Balance Sheet as of September 30, 2023.

The cash collateral is reflected as Restricted Cash in the accompanying unaudited Condensed Consolidated Balance Sheet as of December 31, 2023.

The ANBTX Note bears interest at a fixed rate of 6.15 % and has a maturity date of April 14, 2024 .

Future maturities of loans payable are as follows:

BankUnited Term Loan

Bank United Term Loan

Equipment Loans

Fiscal year ending:

June 30, 2024 (remaining nine months)

June 30, 2024 (remaining six months)

June 30, 2025

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

dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $ 481,000 and $ 607,000 as of September 30, 2023 and June 30, 2023, respectively.

We also recognized net foreign currency transaction gains of $ 25,000 and $ 23,000 during the three months ended September 30, 2023 and 2022, respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash, cash equivalents and restricted cash totaled approximately $ 6.9 million at September 30, 2023.

dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $ 741,000 and $ 607,000 as of December 31, 2023 and June 30, 2023, respectively.

We also recognized net foreign currency transaction gains of $ 4,000 and losses of $ 29,000 during the three months ended December 31, 2023 and 2022, respectively.

During the six months ended December 31, 2023 and 2022, we recognized net foreign currency transaction gains of $ 29,000 and losses of $ 7,000 , respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

Our cash, cash equivalents and restricted cash totaled approximately $ 5.9 million at December 31, 2023.

Of this amount, greater than 25% was held by our foreign subsidiaries in China and Latvia.

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With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the respective subsidiary must equal at least 50 % of its registered capital before any funds can be repatriated through dividends.

As of September 30, 2023, LPOIZ had approximately $ 2.7 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2022, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2023.

As of December 31, 2023, LPOIZ had approximately $ 2.0 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2023, the end of the most recent statutory tax year, that remained undistributed as of December 31, 2023.

Revenues from and long-lived assets located in foreign countries are as follows:

Three Months Ended September 30,

Six Months Ended December 31,

United States

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Rest of world

September 30,

December 31, 2023

June 30, 2023

Long-lived assets:

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In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees.

We have incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings.

We incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings.

These expenses, which include legal, consulting and other transitional management fees, totaled $ 718,000 and $ 400,000 during the years ended June 30, 2021 and 2022, respectively.

During the three months ended September 30, 2023 and 2022, respectively, expenses incurred related to the legal proceedings were immaterial.

During the three and six months ended December 31, 2023 and 2022, respectively, expenses incurred related to the legal proceedings were immaterial.

In December 2023, we recovered approximately $ 190,000 in funds that had been recovered by the Chinese authorities, which is included in Other income in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 2023.

We expect to incur minimal additional legal fees and consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies.

Knowing that employee transitions in international subsidiaries can lead to lengthy legal proceedings that can interrupt the subsidiary’s ability to operate, compounded by the fact that our officers could not travel to China to oversee the transitions because of the travel restrictions imposed by COVID-19, we chose to enter into severance agreements with certain of the employees at the time of termination.

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We have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition.

We expect to incur minimal additional legal fees and consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies.

Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the fiscal year ended June 30, 2022.

Although we took steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the fiscal year ended June 30, 2022.

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

Our business, results of operations financial condition, cash flows, and the stock price of our Class A common stock can be adversely affected by pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic and its lasting impacts.

To date, we have not experienced any significant direct financial impact of COVID-19 to our business.

However, the COVID-19 pandemic continues to impact economic conditions, particularly in China, which has impacted the short-term and long-term demand from customers and, therefore, has negatively impacted our results of operations, cash flows, and financial position in that region.

Additionally, some areas have had travel restrictions in place, including China until recently.

Even though China’s travel restrictions are no longer in place, we are required to re-apply for travel visas and approvals which will continue to affect our ability to travel in China.

As a result, some aspects of our operations that depend on travel, such as recruitment of senior positions, and travel of service providers to maintain our production equipment have been, and will continue to be, adversely impacted.

Management is actively monitoring this situation and taking steps to mitigate the impact on our financial condition, liquidity, and results of operations globally.

However, we are not able to precisely estimate the effects of the continuing COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal 2024 or beyond.

Potential Impact of Economic Conditions in China

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While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline.

Deteriorating economic conditions in China generally and as a remnant of China’s zero-COVID strategy, have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall.

Deteriorating economic conditions in China generally have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall.

A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a material adverse effect on our business and results of operations in future quarters.

Impact of Russian-Ukraine Conflict

Impact of Recent Wars

In February 2022, Russian military forces invaded Ukraine.

This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers.

Given the dynamic nature of this situation, we cannot reasonably estimate the impact of the Russian-Ukraine conflict on our financial condition, results of operations or cash flows into the foreseeable future.

This war has led to sanctions on Russia, which have had some impacts, though temporary, on our supply chain of raw materials.

Separately, in October 2023 Israel has declared war on Hamas.

Initially, this resulted in a temporary increase in our sales, as Israel works to replace electro-optical systems that in some cases use our materials.

However, it is possible that at some point this war will also have a negative impact on our business as a result of the economic impact in Israel.

In addition to the significant defense related market in Israel, we also serve many commercial related applications and work with commercial companies in Israel, and the business of those customers may be negatively impacted by the war over time.

Given the dynamic nature of this situation, we cannot reasonably estimate the impact of either the Russian-Ukraine conflict or the Israel-Hamas war on our financial condition, results of operations or cash flows into the foreseeable future.

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

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

What changed 10-Q

Item 1. Financial Statements