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What changed in LIGHTPATH TECHNOLOGIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LIGHTPATH TECHNOLOGIES INC's 2023 and 2024 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 2024 report.

+345 added−364 removedSource: 10-K (2024-09-19) vs 10-K (2023-09-14)

Top changes in LIGHTPATH TECHNOLOGIES INC's 2024 10-K

345 paragraphs added · 364 removed · 211 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+64 added−36 removed53 unchanged
Biggest changeAdditionally, 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 .
Biggest changeAlong those lines, we continue to focus on developing, acquiring and licensing 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 such as the following: · Infrared Imaging Technologies. Our optical solutions strategy focuses around infrared imaging.
In December 2016, we acquired ISP Optics Corporation, a New York corporation (“ISP”), and its wholly-owned subsidiary, ISP Optics Latvia, SIA, a limited liability company founded in 1998 under the Laws of the Republic of Latvia (“ISP Latvia”).
ISP and ISP Latvia In December 2016, we acquired ISP Optics Corporation, a New York corporation (“ISP”), and its wholly-owned subsidiary, ISP Optics Latvia, SIA, a limited liability company founded in 1998 under the Laws of the Republic of Latvia (“ISP Latvia”).
(“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.
(“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 manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies.
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.
Our market messaging will look to inspire interest and promote engagement. 10 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.
Our infrared optical components compete with optical products produced by Janos Technology LLC, Ophir Optronics Solutions Ltd. (a subsidiary of MKS Instruments, Inc.), Clear Align, II-VI, Inc. and a variety of Eastern European and Asian manufacturers. Infrared optical components can be produced using several techniques.
Infrared Components Product Group. Our infrared optical components compete with optical products produced by Janos Technology LLC, Ophir Optronics Solutions Ltd. (a subsidiary of MKS Instruments, Inc.), Clear Align, II-VI, Inc. and a variety of Eastern European and Asian manufacturers. Infrared optical components can be produced using several techniques.
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.
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.
Our organizational structure includes a product management function that enables the close coordination of supply with demand to help us leverage our core offerings and coordinate our engineering development efforts that will leverage and expand our portfolio of capabilities.
Our organizational structure includes a technical project management function that enables the close coordination of supply with demand to help us leverage our core offerings and coordinate our engineering development efforts that will leverage and expand our portfolio of capabilities.
We believe that leadership in glass molding technologies, our vertical integration by producing our own glass, and our continued investment in technology development in this area, coupled with our diverse manufacturing flexibility, and our manufacturing facilities located in Asia, Europe and North America are key advantages over the products manufactured by competitors. Manufacturing Facilities .
We believe that leadership in glass molding technologies, our vertical integration by producing our own glass, and our continued investment in technology development in this area, coupled with our diverse manufacturing flexibility, and our manufacturing facilities located in Asia, Europe and North America are key advantages over the products manufactured by competitors. Visible Components Product Group.
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.
Subsidiaries LPOI and LPOIZ 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 was primarily engaged in sales and support functions. In December 2013, we formed LightPath Optical Instrumentation (Zhenjiang) Co., Ltd.
ISP is a vertically integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. Since June 2019, ISP’s manufacturing operation has been located at our corporate headquarters facility in Orlando, Florida (the “Orlando Facility”).
ISP is a vertically integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. ISP’s manufacturing operation is located at our corporate headquarters facility in Orlando, Florida (the “Orlando Facility”).
We incurred expenditures for new product development of approximately $2.1 million during both fiscal years 2023 and 2022. In some cases our product and technology development is supported through billing of engineering services, such as non-recurring engineering (“NRE”) fees.
We incurred expenditures for new product development of approximately $2.4 million and $2.1 million during fiscal years 2024 and 2023, respectively. In some cases, our product and technology development is supported through billing of engineering services, such as non-recurring engineering (“NRE”) fees.
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.
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. Growth Strategy Since our Chief Executive Officer, Mr.
Our infrared product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. 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 infrared product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. This product group also includes both conventional and CNC ground and polished lenses. 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.
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.
While the global market for component supply is fragmented and highly competitive, we strive to 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, which can also contain sensors and electronics.
We believe our facilities and planned expansions are adequate to accommodate our needs over the next year. 11 Table of Contents Production and Equipment.
We believe our facilities and planned expansions are adequate to accommodate our needs over the next year. Production and Equipment.
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.
We developed this glass and melt it internally to produce our BlackDiamond 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.
Between these two product groups, we have the capability to manufacture lenses from very small (with diameters of sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2000 millimeters. In addition, both product groups offer catalog and custom designed optics.
We have the capability to manufacture lenses from very small (with diameters of sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2000 millimeters, utilizing our various manufacturing methods. In addition, we offer both catalog and custom designed infrared optics.
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.
Department of Defense (“DoD”) contractors, commercial and industrial customers, and original equipment manufacturers (“OEMs”) for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. Visimid’s facility is located in Plano, Texas. Industry We and our customers support a wide range of industries, including automotive, telecommunications, defense, medical, bio-technology, industrial, consumer goods and more.
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.
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. Effective June 1, 2024, LPOIZ reduced its facility to 39.500 square feet.
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.
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.
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.
So far in 2024, 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 numerous other conferences in the EU as well as Asia.
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.
The diamond turning department has numerous diamond-turning machines accompanied with the latest metrology tools. 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.
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”).
ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics.
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.
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 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. In addition, we compete with providers of thermal imaging products that produce their own optical components and sensors.
The Zhenjiang Facility is also ISO/TS 1649:2009 automotive certified for manufacturing of optical lenses and accessories. The Orlando Facility is International Traffic in Arms Regulations (“ITAR”) compliant and registered with the U.S. Department of State. The Riga Facility has a DSP-5 ITAR license and Technical Assistance Agreement in place that allows this facility to manufacture items with ITAR requirements.
The Orlando, Zhenjiang, and Riga Facilities are ISO 9001:2015 certified. The Zhenjiang Facility is also ISO/TS 1649:2009 automotive certified for manufacturing of optical lenses and accessories. The Orlando Facility is International Traffic in Arms Regulations (“ITAR”) compliant and registered with the U.S. Department of State.
We also expect growth from medical programs and commercial optical sub-assemblies. We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies. Many of our optical assemblies consist of several products that we manufacture.
This continues to be an emerging market with long-term growth potential for us. We also expect growth from medical programs and commercial optical sub-assemblies. We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies.
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.
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.
Such unique technologies include developing tailored and optimized optical coatings, and advanced fabrication techniques such as freeform optical components, custom materials not available elsewhere, and cutting edge optical design capabilities.
Such unique technologies include developing tailored and optimized optical coatings, and advanced fabrication techniques such as freeform optical components, custom materials not available elsewhere, and cutting edge optical design capabilities. During fiscal year 2024, we took several important steps to align the organization to our new strategic direction.
This is part of what makes using photonics so complicated, and at the same time part of what we see as the opportunity.
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.
Growth Strategy Historically, we operated with a focus on optical component manufacturing, and specifically on our leadership position as a precision molded lens manufacturer for visual light applications. While still positioned as a component provider, we expanded our addressable market with the acquisition of ISP, a manufacturer of infrared optical components, in December 2016.
While still positioned as a component provider, we expanded our addressable market with the acquisition of ISP, a manufacturer of infrared optical components, in December 2016.
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.
This transition, which is occurring both organically and through acquisitions, such as the July 2023 acquisition of Visimid Technologies, is positioning the Company for significant growth and higher profitability in coming years. 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.
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.
Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required. We 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.
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.
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 technologies that we acquired through the Visimid acquisition such as video processing, infrared camera integration and more.
In addition, there is a trend toward utilizing smaller size sensors in these devices which require smaller size lenses and that fits well with our molding technology. Specialty Product Group. We offer a group of custom specialty optics products and assemblies that take advantage of our unique technologies and capabilities.
In addition, there is a trend toward utilizing smaller size sensors in these devices which require smaller size lenses and that fits well with our molding technology. Many of our optical assemblies consist of several products that we manufacture. Engineering Services Product Group. We develop products pursuant to development agreements that we enter into with customers.
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.
