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What changed in LIGHTPATH TECHNOLOGIES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LIGHTPATH TECHNOLOGIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+302 added−308 removedSource: 10-K (2023-09-14) vs 10-K (2022-09-15)

Top changes in LIGHTPATH TECHNOLOGIES INC's 2023 10-K

302 paragraphs added · 308 removed · 218 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

66 edited+28 added−23 removed51 unchanged
Biggest changeIn our case, the change has created opportunities to now serve OEM customers for which photonics is only one of several technologies they embed into their product, and that have or are transitioning from a distributed supply chain that would provide all components for the bill of materials (“BOM”) to a highly diversified and fragmented global customer base in which the optical parts of their system are only a part of multiple technologies integrated together.
Biggest changeAs photonics technology continues to develop, leading to broader adaptation and application across more industries, and with customers now possessing expertise in different technologies, customers’ supply chain needs have evolved. In our case, the change has created opportunities to now serve OEM customers for which photonics is only one of several technologies they embed into their products.
Collectively, our operations lacked synergies, maintained a high cost structure, and lacked a defined path for capitalizing on the industry’s evolution and growth opportunities. In March of 2020, our Board of Directors (our “Board”) recruited Mr.
Collectively, our operations lacked synergies, maintained a high cost structure, and lacked a defined path for capitalizing on the industry’s evolution and growth opportunities. In March 2020, our Board of Directors (our “Board”) recruited Mr.
We have taken a more proactive approach to our direct selling efforts to increase our customer engagement, especially within Europe, where we recently transitioned away from working exclusively through a distributor. We have expanded our standard product offerings with the top two catalog companies in the world for optics and photonics which increases our exposure to new revenue opportunities.
We have taken a more proactive approach to our direct selling efforts to increase our customer engagement, especially within Europe, where we recently transitioned away from working exclusively through a distributor. We have expanded our standard product offerings with the top two catalog companies for optics and photonics in the world which increases our exposure to new revenue opportunities.
During fiscal year 2021, we began adding infrared coating capabilities at the Riga Facility, which was completed the second half of fiscal year 2022. The quality control department contains numerous inspection stations with various equipment to perform optical testing of finished optics. 11 Table of Contents The Orlando, Zhenjiang, and Riga Facilities are ISO 9001:2015 certified.
During fiscal year 2021, we began adding infrared coating capabilities at the Riga Facility, which was completed the second half of fiscal year 2022. The quality control department contains numerous inspection stations with various equipment to perform optical testing of finished optics. The Orlando, Zhenjiang, and Riga Facilities are ISO 9001:2015 certified.
Our market messaging will look to inspire interest and promote engagement. Sales Model & Structure. To align the organization to better serve our new solution strategy and for accountability of our key corporate objectives, we have made organizational changes designed to ensure customer satisfaction and operational efficiency.
Our market messaging will look to inspire interest and promote engagement. 9 Table of Contents Sales Model & Structure. To align the organization to better serve our new solution strategy and for accountability of our key corporate objectives, we have made organizational changes designed to ensure customer satisfaction and operational efficiency.
Aspheric lens system manufacturers include Panasonic Corporation, Alps Electric Co., Ltd., Hoya Corporation, as well as other competitors from China and Taiwan, such as E-Pin Optical Industry Co., Ltd., and Kinik Company. Our aspheric lenses compete with lens systems comprised of multiple conventional lenses. Machined aspheric lenses compete with our molded glass aspheric lenses.
Aspheric lens system manufacturers include Panasonic Corporation, Alps Electric Co., Ltd., Hoya Corporation, as well as other competitors from China and Taiwan, such as E-Pin Optical Industry Co., Ltd., and Kinik Company. 10 Table of Contents Our aspheric lenses compete with lens systems comprised of multiple conventional lenses. Machined aspheric lenses compete with our molded glass aspheric lenses.
With the accelerated rate of adoption and highly diversified industries and applications utilizing an expanding array of photonics technologies, comes a change in both the needs of the customers and the supply chain, to support those needs. In the past, we and other component suppliers mostly served customers that specialized in photonics.
The accelerated rate of adoption and highly diversified industries and applications utilizing an expanding array of photonics technologies brought a change in both the needs of the customers and the supply chain, to support those needs. In the past, we and other component suppliers mostly served customers that specialized in photonics.
Product verticals range from consumer (e.g., AR/VR, cameras, cell phones, gaming, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications (e.g., fiber and laser based).
Product verticals range from consumer (e.g., AR/VR headset, cameras, cell phones, gaming devices, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications (e.g., fiber, 5G and satellite laser based).
To support those goals, we began a few different organization-wide efforts, including standardizing and optimizing our processes and systems, taking steps to realigning our organizational structure, such as breaking down our single combined engineering group into the separate engineering functions that are a part of and better support operations, and creating a new product development group that focuses on developing capabilities and technologies that allow us to design and deliver better solutions.
To support those goals, we are pursuing several organization-wide efforts, including standardizing and optimizing our processes and systems, taking steps to realigning our organizational structure, such as breaking down our single combined engineering group into the separate engineering functions that are a part of and better support operations, and creating a new product development group that focuses on developing capabilities and technologies that allow us to design and deliver better solutions.
Our low-cost structure allows us to compete with these lenses based on higher performance and durability from our glass lenses at only a small premium in price. We do not compete in the market for plastic lenses unless a glass substitution presents a viable alternative. 10 Table of Contents Infrared Product Group.
Our low-cost structure allows us to compete with these lenses based on higher performance and durability from our glass lenses at only a small premium in price. We do not compete in the market for plastic lenses unless a glass substitution presents a viable alternative. Infrared Product Group.
A commonality among these industries is the use of photonics as an enabling technology in their products. 4 Table of Contents Over the last ten years we have witnessed a pivotal shift in the adoption of photonics in new applications.
A commonality among these industries is the use of photonics as an enabling technology in their products. Over the last ten years we have witnessed a pivotal shift in the adoption of photonics in new applications.
Given the fast pace of advancements in photonics technologies, achieving a sustainable advantage will also depend on having unique capabilities and technologies that allow our team to design and deliver the best tailored solutions.
Given the fast pace of advancements in photonics technologies, achieving a sustainable advantage will also depend on having unique capabilities and technologies that allow our team to design and deliver the tailored solutions demanded by customers.
While the global market for component supply is fragmented and highly competitive, we maintain advantages through our unique technologies that often build on our leadership in precision molded optics, as well as our vertical integration in infrared optics, from raw materials through assemblies. PMO Product Group.
While the global market for component supply is fragmented and highly competitive, we maintain advantages through our unique technologies that often build on our leadership in precision molded optics, as well as our vertical integration in infrared optics, from raw materials through assemblies and engineered solutions.
As the industry has evolved and sensory, visualization and imaging capabilities have become differentiators, if not a necessity for an expanding array of products in a myriad of industries, the specialized requirements of customers are no longer being adequately addressed.
As the industry has evolved and sensory, visualization and imaging capabilities have become differentiators among suppliers and a necessity for delivery of an expanding array of products in a myriad of industries where the specialized requirements of customers are no longer being adequately addressed.
We developed this glass and melt it internally to produce our Black Diamond glass, which has been trademarked, and is marketed as BD6. Historically, the majority of our thermal imaging products have been germanium-based, which is subject to market pricing and availability.
We also have the ability to manufacture chalcogenide glass from which we produce infrared lenses. We developed this glass and melt it internally to produce our Black Diamond glass, which has been trademarked, and is marketed as BD6. Historically, the majority of our thermal imaging products have been germanium-based, which is subject to market pricing and availability.
Historically, precision molding of lenses is the key technology we have built upon. Precision molding of optics is a unique technology that is well suited for both high volume production of optical components, as well as production of optics with unique shapes, which otherwise would require a very lengthy and complex process to individually polish each lens to shape.
Precision molding of optics is a unique technology that is well suited for both high volume production of optical components, as well as production of optics with unique shapes, which otherwise would require a very lengthy and complex process to individually polish each lens to shape.
By having a small, focused new product development group, we are able to develop unique technologies that allow us to design solutions that we believe are better than what is otherwise available.
By having a small, focused new product development group, we are able to develop unique technologies that allow us to design solutions that we believe are better than what is currently offered by other suppliers.
Our PMO product group consists of visible precision molded optics with varying applications. Our infrared product group is comprised of infrared optics, both molded and diamond-turned, and thermal imaging assemblies. This product group also includes both conventional and CNC ground and polished lenses.
Our infrared product group is comprised of infrared optics, both molded and diamond-turned, and thermal imaging assemblies. This product group also includes both conventional and CNC ground and polished lenses.
During fiscal year 2021, we began adding infrared coating capabilities in the Riga Facility as well. We are routinely adding additional production equipment at our Orlando, Zhenjiang and Riga Facilities.
During fiscal year 2021, we began adding infrared coating capabilities in the Riga Facility as well. We are routinely adding additional production equipment at our Orlando, Zhenjiang and Riga Facilities. In fiscal year 2021, we added additional space in our Riga Facility, and also executed a lease agreement for additional space at our Orlando Facility.
The large equipment manufacturers (“ OEMs”) focused on component companies as their supply chain for optical parts and minor fabrication and assemblies. OEMs typically produced their own designs and relied on the supply chain to fulfill their needs without any strategic product planning or collaboration.
The large OEMs focused on component companies as a significant supply source for optical parts and minor fabrication and assemblies. OEMs typically produced their own designs and relied on their suppliers to fulfill their needs without any strategic product planning, investment or collaboration.
In addition, we continue to enhance our website (www.lightpath.com), which is our main communication vehicle for broader promotion of our company, our value-add capabilities, our growing chalcogenide material portfolio, and similarly have optimized our social media assets.
In addition, we continue to enhance our website (www.lightpath.com), which is our main communication vehicle for broader promotion of our company, our value-add capabilities, our growing chalcogenide material portfolio, and similarly have optimized our social media assets. We make use of digital and print media plus participate in many key industry associations and global trade shows. Trade Shows.
By providing the bridge into the optical solution world, we are able to partner with our customers on a long-term basis, create value for our customers, and capture that value through the long-term supply relationships we seek to develop. Organizational Alignment Along with the development of a new strategic direction, we are focused on the execution of such strategic plan.
By providing the bridge into the optical solution world, we are able to partner with our customers on a long-term basis, create value for our customers, and capture that value through the long-term supply relationships we seek to develop.
We believe we can develop these partnerships by working closely with the customer throughout their design process, designing an optical solution that is tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product.
We have been developing these partnerships by working closely with our customers throughout their design process, designing optical solutions that are tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product.
In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with many component manufacturers into a solution-focused industry with the potential for partnerships for solution development and production. We believe such partnerships can start with us as the supplier.
In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with a component oriented supply chain, into a solution-focused industry with the potential for partnerships for solution development and production.
BD6 offers a lower-cost alternative to germanium, which we expect will benefit the cost structure of some of our current infrared products and allow us to expand our product offerings in response to the markets’ increasing requirement for low-cost infrared optics applications. 8 Table of Contents Overall, we anticipate continued growth for our infrared optics, particularly as BD6 continues to be adopted into new applications and new designs.
BD6 offers a lower-cost alternative to germanium, which we expect will benefit the cost structure of some of our current infrared products and allow us to expand our product offerings in response to the markets’ increasing requirement for low-cost infrared optics applications.
In many cases the benefits of patent protection is offset by the requirement to disclose in detail the processes, and so we intend to apply for a patent only in the case when we believe the patent is enforceable and does not compromise our trade secrets and intellectual properties developed over three decades. 7 Table of Contents We incurred expenditures for new product development during fiscal years 2022 and 2021 of approximately $2.1 million and $2.2 million, respectively.
In many cases the benefits of patent protection is offset by the requirement to disclose in detail the processes, and so we intend to apply for a patent only the case when we believe the patent is enforceable and does not compromise our trade secrets and intellectual properties developed over three decades.
