LIGHTPATH TECHNOLOGIES INC - Quarter Report: 2022 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission file number 000-27548

LIGHTPATH TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware

86-0708398

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

http://www.lightpath.com

2603 Challenger Tech Ct. Suite 100

Orlando, Florida 32826

(Address of principal executive offices)

(ZIP Code)

(407) 382-4003

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common Stock, par value $0.01		LPTH		The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).

YES ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

27,046,790 shares of common stock, Class A, $0.01 par value, outstanding as of May 10, 2022.

LIGHTPATH TECHNOLOGIES, INC.

Form 10-Q

Index

Item		Page

Cautionary Note Concerning Forward-Looking Statements		3

Part I	Financial Information

Item 1	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity	6
	Unaudited Condensed Consolidated Statements of Cash Flows	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Results of Operations	23
	Liquidity and Capital Resource	26
	Contractual Obligations and Commitments	27
	Off-Balance Sheet Arrangements	27
	Critical Accounting Policies and Estimates	27
	Non-GAAP Financial Measures	31
Item 4	Controls and Procedures	32

Part II	Other Information

Item 1	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3	Defaults Upon Senior Securities	33
Item 4	Mine Safety Disclosures	33
Item 5	Other Information	33
Item 6	Exhibits	34

Signatures		36

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements and information in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Quarterly Report”) may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, which address activities, events, or developments that we expect or anticipate will or may occur in the future, including such things as future capital expenditures, growth, product development, sales, business strategy, statements related to any further expected effects on our business from the coronavirus (“COVID-19”) pandemic, and other similar matters are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or other comparable terminology. These forward-looking statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our control. These statements are subject to many risks, uncertainties, and other important factors that could cause actual future results to differ materially from those expressed in the forward-looking statements including, but not limited to, the continued duration and scope of the COVID-19 pandemic and any impact on the demand for our products; our ability to obtain needed raw materials and components from our suppliers; additional actions governments, businesses, and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions, particularly at our foreign facilities; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps that we could take to reduce operating costs; our inability to sustain profitable sales growth, convert inventory to cash, or reduce our costs to maintain competitive prices for our products; circumstances or developments that may make us unable to implement or realize the anticipated benefits, or that may increase the costs, of our current and planned business initiatives; and those factors detailed by us in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2021. In light of these risks and uncertainties, all of the forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained herein.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Balance Sheets

(unaudited)

	March 31,			June 30,
Assets	2022			2021
Current assets:
Cash and cash equivalents	$	5,240,946		$	6,774,694
Trade accounts receivable, net of allowance of $25,692 and $45,643		4,976,891			4,656,354
Inventories, net		7,617,849			8,659,587
Other receivables		31,505			137,103
Prepaid expenses and other assets		438,878			475,364
Total current assets		18,306,069			20,703,102

Property and equipment, net		12,628,654			13,279,867
Operating lease right-of-use assets		10,598,425			9,015,498
Intangible assets, net		4,739,069			5,582,881
Goodwill		5,854,905			5,854,905
Deferred tax assets, net		147,000			147,000
Other assets		27,737			27,737
Total assets	$	52,301,859		$	54,610,990
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,661,862		$	2,924,333
Accrued liabilities		670,171			1,067,265
Accrued payroll and benefits		1,986,328			2,810,043
Operating lease liabilities, current		973,174			799,507
Loans payable, current portion		902,601			634,846
Finance lease obligation, current portion		91,277			212,212
Total current liabilities		7,285,413			8,448,206

Finance lease obligation, less current portion		15,392			66,801
Operating lease liabilities, noncurrent		9,686,335			8,461,133
Loans payable, less current portion		3,489,070			4,057,365
Total liabilities		20,476,210			21,033,505

Commitments and Contingencies

Stockholders’ equity:
Preferred stock: Series D, $0.01 par value, voting; 500,000 shares authorized; none issued and outstanding		-			-
Common stock: Class A, $0.01 par value, voting; 44,500,000 shares authorized; 27,034,266 and 26,985,913 shares issued and outstanding		270,343			269,859
Additional paid-in capital		232,031,350			231,438,651
Accumulated other comprehensive income		1,953,524			2,116,152
Accumulated deficit		(202,429,568	)		(200,247,177	)
Total stockholders’ equity		31,825,649			33,577,485
Total liabilities and stockholders’ equity	$	52,301,859		$	54,610,990