Today, LightPath is a global company with facilities in the United States, the People’s Republic of China and the Republic of Latvia. Our corporate headquarters is located in Orlando, Florida. Historically, we operated with a focus on optical component manufacturing, and specifically on our leadership position as a precision molded lens manufacturer for visual light applications.
ISP Latvia’s Riga Facility consists of crystal growth, grinding, polishing, diamond turning, quality control departments and a mechanical shop to provide the departments with the necessary tooling. The crystal growth department is equipped with multiple furnaces to grow water soluble crystals.
ISP Latvia’s Riga Facility consists of crystal growth, grinding, polishing, diamond turning, quality control departments and a mechanical shop to provide the departments with the necessary tooling. The grind and polish department has modern CNC equipment, lens centering and conventional equipment to perform spindle, double sided and continuous polishing operations.
Plastic molded aspheres and hybrid plastic/glass aspheric optics allow for high volume production, but primarily are limited to low-cost consumer products that do not place a high demand on performance (such as plastic lenses in disposable or mobile phone cameras). Molded plastic aspheres appear in products that stress cost or weight as their measure of success over performance and durability.
We do not depend on one facility and are able to move production in and out of China, which we believe creates a significant advantage by giving us supply chain continuity and an ability to adjust to customers’ geographical preferences. 12 Table of Contents Plastic molded aspheres and hybrid plastic/glass aspheric optics allow for high volume production, but primarily are limited to low-cost consumer products that do not place a high demand on performance (such as plastic lenses in disposable or mobile phone cameras).
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 continue to enhance our website ( www.lightpath.com ), social media presence, email communications and our position as thought leaders in both optics and thermal imaging through these platforms. Trade Shows. We display our standard products, promote new innovative offerings and meet with industry influencers at a number of conferences each year throughout North America, Europe and Asia.
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.
As part of our product development and research and development efforts, we have numerous employees with engineering and related advanced degrees located in our facilities in the U.S., China and Latvia. Our facilities in Orlando, Florida, Plano, Texas, and Zhenjiang, China are located in or near industrial technology campuses with substantial access to optical industry constituencies, including a major university.
Over the last few years Lightpath has been investing in developing and commercializing our BlackDiamond glass as an alternative to using Germanium. BD2, our first glass, has been in production for nearly 15 years. BD6, our second glass, and our flagship material, is produced in volume and fielded in multiple products, both commercial and defense related.
Over the last few years LightPath has been investing in developing and commercializing our BlackDiamond glasses (which are labeled with a “BD” prefix) as alternatives to using Germanium. BD2, our first glass, has been in production for nearly 15 years.
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.
ISP Latvia’s manufacturing facility is located in Riga, Latvia (the “Riga Facility”). 4 Table of Contents Visimid 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 U.S.
These products include custom optical designs, mounted lenses, optical assemblies, and collimator assemblies. Collimator assemblies are utilized in applications involving light detection and ranging (“LIDAR”) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment. This continues to be an emerging market with long-term growth potential for us.
Our assemblies and modules product group is comprised of other value-added products, including both infrared and visible components, such as mounted lenses, optical assemblies, collimator assemblies, and other custom specialty optics. Collimator assemblies are utilized in applications involving light detection and ranging (“LIDAR”) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment.
We have also transitioned from a business unit focus to a unified global direct sales team that promotes the overall company portfolio and is standardized on a problem solving, needs analysis process. The team recently went through Sandler Training to help with this shift and to empower action with improved communication techniques.
We have recently incorporated our product management function within our go-to-market team to provide both internal and external support for growth of our thermal imaging product solutions portfolio. We have also transitioned from a business unit focus to a unified global direct sales team that promotes the overall company portfolio and is standardized on a problem solving, needs analysis process.
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.
Molded plastic aspheres appear in products that stress cost or weight as their measure of success over performance and durability. 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.
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.
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.
Additionally, in December 2021 we received an exclusive license from the U.S. government for the Chalcogenide materials that have been developed in the U.S. Naval Research Laboratories (“NRL”).
BD6, our second glass, and our flagship material, is produced in volume and fielded in multiple products, both commercial and defense related. Additionally, in December 2021 we received an exclusive license from the U.S. government for the Chalcogenide materials that have been developed by the NRL.
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.
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. 8 Table of Contents New Product Development Consistent with our strategic plan, we have focused our development efforts in fiscal years 2023 and 2024 on products, technologies and capabilities that allow us to provide better solutions using the most optimal technology for each customer and with alignment to customer product lifecycle.
Army, to name a few. Those fundings are all aimed at accelerating the qualification of the materials for use in their respective applications.
DoD, the Defense Logistics Agency, the European Space Agency, and the U.S. Army, among others. Those fundings are all aimed at accelerating the qualification of the materials for use in their respective applications. We continue to develop those technical capabilities and materials, both using internal funding and federal funding.
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.
Our numerous manufacturing capabilities allow us to meet complex optical challenges that demand more exotic optical substrate materials that are non-moldable, as well as larger size optics. 9 Table of Contents We also have the ability to manufacture chalcogenide glass from which we produce infrared lenses.
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.
We expect this shift to start favorably impacting our financial results in future periods. Organizational Alignment Along with the development of a new strategic direction, we are focused on the execution of a complementary strategic plan.
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.
Overall, we anticipate moderate growth for our infrared components, particularly as our germanium alternatives continue to be adopted into new applications and designs. This product group also supports our assemblies and modules product group. Visible Components Product Group. Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses.
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.
The aggregation of such unique technologies is intended to allow us to differentiate our optical solutions and provide customers with products that are tailored exactly to their needs. 6 Table of Contents Technologies We believe that to be the preferred partner to fulfill the photonics needs of our customers, domain expertise and differentiating technologies in photonics are key elements.
In connection with our new strategic direction and the expanding portfolio of products and services, we are evaluating the ways in which we may optimize the financial reporting of our product groups. Sales and Marketing Marketing . Extensive product diversity and varying levels of product maturity characterize the optics industry.
The timing and extent of any such product development requests are unpredictable and outside of our control. Sales and Marketing Marketing . Extensive product diversity and varying levels of product maturity characterize the optics industry.
Lastly, the importance of the materials and how they align within our strategy can also be seen in our own products, with our first camera product, Mantis, being based on, and enabled by one of those exclusive and unique materials. · High precision molded lenses. Historically, precision molding of lenses is the key technology we have built upon.
We expect infrared materials to continue to be an important technology in our portfolio · High precision molded lenses. Historically, precision molding of lenses is the key technology we have built upon.
Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications. The timing and extent of any such product development requests are outside of our control. We are re-evaluating our product groups going into fiscal year 2024, with the addition of Visimid in July 2023.
Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications. The purpose of those engineering services that we offer is not only to provide purely engineering services for a customer, but also to engineer new products which we later manufacture for the customer.
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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.
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Effective February 28, 2023, the legal entities of LPOI and LPOIZ were merged, with LPOIZ as the surviving company and the operations of the two companies were merged.
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Sam Rubin, an industry veteran with a proven track record for delivering high growth through organic and inorganic means, to assume the role of Chief Executive Officer and to develop and implement a new strategy going forward. In the fall of 2020, Mr.
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Sam Rubin, joined the Company in 2020, we have been developing a new strategy that will transition the Company from a pure component manufacturer to a supplier of imaging subsystems and systems.
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Rubin led our Board and the leadership team in collaborative discussions with the purpose of defining a new comprehensive strategy for our business.
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Our new strategic direction, which is based on our core technological differentiators such as our BlackDiamond glass (“BlackDiamond”) and proprietary molding technologies, significantly increases our value add to customers.
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The collaborative strategic planning process included leaders from across the organization, detailed dialogs with customers, vendors and partners, and an in-depth analysis of the environment we are in, changes and trends in and around the use of photonics, and an analysis of our capabilities, strengths and weaknesses.
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Continually adding differentiating technologies is key to our strategy and we expect to continue to do so both organically and through acquisitions. Examples of this strategic approach can be found in many of our recent new product lines. We refer to these as LightPath 2.0 and 3.0, as that symbolizes the evolution of the Company.