LPOIZ’s manufacturing facility (the “Zhenjiang Facility”) serves as our primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies.
(“LPOIZ”), a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s manufacturing facility (the “Zhenjiang Facility”) serves as our primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies.
This coating is currently available only at a small number of vendors, and is an example of a capability that we believe gives us a competitive advantage by allowing us to design better optical solutions. · Assembly and testing. In recent years, we have invested significantly in capabilities for sub-system level assemblies and testing in two of our facilities.
This coating is currently available only at a small number of vendors, and is an example of a capability that we believe gives us a competitive advantage by allowing us to design better optical solutions. · Optical assembly and testing.
We refer to this ecosystem as “optical engineered solutions,” and believe we are positioned to serve as a single source, global optical solutions provider with leading engineering and manufacturing capabilities.
We refer to this ecosystem as “optical engineered solutions,” and believe we are positioned to serve as a single source, global provider of optical solutions with leading engineering and manufacturing capabilities. This has led to our development of a new strategy and organizational alignment which is further discussed below.
Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems.
Throughout the process, we focused on developing a strategy that creates a unique and long-lasting value to our customers, and utilizes our unique capabilities and differentiators, both existing capabilities and differentiators, as well as new capabilities we acquire and develop organically. 5 Table of Contents Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems.
We make use of digital and print media plus participate in many key industry associations and global trade shows. 9 Table of Contents Trade Shows. We display our standard products, promote new innovative offerings and meet with industry influencers at a number of trade shows each year throughout North America, Europe and Asia.
We display our standard products, promote new innovative offerings and meet with industry influencers at a number of trade shows each year throughout North America, Europe and Asia.
Our manufacturing is largely performed in our combined 62,000 square feet of production facilities in Orlando, Florida, in LPOIZ’s combined 55,000 square feet of production facilities in Zhenjiang, China, and in ISP Latvia’s 29,000 square feet of production facilities in Riga, Latvia. LPOI sales and support functions occupy a 1,900 square foot facility in Shanghai, China.
Our manufacturing is largely performed in our combined 58,500 square feet of production facilities in Orlando, Florida, in LPOIZ’s combined 55,000 square feet of production facilities in Zhenjiang, China, and in ISP Latvia’s 29,000 square feet of production facilities in Riga, Latvia.
Today, LightPath is a global company with major facilities in the United States, the People’s Republic of China and the Republic of Latvia. Our corporate headquarters is located in Orlando, Florida. Subsidiaries In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd (“LPOI”), a wholly-owned subsidiary, located in Jiading, People’s Republic of China.
Today, LightPath is a global company with major facilities in the United States, the People’s Republic of China and the Republic of Latvia. Our corporate headquarters is located in Orlando, Florida.
These trade shows provide us an opportunity to further expand our brand, network to enhance business relationships and gain valuable insight into technology trends in our target markets. Competition Engineered Solutions The market for non-captive optical engineered solutions is emerging.
These trade shows provide us an opportunity to further expand our brand, network to enhance business relationships and gain valuable insight into technology trends in our target markets. Competition The markets in which we compete in are generally highly competitive and highly fragmented.
Our PMO products compete with conventional lenses and optical components manufactured from companies such as Asia Optical Co., Inc., Anteryon BV, Rochester Precision Optics, and Sunny Optical Technology (Group) Company Limited.
We believe that one of our key differentiators is our unique technologies that allow us to design better solutions. Optical Components PMO Product Group. Our PMO products compete with conventional lenses and optical components manufactured from companies such as Asia Optical Co., Inc., Anteryon BV, Rochester Precision Optics, and Sunny Optical Technology (Group) Company Limited.
ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s manufacturing facility is located in Riga, Latvia (the “Riga Facility”). Industry We and our customers support a wide range of industries, including automotive, telecommunications, defense, medical, bio-technology, industrial, consumer goods and more.
ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s manufacturing facility is located in Riga, Latvia (the “Riga Facility”).
Such an approach builds on our unique, value-added technologies that we currently own, such as optical molding, fabrication, system design, and proprietary manufacturing technologies, along with other technologies that we may acquire or develop in the future, to create tailored solutions for our customers. 5 Table of Contents Our domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, freeing them from the need to develop subject matter expertise in optics.
Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with other technologies that we may acquire or develop in the future, to create tailored solutions for our customers.
So far in 2022, we participated in a few virtual shows plus several in person shows which included the SHOT Show in Las Vegas, the largest professional event for the sport shooting, hunting and outdoor industry in North America; SPIE Photonics West in San Francisco, where LightPath won a PRISM Award which honors the best new optics and photonics products on the market; SPIE DCS, AUVSI which promotes emerging technologies supporting autonomous vehicles, drones and robotics; and Laser World of Photonics in Munich.
So far in 2023, we have participated in the SHOT Show in Las Vegas, the largest professional event for the sport shooting, hunting and outdoor industry in North America; SPIE Photonics West in San Francisco; SPIE DCS, AUVSI Xponential which promotes emerging technologies supporting autonomous vehicles, drones and robotics; and Laser World of Photonics in both Munich, Germany and Shanghai, China.
In the longer term, we have identified capabilities and technologies that could be important differentiators, including, for example, optical detectors and active optical components such as lasers, motion systems, and more.
In the longer term, we have identified capabilities and technologies that could be important differentiators, including, for example, optical detectors and active optical components such as lasers, motion systems, and more. The aggregation of such unique technologies will allow us to differentiate our optical solutions, and provide customers with products that are tailored exactly to their needs.
We generally rely on trade secret protection for technology we develop, but do pursue patents for certain of such technology.
This innovation and leveraging our technologies is a pillar of our growth strategy and differentiation. We generally rely on trade secret protection for technology we develop, but do pursue patents for certain of such technology.
We have in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities.
Over the last couple of years we have worked to align our organization to this strategy, and leverage our in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities.
Our specialty product group is comprised of value-added products, such as optical subsystems, assemblies, collimators, and NRE products, consisting of those products we develop pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications.
Our specialty product group is comprised of other value-added products, such as mounted lenses, optical assemblies, collimators, and NRE products, which consist of those products we develop pursuant to product development agreements that we enter into with customers.
Optics and photonics require multidisciplinary skills, including physics, mechanical engineering, material sciences, electrical engineering, and chemistry, among others. This is part of what makes using photonics so complicated, and at the same time part of what we see as the opportunity.
This is part of what makes using photonics so complicated, and at the same time part of what we see as the opportunity.
We intend to monitor the capacity at our facilities, and will increase such space as needed. We believe our facilities and planned expansions are adequate to accommodate our needs over the next year. Production and Equipment.
We believe our facilities and planned expansions are adequate to accommodate our needs over the next year. 11 Table of Contents Production and Equipment.
Additionally, to design the best solution for a customer, we not only need to know what can be produced and how to design it, we also must have unique capabilities that differentiate our solutions and allow us to design and produce a better solution that is more profitable than what may otherwise be available.
Additionally, to design the best solution for a customer, we not only need to know what can be produced and how to design it, we also must have unique capabilities that differentiate our solutions and allow us to design and produce a better solution that is more profitable than what may otherwise be available. 6 Table of Contents Along those lines, we continue to focus on developing new, innovative capabilities and technologies in all of our engineering and manufacturing groups, including systems design and testing, optical fabrication of components, material production, optical coatings, and electro mechanical design and production including the following: · Materials .
The LPOI facility (the “Shanghai Facility”) is primarily used for sales and support functions. In December 2013, we formed LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China.
Subsidiaries In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd (“LPOI”), a wholly-owned subsidiary, located in Jiading, People’s Republic of China, which is primarily engaged in sales and support functions. In December 2013, we formed LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.
In some cases our product and technology development is supported through billing of engineering services, such as non-recurring engineering (“NRE”) fees. In other cases we receive external funding, such as our previously announced funding from Space Florida’s Space Foundation and Israel’s Ministry of Science. Our efforts are self-funded in all other cases.
In other cases we receive external funding, such as our previously announced funding from Space Florida’s Space Foundation and Israel’s Ministry of Science, and the U.S. DoD (via the Defense Logistics Agency). Our efforts are self-funded in all other cases.
Even more recently, we have added capabilities of active alignment, and extended testing including environmental testing, to support our growing business of optical assemblies and engineered solutions. We expect to continue to invest in this area as activity grows, particularly in volume manufacturing and testing of assemblies.
In recent years, we have invested significantly in capabilities for sub-system level lens assemblies and testing in two of our facilities. Even more recently, we have added capabilities of active alignment, and extended testing including environmental testing, to support our growing business of optical assemblies and engineered solutions.
Thin film coatings are designed to reduce losses and protect the optical material, which are a key part of any optical system. Through our recent investments, we have the ability to coat lenses in all of our facilities, providing efficient, high quality antireflective coatings, as well as reflective and protective coatings.
Through our recent investments, we have the ability to coat lenses in all of our facilities, providing efficient, high quality antireflective coatings, as well as reflective and protective coatings. Our coating facilities employ both physical vapor deposition techniques as well as chemical vapor deposition techniques.
Molding is the most consistent and economical way to produce aspheres and we have perfected this method to offer the most precise molded aspheric lenses available. Infrared Product Group. Our infrared product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials.
Our glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price. Molding is the most consistent and economical way to produce aspheres and we have perfected this method to offer the most precise molded aspheric lenses available. 8 Table of Contents Infrared Product Group.
In fiscal year 2021, we added additional space in our Riga Facility, and also executed a lease agreement for additional space at our Orlando Facility, which we expect to occupy in mid-fiscal year 2023. In addition to adding equipment or space at our manufacturing facilities, we add work shifts, as needed, to increase capacity and meet forecasted demand.
We completed the build out of our additional Orlando Facility space in August 2023. In addition to adding equipment or space at our manufacturing facilities, we add work shifts, as needed, to increase capacity and meet forecasted demand. We intend to monitor the capacity at our facilities, and will increase such space as needed.
Advances in chalcogenide materials have enabled compression molding for mid-wave (“MWIR”), and long-wave (“LWIR”), optics in a process similar to precision molded lenses. Our molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods.
Our molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods. Utilizing precision molded aspheric optics significantly reduces the number of lenses required for typical thermal imaging systems and the cost to manufacture these lenses.
Our coating facilities employ both physical vapor deposition techniques as well as chemical vapor deposition techniques. In addition to our library of dozens of standard coatings, our coating engineers often design coatings specific for an application, optimizing the performance of the system for a specific customer use.
In addition to our library of dozens of standard coatings, our coating engineers often design coatings specific for an application, optimizing the performance of the system for a specific customer use. One of our most known advanced coatings is Diamond Like Carbon, which provides materials such as chalcogenide glass significant environmental protection.
ISP’s capabilities increase our ability to meet complex optical challenges that demand more exotic optical substrate materials that are non-moldable, as well as larger size optics. We also have the ability to manufacture chalcogenide glass from which we produce infrared lenses.
This manufacturing technique allows us to offer larger lens sizes and the ability to use other optical materials that cannot be effectively molded. ISP’s capabilities increase our ability to meet complex optical challenges that demand more exotic optical substrate materials that are non-moldable, as well as larger size optics.
As part of our product development and research and development efforts, we have over 50 employees with engineering and related advanced degrees located in our facilities in the United States, China and Latvia. Our facilities in Orlando, Florida and Zhenjiang, China are located in or near industrial technology campuses with substantial access to optical industry constituencies, including a major university.
As part of our product development and research and development efforts, we have over 60 employees with engineering and related advanced degrees located in our facilities in the U.S., China and Latvia.
This enables us and our staff to remain on the cutting edge of industry design trends and to enter into collaborative engagements. Product Groups and Markets Overview Our business is organized into three product groups: PMOs, infrared products and specialty products. These product groups are supported by our major product capabilities: molded optics, thermal imaging optics, and custom designed optics.
Product Groups and Markets Overview Our revenues are categorized into three product groups: PMOs, infrared products and specialty products. These product groups are supported by our major product capabilities: molded optics, thermal imaging optics, and custom designed optics, and the related assemblies. Our PMO product group consists of visible precision molded optics with varying applications.