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

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LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2022			2021			2022			2021
Revenue, net	$	8,305,412		$	10,701,362		$	26,651,929		$	30,132,505
Cost of sales		5,271,161			6,797,605			17,645,897			18,748,220
Gross margin		3,034,251			3,903,757			9,006,032			11,384,285
Operating expenses:
Selling, general and administrative		2,619,269			2,805,829			8,435,313			8,009,484
New product development		590,405			640,528			1,569,376			1,620,927
Amortization of intangibles		281,270			281,270			843,812			843,812
Loss on disposal of property and equipment		337			9,473			337			8,951
Total operating expenses		3,491,281			3,737,100			10,848,838			10,483,174
Operating income (loss)		(457,030	)		166,657			(1,842,806	)		901,111
Other income (expense):
Interest expense, net		(54,984	)		(52,795	)		(151,064	)		(166,491	)
Other income (expense), net		180,070			(28,592	)		139,807			(23,075	)
Total other income (expense), net		125,086			(81,387	)		(11,257	)		(189,566	)
Income (loss) before income taxes		(331,944	)		85,270			(1,854,063	)		711,545
Income tax provision		163,059			307,834			328,328			983,586
Net loss	$	(495,003	)	$	(222,564	)	$	(2,182,391	)	$	(272,041	)
Foreign currency translation adjustment		(18,738	)		(373,114	)		(162,628	)		1,079,590
Comprehensive income (loss)	$	(513,741	)	$	(595,678	)	$	(2,345,019	)	$	807,549
Loss per common share (basic)	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.01	)
Number of shares used in per share calculation (basic)		27,033,578			26,366,651			27,011,943			26,153,839
Loss per common share (diluted)	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.01	)
Number of shares used in per share calculation (diluted)		27,033,578			26,366,651			27,011,943			26,153,839

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

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LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(unaudited)

								Accumulated
	Class A				Additional			Other						Total
	Common Stock				Paid-in			Comphrehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Income			Deficit			Equity
Balances at June 30, 2021		26,985,913	$	269,859	$	231,438,651		$	2,116,152		$	(200,247,177	)	$	33,577,485
Issuance of common stock for:
Employee Stock Purchase Plan		8,621		86		21,640			-			-			21,726
Stock-based compensation on stock options & RSUs		-		-		116,591			-			-			116,591
Foreign currency translation adjustment		-		-		-			(144,174	)		-			(144,174	)
Net loss		-		-		-			-			(632,097	)		(632,097	)
Balances at September 30, 2021		26,994,534	$	269,945	$	231,576,882		$	1,971,978		$	(200,879,274	)	$	32,939,531
Issuance of common stock for:
Settlement of RSUs, net		27,341		274		(274	)		-			-			-
Stock-based compensation on stock options & RSUs		-		-		184,538			-			-			184,538
Foreign currency translation adjustment		-		-		-			284			-			284
Net loss		-		-		-			-			(1,055,291	)		(1,055,291	)
Balances at December 31, 2021		27,021,875	$	270,219	$	231,761,146		$	1,972,262		$	(201,934,565	)	$	32,069,062
Issuance of common stock for:
Employee Stock Purchase Plan		12,391		124		29,861			-			-			29,985
Stock-based compensation on stock options & RSUs		-		-		240,343			-			-			240,343
Foreign currency translation adjustment		-		-		-			(18,738	)		-			(18,738	)
Net loss		-		-		-			-			(495,003	)		(495,003	)
Balances at March 31, 2022		27,034,266	$	270,343	$	232,031,350		$	1,953,524		$	(202,429,568	)	$	31,825,649


Balances at June 30, 2020		25,891,885	$	258,919	$	230,634,056		$	735,892		$	(197,061,926	)	$	34,566,941
Issuance of common stock for:
Employee Stock Purchase Plan		3,306		33		10,976			-			-			11,009
Exercise of stock options, net		207,640		2,076		124,024			-			-			126,100
Stock-based compensation on stock options & RSUs		-		-		136,849			-			-			136,849
Foreign currency translation adjustment		-		-		-			729,308			-			729,308
Net income		-		-		-			-			97,068			97,068
Balances at September 30, 2020		26,102,831	$	261,028	$	230,905,905		$	1,465,200		$	(196,964,858	)	$	35,667,275
Issuance of common stock for:
Exercise of stock options & RSU's, net		24,530		246		2,488			-			-			2,734
Stock-based compensation on stock options & RSUs		-		-		106,167			-			-			106,167
Foreign currency translation adjustment		-		-		-			723,396			-			723,396
Net loss		-		-		-			-			(146,545	)		(146,545	)
Balances at December 31, 2020		26,127,361	$	261,274	$	231,014,560		$	2,188,596		$	(197,111,403	)	$	36,353,027
Issuance of common stock for:
Employee Stock Purchase Plan		4,839		48		18,920			-			-			18,968
Exercise of stock options & RSUs, net		433,726		4,337		9,521			-			-			13,858
Stock-based compensation on stock options & RSUs		-		-		200,061			-			-			200,061
Foreign currency translation adjustment		-		-		-			(373,114	)		-			(373,114	)
Net loss		-		-		-			-			(222,564	)		(222,564	)
Balances at March 31, 2021		26,565,926	$	265,659	$	231,243,062		$	1,815,482		$	(197,333,967	)	$	35,990,236