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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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LightPath 2.0 refers to our assemblies and LightPath 3.0 refers to our cameras and related subsystems and systems. Our Mantis camera represents an innovation in imaging in both mid wave and long wave simultaneously, something made possible by our exclusive BlackDiamond materials licensed from the U.S.
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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.
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Naval Research Laboratories (the “NRL”), and which has opened the door into markets such as fire detection and industrial furnace and boiler inspection. The camera system we are developing as a sub system for Lockheed Martin is based on a unique and proprietary imaging technology.
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Rubin’s appointment as president and Chief Executive Officer (“CEO”), continuing with operational activities, such as refocusing our investments and expansion from a China focus to prioritizing the growth and development of our U.S. and Latvia operations.
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There are many other exciting new products and projects currently in development and various stages of testing, all based similarly on key differentiating technologies that we are leveraging to transition from a component company to a solution provider.
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In furtherance of our strategic plan, we recently acquired Visimid in Texas resulting in immediate growth of our development and engineering team and capabilities through the addition of the Visimid team.
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The shift in strategy and product offerings also shifts the price range of our product portfolio and indirectly drives growth in and of itself. Historically, as a pure component Company, the average selling prices (“ASPs”) of those products were measured in single dollars or tens of dollars, whereas with the development of our assemblies product line (i.e.
Removed
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 .
Added
LightPath 2.0), ASPs for those products are measured in hundreds of dollars. When we added cameras, subsystems and systems (LightPath 3.0), ASPs for those products are measured in thousands of dollars, and as much as $30,000 for our most advanced and recent version of the Mantis camera.
Removed
In addition to providing alternative to the use of Germanium, the new materials from NRL, which we are now in the process of commercializing, have unique advantages such as enabling multispectral imaging (imaging in two or more wavebands with one camera), and thermal and mechanical characteristics that enable customers to build better, lighter and smaller systems.
Added
Those steps include expanding the footprint of our manufacturing operations in Orlando and consolidating those operations previously in two separate buildings into a single building. With this facility consolidation, we brought together certain operational functions of ISP and LightPath, which had remained separate since the acquisition of ISP in fiscal year 2017.
Removed
As the world looks to transition away from Germanium, in light of the supply chain liability coming from export restrictions and availability of Germanium, our exclusive family of BlackDiamond glass provides customers not only an alternative, but in fact significant advantages over using Germanium.
Added
We also right-sized our China operation by consolidating two buildings in Zhenjiang into one and closed a sales office in Shanghai. All of those, coupled with right-sizing the relevant parts of the organization have aligned our structure, systems and organization to our strategic direction and set the stage for significant future growth in the U.S. and Europe.
Removed
We believe that this creates a distinctive competitive advantage, which we are leveraging to both enter markets in a more aggressive way (such as defense), and as a stepping stone for our transition from components to solutions.
Added
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. Such technologies allow us to develop solutions and sub systems that outperform other solutions in size, weight, power, and cost.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+18 added−48 removed79 unchanged
Biggest changeHowever, the loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect our revenues. 14 Table of Contents We may be affected by political and other risks as a result of our sales to international customers and/or our sourcing of materials from international suppliers.
Biggest changeWe may be affected by political and other risks as a result of our sales to international customers and/or our sourcing of materials from international suppliers. In fiscal year 2024, 39% of our net revenue was derived from sales outside of the U.S., with 94% of our foreign sales derived from customers in Europe and Asia.
Any potential intellectual property litigation could also force us to do one or more of the following, any of which could harm our business and adversely affect our financial condition and results of operations: · stop selling, incorporating or using our products that use the disputed intellectual property; · obtain from third parties a license to sell or use the disputed technology, which license may not be available on reasonable terms, or at all; or · redesign our products that use the disputed intellectual property. 22 Table of Contents Item 2.
Any potential intellectual property litigation could also force us to do one or more of the following, any of which could harm our business and adversely affect our financial condition and results of operations: · stop selling, incorporating or using our products that use the disputed intellectual property; · obtain from third parties a license to sell or use the disputed technology, which license may not be available on reasonable terms, or at all; or · redesign our products that use the disputed intellectual property. 22 Table of Contents Item 1B.
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.
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. 17 Table of Contents We also source certain raw materials from outside the U.S.
We currently purchase several key materials, or have outside vendors perform process steps, such as lens coatings, used in or during the manufacture of our products from single or limited source suppliers.
We currently purchase several key materials (including Germanium) or have outside vendors perform process steps, such as lens coatings, used in or during the manufacture of our products from single or limited source suppliers.
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.
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.
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.
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 2024, greater than 25% of our cash was held abroad.
In addition, we may experience manufacturing delays and reduced manufacturing yields upon introducing new products to our manufacturing lines. The occurrence of unacceptable manufacturing yields or product yields could adversely affect our financial condition and results of operations. If our customers do not qualify our manufacturing lines for volume shipments, our operating results could suffer .
In addition, we may experience manufacturing delays and reduced manufacturing yields upon introducing new products to our manufacturing lines. The occurrence of unacceptable manufacturing yields or product yields could adversely affect our financial condition and results of operations. 20 Table of Contents If our customers do not qualify our manufacturing lines for volume shipments, our operating results could suffer .
If a designated employee uses a chop in an effort to obtain control over one or more of our Chinese subsidiaries, we would need to take legal action to seek the return of the applicable chop(s), apply for a new chop(s) with the relevant authorities, or otherwise seek legal redress for the violation of their duties.
If a designated employee uses a chop in an effort to obtain control over our Chinese subsidiary, we would need to take legal action to seek the return of the applicable chop(s), apply for a new chop(s) with the relevant authorities, or otherwise seek legal redress for the violation of their duties.
We are subject to the following risks, among others: · greater difficulty in accounts receivable collection and longer collection periods; · potentially different pricing environments and longer sales cycles; · the impact of recessions in economies outside the U.S.; · the impact of high, sustained inflation; · unexpected changes in foreign regulatory requirements; · the burdens of complying with a wide variety of foreign laws and different legal standards; · certification requirements; · reduced protection for intellectual property rights in some countries; · difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; · potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; · price controls and exchange controls; · government embargoes or foreign trade restrictions; · imposition of duties and tariffs and other trade barriers; · import and export controls; · transportation delays and interruptions; · terrorist attacks and security concerns in general; and · political, social, economic instability and disruptions.
We are subject to the following risks, among others: · greater difficulty in accounts receivable collection and longer collection periods; · potentially different pricing environments and longer sales cycles; · the impact of recessions in economies outside the U.S.; · the impact of high, sustained inflation; · unexpected changes in foreign regulatory requirements; · the burdens of complying with a wide variety of foreign laws and different legal standards; · certification requirements; · reduced protection for intellectual property rights in some countries; · difficulties in managing the staffing of international operations, including labor unrest and current and changing regulatory environments; · potentially adverse tax consequences, including the complexities of foreign value-added tax systems, restrictions on the repatriation of earnings, and changes in tax rates; · price controls and exchange controls; · government embargoes or foreign trade restrictions; · imposition of duties and tariffs and other trade barriers; · import and export controls; · transportation delays and interruptions; · terrorist attacks and security concerns in general; and · political, social, economic instability and disruptions. 16 Table of Contents Russia’s ongoing conflict with Ukraine may continue to disrupt our supply chain .
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.
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.
During any period where we lose effective control of the corporate activities of one or more of our Chinese subsidiaries as a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we could lose the economic benefits of that aspect of our business.
During any period where we lose effective control of the corporate activities of our Chinese subsidiary as a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted, and we could lose the economic benefits of that aspect of our business.
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 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.
To the extent those chops are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and the operations of those entities could be significantly and adversely impacted.
To the extent those chops are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of this entity could be severely and adversely compromised, and the operations of this entity could be significantly and adversely impacted.
We believe that our intellectual property rights are important to our success and our competitive position, and we rely on a combination of patent, copyright, trademark, and trade secret laws and restrictions on disclosure to protect our intellectual property rights.
We believe that our intellectual property rights are important to our success and our competitive position, and we rely on a combination of patent, copyright, trademark, and trade secret laws and restrictions on disclosure to protect our intellectual property rights in the United States and internationally.