This supply chain was fragmented and consisted of a large number of small companies, many of which had particular specialties in the fabrication process.
This supply chain was fragmented and consisted of a large number of small companies, many of which had particular specialties in the fabrication process. Often times these types of activities are referred to as build-to-print, as the OEM customer would design the lens down to the final manufacturing prints and the vendor would focus on producing according to those prints.
New Product Development Consistent with our new strategic direction, our development efforts during fiscal years 2021 and 2022 also shifted to focus on developing products, technologies and capabilities that allow us to provide better solutions, using the most fit technology for each customer and with alignment to customer product lifecycle.
This includes designing the electronic hardware and software to specific form fit and function for the customer, assembling with LightPath lenses, and calibrating the entire camera core so it can ship ready for the customer to use. 7 Table of Contents New Product Development Consistent with our strategic plan, we have focused our development efforts in fiscal years 2022 and 2023 on products, technologies and capabilities that allow us to provide better solutions using the most fit technology for each customer and with alignment to customer product lifecycle.
Through ISP, our wholly-owned subsidiary, we also offer germanium, silicon or zinc selenide aspheres and spherical lenses, which are manufactured by diamond turning. This manufacturing technique allows us to offer larger lens sizes and the ability to use other optical materials that cannot be effectively molded.
Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required. Through ISP, our wholly-owned subsidiary, we also offer germanium, silicon or zinc selenide aspheres and spherical lenses, which are manufactured by diamond turning.
As discussed in more detail in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations , we terminated certain of our management employees at our Chinese subsidiaries, LPOIZ and LPOI, in late fiscal year 2021, and transitioned to new management personnel.
In addition to the organizational alignment initiatives we are implementing, we have also executed a leadership transition and operational enhancements at our Chinese subsidiaries as discussed in more detail in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations .
Our key differentiator is our unique technologies that allow us to design better solutions. Optical Components In our optical components business, the market for optical components generally is highly competitive and highly fragmented. We compete with manufacturers of conventional spherical lenses and optical components, providers of aspheric lenses and optical components, and producers of optical quality glass.
We compete with manufacturers of conventional spherical lenses and optical components, providers of aspheric lenses and optical components, and producers of optical quality glass.
These events adversely impacted domestic sales in China beginning in late fiscal year 2021 through fiscal year 2022. Technologies We believe that to be the preferred partner to fulfill the photonics needs of our customers, domain expertise in photonics is the key element.
Technologies We believe that to be the preferred partner to fulfill the photonics needs of our customers, domain expertise in photonics is the key element. Optics and photonics require multidisciplinary skills, including physics, mechanical engineering, material sciences, electrical engineering, and chemistry, among others.
Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine. Our glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price.
Visimid’s revenue is generally derived from engineering services and infrared camera cores and assemblies. PMO Product Group. Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine.
As companies such as LightPath begin transitioning their offering from components to engineered solutions, we compete on several fronts: · Engineered solutions companies.
Engineered Solutions The market for non-captive optical engineered solutions is emerging and competition will increase as companies such as LightPath begin transitioning their offerings from components to engineered solutions: · Engineered solutions companies.
These include CNC (computer numerical control) grinding and polishing of optical elements, traditional grinding and polishing of lenses, and diamond turning of infrared materials. · Materials . Materials play an important role in providing design flexibility and allow tradeoffs between optical performance, weight, and performance in varying conditions.
Materials play an important role in providing design flexibility and allow tradeoffs between optical performance, weight, and performance in varying conditions. Traditionally, infrared applications have only a small number of materials, all of which are crystal based, with Germanium being the most commonly used material.
First, we have taken steps to align the organization with the strategic plan. Such alignment has been ongoing in all levels of the organization, starting at the leadership level through the creation of a new position, Vice President of Operations, and hiring Peter Grief, an expert at building and scaling manufacturing operations, in April 2022 to fill such position.
Organizational Alignment Along with the development of a new strategic direction, we are focused on the execution of a complementary strategic plan. First, we have taken steps to align the organization at all levels with the strategic plan. Starting with a new leadership team that was recruited and put in place following Mr.
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With the wider adaptation of the technology, and with customers that now possess different expertise in different technologies, the needs are different, as is often the case with a mature supply chain.
Added
In July 2023, we acquired Liebert Consulting, LLC, dba Visimid Technologies (“Visimid”), 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 original equipment manufacturers (“OEMs”) for original new products.
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As a result, the expanding market of original equipment and end market manufacturers are increasingly requiring an ecosystem around them to support their needs for domain knowledge, design, assembly and supply of their optical components.
Added
Visimid’s core competency is developing and producing custom thermal and night vision cores. Visimid’s facility is located in Plano, Texas. 4 Table of Contents Industry We and our customers support a wide range of industries, including automotive, telecommunications, defense, medical, bio-technology, industrial, consumer goods and more.
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This has led to our development of a new strategy and organizational alignment as discussed below, which we have begun to implement in recent months with significant initial success, including a return to double digit annual revenue growth, multiple new product designs and key multinational customer contract wins.
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While in the past our typical customer viewed optics as their specialty and hence they designed all aspects of their systems and outsourced only the component fabrication, this is not the case with our newer customers.
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Throughout the process, we focused on developing a strategy that creates a unique and long-lasting value to our customers, and utilizes our unique capabilities and differentiators, both existing capabilities and differentiators, as well as new capabilities we acquire and develop organically.
Added
Many of our current and potential customers do not wish or do not have the capability to design and build the optical portion of their products in-house.
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We also hired Albert Miranda, who has strong experience in financial management and mergers and acquisitions in the optical industry, as our Chief Financial Officer in May 2022 , to replace our former Chief Financial Officer who retired.
Added
As such, the fragmented supply chain that existed in our industry in order to serve customers on the component level, is not relevant for customers that view optics as only a part of their system, and not a core capability or function. For these customers, LightPath is well positioned to become their solutions partner for their optics needs.
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We believe that these actions will enhance our focus on building a strong foundation that is aligned with our strategic plan and create an operation that will be ready to take on significant growth, both organic and inorganic. We also appointed S.
Added
By tapping into the domain knowledge and design, assembly and testing capabilities of solutions providers like LightPath, the customer can avoid making the large investment needed for them to develop those capabilities in-house.
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Eric Creviston, who has extensive experience with wireless and mobile technology and the semiconductor industry, as a new director to our Board.
Added
Our domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, freeing them from the need to develop subject matter expertise in optics.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+6 added−12 removed129 unchanged
Biggest changeThere can be no assurance that our current or new products will achieve market acceptance at the rate at which we expect, or at all, which could adversely affect our results of operations and financial condition. 17 Table of Contents We may need additional capital to sustain our operations in the future, and may need to seek further financing, which we may not be able to obtain on acceptable terms or at all, which could affect our ability to implement our business strategies.
Biggest changeWe may need additional capital to sustain our operations in the future, and may need to seek further financing, which we may not be able to obtain on acceptable terms or at all, which could affect our ability to implement our business strategies. We have limited capital resources.
We may fail to obtain required materials or services in a timely manner in the future, or could experience delays as a result of evaluating and testing the products or services of potential alternative suppliers.
We may fail to obtain required materials or services in a timely manner in the future, or we could experience delays as a result of evaluating and testing the products or services of potential alternative suppliers.
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 recent global outbreak of COVID-19. In March 2020, the World Health Organization (the “WHO”) declared COVID-19 as a pandemic.
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 global outbreak of COVID-19. In March 2020, the World Health Organization (the “WHO”) declared COVID-19 as a pandemic.
We have limited capital resources. Our operations have historically been largely funded from the proceeds of equity financings with some level of debt financing as well as cash flow from operations. In recent years we have generated sufficient capital to fund our operations and necessary investments.
Our operations have historically been largely funded from the proceeds of equity financings with some level of debt financing as well as cash flow from operations. In recent years we have generated sufficient capital to fund our operations and necessary investments.
If we fail to effectively transfer production processes, develop product enhancements, or introduce new products that meet the needs of our customers as scheduled, our net revenues may decline, which would adversely affect our results of operations and financial condition. If we are unable to effectively compete, our business and operating results could be negatively affected.
If we fail to effectively transfer production processes, develop product enhancements, or introduce new products that meet the needs of our customers as scheduled, our net revenues may decline, which would adversely affect our results of operations and financial condition. 17 Table of Contents If we are unable to effectively compete, our business and operating results could be negatively affected.
Furthermore, imposition of tariffs could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users, which would directly impact our business. It remains unclear how tax or trade policies, tariffs, or trade relations may change or evolve with changes in the U.S. Presidential Administration.
Furthermore, imposition of tariffs could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users, which would directly impact our business. 16 Table of Contents It remains unclear how tax or trade policies, tariffs, or trade relations may change or evolve with changes in the U.S. Presidential Administration.
Additionally, in order to avoid excess material inventories, we may incur cancellation charges associated with modifying existing purchase orders with our vendors, which, depending on the magnitude of such cancellation charges, may adversely affect our results of operations. 20 Table of Contents If we do not achieve acceptable manufacturing yields our operating results could suffer.
Additionally, in order to avoid excess material inventories, we may incur cancellation charges associated with modifying existing purchase orders with our vendors, which, depending on the magnitude of such cancellation charges, may adversely affect our results of operations. If we do not achieve acceptable manufacturing yields our operating results could suffer.
If we incur operating losses and/or require cash that is held in international accounts for use in our operations based in the U.S., a failure to repatriate such cash in a timely and cost-effective manner could adversely affect our business and financial results. 18 Table of Contents Our business may be materially affected by changes to fiscal and tax policies.
If we incur operating losses and/or require cash that is held in international accounts for use in our operations based in the U.S., a failure to repatriate such cash in a timely and cost-effective manner could adversely affect our business and financial results. Our business may be materially affected by changes to fiscal and tax policies.
Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition, and cash flows. Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression.
Any resulting financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations, financial condition, and cash flows. Now that the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression.
As of June 30, 2022, LPOIZ had approximately $3.9 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2022.
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.
We reported net losses of $3.5 million and $3.2 million for fiscal years 2022 and 2021, respectively, and although we reported net income of $0.9 million for fiscal year 2020, we incurred a net loss of $2.7 million for fiscal year 2019. As of June 30, 2022, we had an accumulated deficit of approximately $203.8 million.
We reported net losses of $4.0 million, $3.5 million and $3.2 million for fiscal years 2023, 2022 and 2021, respectively, and although we reported net income of $0.9 million for fiscal year 2020, we incurred a net loss of $2.7 million for fiscal year 2019. As of June 30, 2023, we had an accumulated deficit of approximately $207.8 million.
A significant portion of our cash is generated and held outside of the U.S. The risks of maintaining significant cash abroad could adversely affect our cash flows and financial results. During fiscal year 2022, greater than 50% of our cash was held abroad.
A significant portion of our cash is generated and held outside of the U.S. The risks of maintaining significant cash abroad could adversely affect our cash flows and financial results. During fiscal year 2023, greater than 25% of our cash was held abroad.
If we overestimate our material requirements, we may have excess inventory, which would increase our costs. If we underestimate our material requirements, we may have inadequate inventory, which could interrupt our manufacturing and delay delivery of our products to our customers. Any of these occurrences would negatively impact our results of operations.
If we underestimate our material requirements, we may have inadequate inventory, which could interrupt our manufacturing and delay delivery of our products to our customers. Any of these occurrences would negatively impact our results of operations.
The following schedule presents the approximate square footage of our offices and facilities as of June 30, 2022: Location Square Feet Commitment and Use Orlando, Florida 62,000 Leased; 3 suites used for corporate headquarters offices, manufacturing, and research and development Riga, Latvia 29,000 Leased; 3 suites used for administrative offices, manufacturing and crystal growing Zhenjiang, China 55,000 Leased; 1 building used for manufacturing, and 1 floor of 1 building used for manufacturing Shanghai, China 1,900 Leased; 1 office suite used for sales, marketing and administrative offices Our territorial sales personnel maintain an office from their homes to serve their geographical territories.
