What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2024-02-08 · 157 added, 140 removed, 551 unchanged (35% of the section changed)

37 unchanged sentences

Class A, $ 0.01 par value, voting;

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

94,500,000 and 44,500,000 shares authorized;

38,126,249 and 34,344,739 shares issued and outstanding

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of sales

3 unchanged sentences

Amortization of intangibles

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Total operating expenses

11 unchanged sentences

( 5,532,171 )

( 3,015,615 )

Income tax provision

8 unchanged sentences

$ ( 5,631,164 )

$ ( 3,196,128 )

Loss per common share (basic)

30 unchanged sentences

$ ( 210,892,268 )

Issuance of common stock for:

Employee Stock Purchase Plan

Exercise of Stock Options, RSUs & RSAs, net

Issuance of common stock for acquisition of Visimid

Issuance of common stock under public equity placement

Stock-based compensation on stock options, RSUs & RSAs

Foreign currency translation adjustment

( 2,597,534 )

Balances at March 31, 2024

$ 244,188,153

$ ( 213,489,802 )

Balances at June 30, 2022

18 unchanged sentences

$ ( 205,864,119 )

Issuance of common stock for:

Employee Stock Purchase Plan

Exercise of Stock Options, RSUs & RSAs, net

Issuance of common stock under public equity placement

Stock-based compensation on stock options, RSAs & RSUs

Foreign currency translation adjustment

( 1,163,270 )

Balances at March 31, 2023

$ 242,529,230

$ ( 207,027,389 )

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended December 31,

Nine Months Ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Interest from amortization of debt costs

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

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

Provision for doubtful accounts receivable

Provision for credit losses

Change in operating lease assets and liabilities

4 unchanged sentences

Other current assets

( 1,317,347 )

Prepaid expenses and deposits

Accounts payable and accrued liabilities

( 1,255,961 )

Net cash provided by (used in) operating activities

2 unchanged sentences

( 1,892,660 )

Acquisition of Visimid Technologies, net of cash acquired

( 2,325,155 )

Proceeds from sale of equipment

Proceeds from sale-leaseback of equipment

Acquisition of Visimid Technologies, net of cash acquired

Net cash used in investing activities

( 2,375,091 )

( 2,259,655 )

Cash flows from financing activities:

Proceeds from sale of common stock from Employee Stock Purchase Plan

Proceeds from issuance of common stock under public equity placement

Borrowings on loans payable

Payments on loans payable

( 2,262,798 )

( 1,648,899 )

Repayment of finance lease obligations

Net cash used in financing activities

Net cash (used in) provided by financing activities

( 2,069,670 )

Effect of exchange rate on cash and cash equivalents

1 unchanged sentence

( 3,985,538 )

( 1,714,039 )

Cash, cash equivalents and restricted cash, beginning of period

20 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 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.

There have been no material changes to our significant accounting policies during the nine months ended March 31, 2024, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

Use of Estimates

12 unchanged sentences

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 January 1, 2024 installment, 267,176 shares were issued.

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.

Of this amount, $ 600,000 was paid at closing, cash installments of $ 150,000 and $ 125,000 were paid in October 2023 and January 2024, respectively, 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 March 31, 2024.

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

6 unchanged sentences

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.

During the three months ended 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 nine months ended March 31, 2024, the Company incurred approximately $ 98,000 , in acquisition costs, of which less than $ 1,000 was incurred during the three months ended March 31, 2024.

These costs are included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) 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.

14 unchanged sentences

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.

Deferred revenue was $ 818,000 and $ 314,000 as of March 31, 2024 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.

Visimid has one longer-term order with a defense 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 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,

Revenue by product group for the three and nine months ended March 31, 2024 and 2023 was as follows, with fiscal year 2023 amounts reclassified from those previously reported to conform to current classification:

Three Months Ended March 31,

Nine Months Ended March 31,

Infrared components

4 unchanged sentences

The components of inventories include the following:

March 31, 2024

June 30, 2023

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 December 31, 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 March 31, 2024 and June 30, 2023, respectively.