We do not have detailed disaster recovery plans for our facilities and we do not have a backup facility, other than our other facilities, or contractual arrangements with any other manufacturers in the event of a casualty to or destruction of any facility or if any facility ceases to be available to us for any other reason.
We do have a business continuity and recovery plan for our facilities however, we do not have a backup facility, other than our other facilities, or contractual arrangements with any other manufacturers in the event of a casualty to or destruction of any facility or if any facility ceases to be available to us for any other reason.
If we do not expand our sales and marketing organization, our revenues may not increase. The sale of our products requires prolonged sales and marketing efforts targeted at several key departments within our prospective customers’ organizations and often involves our executives, personnel, and specialized systems and applications engineers working together. Currently, our direct sales and marketing organization is somewhat limited.
The sale of our products requires prolonged sales and marketing efforts targeted at several key departments within our prospective customers’ organizations and often involves our executives, personnel, and specialized systems and applications engineers working together. Currently, our direct sales and marketing organization is somewhat limited.
If we are unable to continue to expand our sales operations globally, we may not be able to continue to increase market awareness or sales of our products, which would adversely affect our revenues, results of operations, and financial condition.
If we are unable to continue to expand our sales operations globally, we may not be able to continue to increase market awareness or sales of our products, which would adversely affect our revenues, results of operations, and financial condition. If we are unable to effectively compete, our business and operating results could be negatively affected.
In fiscal years 2023 and 2022, we recognized net losses of approximately $37,000 and $3,000 on foreign currency transactions, respectively.
In fiscal years 2024 and 2023, we recognized net gains of approximately $73,000 and losses of $37,000 on foreign currency transactions, respectively.
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.
As of June 30, 2024, LPOIZ had approximately $1.6 million in retained earnings available for repatriation, based on earnings accumulated through December 31, 2023, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2024. LPOI did not have any earnings available for repatriation as of the date of the merger with LPOIZ.
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 2024, we had sales to three customers that comprised an aggregate of approximately 25% of our annual revenue, with one customer at 12% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales.
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.
Our business, financial condition, and results of operations could be adversely affected by continued disruption and global consequences stemming from the conflict.
Our Chinese subsidiaries, LPOI and LPOIZ, generally execute legal documents with corporate chops. One or more of our corporate chops may be used to, among other things, execute commercial sales or purchase contracts, procurement contracts and office leases, open bank accounts, issue checks and to issue invoices. We have controls in place over access to and use of the chops.
Our Chinese subsidiary, LPOIZ (and formerly LPOI), generally executes legal documents with corporate chops. One or more of our corporate chops may be used to, among other things, execute commercial sales or purchase contracts, procurement contracts and office leases, open bank accounts, issue checks and to issue invoices.
We cannot assure you that we will be able to do so in a timely manner or upon acceptable terms and conditions and the failure to do either of the foregoing would negatively affect our business, results of operations, financial condition, and cash flows. We may not be able to protect our intellectual property rights throughout the world.
We cannot assure you that we will be able to do so in a timely manner or upon acceptable terms and conditions and the failure to do either of the foregoing would negatively affect our business, results of operations, financial condition, and cash flows. Data breach and breakdown of information and communication technologies.
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.
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.
If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, financial condition, and results of operations. Our operations are subject to anti-corruption laws, including the U.S.
Foreign Corrupt Practices Act and other similar foreign anti-corruption laws, as well as other laws governing our operations. If we fail to comply with these laws, we could be subject to civil or criminal penalties, other remedial measures, and legal expenses, which could adversely affect our business, financial condition, and results of operations.
However, we cannot assure you that unauthorized access to or use of those chops can be prevented.
We have controls in place over access to and use of the chops. However, we cannot assure you that unauthorized access to or use of those chops can be prevented.
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.
Any material impacts to our customers could have a material adverse effect on our business and operating results. 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 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.
We reported net losses of $8.0 million, $4.0 million, $3.5 million and $3.2 million for fiscal years 2024, 2023, 2022 and 2021, respectively. As of June 30, 2024, we had an accumulated deficit of approximately $215.8 million.
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.
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. We will likely need additional capital to sustain our operations in the future and to repay indebtedness.
Foreign Corrupt Practices Act (“FCPA”), and other foreign anti-corruption laws that apply in countries where we do business. The FCPA and these other laws generally prohibit us and our employees and intermediaries from offering, promising, authorizing or making payments to government officials or other persons to obtain or retain business or gain some other business advantage.
The FCPA and these other laws generally prohibit us and our employees and intermediaries from offering, promising, authorizing or making payments to government officials or other persons to obtain or retain business or gain some other business advantage.
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.
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. The economic decline in China may have adversely impacted the financial condition of certain of our suppliers, some of whom have limited financial resources.
The successful commercialization of our products and technologies will depend in part on our ability to meet obligations under contracts with respect to the products and related development requirements. The failure of these business relationships will limit the commercialization of our products and technologies, which will have an adverse impact on our business development and our ability to generate revenues.
The successful commercialization of our products and technologies will depend in part on our ability to meet obligations under contracts with respect to the products and related development requirements.
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.
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.
In addition, we cannot predict the nature, scope, or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted. Operations outside of the U.S. may be affected by changes in trade production laws, policies, and measures, and other regulatory requirements affecting trade and investment.
In addition, we cannot predict the nature, scope, or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
By providing the bridge into the optical solution world, we partner with our customers on a long term basis, create value to our customers, and capture that value through the long-term supply relationships we develop.
By providing the bridge into the optical solution world, we partner with our customers on a long-term basis, create value to our customers, and capture that value through the long-term supply relationships we develop. However, the loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect our revenues.
To the extent that our supply chain, costs, sales, or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition, and results of operations may be materially adversely affected. Our future growth is partially dependent on our market penetration efforts.
To the extent that our supply chain, costs, sales, or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition, and results of operations may be materially adversely affected. We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
We are also subject to other laws and regulations governing our international operations, including regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S.
Operations outside of the U.S. may be affected by changes in trade production laws, policies, and measures, and other regulatory requirements affecting trade and investment. 18 Table of Contents We are also subject to other laws and regulations governing our international operations, including regulations administered by the U.S. Department of Commerce’s Bureau of Industry and Security, the U.S.
Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel to support our business strategy.
Because of these factors, the loss of the services of any of these key employees could adversely affect our business, financial condition, and results of operations. Our continuing ability to attract and retain highly qualified personnel will also be critical to our success because we will need to hire and retain additional personnel to support our business strategy.
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.
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.
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.
We have limited capital resources. Our operations have historically been largely funded from the proceeds of equity financings and cash flow from operations along with a minimal level of debt financing.
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.
Our operations are vulnerable to interruption by fire, hurricane winds and rain, earthquakes, electric power loss, telecommunications failure, and other events beyond our control.
Financial or other difficulties faced by these suppliers could limit the availability of key components or materials. For example, increasing labor costs in China has increased the risk of bankruptcy for suppliers with operations in China, and has led to higher manufacturing costs for us and the need to identify alternate suppliers.
The economic decline in China has also increased the risk of bankruptcy for suppliers with operations in China and has led to higher manufacturing costs for us and the need to identify alternate suppliers. Additionally, financial difficulties could impair our ability to recover advances made to these suppliers.
Any infringement or misappropriations of our patents and intellectual property rights would adversely affect our business, results of operations, financial condition, and cash flows. We may become involved in intellectual property disputes and litigation, which could adversely affect our business .
We may become involved in intellectual property disputes and litigation, which could adversely affect our business .
If one or more of our key employees are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Additionally, we may incur additional expenses to recruit and retain new key employees.
Our future success largely depends upon the continued services of our key executive officers, management team, and other engineering, sales, marketing, manufacturing, and support personnel. If one or more of our key employees are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all.
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.
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. Since that announcement, supply of Germanium has been disrupted, though not completely stopped.
The decline in demand in the telecommunications equipment industry may have adversely impacted the financial condition of certain of our suppliers, some of whom have limited financial resources. We have in the past, and may in the future, be required to provide advance payments in order to secure key materials from financially limited suppliers.
We have in the past, and may in the future, be required to provide advance payments in order to secure key materials from financially limited suppliers. Financial or other difficulties faced by these suppliers could limit the availability of key components or materials.