The following schedule presents the approximate square footage of our offices and facilities as of June 30, 2023: Location Square Feet Commitment and Use Orlando, Florida 58,500 Leased; 2 suites used for corporate headquarters offices, manufacturing, and research and development Riga, Latvia 29,000 Leased; 3 suites used for administrative offices, manufacturing and crystal growing Zhenjiang, China 55,000 Leased; 1 building used for manufacturing, and 1 floor of 1 building used for manufacturing Our territorial sales personnel maintain an office from their homes to serve their geographical territories.
We also source certain raw materials from outside the U.S. Some of those materials, priced in non-dollar currencies, fluctuate in price due to the value of the U.S. dollar against non-dollar-pegged currencies, especially the Euro and Renminbi. As the dollar strengthens, this increases our margins and helps with our ability to reach positive cash flow and profitability.
Some of those materials, priced in non-dollar currencies, fluctuate in price due to the value of the U.S. dollar against non-dollar-pegged currencies, especially the Euro and Renminbi. As the dollar strengthens, this increases our margins and helps with our ability to reach positive cash flow and profitability.
In fiscal year 2022, 61% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia. In fiscal year 2021, 68% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia.
In fiscal year 2023, 50% of our net revenue was derived from sales outside of the U.S., with 93% of our foreign sales derived from customers in Europe and Asia. In fiscal year 2022, 61% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia.
The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depends upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effect.
The extent to which future pandemics or other public health emergencies may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, depends upon the severity and duration of the outbreak and the effectiveness of actions taken globally to contain or mitigate its effect.
To date, we have continued to operate our manufacturing facilities consistent with government guidelines and state and local orders; however, the outbreak of COVID-19 and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers, and transportation networks, including business shutdown or disruptions.
Throughout the COVID-19 pandemic, we continued to operate our manufacturing facilities consistent with government guidelines and state and local orders; however, future pandemics or other public health emergencies and any preventive or protective actions taken by governmental authorities may have a material adverse effect on our operations, supply chain, customers, and transportation networks, including business shutdown or disruptions.
However, given the uncertainty regarding the scope and duration of the effective and proposed tariffs, as well as the potential for additional trade actions by the U.S. or other countries in the future, any future impact on our operations and financial results is uncertain and these impacts could be more significant than those we experienced in fiscal year 2020.
However, given the uncertainty regarding the current tariffs, as well as the potential for additional trade actions by the U.S. or other countries in the future, any future impact on our operations and financial results is uncertain and these impacts could be more significant than those we have experienced in the past.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for an additional discussion of these and other related factors that affect our operations and/or financial performance.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for an additional discussion of these and other related factors that affect our operations and/or financial performance. Risks Related to Our Business and Financial Results We have a history of losses.
In fiscal year 2021, we had sales to three customers that comprised an aggregate of approximately 38% of our annual revenue, with one customer at 18% of our sales, another customer at 10% of our sales, and the third customer at 10% of our sales.
In fiscal year 2023, we had sales to three customers that comprised an aggregate of approximately 24% of our annual revenue, with one customer at 11% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales.
Such developments could have a material adverse effect on our business, financial position, liquidity and results of operations. Russia’s ongoing conflict with Ukraine has disrupted the global economy. Our business, financial condition, and results of operations could be adversely affected by continued disruption and global consequences stemming from the conflict.
Russia’s ongoing conflict with Ukraine has disrupted the global economy. Our business, financial condition, and results of operations could be adversely affected by continued disruption and global consequences stemming from the conflict.
Though we do not anticipate any challenges from sourcing germanium solely from suppliers in China, we cannot provide any assurances that we will be able to obtain adequate supplies in the future or, if adequate supplies are available, that the timing or costs of obtaining such raw materials will be acceptable to us.
We cannot provide any assurances that we will be able to obtain adequate supplies in the future or, if adequate supplies are available, that the timing or costs of obtaining such raw materials will be acceptable to us.
Properties. Our properties consist primarily of leased office and manufacturing facilities. Our corporate headquarters are located in Orlando, Florida and our manufacturing facilities are primarily located in Zhenjiang, China and Riga, Latvia. We also have a sales, marketing, and administrative office in Shanghai, China.
Properties. Our properties consist primarily of leased office and manufacturing facilities. Our corporate headquarters are located in Orlando, Florida and our manufacturing facilities are primarily located in Zhenjiang, China and Riga, Latvia.
The third customer lost a significant bid in 2021 which adversely affected our sales in fiscal year 2022. Our current strategy of providing the domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, without needing to develop subject matter expertise in optics.
Our current strategy of providing the domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, without needing to develop subject matter expertise in optics.
Beginning in the spring of 2021, we have seen some restrictions lift as vaccines have become more available. We are considered an “essential business,” as a critical supplier to both the medical and defense industries.
Beginning in the spring of 2021, we saw restrictions begin to lift as vaccines have become more available, and as if June 30, 2023 there are no remaining restrictions impacting our operations. We are considered an “essential business,” as a critical supplier to both the medical and defense industries.
Any losses or damages incurred by us as a result of blackouts, rebuilding, relocation, or other business interruptions, could result in a significant delay or reduction in manufacturing and production capabilities, impair our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in reduced sales, lost revenue, increased costs and/or loss of market share, any of which could substantially harm our business and our results of operations.
Any losses or damages incurred by us as a result of blackouts, rebuilding, relocation, or other business interruptions, could result in a significant delay or reduction in manufacturing and production capabilities, impair our reputation, harm our ability to retain existing customers and to obtain new customers, and could result in reduced sales, lost revenue, increased costs and/or loss of market share, any of which could substantially harm our business and our results of operations. 20 Table of Contents 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 2020 outbreak of COVID-19.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales and revenues to drop, which could materially and adversely impact our business and results of operations. Tariffs had a negative impact on our cost of sales beginning late in fiscal year 2019.
Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products and cause our sales and revenues to drop, which could materially and adversely impact our business and results of operations. We utilize a number of strategies to mitigate the current and, hopefully, future impact of tariffs.
Product liability insurance is expensive, subject to various coverage exclusions, and may not be obtainable on terms acceptable to us if we decide to procure such insurance in the future. Moreover, the amount and scope of any coverage may be inadequate to protect us in the event that a product liability claim is successfully asserted.
We do not currently maintain product liability insurance coverage. Product liability insurance is expensive, subject to various coverage exclusions, and may not be obtainable on terms acceptable to us if we decide to procure such insurance in the future.
As a U.S. corporation with international operations, we are subject to the U.S. Foreign Corrupt Practices Act and other similar foreign anti-corruption laws, as well as other laws governing our operations.
Any material impacts to our customers could have a material adverse effect on our business and operating results. 15 Table of Contents As a U.S. corporation with international operations, we are subject to the U.S. Foreign Corrupt Practices Act and other similar foreign anti-corruption laws, as well as other laws governing our operations.
There can be no assurance that any proposed products will be successfully developed, demonstrate desirable optical performance, be capable of being produced in commercial quantities at reasonable costs, or be successfully marketed. 16 Table of Contents We rely, in large part, on key business and sales relationships for the successful commercialization of our products, which, if not developed or maintained, will have an adverse impact on achieving market awareness and acceptance and will result in a loss of business opportunities.
We rely, in large part, on key business and sales relationships for the successful commercialization of our products, which, if not developed or maintained, will have an adverse impact on achieving market awareness and acceptance and will result in a loss of business opportunities.
In fiscal year 2022, sales of PMO products represented approximately 42% of our net revenues, sales of infrared products represented approximately 53% of our net revenues, and sales of specialty products represented 5% of our revenues. In the future, we expect growth in both our PMO and infrared product groups.
In fiscal year 2023, sales of PMO products represented approximately 41% of our net revenues, sales of infrared products represented approximately 51% of our net revenues, and sales of specialty products represented 8% of our revenues. In the future, we expect growth primarily from our infrared product groups, including engineered solutions and assemblies.
To the extent the COVID-19 pandemic may adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K. We have a history of losses.
To the extent the COVID-19 pandemic may adversely affect our business and financial results, it may also have the effect of heightening many of the other risks described in this Annual Report on Form 10-K. Our failure to accurately forecast material requirements could cause us to incur additional costs, have excess inventories, or have insufficient materials to manufacture our products.
Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. 19 Table of Contents We depend on single or limited source suppliers for some of the key materials or process steps in our products, making us susceptible to supply shortages, poor performance, or price fluctuations.
We depend on single or limited source suppliers for some of the key materials or process steps in our products, making us susceptible to supply shortages, poor performance, or price fluctuations.
It is very important that we accurately predict both the demand for our products and the lead times required to obtain the necessary materials. Lead times for materials that we order vary significantly and depend on factors, such as specific supplier requirements, the size of the order, contract terms, and the market demand for the materials at any given time.
Lead times for materials that we order vary significantly and depend on factors, such as specific supplier requirements, the size of the order, contract terms, and the market demand for the materials at any given time. If we overestimate our material requirements, we may have excess inventory, which would increase our costs.
We face product liability risks, which could adversely affect our business . The sale of our optical products involves the inherent risk of product liability claims by others. We do not currently maintain product liability insurance coverage.
Because of these factors, we may not be able to effectively manage or grow our business, which could adversely affect our financial condition or business. We face product liability risks, which could adversely affect our business . The sale of our optical products involves the inherent risk of product liability claims by others.
Our operations are vulnerable to interruption by fire, hurricane winds and rain, earthquakes, electric power loss, telecommunications failure, and other events beyond our control.
The Riga Facility is subject to two leases which expire in December 2030, and the Zhenjiang Facility is subject to one lease that expires in December 2024. Our operations are vulnerable to interruption by fire, hurricane winds and rain, earthquakes, electric power loss, telecommunications failure, and other events beyond our control.
Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws, or Trade Control Laws by the U.S. or foreign authorities could also have an adverse impact on our reputation, business, financial condition, and results of operations. 15 Table of Contents If the custodians or authorized users of our controlling non-tangible assets, including corporate chops and seals of our Chinese subsidiaries, fail to fulfill their responsibilities or misappropriate or misuse those assets, our business and operations could be materially and adversely affected.
Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws, or Trade Control Laws by the U.S. or foreign authorities could also have an adverse impact on our reputation, business, financial condition, and results of operations.
In fiscal years 2022 and 2021, we recognized net losses of approximately $3,000 and $1,000 on foreign currency transactions, respectively. Any such fluctuations that result in a less favorable exchange rate could adversely affect a portion of our revenues and expenses, which could negatively impact our results of operations and financial condition.
Any such fluctuations that result in a less favorable exchange rate could adversely affect a portion of our revenues and expenses, which could negatively impact our results of operations and financial condition. 18 Table of Contents We also source certain raw materials from outside the U.S.
If a claim is asserted and successfully litigated by an adverse party, our financial position and results of operations could be adversely affected. Business interruptions could adversely affect our business . We manufacture our products at manufacturing facilities located in Orlando, Florida; Riga, Latvia; and Zhenjiang, China. Our revenues are dependent upon the continued operation of these facilities.
We manufacture our products at manufacturing facilities located in Orlando, Florida; Riga, Latvia; and Zhenjiang, China. Our revenues are dependent upon the continued operation of these facilities. The Orlando Facility is subject to a lease that expires March 31, 2034.
Historically, we have sourced germanium from suppliers located in Russia and China. We have, and intend to continue, sourcing germanium from suppliers located in China through the continuation of the Russian-Ukraine conflict and the Russian trade embargo.
Historically, we have sourced germanium from suppliers located in Russia and China. At the start of the Russia\Ukraine conflict we had ceased all purchases of Germanium from vendors in Russia and instead have been purchasing Germanium from vendors in China.