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

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LIGHTPATH TECHNOLOGIES, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Nine Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(2,182,391	)	$	(272,041	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		2,763,620			2,608,472
Interest from amortization of debt costs		33,414			13,929
Loss on disposal of property and equipment		337			8,951
Stock-based compensation on stock options & RSUs, net		541,472			443,077
Provision for doubtful accounts receivable		20,200			(1,632	)
Change in operating lease assets and liabilities		(184,058	)		(135,746	)
Inventory write-offs to allowance		188,011			144,741
Changes in operating assets and liabilities:
Trade accounts receivable		(340,737	)		31,649
Other receivables		105,598			(186,769	)
Inventories		853,727			(43,542	)
Prepaid expenses and other assets		36,486			125,237
Accounts payable and accrued liabilities		(1,483,281	)		339,909
Net cash provided by operating activities		352,398			3,076,235

Cash flows from investing activities:
Purchase of property and equipment		(1,492,668	)		(2,721,567	)
Net cash used in investing activities		(1,492,668	)		(2,721,567	)

Cash flows from financing activities:
Proceeds from exercise of stock options		-			142,693
Proceeds from sale of common stock from Employee Stock Purchase Plan		51,711			29,976
Loan costs		(61,223	)		-
Borrowings on loans payable		266,850			275,377
Payments on loans payable		(509,754	)		(554,102	)
Repayment of finance lease obligations		(172,344	)		(206,644	)
Net cash used in financing activities		(424,760	)		(312,700	)
Effect of exchange rate on cash and cash equivalents		31,282			511,343
Change in cash and cash equivalents		(1,533,748	)		553,311
Cash and cash equivalents, beginning of period		6,774,694			5,387,388
Cash and cash equivalents, end of period	$	5,240,946		$	5,940,699

Supplemental disclosure of cash flow information:
Interest paid in cash	$	118,094		$	151,537
Income taxes paid	$	243,162		$	787,289

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

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LIGHTPATH TECHNOLOGIES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation

References in this document to “the Company,” “LightPath,” “we,” “us,” or “our” are intended to mean LightPath Technologies, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the requirements of Article 8 of Regulation S-X promulgated under the Exchange Act and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended June 30 and the associated quarters of those fiscal years.

These Condensed Consolidated Financial Statements are unaudited, but include all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. The Consolidated Balance Sheet as of June 30, 2021 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the year as a whole. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

2. Significant Accounting Policies

Our significant accounting policies are provided in Note 2, Summary of Significant Accounting Policies, in the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021. There have been no material changes to our significant accounting policies during the nine months ended March 31, 2022, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Use of Estimates

Management makes estimates and assumptions during the preparation of our unaudited Condensed Consolidated Financial Statements that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which, in turn, could impact the amounts reported and disclosed herein.

3. Revenue

Product Revenue

We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies.

Revenue Recognition

Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments.

Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of our performance. Deferred revenue was not significant as of June 30, 2021 and March 31, 2022.

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Nature of Products

Revenue from the sale of optical components and assemblies is recognized upon transfer of control, including the risks and rewards of ownership, to the customer. The performance obligations for the sale of optical components and assemblies are satisfied at a point in time. Product development agreements are generally short term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. We have organized our products in three groups: precision molded optics (“PMO”), infrared, and specialty products. Revenues from product development agreements are included in specialty products. Revenue by product group for the three and nine months ended March 31, 2022 and 2021 was as follows:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
PMO	$	4,033,218	$	3,904,857	$	11,608,665	$	12,940,919
Infrared Products		3,725,684		6,462,527		13,688,770		15,995,133
Specialty Products		546,510		333,978		1,354,494		1,196,453
Total revenue	$	8,305,412	$	10,701,362	$	26,651,929	$	30,132,505

4. Inventories

The components of inventories include the following:

	March 31, 2022			June 30, 2021
Raw materials	$	3,305,164		$	3,908,630
Work in process		2,551,647			2,473,070
Finished goods		3,338,454			3,467,105
Allowance for obsolescence		(1,577,416	)		(1,189,218	)
	$	7,617,849		$	8,659,587

The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $1.7 million and $2.0 million as of March 31, 2022 and June 30, 2021, respectively.