If any of our key employees joins a competitor or forms a competing company, we may lose some or a significant portion of our customers. Because of these factors, the loss of the services of any of these key employees could adversely affect our business, financial condition, and results of operations.
Additionally, we may incur additional expenses to recruit and retain new key employees. If any of our key employees joins a competitor or forms a competing company, we may lose some or a significant portion of our customers.
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.
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.
Because of our limited product offerings, our ability to generate additional revenues may be limited without additional growth . We organized our business based on three product groups: PMOs, infrared products, and specialty products.
Because of our limited product offerings, our ability to generate additional revenues may be limited without additional growth . With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services.
Our future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel. Our future success largely depends upon the continued services of our key executive officers, management team, and other engineering, sales, marketing, manufacturing, and support personnel.
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 future success depends on our key executive officers and our ability to attract, retain, and motivate qualified personnel.
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.
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.
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.
Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act (“FCPA”), and other foreign anti-corruption laws that apply in countries where we do business.
Removed
Additionally, financial difficulties could impair our ability to recover advances made to these suppliers.
Added
As a purchaser of Germanium, we are mostly able to purchase the Germanium we need, though the availability of it and ability to receive export licenses varies between vendors. From our customers we know that some of them are able to import Germanium from China, while some get refused for a license.
Removed
Our future growth is partially dependent on our market penetration efforts, which include diversifying our sales and offering to provide complete optical solutions such as assemblies to existing and other markets.
Added
Yet, even those that are able to receive a license experience material lead times that are significantly prolonged because of the process to get a license, and prices that as of August 2024, were 60% higher than the same time last year.
Removed
While we believe we are able to provide such engineered solutions, we anticipate the need to gain the customer’s trust in providing more than the optical component, a process that can sometimes take months, if not years. Expansion of our product lines and sales into new markets will require significant investment in equipment, facilities, and materials.
Added
We will likely need to raise additional financing to repay our outstanding indebtedness of approximately $4.2 million, as of August 2024, and to fund our current level of operations as well as our strategic plan. Additional financing will be required in order for us to take advantage of acquisition opportunities that we may identify.
Removed
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.
Added
Such financing, which is not in place at this time, may be from the sale of equity or convertible or other debt securities in a public or private offering, or from an additional credit facility.
Removed
If we are unable to develop and successfully introduce new and enhanced products that meet the needs of our customers, our business may not be successful. Our future success depends, in part, on our ability to anticipate our customers’ needs and develop products that address those needs.
Added
We may be unable to raise sufficient additional capital on favorable terms, if at all, to supply the working capital needs of our existing operations or to expand our business. Our stock price may fluctuate widely.
Removed
Introduction of new products and product enhancements will require that we effectively transfer production processes from research and development to manufacturing, and coordinate our efforts with the efforts of our suppliers to rapidly achieve efficient volume production.
Added
Many factors, including, but not limited to, future announcements concerning the Company, its competitors or customers, as well as quarterly variations in operating results, announcements of technological innovations, seasonal or other variations in anticipated or actual results of operations, changes in earnings estimates by analysts or reports regarding the Company’s industries in the financial press or investment advisory publications, could cause the market price of the Company’s stock to fluctuate substantially.
Removed
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.
Added
In addition, the Company’s stock price may fluctuate widely for reasons which may be unrelated to operating results. Also, any information concerning the Company, including projections of future operating results could in the future contribute to volatility in the market price of the Company’s common stock. As a U.S. corporation with international operations, we are subject to the U.S.
Removed
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.
Added
The failure of these business relationships will limit the commercialization of our products and technologies, which will have an adverse impact on our business development and our ability to generate revenues. 19 Table of Contents If we do not expand our sales and marketing organization, our revenues may not increase.
Removed
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. We have limited capital resources.
Added
In fiscal year 2024, sales of infrared components represented approximately 44% of our net revenues, sales of visible components represented approximately 33% of our net revenues, sales of assemblies and modules represented 14% of our revenues, and engineering services represented 6% of our revenues.
Removed
Accordingly, in future years, we anticipate only requiring additional capital to support acquisitions that would further expand our business and product lines. We may not be able to obtain additional financing when we need it on terms acceptable to us, or at all.
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In the future, we expect growth primarily from our assemblies and modules and engineering services product groups, the vertical integration of which will be supported by the infrared components product group. Continued and expanding market acceptance of these products, particularly infrared products based on our proprietary chalcogenide materials (Germanium alternatives), is critical to our future success.
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Our future capital needs will depend on numerous factors including: (i) profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including equipment and acquisitions.
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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. We intend to renew the lease for the Zhenjiang Facility for at least a one-year term.
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We cannot assure you that we will be able to obtain capital in the future to meet our needs. If we are unable to raise capital when needed, our business, financial condition, and results of operations would be materially adversely affected, and we could be forced to reduce or discontinue our operations.
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In the course of our business, we collect and store sensitive data, including intellectual property. We could be subject to service outages or breaches of security systems which may result in disruption, unauthorized access, misappropriation, or corruption of this information. We rely on our information technology systems to effectively manage our operational and financial functions.
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Litigation may adversely affect our business, financial condition, and results of operations. From time to time in the normal course of business operations, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to our business operations are required.
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We increasingly rely on information technology systems to process, transmit, and store electronic information. In addition, a significant portion of internal communications, as well as communication with customers and suppliers, depends on information technology. We are exposed to the risk of cyber incidents in the normal course of business.
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The cost to defend such litigation may be significant and is subject to inherent uncertainties. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters.
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Cyber incidents may be deliberate attacks for the theft of intellectual property, other sensitive information or cash or may be the result of unintentional events.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAny 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.
Biggest changeWe have used and will continue utilizing part-time support, including interns, temporary employment agencies, and outside consultants, 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 2025.
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.
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 February 12, 2025 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.
We believe we maintain all necessary permits and are in full compliance with all applicable regulations. To our knowledge, there are currently no U.S. federal, state, or local regulations that restrict the manufacturing and distribution of our products. Certain end-user applications require government approval of the complete optical system, such as U.S.
We believe we maintain all necessary permits and are in full compliance with all applicable regulations. 14 Table of Contents To our knowledge, there are currently no U.S. federal, state, or local regulations that restrict the manufacturing and distribution of our products. Certain end-user applications require government approval of the complete optical system, such as U.S.
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.
Over the past two years we have filed 6 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.
ISP utilizes major infrared material suppliers located around the globe for a broad spectrum of infrared crystal and glass. The development of our manufacturing capability for BD6 glass provides a low-cost internal source for infrared glass.
We utilize major infrared material suppliers located around the globe for a broad spectrum of infrared crystal and glass. The development of our manufacturing capability for BD6 glass and other germanium alternatives provides a low-cost internal source for infrared glass.
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 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.
To date, we are not dependent on any of these manufacturers and have found a suitable number of qualified vendors and suppliers for these materials and services. We currently purchase a few key materials from single or limited sources.
In addition, certain products require external processing, such as anodizing and metallization. To date, we are not dependent on any of these manufacturers and have found a suitable number of qualified vendors and suppliers for these materials and services. We currently purchase a few key materials from single or limited sources.
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.
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 Employees Our employees are critical in providing our customers the most innovative optic products.
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.
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 believe that a satisfactory supply of such production materials will continue to be available, at reasonable or, in some cases, increased prices, although there can be no assurance in this regard.
We believe that a satisfactory supply of such production materials will continue to be available, at reasonable or, in some cases, increased prices, although there can be no assurance in this regard. 13 Table of Contents We also rely on local and regional vendors for component materials and services such as housings, fixtures, chemicals and inert gases, specialty ceramics, UV and AR coatings, and other specialty coatings.
The 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.
The 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.
The loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect our revenues and profits. We continue to diversify our business in order to minimize our sales concentration risk.
The loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect our revenues and profits. However, the largest customer for fiscal year 2024 was not among the three largest for fiscal year 2023, which demonstrates that our customer concentration is not static.
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.
As of June 30, 2024, we had 316 employees globally, including 304 full-time and 12 part-time employees, with 99 full-time employees in the U.S., 102 full-time employees located in Riga, Latvia, and 101 full-time employees located in Zhenjiang, China.