The inability to obtain customer qualification of our manufacturing lines, or the delay in obtaining such qualification, could adversely affect our financial condition and results of operations. Our business could suffer as a result of the United Kingdom’s decision to end its membership in the European Union .
The inability to obtain customer qualification of our manufacturing lines, or the delay in obtaining such qualification, could adversely affect our financial condition and results of operations. Risks Related To Our Intellectual Property If we are unable to protect and enforce our intellectual property rights, we may be unable to compete effectively.
The income earned in these various jurisdictions is taxed on differing basis, including net income actually earned, net income deemed earned, and revenue-based tax withholding.
As of June 30, 2023, all deferred payroll taxes have been remitted. 19 Table of Contents Further, our worldwide operations subject us to the jurisdiction of a number of taxing authorities. The income earned in these various jurisdictions is taxed on differing basis, including net income actually earned, net income deemed earned, and revenue-based tax withholding.
Continued and expanding market acceptance of these products, particularly our BD6-based infrared products, is critical to our future success.
Continued and expanding market acceptance of these products, particularly our BD6-based infrared products, is critical to our future success. There can be no assurance that our current or new products will achieve market acceptance at the rate at which we expect, or at all, which could adversely affect our results of operations and financial condition.
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Risks Related to Our Business and Financial Results 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 recent outbreak of COVID-19.
Added
On July 4, 2023 China announced its intentions to impose some export restrictions on Germanium, requiring all international customers to provide an end user statement for approval before receiving an export license. As of the time of preparing this Annual Report, our vendors have applied for export licenses for shipments of Germanium to us, and have not yet received them.
Removed
As a result, we implemented a number of strategies to mitigate the current and, hopefully, future impact of tariffs. These strategies mitigated the impact of tariffs beginning in the second quarter of fiscal year 2020 and continued through fiscal years 2021 and 2022.
Added
If the custodians or authorized users of our controlling non-tangible assets, including corporate chops and seals of our Chinese subsidiaries, fail to fulfill their responsibilities or misappropriate or misuse those assets, our business and operations could be materially and adversely affected.
Removed
While we may receive further financial, tax, or other relief and other benefits under and as a result of the CARES Act, it is not possible to estimate at this time the availability, extent, or impact of any such relief. Further, our worldwide operations subject us to the jurisdiction of a number of taxing authorities.
Added
There can be no assurance that any proposed products will be successfully developed, demonstrate desirable optical performance, be capable of being produced in commercial quantities at reasonable costs, or be successfully marketed.
Removed
The Orlando Facility is subject to two leases, one that expires in November 2022 and the other in November 2032. The Riga Facility is subject to two leases which expire in December 2030, and the Zhenjiang Facility is subject to one lease that expires in December 2024.
Added
In fiscal years 2023 and 2022, we recognized net losses of approximately $37,000 and $3,000 on foreign currency transactions, respectively.
Removed
Our failure to accurately forecast material requirements could cause us to incur additional costs, have excess inventories, or have insufficient materials to manufacture our products. Our material requirements forecasts are based on actual or anticipated product orders.
Added
Moreover, the amount and scope of any coverage may be inadequate to protect us in the event that a product liability claim is successfully asserted. If a claim is asserted and successfully litigated by an adverse party, our financial position and results of operations could be adversely affected. Business interruptions could adversely affect our business .
Removed
In January 2020, the United Kingdom and the European Union entered into a withdrawal agreement pursuant to which the United Kingdom formally withdrew from the European Union on January 31, 2020 (generally referred to as “BREXIT”). Following such withdrawal, the United Kingdom entered into a transition period scheduled to end on December 31, 2020.
Added
Our material requirements forecasts are based on actual or anticipated product orders. It is very important that we accurately predict both the demand for our products and the lead times required to obtain the necessary materials.
Removed
Effective May 1, 2021, the United Kingdom and the European Union struck a bilateral trade and cooperation deal governing the future relationship between the United Kingdom and the European Union.
Removed
However, there remains uncertainties and risks to our business related to Brexit and the new relationship between the United Kingdom and European Union, which will continue to be developed and defined, as well as any resulting political and economic instability created by Brexit.
Removed
The political and economic impact of Brexit has caused and may continue to cause significant volatility in global markets as well as greater restrictions on imports and exports between the United Kingdom and European Union countries, a fluctuation in currency exchange rates, and increased regulatory complexities.
Removed
The impact of the withdrawal of the United Kingdom may adversely affect business activity, political stability, and economic conditions in the United Kingdom, the European Union, and elsewhere.
Removed
Such developments and their ultimate impact, or the perception that any of these developments are likely to occur, could have a material adverse effect on economic growth or business activity in the United Kingdom, the Eurozone ,or the European Union, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, inhibit the growth of the European economy, cause greater volatility in all of the global currencies that we currently use to transact business and impact the stability of the financial markets, availability of credit, political systems or financial institutions, and the financial and monetary system.
Removed
Any material impacts to our customers could have a material adverse effect on our business and operating results. Risks Related To Our Intellectual Property If we are unable to protect and enforce our intellectual property rights, we may be unable to compete effectively.

Item 2. Properties

Properties — owned and leased real estate

15 edited+3 added−2 removed17 unchanged
Biggest changeOur means of protecting our proprietary rights may not be adequate and our competitors may independently develop technology or products that are similar to ours or that compete with ours. Patent, trademark, and trade secret laws afford only limited protection for our technology and products.
Biggest changeThe fifth filing is for a single camera that can detect a signaling laser such as a beacon in one wavelength, while imaging the heat emitted from objects in another waveband. 12 Table of Contents Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop technology or products that are similar to ours or that compete with ours.
We believe that a satisfactory supply of production materials will continue to be available at competitive prices, although we are experiencing inflationary pricing pressure in the short term, however there can be no assurances in this regard. Intellectual Property Our policy is to protect our technology by, among other things, patents, trade secret protection, trademarks, and copyrights.
We believe that a satisfactory supply of production materials will continue to be available at competitive prices, although we are experiencing inflationary pricing pressure in the short term, however there can be no assurances in this regard. Intellectual Property Our policy is to protect our technology by, among other things, trade secret protection, patents, trademarks, and copyrights.
Any employee additions or terminations over the next twelve months will be dependent upon the actual sales levels realized during fiscal year 2022. We have used and will continue utilizing part-time help, including interns, temporary employment agencies, and outside consultants, where appropriate, to qualify prospective employees and to ramp up production as required from time to time.
Any employee additions or terminations over the next twelve months will be dependent upon the actual sales levels realized during fiscal year 2024. We have used and will continue utilizing part-time help, including interns, temporary employment agencies, and outside consultants, where appropriate, to qualify prospective employees and to ramp up production as required from time to time.
Concentration of Customer Risk In fiscal year 2022, we had sales to three customers that comprised an aggregate of approximately 35% of our annual revenue with one customer at 19% of our sales, another customer at 9% of our sales, and the third customer at 7% of our sales.
In fiscal year 2022, we had sales to three customers that comprised an aggregate of approximately 35% of our annual revenue with one customer at 19% of our sales, another customer at 9% of our sales, and the third customer at 7% of our sales.
Mark Type Registered Country Renewal Date LightPath® Service mark Yes United States October 22, 2022 GRADIUM™ Trademark Yes United States April 29, 2027 Circulight Trademark No - - BLACK DIAMOND Trademark No - - GelTech Trademark No - - Oasis Trademark No - - LightPath® Service mark Yes People’s Republic of China September 13, 2025 ISP Optics® Trademark Yes United States August 12, 2023 Environmental and Governmental Regulation Currently, emissions and waste from our manufacturing processes are at such low levels that no special environmental permits or licenses are required.
Mark Type Registered Country Renewal Date LightPath® Service mark Yes United States Pending GRADIUM™ Trademark Yes United States April 29, 2027 Circulight Trademark No - - BLACK DIAMOND Trademark No - - GelTech Trademark No - - Oasis Trademark No - - LightPath® Service mark Yes People’s Republic of China September 13, 2025 ISP Optics® Trademark Yes United States August 12, 2024 Environmental and Governmental Regulation Currently, emissions and waste from our manufacturing processes are at such low levels that no special environmental permits or licenses are required.
In fiscal year 2022, 61% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia.
In fiscal year 2023, 50% of our net revenue was derived from sales outside of the U.S., with 93% of our foreign sales derived from customers in Europe and Asia. In fiscal year 2022, 61% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia.
Of our 329 full-time equivalent employees, we have 33 employees engaged in management, administrative, and clerical functions, 32 employees in new product development, 11 employees in sales and marketing, and 253 employees in production and quality control functions.
Of our 320 full-time equivalent employees, we have 32 employees engaged in management, administrative, and clerical functions, 23 employees in new product development, 11 employees in sales and marketing, and 254 employees in production and quality control functions.
The following table sets forth our registered and unregistered marks, and denotes whether each mark is registered, the country in which the mark is filed, and the renewal date for such mark.
We own several registered and unregistered service marks and trademarks (collectively, “marks”) that are used in the marketing and sale of our products. The following table sets forth our registered and unregistered marks, and denotes whether each mark is registered, the country in which the mark is filed, and the renewal date for such mark.
Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement, invalidity, misappropriation, or other claims. 12 Table of Contents We own several registered and unregistered service marks and trademarks (collectively, “marks”) that are used in the marketing and sale of our products.
Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement, invalidity, misappropriation, or other claims.
We cannot assure you that our technology platform and products do not infringe patents held by others or that they will not in the future.
In addition, if any of our products or technology is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions. We cannot assure you that our technology platform and products do not infringe patents held by others or that they will not in the future.
The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States (“U.S.”). Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information that we regard as proprietary.
Patent, trademark, and trade secret laws afford only limited protection for our technology and products. The laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States (“U.S.”).
Third parties may also design around our proprietary rights, which may render our protected technology and products less valuable, if the design around is favorably received in the marketplace. In addition, if any of our products or technology is covered by third-party patents or other intellectual property rights, we could be subject to various legal actions.
Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to obtain and use information that we regard as proprietary. Third parties may also design around our proprietary rights, which may render our protected technology and products less valuable, if the design around is favorably received in the marketplace.
In fiscal year 2021, 68% of our net revenue was derived from sales outside of the U.S., with 95% of our foreign sales derived from customers in Europe and Asia. 13 Table of Contents Employees As of June 30, 2022, we had 334 employees, of which 329 were full-time equivalent employees, with 108 in the U.S., including 101 located in Orlando, Florida and 7 working remotely from various locations, 98 located in Riga, Latvia, and 128 located in Jiading and Zhenjiang, China.
Employees As of June 30, 2023, we had 327 employees, of which 320 were full-time equivalent employees, with 111 in the U.S., including 106 located in Orlando, Florida and 5 working remotely from various locations, 99 located in Riga, Latvia, and 117 located in Zhenjiang, China.
In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. We strive to only use suppliers that source from conflict-free smelters and refiners; however, in the future, we may face difficulties in gathering information regarding our suppliers and the source of any such conflict minerals.
In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products.
In fiscal year 2021, we had sales to three customers that comprised an aggregate of approximately 38% of our annual revenue with one customer at 18% of our sales, another customer at 10% of our sales, and the third customer at 10% of our sales.
We strive to only use suppliers that source from conflict-free smelters and refiners; however, in the future, we may face difficulties in gathering information regarding our suppliers and the source of any such conflict minerals. 13 Table of Contents Concentration of Customer Risk In fiscal year 2023, we had sales to three customers that comprised an aggregate of approximately 24% of our annual revenue with one customer at 11% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales.
Removed
Over the past three years, we have been granted two new patents. We also have three other patents that relate to the fusing of certain of our lenses that are part of our specialty products group. These patents expire at various times throughout 2023. For 2022, we have three new groups of patents being submitted.
Added
Over the past year we have filed 5 new patent applications. The first filing uses a midwave thermal imaging camera with relay optics and a risley prism scanner for inspection of boilers and furnaces. The risley prism scanner gives the system the ability to steer the image area within the furnace.