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5. Property and Equipment

Property and equipment are summarized as follows:

	Estimated Lives (Years)		March 31, 2022			June 30, 2021
Manufacturing equipment	5 - 10		$	23,087,018		$	21,465,402
Computer equipment and software	3 - 5			989,771			918,679
Furniture and fixtures		5		361,793			362,944
Leasehold improvements	5 - 7			3,120,978			2,944,543
Construction in progress				826,563			1,529,452
Total property and equipment				28,386,123			27,221,020
Less accumulated depreciation and amortization				(15,757,469	)		(13,941,153	)
Total property and equipment, net			$	12,628,654		$	13,279,867

6. Goodwill and Intangible Assets

There were no changes in the net carrying value of goodwill during the nine months ended March 31, 2022.

Identifiable intangible assets were comprised of:

	Useful Lives (Years)		March 31, 2021			June 30, 2021
Customer relationships		15	$	3,590,000		$	3,590,000
Trade secrets		8		3,272,000			3,272,000
Trademarks		8		3,814,000			3,814,000
Total intangible assets				10,676,000			10,676,000
Less accumulated amortization				(5,936,931	)		(5,093,119	)
Total intangible assets, net			$	4,739,069		$	5,582,881

Future amortization of identifiable intangibles is as follows:

Fiscal year ending:
June 30, 2022 (remaining three months)	$	281,271
June 30, 2023		1,125,083
June 30, 2024		1,125,083
June 30, 2025		658,398
After June 30, 2025		1,549,234
	$	4,739,069

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7. Income Taxes

A summary of our total income tax expense and effective income tax rate for the three and nine months ended March 31, 2022 and 2021 is as follows:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
(Loss) income before income taxes	$	(331,944	)	$	85,270		$	(1,854,063	)	$	711,545
Income tax provision	$	163,059		$	307,834		$	328,328		$	983,586
Effective income tax rate		-49	%		361	%		-18	%		138	%

The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia. For the three and nine months ended March 31, 2022 and 2021, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), which dividend will be paid to us, as its parent company.

We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of March 31, 2022 and June 30, 2021, we have provided for a valuation allowance against our net deferred tax assets to reduce the net deferred tax assets to the amount we estimate is more-likely-than-not to be realized. Our net deferred tax asset consists primarily of federal and state tax credits with indefinite carryover periods.

U.S. Federal and State Income Taxes

Our U.S. federal and state statutory income tax rate is estimated to be 25.5%. Based on our current assessment of the valuation allowance position on our net deferred tax assets, no additional tax expense or benefit is expected to be recorded on pre-tax income or losses generated in the U.S.

Income Tax Law of the People’s Republic of China

Our Chinese subsidiaries, LightPath Optical Instrumentation (Shanghai) Co., Ltd. (“LPOI”) and LPOIZ, are governed by the Income Tax Law of the People’s Republic of China. As of March 31, 2022, LPOI and LPOIZ were subject to statutory income tax rates of 25% and 15%, respectively.

During fiscal 2020, the Company began declaring intercompany dividends to remit a portion of the historical earnings of its foreign subsidiaries to the U.S. parent company. The Company intends to reinvest a portion of the more recent earnings generated by its foreign subsidiaries; however, the Company also plans to repatriate a portion of the historical earnings of its subsidiaries. During fiscal 2020, the Company began to accrue for these taxes on the portion of historical earnings that it intends to repatriate.

Law of Corporate Income Tax of Latvia

Our Latvian subsidiary, ISP Optics Latvia, SIA (“ISP Latvia”), is governed by the Law of Corporate Income Tax of Latvia. Effective January 1, 2018, the Republic of Latvia enacted tax reform with the following key provisions: (i) corporations are no longer subject to income tax, but are instead subject to a distribution tax on distributed profits (or deemed distributions, as defined) and (ii) the rate of tax was changed to 20%; however, distribution amounts are first divided by 0.8 to arrive at the profit before tax amount, resulting in an effective tax rate of 25%. As a transitional measure, distributions of earnings prior to January 1, 2018 are not subject to tax if declared prior to December 31, 2019. ISP Latvia has declared an intercompany dividend to be paid to ISP, its U.S. parent company, for the full amount of earnings accumulated prior to January 1, 2018. Distributions of this dividend will be from earnings prior to January 1, 2018 and, therefore, will not be subject to tax. We currently do not intend to distribute any earnings generated after January 1, 2018. If, in the future, we change such intention, we will accrue distribution taxes, if any, as profits are generated.