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.
Major Customers In fiscal year 2024, we had sales to three customers that comprised an aggregate of approximately 25% of our annual revenue with one customer at 12% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales.
In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products.
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.
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We also rely on local and regional vendors for component materials and services such as housings, fixtures, chemicals and inert gases, specialty ceramics, UV and AR coatings, and other specialty coatings. In addition, certain products require external processing, such as anodizing and metallization.
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The sixth is for directed shutterless calibration by using pulsed infrared sources that can illuminate all pixels in the focal plane array with short pulses of light, which can then be used for non-uniformity correction. We own several registered and unregistered service marks and trademarks (collectively, “marks”) that are used in the marketing and sale of our products.
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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.”).
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We continue to diversify our business in order to minimize our sales concentration risk. In fiscal year 2024, 39% of our net revenue was derived from sales outside of the U.S., with 94% of our foreign sales derived from customers in Europe and Asia.
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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.
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We employ a diverse group of people with different backgrounds, cultures, education and experience to move the Company and our strategic plan forward.
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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.
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Compensation and Benefits LightPath offers competitive compensation and benefit packages are designed to meet the short-term and long-term needs of our employees and their families. These benefits include but are not limited to a 401(k) Plan with company match, flexible spending and health savings accounts, short-term incentive programs, healthcare benefits, and employee assistance program.
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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.
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Recruitment Sourcing and hiring top talent is part of our success. Using different sources and partnerships to connect with talent has been crucial. LightPath uses regional, industry and internal metrics to ensure we are staying competitive in the market. Diversity and Inclusion Initiatives LightPath is committed to being a diverse and equal opportunity employer.
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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.
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We strive to create a diverse and inclusive workplace. As a global company, we celebrate diversity. All employment decisions are based on business need, basis of qualifications, performance and merit. Employee Training Employees start training on the first day of employment. Depending on their new position, initial training can take up to six months.
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All employees are given basic safety training for fire, hazardous materials, first aid, physical lifting, and accident prevention. As changes are made to processes and new products are introduced, training is imperative.
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All electronic training programs are assigned through a labor management system and completion records are maintained within the same system. 15 Table of Contents Available Information We maintain a website with the address www.lightpath.com . We are not including the information contained on our website as part of, or incorporating it by reference into, this Form 10-K.
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Through our website, we make available free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports and amendments to these reports that we file with or furnish to the Securities and Exchange Commission (“SEC”) in a timely manner after we provide them.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings. From time to time, we are involved in various legal actions arising in the normal course of business. We currently have no material legal proceeding to which we are a party to or to which our property is subject to and, to the best of our knowledge, no material adverse legal activity is anticipated or threatened.
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Item 3. Legal Proceedings 24 PART II 25 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 37 Item 8. Financial Statements and Supplementary Data 37

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeHolders As of September 9, 2024, we estimate there were approximately 206 holders of record and approximately 10,293 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.
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Issuer Purchases of Equity Securities During the year ended June 30, 2024 there were no repurchases of the Company’s Class A common stock by the Company.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe critical accounting policies used by management and the methodology for its estimates and assumptions are as follows: Allowance for accounts receivable is calculated by taking 100% of the total of invoices that are over 90 days past due from the due date and 10% of the total of invoices that are over 60 days past due from the due date for U.S.- and Latvia-based accounts and 100% on invoices that are over 120 days past due for China-based accounts without an agreed upon payment plan.
Biggest changeThe critical accounting policies used by management and the methodology for its estimates and assumptions are as follows: Allowance for credit losses is based on the best estimate of the amount of probable credit losses in existing accounts receivable.
In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees. We have incurred various expenses associated with our investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings.
In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees. We incurred various expenses associated with our investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings.
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.
As of June 30, 2023, loans payable 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: Equipment Loans.
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.
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.
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.
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. 36 Table of Contents In the ordinary course of global business, there are many transactions and calculations where the ultimate tax outcome is uncertain.
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.
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. 35 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.
As of June 30, 2022, approximately $430,000 was accrued. The Chinese Labor Court ruled in favor of the former employees, as expected, and these severance payments were paid out during the first half of fiscal year 2023.
As of June 30, 2022, approximately $430,000 remained accrued. The Chinese Labor Court ruled in favor of the former employees, as expected, and these severance payments were paid out during the first half of fiscal year 2023.
Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of a critical component from foreign merchant production sources.
Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of critical component(s) from foreign sources.
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.
The cash outflow for accounts payable and accrued liabilities for fiscal year 2023 was largely 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.
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.
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 BlackDiamond materials, and other materials we are currently developing under an exclusive license with the Naval Research Lab.
Financial indicators that are usually reviewed at the same time include the major elements of the micro-level business cycle: · sales backlog; · revenue dollars and units by product group; · inventory levels; · accounts receivable levels and quality; and · other key indicators.
Financial indicators that are usually reviewed at the same time include the major elements of the micro-level business cycle: · sales backlog; · revenue by product group; · inventory levels; · accounts receivable levels and quality; · EBITDA; and · other key indicators.
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.
In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment.
In this latter type of business, we work with customers to help them determine optical specifications and even create certain optical designs for them, including complex multi-component designs that we call “engineered solutions.” This is followed by “sampling” small numbers of the product for the customers’ test and evaluation.
In this latter type of business, we work with customers to help them determine optical specifications and even create certain optical designs for them, including complex multi-component, optical system or sub-system designs that we call “engineered solutions.” This is followed by “sampling” or prototyping small numbers of the product for the customers’ test and evaluation.
As we have outlined in our Strategic direction, we do not expect to see significant growth in our visible PMO product group in the near future.
As we have outlined in our strategic direction, we do not expect to see significant growth in our visible components product group in the near future.
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.
Less than 50% of our total cash, cash equivalents and restricted cash 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.
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.
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.
In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. During fiscal years 2023 and 2022, we repatriated approximately $1.9 million and $2.8 million, respectively, from LPOIZ.
In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. During fiscal years 2024 and 2023, we repatriated approximately $1.4 million and $1.9 million, respectively, from LPOIZ.
We face several challenges in doing so: · Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff; · The fact that as our customers take products of this nature into higher volume, commercial production (for example, in the case of molded optics, this may be volumes over one million pieces per year) they begin to work seriously to reduce costs – which often leads them to turn to larger or overseas producers, even if sacrificing quality; and · Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures.
We face several challenges in doing so: · Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff; · The fact that as our customers take products of this nature into higher volume, commercial production they begin to work seriously to reduce costs – which may lead them to turn to larger producers, domestic or overseas, even if sacrificing quality; and · Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures.
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.
As of June 30, 2024, LPOIZ had approximately $1.6 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2023, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2024.
Please refer to Note 8, Income Taxes , in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to each of our tax jurisdictions. Net Income (Loss).
Please refer to Note 9, Income Taxes , in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to each of our tax jurisdictions. 27 Table of Contents Net Income (Loss).
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.
We anticipate a moderate level of capital expenditures during fiscal year 2025; however, the total amount expended will depend on sales growth opportunities and other circumstances. Cash Flows – Financing. Net cash used in financing activities was approximately $1.5 million, compared to cash provided by financing activities of approximately $7.5 million in fiscal year 2023.
Effect of Certain Events Occurring at Our Chinese Subsidiaries In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement.
Other companies may calculate gross margin in a different manner. 25 Table of Contents Effect of Certain Events Occurring at Our Chinese Subsidiaries In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement.
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.
These expenses, which included legal, consulting and other transitional management fees, totaled $718,000 and $400,000 during the years ended June 30, 2021 and 2022, respectively. During the years ended June 30, 2024 and 2023, expenses incurred related to the legal proceedings were immaterial.
In addition, greater than 25% of our cash, cash equivalents and restricted cash is held by our foreign subsidiaries and, although we regularly repatriate cash, it may not be readily available to repay our liabilities in the U.S. should our cash assets in the U.S. not be sufficient.
In addition, greater than 25% of our cash and cash equivalents was held by our foreign subsidiaries as of June 30, 2024 and, although we regularly repatriate cash, it may not be readily available to repay our liabilities in the U.S. should our cash assets in the U.S. not be sufficient.