Removed
The first is for the fabrication of mold tooling and the molding process for acylindrical arrays. The second is for the molding of large freeform optics, with respect to the proprietary molding equipment. The third is for the molding of doublets.
Added
The second filing uses an uncooled broadband camera for flame detection coupled with detection of humans or other low temperature signals within the overall imaging area. The third filing is for an optical element formed from a moldable material, with a transparent layer of a different material applied to the optical surface for use in resistive heating of the element.
Added
This can be used to provide heating on an optic for de-icing or de-fogging. The fourth filing combines LWIR Imaging with an extended short wavelength infrared (“eSWIR”) light source to allow for IR imaging and illumination in the same image using a single detector.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of September 8, 2022, we estimate there were approximately 199 holders of record and approximately 10,930 street name holders of our Class A common stock. Dividends We have never declared or paid any cash dividends on our Class A common stock and do not intend to pay any cash dividends in the foreseeable future.
Biggest changeHolders As of September 7, 2023, we estimate there were approximately 212 holders of record and approximately 10,192 street name holders of our Class A common stock. Dividends We have never declared or paid any cash dividends on our Class A common stock and do not intend to pay any cash dividends in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+47 added−53 removed79 unchanged
Biggest changeQuarterly backlog levels for fiscal years 2022 and 2021 are as follows: Quarter Total Backlog ($ 000) Change From Prior Year End Change From Prior Quarter End Q1 2021 $ 20,866 -5 % -5 % Q2 2021 $ 23,835 9 % 14 % Q3 2021 $ 19,498 -11 % -18 % Q4 2021 $ 21,329 -3 % 9 % Q1 2022 $ 19,265 -10 % -10 % Q2 2022 $ 21,929 3 % 14 % Q3 2022 $ 19,678 -8 % -10 % Q4 2022 $ 17,767 -17 % -10 % The increase in our total backlog from the first quarter to the second quarter of both fiscal years 2022 and 2021 was largely due to the renewal of a large annual contract during the second quarter of the respective fiscal year, which we began shipping against during the third quarter of the respective fiscal year.
Biggest changeQuarterly backlog levels for fiscal years 2023 and 2022 are as follows: Quarter Total Backlog ($ 000) Change From Prior Year End Change From Prior Quarter End Q1 2022 $ 19,265 -10 % -10 % Q2 2022 $ 21,929 3 % 14 % Q3 2022 $ 19,678 -8 % -10 % Q4 2022 $ 17,767 -17 % -10 % Q1 2023 $ 22,973 29 % 29 % Q2 2023 $ 29,427 66 % 28 % Q3 2023 $ 26,620 50 % -10 % Q4 2023 $ 21,652 22 % -19 % The increase in backlog during fiscal year 2023 was due to several large customer orders.
In addition to stay-at-home orders, many jurisdictions also implemented social distancing and other restrictions and measures to slow the spread of COVID-19. These restrictions significantly impacted economic conditions in the U.S. in 2020 and continued into 2021 and 2022. Beginning in the spring of 2021, restrictions began to lift as vaccines became more available.
In addition to stay-at-home orders, many jurisdictions also implemented social distancing and other restrictions and measures to slow the spread of COVID-19. These restrictions significantly impacted economic conditions in the U.S. in 2020 and continued into 2021, 2022 and 2023. Beginning in the spring of 2021, restrictions began to lift as vaccines became more available.
Cash used in financing activities for fiscal year 2022 reflects approximately $894,000 in principal payments on our loans and finance leases and $61,000 in loan costs, offset by proceeds of approximately $267,000 from the Equipment Loan and approximately $52,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.
Cash used in financing activities for fiscal year 2022 reflects approximately $894,000 in principal payments on our loans and finance leases and $61,000 in loan costs, offset by proceeds of approximately $267,000 from the 2020 Equipment Loan and approximately $52,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.
We have not experienced, nor do we anticipate, any material adverse impact on LPOIZ’s or LPOI’s production and supply of products to LightPath for LightPath’s customers. Results of Operations Operating Results for Fiscal Year Ended June 30, 2022 compared to the Fiscal Year Ended June 30, 2021: Revenue.
We have not experienced, nor do we anticipate, any material adverse impact on LPOIZ’s or LPOI’s production and supply of products to LightPath for LightPath’s customers. Results of Operations Operating Results for Fiscal Year Ended June 30, 2023 compared to the Fiscal Year Ended June 30, 2022: Revenue.
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.
However, there are a number of factors that could result in the need to raise additional funds in the longer term, 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.
We use gross margin in measuring the performance of our business and have historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner. Potential Impact of COVID-19 In March 2020, the WHO declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure.
We use gross margin in measuring the performance of our business and have historically analyzed and reported gross margin information publicly. Other companies may calculate gross margin in a different manner. 24 Table of Contents Potential Impact of COVID-19 In March 2020, the WHO declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure.
For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in this Annual Report on Form 10-K. Our Key Performance Indicators Usually on a weekly basis, management reviews several performance indicators. Some of these indicators are qualitative and others are quantitative.
For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in this Annual Report on Form 10-K. 30 Table of Contents Our Key Performance Indicators Usually on a weekly basis, management reviews several performance indicators. Some of these indicators are qualitative and others are quantitative.
Invoiced amounts for VAT related to sales are posted to the balance sheet and are not included in revenue. 36 Table of Contents 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.
Invoiced amounts for VAT related to sales are posted to the balance sheet and are not included in revenue. 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.
The increase in interest expense is due to rising interest rates, partially offset by a 14% reduction in our total debt, including finance lease obligations, and excluding operating lease liabilities, as of June 30, 2022, as compared to the end of the prior fiscal year.
The increase in interest expense is due to rising interest rates, partially offset by a 30% reduction in our total debt, including finance lease obligations, and excluding operating lease liabilities, as of June 30, 2023, as compared to the end of the prior fiscal year.
Greater than 50% of our total cash and cash equivalents was held by our foreign subsidiaries in China and Latvia. Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested.
Greater than 25% of our total cash, cash equivalents and restricted cash was held by our foreign subsidiaries in China and Latvia. Cash, cash equivalents and restricted cash held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested.
As of June 30, 2022, LPOIZ had approximately $3.9 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2022.
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.
These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives. Cash Flows – Operating.
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. Cash Flows – Operating.
These indicators are similarly used to determine tactical operating actions and changes and are discussed in more detail below. Management will evaluate these key indicators as we transition to our new strategic plan to determine whether any changes or updates to our key indicators are warranted. 31 Table of Contents Sales Backlog.
These indicators are similarly used to determine tactical operating actions and changes and are discussed in more detail below. Management will evaluate these key indicators as we transition to our new strategic plan to determine whether any changes or updates to our key indicators are warranted. Sales Backlog.
Income taxes for fiscal years 2022 and 2021 also included Chinese withholding tax expenses of $230,000 and $524,000, respectively, the majority of which are associated with intercompany dividends declared by LPOIZ, payable to us as the parent company.
Income taxes for fiscal years 2023 and 2022 also included Chinese withholding tax expenses of $235,000 and $230,000, respectively, the majority of which are associated with intercompany dividends declared by LPOIZ, payable to us as the parent company.
As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. EBITDA.
As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use. 35 Table of Contents EBITDA.
If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures in order to repay our credit facility and all charges related thereto upon its maturity on April 15, 2024.
If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or reduce operating expenses and capital expenditures in order to repay our credit facility and all charges related thereto upon its maturity on December 31, 2024.
Other income, net, was approximately $177,000 in for fiscal year 2022, compared to other expense, net, of approximately $194,000 for fiscal year 2021. Other income, net, for fiscal year 2022 includes a benefit of $210,000, which represents the reversal of a potential liability related to the actions of the terminated employees of our subsidiaries in China, as previously discussed.
Other income, net, was approximately $25,000 for fiscal year 2023, compared to $177,000 for fiscal year 2022. Other income, net, for fiscal year 2022 includes a benefit of $210,000, which represents the reversal of a potential liability related to the actions of the terminated employees of our subsidiaries in China, as previously discussed.
Loans payable as of June 30, 2022 consisted of the term loan in the original principal amount of approximately $5.8 million (the “BankUnited Term Loan”) issued in favor of BankUnited, N.A. (“BankUnited”) and an equipment loan with a third party. Details of the loans are as follows: BankUnited Loans.
Loans payable as of June 30, 2023 consisted of the term loan in the original principal amount of approximately $5.8 million (the “BankUnited Term Loan”) issued in favor of BankUnited, N.A. (“BankUnited”) and two third-party equipment loans. Details of the loans are as follows: BankUnited Loans.
The table below shows our DSO for the preceding eight fiscal quarters: Fiscal Quarter Ended DSO (days) Q4-2022 6/30/2022 54 Q3-2022 3/31/2022 55 Q2-2022 12/31/2021 49 Q1-2022 9/30/2021 59 Fiscal Year 2022 Average 54 Q4-2021 6/30/2021 51 Q3-2021 3/31/2021 53 Q2-2021 12/31/2020 63 Q1-2021 9/30/2020 60 Fiscal Year 2021 Average 57 34 Table of Contents Our average DSO for fiscal year 2022 was 54, compared to 57 for fiscal year 2021.
The table below shows our DSO for the preceding eight fiscal quarters: 34 Table of Contents Fiscal Quarter Ended DSO (days) Q4-2023 6/30/2023 63 Q3-2023 3/31/2023 59 Q2-2023 12/31/2022 52 Q1-2023 9/30/2022 57 Fiscal Year 2023 Average 58 Q4-2022 6/30/2022 54 Q3-2022 3/31/2022 55 Q2-2022 12/31/2021 49 Q1-2022 9/30/2021 59 Fiscal Year 2022 Average 54 Our average DSO for fiscal year 2023 was 58, compared to 54 for fiscal year 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, we chose to enter into severance agreements with certain of the employees at the time of termination.
Knowing that employee transitions in international subsidiaries can lead to lengthy and expensive legal proceedings that can be disruptive to operations, 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.
We do not expect any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition.
We have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition.
During fiscal year 2022, we incurred net foreign currency transaction losses of approximately $3,000, compared to $1,000 for fiscal year 2021. Income Taxes. During fiscal year 2022, we recorded income tax expense of approximately $863,000, compared to approximately $934,000 in fiscal year 2021, primarily related to income taxes from our operations in China.
During fiscal year 2023, we incurred net foreign currency transaction losses of approximately $37,000, compared to $3,000 for fiscal year 2022. Income Taxes. During fiscal year 2023, we recorded income tax expense of approximately $234,000, compared to approximately $863,000 in fiscal year 2022, primarily related to our operations in China.
Net loss for fiscal year 2022 was approximately $3.5 million, or $0.13 basic and diluted loss per share, compared to approximately $3.2 million, or $0.12 basic and diluted loss per share, for fiscal year 2021.
Net loss for fiscal year 2023 was approximately $4.0 million, or $0.13 basic and diluted loss per share, compared to approximately $3.5 million, or $0.13 basic and diluted loss per share, for fiscal year 2022.
Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for fiscal years 2022 and 2021, as their effects would have been anti-dilutive due to the net loss in those periods. Liquidity and Capital Resources At June 30, 2022, we had working capital of approximately $10.4 million and total cash and cash equivalents of approximately $5.5 million.
Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for fiscal years 2023 and 2022, as their effects would have been anti-dilutive due to the net loss in those periods. 27 Table of Contents Liquidity and Capital Resources At June 30, 2023, we had working capital of approximately $14.9 million and total cash and cash equivalents and restricted cash of approximately $7.1 million.
The table below shows our DCSI for the immediately preceding eight fiscal quarters: Fiscal Quarter Ended DCSI (days) Q4-2022 6/30/2022 104 Q3-2022 3/31/2022 132 Q2-2022 12/31/2021 104 Q1-2022 9/30/2021 134 Fiscal Year 2022 Average 118 Q4-2021 6/30/2021 126 Q3-2021 3/31/2021 119 Q2-2021 12/31/2020 142 Q1-2021 9/30/2020 154 Fiscal Year 2021 Average 135 Our average DCSI for fiscal year 2022 was 118, compared to 135 for fiscal year 2021.