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8. Stock-Based Compensation

Our directors, officers, and key employees are granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, the 2018 Stock and Incentive Compensation Plan (the “SICP”), including incentive stock options, non-qualified stock options, and restricted stock unit (“RSU”) awards. The stock-based compensation expense is based primarily on the fair value of the award as of the grant date, and is recognized as an expense over the requisite service period.

The following table shows total stock-based compensation expense for the three and nine months ended March 31, 2022 and 2021 included in selling, general and administrative (“SG&A”) expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021

Stock options	$	25,596	$	17,036	$	75,603	$	51,277
RSUs		214,747		183,025		465,869		391,800
Total	$	240,343	$	200,061	$	541,472	$	443,077

We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A common stock through payroll deductions, subject to certain limitations. A discount of $5,129 and $2,978 for the nine months ended March 31, 2022 and 2021, respectively, is included in SG&A expenses in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income, which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP.

Grant Date Fair Values and Underlying Assumptions; Contractual Terms

We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2014 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction.

Most stock options granted vest ratably over two to four years and are generally exercisable for ten years. The assumed forfeiture rates used in calculating the fair value of RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the nine months ended March 31, 2022 and 2021. The volatility rate and expected term are based on seven-year historical trends in Class A common stock closing prices and actual forfeitures. The interest rate used is the U.S. Treasury interest rate for constant maturities.

No stock options were granted during the nine months ended March 31, 2022. For stock options granted in the nine-month period ended March 31, 2021, we estimated the fair value of each stock option as of the date of grant using the following assumptions:

Weighted-average expected volatility	71.2	%
Dividend yields	0	%
Weighted-average risk-free interest rate	0.28	%
Weighted-average expected term, in years	7.49

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Information Regarding Current Share-Based Compensation Awards

A summary of the activity for share-based compensation awards in the nine months ended March 31, 2022 is presented below:

	Stock Options							Restricted Stock Units (RSUs)
				Weighted-		Weighted-					Weighted-
				Average		Average					Average
				Exercise		Remaining					Remaining
	Shares			Price		Contract		Shares			Contract
June 30, 2021		432,927		$	2.01		8.8		1,761,885			0.9

Granted		-		$	-				368,461			1.2
Exercised		-		$	-				(27,341	)
Cancelled/Forfeited		(23,465	)	$	1.67				(5,534	)
March 31, 2022		409,462		$	2.03		8.1		2,097,471			0.9

Awards exercisable/
vested as of
March 31, 2022		151,691		$	1.61		7.5		1,334,978

Awards unexercisable/
unvested as of
March 31, 2022		257,771		$	2.28		8.4		762,493			0.9
		409,462							2,097,471

RSU awards vest immediately or from one to four years from the date of grant.

As of March 31, 2022, there was approximately $1.3 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options and RSUs) granted. We expect to recognize the compensation cost as follows:

Fiscal Year Ending:	Stock Options		RSUs		Total
June 30, 2022 (remaining three months)	$	26,682	$	214,698	$	241,380
June 30, 2023		115,881		531,851		647,732
June 30, 2024		94,196		190,864		285,060
June 30, 2025		33,885		54,308		88,193
	$	270,644	$	991,721	$	1,262,365

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9. Earnings (Loss) Per Share

Basic earnings per share is computed by dividing net income or loss by the weighted-average number of shares of Class A common stock outstanding, during each period presented. Diluted earnings per share is computed similarly to basic earnings per share, except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue shares of Class A common stock were exercised or converted into shares of Class A common stock. The computations for basic and diluted earnings (loss) per share of Class A common stock are described in the following table:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021

Net loss	$	(495,003	)	$	(222,564	)	$	(2,182,391	)	$	(272,041	)

Weighted-average common shares outstanding:
Basic number of shares		27,033,578			26,366,651			27,011,943			26,153,839

Effect of dilutive securities:
Options to purchase common stock		-			-			-			-
RSUs		-			-			-			-
Diluted number of shares		27,033,578			26,366,651			27,011,943			26,153,839