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.
The table below shows our DSO for the preceding eight fiscal quarters: Fiscal Quarter Ended DSO (days) Q4-2024 6/30/2024 52 Q3-2024 3/31/2024 55 Q2-2024 12/31/2023 59 Q1-2024 9/30/2023 57 Fiscal Year 2024 Average 56 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 Our average DSO for fiscal year 2024 was 56, compared to 58 for fiscal year 2023.
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.
Income taxes for fiscal years 2024 and 2023 include Chinese withholding tax expenses of $170,000 and $235,000, respectively, the majority of which are associated with intercompany dividends declared by LPOIZ, payable to us as the parent company.
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.
During fiscal year 2024, we incurred net foreign currency transaction gains of approximately $73,000, compared to net foreign currency transaction losses of $37,000 for fiscal year 2023. Income Taxes. During fiscal year 2024, we recorded income tax expense of approximately $67,000, compared to approximately $234,000 in fiscal year 2023, primarily related to our operations in China.
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.
Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for fiscal years 2024 and 2023, as their effects would have been anti-dilutive due to the net loss in those periods. Liquidity and Capital Resources At June 30, 2024, we had working capital of approximately $7.5 million and total cash and cash equivalents of approximately $3.5 million.
Definite-lived intangible assets consist primarily of customer relationships, know-how/trade secrets and trademarks. They are generally valued as the present value of estimated cash flows expected to be generated from the asset using a risk-adjusted discount rate. When determining the fair value of our intangible assets, estimates and assumptions about future expected revenue and remaining useful lives are used.
They are generally valued as the present value of estimated cash flows expected to be generated from the asset using a risk-adjusted discount rate. When determining the fair value of our intangible assets, estimates and assumptions about future expected revenue and remaining useful lives are used.
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.
The increase in net loss for fiscal year 2024, as compared to fiscal year 2023, is attributable to the approximately $4.3 million increase in operating loss resulting from lower revenue and gross margin and increased operating expenses.
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.
Net loss for fiscal year 2024 was approximately $8.0 million, or $0.21 basic and diluted loss per share, compared to approximately $4.0 million, or $0.13 basic and diluted loss per share, for fiscal year 2023.
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.
The initial advance under the 2020 Equipment Loan was 225,000 EUR (or USD $275,000), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. The 2020 Equipment Loan bears interest at a fixed rate of 3.3%.
Based on our previous intent, we had not historically provided for future Chinese withholding taxes on the related earnings. However, during fiscal year 2020 we began to accrue for these taxes on the portion of earnings that we intend to repatriate.
Based on our previous intent, we had not historically provided for future Chinese withholding taxes on the related earnings. However, during fiscal year 2020 we began to accrue for these taxes on the portion of earnings that we intend to repatriate. Loans payable as of June 30, 2024 consisted of two equipment loans (as defined below).
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.
Cash used in operations for fiscal year 2023 was primarily due to an increase in accounts receivable, due to higher sales 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.
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.
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. 29 Table of Contents Cash Flows – Investing.
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.
Weighted-average common stock shares outstanding were 37,944,935 for both basic and diluted in fiscal year 2024, compared to 31,637,445 for both basic and diluted in fiscal year 2023.
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.
The table below shows our DCSI for the immediately preceding eight fiscal quarters: Fiscal Quarter Ended DCSI (days) Q4-2024 6/30/2024 98 Q3-2024 3/31/2024 98 Q2-2024 12/31/2023 133 Q1-2024 9/30/2023 119 Fiscal Year 2024 Average 112 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 Our average DCSI for fiscal year 2024 was 112, compared to 125 for fiscal year 2023.
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.
The shelf registration statement was declared effective by the SEC on March 1, 2022. During the year ended June 30, 2024, we issued 585,483 shares of our Class A common stock pursuant to the at-the-market equity program.
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).
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, 2024, the outstanding balance on the 2020 Equipment Loan was 138,750 EUR (or USD $148,532).
We may also identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.
We may also identify opportunities for acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions. We intend to continue efforts to keep costs under control as we seek renewed sales growth.
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.
For fiscal year 2024, Selling, General and Administrative (“SG&A”) costs were approximately $12.3 million, an increase of approximately $860,000, or 8%, as compared to the prior fiscal year.
Goodwill and intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods appropriate for the type of intangible asset and reported separately from goodwill. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite.
Goodwill and amortizable intangible assets acquired in a business combination are recognized at fair value using generally accepted valuation methods. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization.
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.
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 initial advance under the 2023 Equipment Loan was 128,815 EUR (or USD $141,245), the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. The 2023 Equipment Loan will be payable over 48 months, with monthly installments beginning January 1, 2024.
The initial advance under the 2023 Equipment Loan was 128,815 EUR (or USD $141,245), the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. The final advance for the final payment to the equipment vendor was 132,674 EUR (or USD $141,815).
Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the merchant market, a market that we believe is underserved in this area of service offering.
Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the market to our current and potential customers looking for specific solutions to their needs.
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.
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.
Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to fifteen years. We periodically reassess the useful lives of intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate.
Amortization is computed over the estimated useful lives of the respective assets, generally two to fifteen years. We periodically reassess the useful lives of intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate. Amortizable intangible assets consist primarily of customer relationships, know-how/trade secrets and trademarks.
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.
Cash used in financing activities for fiscal year 2024 reflects approximately $2.6 million in principal payments on our loans and finance leases, offset by $279,000 in proceeds from the 2023 Equipment Loan, $806,000 in proceeds from the sale of Class A common stock pursuant to the at-the-market equity program and $40,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.
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.
Revenue generated by the infrared components product group for the fourth quarter of fiscal year 2024 was $3.0 million, a decrease of 36%, as compared to the same quarter 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.
Interest expense was approximately $192,000 for fiscal year 2024, compared to approximately $283,000 in the prior fiscal year. The decrease in interest expense is due to the 59% reduction in our total debt, including finance lease obligations, and excluding operating lease liabilities, as of June 30, 2024, as compared to the end of the prior fiscal year.
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.
While these repatriation transactions result 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.
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.
Gross margin for fiscal year 2024 was approximately $8.6 million, a decrease of 22%, as compared to approximately $11.1 million in fiscal year 2023. Total cost of sales was approximately $23.1 million for fiscal year 2024, compared to $21.9 million for fiscal year 2023, an increase of 6%.
We have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition.
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 have not experienced any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition.
Accounts receivable are customer obligations due under normal trade terms. We perform continuing credit evaluations of our customers’ financial condition. Recovery of bad debt amounts which were previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If our actual collection experience changes, revisions to our allowance may be required.
Recovery of bad debt amounts which were previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If our actual collection experience changes, revisions to our allowance may be required. After attempts to collect a receivable have failed, the receivable is written off against the allowance.
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.
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.” 34 Table of Contents The following table adjusts net income to EBITDA for the three months and year ended June 30, 2024 and 2023: (unaudited) Three Months Ended June 30, Year Ended June 30, 2024 2023 2024 2023 Net loss $ (2,353,773 ) $ (808,840 ) $ (8,007,346 ) $ (4,046,871 ) Depreciation and amortization 1,062,559 815,019 4,048,409 3,174,569 Income tax provision (53,912 ) 11,618 67,490 234,034 Interest expense 42,814 54,561 191,862 283,266 EBITDA $ (1,302,312 ) $ 72,358 $ (3,699,585 ) $ (355,002 ) % of revenue -15 % 1 % -12 % -1 % Our EBITDA for the quarter ended June 30, 2024 was a loss of approximately $1.3 million, compared to income of $0.1million for the same period of the prior fiscal year.
This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria. Generally, a higher total backlog is better for us.
We evaluate our total backlog, which includes all firm orders requested by a customer that are reasonably believed to remain in the backlog and be converted into revenues. This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria. Generally, a higher total backlog is better for us.
The increase in the weighted-average basic common shares was due to the sale of an aggregate of 9,090,910 shares of Class A common stock pursuant to a public offering which closed January 17, 2023, as well as the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs and RSAs.