Property and Equipment

1 unchanged sentence

Estimated Lives (Years)

December 31, 2023

March 31, 2024

June 30, 2023

10 unchanged sentences

Goodwill and Intangible Assets

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

The change in the net carrying amount of goodwill during the nine months ended March 31, 2024 was as follows:

Goodwill at June 30, 2023

Acquisition of Visimid

Goodwill at December 31, 2023

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

Goodwill at March 31, 2024

The increase in goodwill during the nine months ended March 31, 2024 was due to the acquisition of Visimid.

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

3 unchanged sentences

Useful Lives (Years)

December 31, 2023

March 31, 2024

June 30, 2023

Customer relationships

$ 3,712,300 $ 3,590,000

Trade secrets

4,197,304 3,272,000

4,256,418 3,814,000

Total intangible assets

Less accumulated amortization

12,629,547 10,676,000

Less accumulated amortization

( 8,544,406 ) ( 7,343,285 )

Total intangible assets, net

$ 4,085,141 $ 3,332,715

Future amortization of identifiable intangibles is as follows:

Fiscal year ending:

June 30, 2024 (remaining six months)

June 30, 2024 (remaining three 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 and six months ended December 31, 2023 and 2022 is as follows:

Three Months Ended December 31,

Six Months Ended December 31,

A summary of our total income tax expense and effective income tax rate for the three and nine months ended March 31, 2024 and 2023 is as follows:

Three Months Ended

Nine Months Ended

Loss before income taxes

6 unchanged sentences

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 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.

For the three and nine months ended March 31, 2024 and 2023, 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 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 December 31, 2023 and June 30, 2023 consist primarily of federal and state tax credits with indefinite carryover periods.

As of March 31, 2024 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 deferred tax assets to the net amount we estimate is more-likely-than-not to be realized.

Our net deferred tax assets as of March 31, 2024 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 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.

As of March 31, 2024, 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 March 31, 2024 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 December 31, 2023 and June 30, 2023.

Accrued and unpaid withholding taxes were approximately $ 40,000 as of both March 31, 2024 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 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.

As of March 31, 2024, 831,943 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 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,

The following table shows total stock-based compensation expense for the three and nine months ended March 31, 2024 and 2023, 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 March 31,

Nine Months Ended March 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 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.

A discount of approximately $ 4,000 for each of the nine months ended March 31, 2024 and 2023, 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 six months December 31, 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 six-month periods ended December 31, 2023 or December 31, 2022.

No stock options were granted during the nine months ended March 31, 2023.

For stock options granted in the nine-month period ended March 31, 2024, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

Nine Months Ended

March 31, 2024

Weighted-average expected volatility

Dividend yields

Weighted-average risk-free interest rate

Weighted-average expected term, in years

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 six months ended December 31, 2023 is presented below:

A summary of the activity for share-based compensation awards in the nine months ended March 31, 2024 is presented below:

Stock Options

3 unchanged sentences

Cancelled/Forfeited

December 31, 2023

March 31, 2024

Awards exercisable/

December 31, 2023

March 31, 2024

Awards unexercisable/

unvested as of

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.

March 31, 2024

As of March 31, 2024, there was approximately $ 1.1 million 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 six months)

June 30, 2024 (remaining three months)

June 30, 2025

5 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 December 31,

Six Months Ended December 31,

Three Months Ended

Nine Months Ended

$ ( 2,597,534 )

10 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 December 31,

Six Months Ended December 31,

Three Months Ended

Nine Months Ended

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 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.

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

The finance leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term.

10 unchanged sentences

Effective in January 2022, the terms of our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively .

As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

Currently, none of our leases include variable lease payments that are dependent on an index or rate.

We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our leases.

As most of our operating leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

Currently, none of our operating leases include variable lease payments that are dependent on an index or rate.

We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our operating leases.

These amounts are generally considered to be variable and are not included in the measurement of the ROU assets and the related lease liabilities.

7 unchanged sentences

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.

We funded the balance of the tenant improvement costs of approximately $ 3.7 million.