The table below shows our DCSI for the immediately preceding eight fiscal quarters: Fiscal Quarter Ended DCSI (days) Q4-2023 6/30/2023 102 Q3-2023 3/31/2023 154 Q2-2023 12/31/2022 120 Q1-2023 9/30/2022 125 Fiscal Year 2023 Average 125 Q4-2022 6/30/2022 104 Q3-2022 3/31/2022 132 Q2-2022 12/31/2021 104 Q1-2022 9/30/2021 134 Fiscal Year 2022 Average 118 33 Table of Contents Our average DCSI for fiscal year 2023 was 126, compared to 118 for fiscal year 2022.
Revenue for fiscal year 2022 was approximately $35.6 million, a decrease of 8%, as compared to $38.5 million in fiscal year 2021. Revenue generated by infrared products was approximately $18.7 million in fiscal year 2022, a decrease of 11%, as compared to the prior fiscal year.
Revenue for fiscal year 2023 was approximately $32.9 million, a decrease of 7%, as compared to $35.6 million in fiscal year 2022. Revenue generated by infrared products was approximately $16.7 million in fiscal year 2023, a decrease of 11%, as compared to the prior fiscal year.
The initial advance under the 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 Equipment Loan bears interest at a fixed rate of 3.3%.
The 2020 Equipment Loan is subordinate to the Term Loan and is 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.
While this repatriation transaction resulted in some additional Chinese withholding taxes, LPOIZ currently qualifies for a reduced Chinese income tax rate; therefore, the total tax on those earnings was still below the normal income tax rate.
While this repatriation transaction resulted in some additional Chinese withholding taxes, LPOIZ currently qualifies for a reduced Chinese income tax rate; therefore, the total tax on those earnings was still below the normal income tax rate. The income tax provision for fiscal year 2022 also includes a true-up of deferred tax liabilities for LPOIZ.
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. We believe we have adequate financial resources to sustain our current and anticipated operations in the coming year.
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.
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. As of June 30, 2022, the outstanding balance on the Equipment Loan was 335,000 EUR (or USD $352,000).
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. As of June 30, 2023, the outstanding balance on the 2020 Equipment Loan was 237,000 EUR (or USD $259,000).
During the third quarter of fiscal year 2022, it was determined that our Chinese subsidiary would not be responsible for this amount. As such, this accrual was reversed and is included in the accompanying Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net” for the year ended June 30, 2022.
This amount was accrued as of June 30, 2021, pending further investigation, and was included in “Other Expense, net” in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. During the third quarter of fiscal year 2022, it was determined that our Chinese subsidiary would not be responsible for this amount.
For fiscal year 2022, Selling, General and Administrative (“SG&A”) costs were approximately $11.2 million, a decrease of approximately $768,000, or 6%, as compared to the prior fiscal year.
For fiscal year 2023, Selling, General and Administrative (“SG&A”) costs were approximately $11.4 million, an increase of approximately $215,000, or 2%, as compared to the prior fiscal year.
This potential liability was accrued as of June 30, 2021, pending further investigation, and it was determined in the third quarter of fiscal year 2022 that our Chinese subsidiary would not be responsible for this amount. Other expense, net, for fiscal year 2021 included an expense of $210,000 associated with this accrual.
This potential liability was accrued as of June 30, 2021, pending further investigation, and it was determined in the third quarter of fiscal year 2022 that our Chinese subsidiary would not be responsible for this amount. Other income, net also includes net foreign currency transaction gains and losses.
However, during fiscal year 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company.
However, during fiscal year 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however we also plan to repatriate a portion of their earnings.
We measure the quality of receivables by the proportions of the total that are at various increments past due from our normally extended terms, which are generally 30 days.
Accounts Receivable Levels and Quality. Similarly, we manage our accounts receivable to minimize investment in working capital. We measure the quality of receivables by the proportions of the total that are at various increments past due from our normally extended terms, which are generally 30 days.
The decrease in accounts payable and accrued liabilities was primarily due to the previously described events that occurred at our Chinese subsidiaries, for which certain expenses were accrued as of June 30, 2021, many of which were paid during fiscal year 2022, as well as payment of certain bonuses paid to our executive officers and other employees which were earned during fiscal year 2021.
The cash outflow for accounts payable and accrued liabilities for fiscal years 2022 and 2023 was primarily due to the previously described events that occurred at our Chinese subsidiaries, for which certain expenses were accrued as of June 30, 2021 and paid during fiscal years 2022 and 2023.
Revenue from the PMO product group for the fourth quarter of fiscal year 2022 was $3.4 million, an increase of 16%, as compared to the same quarter of the prior fiscal year.
Revenue from the PMO product group for the fourth quarter of fiscal year 2023 was $3.2 million, a decrease of 7%, as compared to the same quarter of the prior fiscal year.
These changes, if any, may require material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made, which, in turn, may result in an increase or decrease to our tax provision in a subsequent period.
These changes, if any, may require material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in net loss in the period when such determinations are made, which, in turn, may result in an increase or decrease to our tax provision in a subsequent period. 37 Table of Contents In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain.
The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in the forward-looking statements.
The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Annual Report on Form 10-K regarding forward-looking statements.
During fiscal year 2022, we expended approximately $1.6 million for capital equipment, as compared to approximately $3.2 million during fiscal year 2021. Our capital expenditures during fiscal year 2022 were primarily related to the continued expansion of our infrared coating capacity as well as increasing our lens diamond turning capacity to meet current and forecasted demand.
Our capital expenditures during fiscal year 2022 were primarily related to the continued expansion of our Riga Facility to increase our infrared coating capacity as well as increasing our lens diamond turning capacity to meet current and forecasted demand.
Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our new BD6 material.
We anticipate that our existing annual and multi-year contracts will be renewed in future quarters. Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 and our new BDNL4 materials.
Cash flow provided by operations was approximately $1.5 million for fiscal year 2022, compared to approximately $4.7 million for fiscal year 2021.
Cash flow used in operations was approximately $2.8 million for fiscal year 2023, compared to cash provided by operations of approximately $1.5 million for fiscal year 2022.
Please also see the cautionary language at the beginning of this Annual Report on Form 10-K regarding forward-looking statements. 24 Table of Contents The following discussions also include use of the non-GAAP term “gross margin,” as well as other non-GAAP measures discussed in more detail under the heading “Non-GAAP Financial Measures.” Gross margin is determined by deducting the cost of sales from operating revenue.
The following discussions also include use of the non-GAAP term “gross margin,” as well as other non-GAAP measures discussed in more detail under the heading “Non-GAAP Financial Measures.” Gross margin is determined by deducting the cost of sales from operating revenue.
In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain. Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities, which could impact our income or loss in each jurisdiction in which we operate.
Some of these uncertainties arise as a consequence of cost reimbursement and royalty arrangements among related entities, which could impact our income or loss in each jurisdiction in which we operate.
For example, in August 2022 we announced a $4 million supply agreement for PMO, with a long time European customer of precision motion control systems and OEM assemblies. The new supply agreement will go into effect in the second half of our fiscal year 2023 and is expected to run for around 12-18 months.
One such order is a $4 million supply agreement with a long time European customer of precision motion control systems and OEM assemblies. The new supply agreement went into effect in the fourth quarter of our fiscal year 2023 and is expected to run for approximately 12 to18 months.
On February 26, 2019, we entered into the Loan Agreement (the “Loan Agreement”) with BankUnited for the BankUnited Term Loan, a revolving line of credit up to a maximum amount of $2 million (the “BankUnited Revolving Line”), and a non-revolving guidance line of credit up to a maximum amount of $10 million (the “Guidance Line” and together with the BankUnited Revolving Line and BankUnited Term Loan, the “BankUnited Loans”).
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 (“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 certain promissory notes we executed in favor of BankUnited (the “BankUnited Notes”).
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).
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. During the year ended June 30, 2023, expenses incurred related to the legal proceedings were immaterial.
We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation, and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.” The following table adjusts net income to EBITDA for the three and twelve months ended June 30, 2022 and 2021: (unaudited) Quarter Ended June 30, Year Ended June 30, 2022 2021 2022 2021 Net loss $ (1,359,790 ) $ (2,913,210 ) $ (3,542,181 ) $ (3,185,251 ) Depreciation and amortization 854,123 900,964 3,617,743 3,509,436 Income tax provision 534,579 (49,671 ) 862,907 933,915 Interest expense 78,411 48,863 229,475 215,354 EBITDA $ 107,323 $ (2,013,054 ) $ 1,167,944 $ 1,473,454 % of revenue 1 % -24 % 3 % 4 % 35 Table of Contents Our EBITDA for the quarter ended June 30, 2022 was approximately $107,000, compared a loss of $2.0 million for the same period of the prior fiscal year.
We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation, and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.” The following table adjusts net income to EBITDA for the three and twelve months ended June 30, 2023 and 2022: (unaudited) Quarter Ended June 30, Year Ended June 30, 2023 2022 2023 2022 Net loss $ (808,840 ) $ (1,359,790 ) $ (4,046,871 ) $ (3,542,181 ) Depreciation and amortization 815,019 854,123 3,174,569 3,617,743 Income tax provision 11,618 534,579 234,034 862,907 Interest expense 54,561 78,411 283,266 229,475 EBITDA $ 72,358 $ 107,323 $ (355,002 ) $ 1,167,944 % of revenue 1 % 1 % -1 % 3 % Our EBITDA for the quarter ended June 30, 2023 was approximately $72,000, compared to $107,000 for the same period of the prior fiscal year.
Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales.
Our efforts are directed toward generating positive cash flow and profitability. If these efforts are not successful, we may need to raise additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales.
However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financials, or liquidity in fiscal year 2023 or beyond.
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 in fiscal 2024 and beyond.
The increase in net loss for fiscal year 2022, as compared to fiscal year 2021, is primarily attributable to a $785,000 increase in operating loss resulting from lower gross margin, which was partially offset by lower operating expenses.
The increase in net loss for fiscal year 2023, as compared to fiscal year 2022, is attributable to the approximately $927,000 increase in operating loss resulting from lower revenue and gross margin and increased operating expenses.
For additional information regarding the BankUnited Loans and the Equipment Loan, see Note 13, Loans Payable , to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K. 29 Table of Contents In February 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time.
In February 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.
We have established milestones that will be tracked to ensure that as funds are expended we are achieving results before additional funds are committed. We anticipate sales growth in future years, primarily from the engineered solutions we plan to focus on.
We have established milestones that will be tracked to ensure that as funds are expended we are achieving results before additional funds are committed.
Other income (expense), net also includes net foreign currency transaction gains and losses, which were minimal for fiscal years 2022 and 2021. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations.
We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations.
We anticipate continued improvement in our cash flows provided by operations in future years, as we continue to focus on managing our receivables, payables and inventory, while continuing to grow our sales and improve gross margins, with moderate increases in general, administrative, sales and marketing and new product development costs. Cash Flows – Investing.
During fiscal years 2022 and 2023 we also made the installment payments for payroll taxes deferred in fiscal year 2020 under the CARES Act. 29 Table of Contents We anticipate continued improvement in our cash flows provided by operations in future years, as many of these non-recurring payables are behind us, and as we continue to focus on managing our receivables, payables and inventory, while continuing to grow our sales and improve gross margins, with moderate increases in general, administrative, sales and marketing and new product development costs.
Gross margin for fiscal year 2022 was approximately $11.8 million, a decrease of 12%, as compared to approximately $13.4 million in fiscal year 2021. Total cost of sales was approximately $23.7 million for fiscal year 2022, compared to $25.0 million for fiscal year 2021, a decrease of 5%.
Total cost of sales was approximately $21.9 million for fiscal year 2023, compared to $23.7 million for fiscal year 2022, a decrease of 8%. Gross margin as a percentage of revenue was 34% for fiscal year 2023 as compared to 33% for fiscal year 2022.