The increase in the weighted-average basic common shares was primarily due to the sale of an aggregate of 9,090,910 shares of Class A common stock pursuant to a public offering which closed January 17, 2023, as well as the 585,483 shares issued during the second half of fiscal year 2024 pursuant to the at-the-market equity program.
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.
Knowing that employee transitions in international subsidiaries can lead to lengthy and expensive legal proceedings that can interrupt the subsidiary’s ability to operate, we chose to enter into severance agreements with certain of the employees at the time of termination.
The increased operating loss and decrease in other income were partially offset by a favorable difference of approximately $629,000 in the provision for income taxes for fiscal year 2023 as compared to fiscal year 2022.
This loss increase was partially offset by a decrease in other expense, net, of approximately $145,000, primarily due to the decrease in interest expense. In addition, there was a favorable difference of approximately $167,000 in the provision for income taxes for fiscal year 2024 as compared to fiscal year 2023.
The increase is due to increased sales of a custom visible lens assembly to a medical customer, for which we have an end of life order in backlog going into fiscal 2025. Year ended June 30, 2023 compared to year ended June 30, 2022.
Revenue from assemblies and modules decreased by 14% for the fourth quarter of fiscal 2024, as compared to the same quarter of the prior fiscal year. The majority of the decrease is due to sales of a custom visible lens assembly to a medical customer, for which we have an end of life order in backlog going into fiscal 2025.
However, based on the likelihood that the courts in China will determine that our subsidiaries will ultimately be obligated to pay these amounts, we have accrued for these payments as of June 30, 2021, and such expenses were recorded as “Selling, general and administrative” expenses in the accompanying Consolidated Statement of Comprehensive Income (Loss) in fiscal year 2021.
As a result, LPOIZ and LPOI did not immediately pay the severance payments and disputed the employees’ rights to such payments. However, based on the likelihood that the courts in China will determine that our subsidiaries would ultimately be obligated to pay these amounts, we have accrued for these payments as of June 30, 2021.
The decrease in EBITDA in the fourth quarter of fiscal year 2023 was primarily attributable to the increase in operating expenses, including SG&A and new product development, which were partially offset by higher revenue and gross margin. Our EBITDA for fiscal year 2023 was a loss of approximately $355,000, compared to income of $1.2 million for fiscal year 2022.
Our EBITDA for fiscal year 2024 was a loss of approximately $3.7 million, compared to $0.4 million for fiscal year 2023. The decrease in EBITDA for fiscal year 2024 is primarily attributable to lower revenue and gross margin, coupled with increased operating expenses, including SG&A and new product development.
In addition, we received orders from existing customers in the U.S. and Europe related to several other significant long-term projects. 31 Table of Contents The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders.
The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders. We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.
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.
Revenue generated by the visible components product group was approximately $11.2 million for fiscal year 2024, a decrease of 16%, as compared to the prior fiscal year.
The strategy is to create an annuity revenue stream that makes the best use of our production capacity, as compared to the turns business, which is unpredictable and uneven. This annuity revenue stream can also generate low-cost, high-volume type orders.
The strategy is to create an annuity revenue stream that makes the best use of our production capacity and longer-term revenue planning, as compared to the turns business, which is unpredictable and uneven. A key business objective is to convert as much of our business to the design win and annuity model as is possible.
Quarterly backlog levels for fiscal years 2023 and 2022 are as follows: Quarter Total Backlog ($ 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.
Quarterly backlog levels for fiscal years 2024 and 2023 are as follows: Quarter Total Backlog ($ 000) Change From Prior Year End Change From Prior Quarter End Q1 2023 $ 22,973 29 % 29 % Q2 2023 $ 29,427 66 % 28 % Q3 2023 $ 26,620 50 % -10 % Q4 2023 $ 21,652 22 % -19 % Q1 2024 $ 21,303 -2 % -2 % Q2 2024 $ 21,220 -2 % 0 % Q3 2024 $ 21,967 1 % 4 % Q4 2024 $ 19,268 -11 % -12 % The decrease in backlog during fiscal year 2024 as compared fiscal year 2023 is primarily due to shipments against the prior period backlog under several annual and multi-year contract renewals.
The Revolving Line expired on February 26, 2022 and was not renewed. For additional information on the amendments and the terms of the Loan Agreement, see Note 13, Loans Payable , to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.
For additional information regarding the BankUnited Loans and the equipment loans, see Note 14, Loans Payable , to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.
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.
The decrease in average DSO for fiscal year 2024 is driven by decreases in revenue from some key accounts with longer payment cycles, which revenue has been largely replaced by customer accounts with shorter payment cycles. In addition, we continue to focus on collections. We strive to maintain a DSO of less than 60. Other Key Indicators.
These indicators change from time to time as the opportunities and challenges in the business change.
Other key indicators include various operating metrics, some of which are qualitative and others are quantitative. These indicators change from time to time as the opportunities and challenges in the business change.
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.
Our revenue decreased by 11% in the fourth quarter of fiscal year 2024, as compared to the same quarter of the prior fiscal year, driven by decreases in infrared components and assemblies and modules, partially offset by an increase in engineering services.
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.
Cash provided by operations was approximately $0.5 million for fiscal year 2024, compared to cash used in operations of approximately $2.8 million for fiscal year 2023. The increase in cash flows from operations during fiscal year 2024 is primarily due decreases in accounts receivable and inventory, due to lower sales in fiscal year 2024, as compared to fiscal year 2023.
We expect to incur additional legal fees and consulting expenses in future periods as we continue to pursue our legal options and remedies; however, such future fees are expected to be at lower levels than have been incurred to date.
We do not expect to incur additional legal fees or consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies.
Please refer to Note 14, Contingencies , in the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. New Product Development. New product development costs were approximately $2.1 million in fiscal year 2023, an increase of approximately 3% as compared to the prior fiscal year.
During fiscal year 2024, we expended approximately $2.2 million for capital equipment, as compared to approximately $3.1 million during fiscal year 2023. We also expended approximately $847,000, net of cash acquired, to acquire Visimid during fiscal year 2024, as disclosed in Note 3, Acquisition of Visimid Technologies , in the Consolidated Financial Statements in this Annual Report on Form 10-K.
The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (6.75% as of June 30, 2023). For additional information regarding the BankUnited Loans and the equipment loans, see Note 13, Loans Payable , to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K. Equity Financing.
For additional information regarding this note, see Note 19, Subsequent Events , in the Notes to the Consolidated Financial Statements of this Annual Report on Form 10-K. Equity Financing.
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.
Revenue generated by the infrared components product group was approximately $14.1 million in fiscal year 2024, a decrease of 2%, as compared to the prior fiscal year.
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.
Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 and our new BDNL-4 materials.
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.
Revenue from the assemblies and modules product group was approximately $4.5 million in fiscal year 2024, a decrease of approximately 5% as compared to fiscal year 2023, primarily due to a decrease in shipments against a multi-year contract with a defense customer due to timing, as well as decreases in sales to certain industrial customers, particularly in China.
Although our new sales and management personnel have now established relationships with customers, domestic sales in China have also been adversely impacted by the economic downturn in China, which negatively impacted fiscal year 2023 revenue and bookings in that region. Revenue Dollars and Units by Product Group.
In addition, order bookings for both visible and infrared components and assemblies continue to be slow in China. Domestic sales in China have also been adversely impacted by the economic downturn in China, which continues to negatively impact revenue and bookings in that region. Revenue by Product Group.
Cash Flows – Investing. During fiscal year 2023, we expended approximately $3.1 million for capital equipment, as compared to approximately $1.6 million during fiscal year 2022. During fiscal year 2023, our capital expenditures were primarily related to the expansion of our Orlando Facility.
Fiscal year 2024 also reflects proceeds of approximately $365,000 from sale-leasebacks of equipment. During fiscal years 2024 and 2023, our capital expenditures were primarily related to the expansion of our Orlando Facility.
For additional information on liquidity, see Note 13, Loans Payable , to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K. 28 Table of Contents Equipment Loans. In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which is also a significant customer.
In December 2020, ISP Latvia entered into an equipment loan with a third party (the “2020 Equipment Loan”), which is also a customer. The 2020 Equipment Loan is subordinate to the Term Loan and is collateralized by certain equipment.

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