The components of lease expense were as follows:

Three Months Ended December 31,

Six Months Ended December 31,

Three Months Ended March 31,

Nine Months Ended March 31,

Operating lease cost

6 unchanged sentences

Classification

December 31, 2023

March 31, 2024

June 30, 2023

1 unchanged sentence

Operating lease assets

$ 7,164,556 $ 9,571,604

Finance lease assets

Property and equipment, net (1)

991,507 542,105

Total lease assets

$ 8,156,063 $ 10,113,709

Operating leases

Operating lease liabilities, current

$ 1,090,896 $ 969,890

Finance leases

Finance lease liabilities, current

172,904 103,646

Operating leases

Operating lease liabilities, less current portion

8,315,001 8,393,248

Finance leases

Finance lease liabilities, less current portion

573,130 341,201

Total lease liabilities

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.

$ 10,151,931 $ 9,807,985

Finance lease assets were recorded net of accumulated depreciation of approximately $ 72,000 as of both March 31, 2024 and June 30, 2023.

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

Lease Term and Discount Rate

December 31, 2023

March 31, 2024

Weighted Average Remaining Lease Term (in years)

5 unchanged sentences

Supplemental cash flow information:

Six Months Ended December 31,

Nine Months Ended March 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 December 31, 2023:

Future maturities of lease liabilities were as follows as of March 31, 2024:

Fiscal year ending:

1 unchanged sentence

Operating Leases

June 30, 2024 (remaining six months)

June 30, 2024 (remaining three months)

June 30, 2025

7 unchanged sentences

Loans Payable

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.

As of March 31, 2024, loans payable consisted of two equipment loans and the ANBTX Note (as defined below).

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

(“BankUnited”).

This loan was paid in full in February 2024 and is no longer outstanding as of March 31, 2024.

Equipment Loans

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 was subordinate to the BankUnited Loans (as defined below), and collateralized by certain equipment.

The initial advance under the 2020 Equipment Loan was 225,000 EUR (or USD $ 275,000 ), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date.

An additional 225,000 EUR (or USD $ 267,000 ) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months.

The 2020 Equipment Loan bears interest at a fixed rate of 3.3 %.

In May 2023, ISP Latvia entered into an equipment loan with a third party (the “2023 Equipment Loan”).

The 2023 Equipment Loan is collateralized by certain equipment.

Through March 31, 2024, 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% ( 6.69 % as of March 31, 2024).

In connection with the acquisition of Visimid in July 2023, we executed a promissory note of $ 150,000 in favor of The American National Bank of Texas (the “ANBTX Note”) which bore interest at a fixed rate of 6.15 % and was secured by 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 March 31, 2024.

The ANBTX Note was repaid in full on May 2, 2024 .

BankUnited Term Loan

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.

34 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 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 Revolving Line should the Revolving Line not be renewed beyond February 26, 2022.

Pursuant to the Fourth Amendment, the maturity date of the Term Loan is December 31, 2024 .

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

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

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

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

Pursuant to the Fourth Amendment, commencing on March 1, 2023 and continuing on the first day of each month thereafter until December 31, 2023, monthly payments were reduced to $ 75,000 , and commencing on January 1, 2024 and continuing on the first day of each month thereafter until the maturity date, monthly payments will increase to $ 100,000 , with each such payment applied first to interest, costs and expenses and then to principal.

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

Security and Guarantees

Our obligations under the Amended Loan Agreement were previously collateralized by a first priority security interest (subject to permitted liens) in all of our assets and the assets of the Company’s U.S.

subsidiaries, GelTech, Inc.

(“GelTech”), and ISP, pursuant to a Security Agreement granted by GelTech, ISP, and the Company in favor of BankUnited.

The Company’s equity interests in, and the assets of, its foreign subsidiaries were excluded from the security interest.

Pursuant to the Fifth Amendment, the security interest in certain of the collateral then securing the BankUnited Loans terminated and was replaced by a security interest in a cash collateral account maintained at BankUnited, initially in the amount of approximately $ 2,457,000 , with a portion of such cash collateral to be released on a quarterly basis equal to 110% of the principal reductions effected during that quarter.