The improvement in fiscal year 2022 reflects our increased focus on collections, and tightening of payment terms policies. We strive to maintain a DSO of less than 60. Other Key Indicators. Other key indicators include various operating metrics, some of which are qualitative and others are quantitative.
The increase in average DSO for fiscal year 2023 is driven by some key accounts with longer payment cycles that have increased in revenue. We strive to maintain a DSO of less than 60. Other Key Indicators. Other key indicators include various operating metrics, some of which are qualitative and others are quantitative.
However, the COVID-19 pandemic continues to impact economic conditions, which could impact the short-term and long-term demand from our customers and, therefore, has the potential to negatively impact our results of operations, cash flows, and financial position in the future. Management is actively monitoring this situation and any impact on our financial condition, liquidity, and results of operations.
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.
In December 2020, ISP Latvia entered into an equipment loan with a third party (the “Equipment Loan”), which party is also a significant customer. The Equipment Loan is subordinate to the BankUnited Loans and is collateralized by certain equipment.
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.
We also identified a further liability in the amount of $210,000, which could have been incurred in the future due to the actions of these employees. This amount was accrued as of June 30, 2021, pending further investigation, and was included in “Other Expense, net” in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021.
Such expenses were recorded as “Selling, general and administrative” expenses in the accompanying Consolidated Statements of Comprehensive Income (Loss). We also identified a further liability in the amount of $210,000, which could have been incurred in the future due to the actions of these employees.
The unit volume for telecommunications products decreased by approximately 62% for fiscal year 2022, as compared to the same period of the prior fiscal year. 33 Table of Contents Revenue generated by the infrared product group for fiscal year 2022 was $18.7 million, a decrease of approximately 11%, as compared to the prior fiscal year.
The volume decrease was largely driven by a lower mix of telecommunications products, which typically have lower average selling prices. Revenue generated by the infrared product group for fiscal year 2023 was $16.7 million, a decrease of approximately 11%, as compared to the prior fiscal year.
The increase in revenue is primarily attributed to increases in sales to customers in the industrial and telecommunications markets, partially offset by a decrease in sales through our catalog and distribution channels. The decrease in sales through our catalog and distribution channels is primarily due to the termination of our distribution agreement in Europe.
The decrease in revenue is due to a decrease in sales to customers in the telecommunications industry and a decrease in sales of commercial products, partially offset by increases in sales to defense and industrial customers.
Year ended June 30, 2022 compared to year ended June 30, 2021. Our revenue decreased by approximately $2.9 million, or 8%, for fiscal year 2022, as compared to fiscal year 2021, with decreases in both infrared and PMO product sales.
Our revenue decreased by approximately 7%, for fiscal year 2023, as compared to fiscal year 2022, with decreases in both infrared and PMO product sales. Revenue from the PMO product group for fiscal year 2023 was $13.4 million, a decrease of 11%, as compared to fiscal year 2022.
We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance.
As of June 30, 2023, the outstanding principal balance on the Term Loan was approximately $2.2 million. We have commenced discussions with other lenders with the intent of refinancing our credit facility prior to maturity. There can be no assurance that we will be successful in such refinancing or that we such refinancing will be available under reasonable commercial terms.
New product development costs were approximately $2.1 million in fiscal year 2022, a decrease of approximately 4%, as compared to approximately $2.2 million in the prior fiscal year. This decrease was primarily due to lower spending on internally-funded development projects, while customer- and government-funded NRE projects increased in fiscal year 2022. Other Expense.
This increase was primarily due to greater spending on internally-funded development projects in fiscal year 2023, such as the MANTIS reference design camera, whereas in fiscal year 2022, new product development consisted of more customer- and government-funded NRE projects. Other Expense. Interest expense was approximately $283,000 for fiscal year 2023, compared to approximately $229,000 in the prior fiscal year.
The decrease in cash flows from operations during fiscal year 2022 is primarily due to the increase in net loss, decrease in accounts payable and accrued liabilities, and an increase in accounts receivable, partially offset by a reduction in inventory.
The decrease in cash flows from operations during fiscal year 2023 is primarily due to an increase in accounts receivable, due to higher revenues in the fourth quarter of fiscal year 2023 as compared to fiscal 2022, and an increase in inventory during the second half of fiscal year 2023.
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).
An exit fee equal to 1% of the outstanding principal balance will be due on December 31, 2023 and (b) 4% of the outstanding principal balance on December 31, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).
With the global supply of germanium currently sourced from Russia and China, recent global events are generating renewed interest in BD6 as an alternative to germanium.
With the global supply of germanium currently concentrated in Russia and China, recent global events are generating renewed interest in germanium alternatives such as our proprietary BD6 material, and other materials we are currently developing under an exclusive license with the Naval Research Lab.
Our revenue increased by 7% in the fourth quarter of fiscal year 2022, as compared to the same quarter of the prior fiscal year, primarily as a result of an increase in demand for PMO products.
Our revenue increased by 9% in the fourth quarter of fiscal year 2023, as compared to the same quarter of the prior fiscal year, driven by increases in infrared and specialty products.
The following table sets forth revenue dollars and units by our three product groups for the three and twelve months ended June 30, 2022 and 2021: (unaudited) Three Months Ended June 30, Year Ended June 30, Quarter Year-to-date 2022 2021 2022 2021 % Change % Change Revenue PMO $ 3,411,877 $ 2,941,270 $ 15,020,542 $ 15,882,189 16 % -5 % Infrared Products 5,046,555 4,975,947 18,735,325 20,971,080 1 % -11 % Specialty Products 448,799 415,099 1,803,293 1,611,552 8 % 12 % Total revenue $ 8,907,231 $ 8,332,316 $ 35,559,160 $ 38,464,821 7 % -8 % Units PMO 398,064 323,404 1,999,200 3,139,774 23 % -36 % Infrared Products 100,715 122,127 438,508 579,563 -18 % -24 % Specialty Products 4,079 8,901 18,948 32,980 -54 % -43 % Total units 502,858 454,432 2,456,656 3,752,317 11 % -35 % Three months ended June 30, 2022 compared to three months ended June 30, 2021.
The following table sets forth revenue dollars and units by our three product groups for the three and twelve months ended June 30, 2023 and 2022: (unaudited) Three Months Ended June 30, Quarter Year Ended June 30, Year-to-date 2023 2022 % Change 2023 2022 % Change Revenue PMO $ 3,170,928 $ 3,411,877 -7 % $ 13,425,643 $ 15,020,542 -11 % Infrared Products 5,465,084 5,046,555 8 % 16,735,869 18,735,325 -11 % Specialty Products 1,048,709 448,799 134 % 2,772,437 1,803,293 54 % Total revenue $ 9,684,721 $ 8,907,231 9 % $ 32,933,949 $ 35,559,160 -7 % Units PMO 314,906 398,064 -21 % 1,462,800 1,999,200 -27 % Infrared Products 42,877 100,715 -57 % 167,095 438,508 -62 % Specialty Products 16,208 4,079 297 % 58,197 18,948 207 % Total units 373,991 502,858 -26 % 1,688,092 2,456,656 -31 % Three months ended June 30, 2023 compared to three months ended June 30, 2022.
Weighted-average common stock shares outstanding were 27,019,534 for both basic and diluted in fiscal year 2022, compared to 26,314,025 for both basic and diluted in fiscal year 2021. The increase in the weighted-average basic common shares was due to the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs.
Weighted-average common stock shares outstanding were 31,637,445 for both basic and diluted in fiscal year 2023, compared to 27,019,534 for both basic and diluted in fiscal year 2022.
Inventory obsolescence allowance is calculated by reserving 100% for items that have not been sold in two years or that have not been purchased in two years.
To date, our actual results have been materially consistent with our estimates, and we expect such estimates to continue to be materially consistent in the future. 36 Table of Contents Inventory obsolescence allowance is calculated by reserving 100% for items that have not been sold in two years or that have not been purchased in two years.
NRE revenue is project based and the timing of any such projects is wholly dependent on our customers and their project activity. Inventory Levels. We manage inventory levels to minimize investment in working capital but still have the flexibility to meet customer demand to a reasonable degree. We review our inventory for obsolete items quarterly.
The first quarter of fiscal 2023 also included a charge for in-process materials billed to a customer upon order cancellation, during the first quarter of fiscal 2023. Inventory Levels. We manage inventory levels to minimize investment in working capital but still have the flexibility to meet customer demand to a reasonable degree. We review our inventory for obsolete items quarterly.
As of June 30, 2022, approximately $430,000 remains accrued. The Chinese Labor Court has ruled in favor of the former employees, as expected. We are continuing litigation and negotiation as an option. 25 Table of Contents We have transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on their ability to operate.
We continue to have litigation pending in the Chinese court system related to these matters, but there has been little activity during fiscal year 2023. 25 Table of Contents We have transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on their ability to operate.
We expect to maintain moderate growth in our visible PMO product group by continuing to diversify and offer new applications, with a cost competitive structure; however, we believe that, although necessary, the terminations of certain of our management employees in our China subsidiaries, LPOIZ and LPOI, and transition to new management personnel has adversely impacted the domestic sales in China of these subsidiaries through fiscal year 2022.
However, order bookings for both PMO and infrared products continue to be slow in China. We believe the terminations of certain of our management employees in our China subsidiaries, LPOIZ and LPOI, and transition to new management personnel in fiscal year 2021, adversely impacted the domestic sales in China of these subsidiaries during fiscal year 2022 and fiscal year 2023.
After attempts to collect a receivable have failed, the receivable is written off against the allowance. To date, our actual results have been materially consistent with our estimates, and we expect such estimates to continue to be materially consistent in the future.
After attempts to collect a receivable have failed, the receivable is written off against the allowance.
The decrease in revenue is primarily driven by sales to customers in the industrial market, particularly for our BD6-based molded infrared products. During fiscal year 2022, sales of infrared units decreased by 24%, as compared to the prior year period.
The decrease in revenue is primarily driven by sales of BD6-based molded infrared products, particularly to customers in the China commercial and industrial markets. The decrease in sales to customers in the China commercial and industrial markets were partially offset by increased revenue from sales of BD6-based products to customers in the defense industry.
Cash used in financing activities for fiscal year 2021 reflects approximately $1.3 million in principal payments on our loans and finance leases, offset by proceeds of approximately $275,000 from the Equipment Loan, and approximately $173,000 in proceeds from the exercise of stock options and from the sale of Class A common stock under the 2014 ESPP. 30 Table of Contents How We Operate We have continuing sales of two basic types: sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and the more challenging and potentially more rewarding business of customer product development.
Cash provided by financing activities for fiscal year 2023 reflects equity proceeds of $9.2 million from a public offering of Class A common stock, which closed in January 2023, offset by approximately $1.9 million in principal payments on our loans and finance leases, offset by proceeds of approximately $141,000 from the 2023 Equipment Loan and approximately $40,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.
During fiscal year 2021, our capital expenditures were primarily related to the continued expansion of our infrared coating capacity as well as increasing our lens pressing and dicing capacity to meet demand. We anticipate a similar level of capital expenditures during fiscal year 2023; however, the total amount expended will depend on sales growth opportunities and other circumstances.
We anticipate a similar level of capital expenditures during fiscal year 2023; however, the total amount expended will depend on sales growth opportunities and other circumstances. Cash Flows – Financings. Net cash provided by financing activities was approximately $7.5 million in fiscal year 2023, compared to cash used in financing activities of approximately $636,000 in fiscal year 2022.
Non-operating items include a $420,000 favorable difference for the aforementioned accrual and subsequent reversal of a potential liability associated with the actions of our terminated employees of our Chinese subsidiaries. In addition, there was a favorable difference of approximately $71,000 in the provision for income taxes.
Other income also decreased approximately $152,000, primarily due to the aforementioned $210,000 accrual reversal in fiscal year 2022, after a potential liability associated with the actions of our terminated employees of our Chinese subsidiaries was favorably resolved.

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