In addition, all of the Company’s subsidiaries have guaranteed the Company’s obligations under the Amended Loan Agreement and related documents, pursuant to Guaranty Agreements executed by the Company and its subsidiaries in favor of BankUnited.

General Terms

The Amended Loan Agreement initially contained customary covenants, including, but not limited to:

(i) limitations on the disposition of property;

(ii) limitations on changing the Company’s business or permitting a change in control;

(iii) limitations on additional indebtedness or encumbrances;

(iv) restrictions on distributions;

and (v) limitations on certain investments.

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

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

The Second Amendment to the Amended Loan Agreement granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) through June 30, 2022.

Based on the waivers, we were no longer in default of the Amended Loan Agreement.

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

As of 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.

Late payments are subject to a late fee equal to five percent (5%) of the unpaid amount.

Amounts outstanding during an event of default accrue interest at a rate of five percent (5%) above BankUnited’s then prime rate of interest, as adjusted from time to time, applicable immediately prior to the occurrence of the event of default.

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

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

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 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.

An additional 225,000 EUR (or USD $ 267,000 ) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months.

The 2020 Equipment Loan bears interest at a fixed rate of 3.3 %.

In May 2023, ISP Latvia entered into an equipment loan with a third party (the “2023 Equipment Loan”).

The 2023 Equipment Loan is collateralized by certain equipment.

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 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 December 31, 2023.

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

Amortization of approximately $ 19,000 and $ 55,700 is included in interest expense for the three and nine months ended March 31, 2023, respectively.

There was no amortization for the three and nine-month periods ended March 31, 2024, as all costs were fully amortized in prior periods.

Future maturities of loans payable are as follows:

Bank United Term Loan

Equipment Loans

Fiscal year ending:

June 30, 2024 (remaining six months)

June 30, 2024 (remaining three months)

June 30, 2025

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Less current portion

( 2,138,775 )

Non-current portion

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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 $ 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.

dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $ 629,000 and $ 607,000 as of March 31, 2024 and June 30, 2023, respectively.

We also recognized net foreign currency transaction gains of $ 12,000 and losses of $ 79,000 during the three months ended March 31, 2024 and 2023, respectively.

During the nine months ended March 31, 2024 and 2023, we recognized net foreign currency transaction gains of $ 41,000 and losses of $ 85,000 , 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 $ 3.2 million at March 31, 2024.

Of this amount, greater than 50 % 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 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.

As of March 31, 2024, 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 March 31, 2024.

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

Six Months Ended December 31,

Nine Months Ended March 31,

United States

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Rest of world

December 31, 2023

March 31, 2024

June 30, 2023

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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 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.

During the three and nine months ended March 31, 2024 and 2023, respectively, expenses incurred related to the legal proceedings were immaterial.

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.

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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.

Separately, Israel declared war on Hamas in October 2023.

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

However, it is possible that this war will also have a negative impact on our business at some point 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.

We have commenced discussions with prospective lenders regarding the refinancing of our debt obligations prior to the maturity date of the BankUnited Term Loan on December 31, 2024.

There can be no assurance that we will be successful in such refinancing or that such refinancing will be available under reasonable commercial terms.

If we are unable to refinance the credit facility with other commercial lenders prior to maturity, it may need to raise additional equity financing, source financing through non-commercial lenders or reduce operating expenses and capital expenditures in order to repay the credit facility and all charges related thereto upon its maturity on December 31, 2024.

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 our debt.

On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $ 75.8 million from time to time.

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The shelf registration statement was declared effective by the SEC on March 1, 2022.

We have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.

As of March 31, 2024, we issued 68,041 shares of our Class A common stock pursuant to the at-the-market equity program.

On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of 9,090,910 shares of the Company’s Class A common stock, par value $ 0.01 per share for a purchase price of $ 1.10 per share and filed a prospectus supplement with the SEC related thereto.

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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