Loss per common share:
Basic	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.01	)
Diluted	$	(0.02	)	$	(0.01	)	$	(0.08	)	$	(0.01	)

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

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Options to purchase common stock		414,664		364,536		420,835		515,870
RSUs		2,077,780		2,255,487		1,904,081		2,331,648
		2,492,444		2,620,023		2,324,916		2,847,518

10. Leases

Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida. The operating leases for facilities are non-cancelable operating leases, expiring through 2032. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option. We currently have obligations under three finance lease agreements, entered into during fiscal 2019, with terms ranging from three to five years. The leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. One such lease ends in November 2022 and we do not plan to renew, and the second such lease was amended in April 2021, and subsequently amended in September 2021, to extend the term to 2032 and increase the leased space from 26,000 square feet to approximately 58,500 square feet. Effective in January 2022, our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively.

As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently, none of our leases include variable lease payments that are dependent on an index or rate. We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

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We received tenant improvement allowances for each of our two leases with respect to our facility located in Orlando, Florida (the “Orlando Facility”). These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms.

The components of lease expense were as follows:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2022		2021		2022		2021
Operating lease cost	$	129,934	$	168,017	$	474,075	$	508,428
Finance lease cost:
Depreciation of lease assets		36,767		47,354		127,946		160,577
Interest on lease liabilities		4,323		11,432		16,070		35,688
Total finance lease cost		41,090		58,786		144,016		196,265
Total lease cost	$	171,024	$	226,803	$	618,091	$	704,693

Supplemental balance sheet information related to leases was as follows:

	Classification	March 31, 2022		June 30, 2021
Assets:
Operating lease assets	Operating lease assets	$	10,598,425	$	9,015,498
Finance lease assets	Property and equipment, net⁽¹⁾		95,677		477,102
Total lease assets		$	10,694,102	$	9,492,600

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	973,174	$	799,507
Finance leases	Finance lease liabilities, current		91,277		212,212

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		9,686,335		8,461,133
Finance leases	Finance lease liabilities, less current portion		15,392		66,801
Total lease liabilities		$	10,766,178	$	9,539,653

⁽¹⁾

Finance lease assets were recorded net of accumulated depreciation of approximately $435,000 and $1.2 million as of March 31, 2022 and June 30, 2021, respectively. In December 2021, we executed a purchase option at the end of one of our finance leases, therefore the related asset and accumulated depreciation were reclassified from finance lease assets.

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

Lease Term and Discount Rate	March 31, 2022
Weighted Average Remaining Lease Term (in years)
Operating leases		10.2
Finance leases		1.0

Weighted Average Discount Rate
Operating leases		3.0	%
Finance leases		7.7	%

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Supplemental cash flow information:

	Nine Months Ended March 31,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	638,943	$	645,174
Operating cash used for finance leases	$	16,070	$	35,688
Financing cash used for finance leases	$	172,344	$	206,644

Future maturities of lease liabilities were as follows as of March 31, 2022:

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2022 (remaining three months)	$	43,369		$	168,270
June 30, 2023		59,647			1,195,376
June 30, 2024		11,811			1,213,080
June 30, 2025		-			1,177,525
June 30, 2026		-			1,143,042
Thereafter		-			7,779,560
Total future minimum payments		114,827			12,676,853
Less imputed interest		(8,158	)		(2,017,344	)
Present value of lease liabilities	$	106,669		$	10,659,509

11. Loans Payable

As of March 31, 2022 and June 30, 2021, loans payable primarily consisted of the BankUnited Term Loan (as defined below) payable to BankUnited N.A. (“BankUnited”). On February 26, 2019, we entered into a Loan Agreement (the “Loan Agreement”) with BankUnited for (i) a revolving line of credit up to maximum amount of $2,000,000 (the “BankUnited Revolving Line”), (ii) a term loan in the amount of up to $5,813,500 (“BankUnited Term Loan”), and (iii) a non-revolving guidance line of credit up to a maximum amount of $10,000,000 (the “Guidance Line” and, together with the BankUnited Revolving Line and BankUnited Term Loan, the “BankUnited Loans”), which Guidance Line has since been terminated. Each of the BankUnited Loans is evidenced by a promissory note in favor of BankUnited (the “BankUnited Notes”). Simultaneously with the execution of the Loan Agreement, we used the proceeds from the BankUnited Term Loan to pay in full, all outstanding amounts owed to Avidbank Corporate Finance, a division of Avidbank (“Avidbank”) pursuant to an acquisition term loan.

On May 6, 2019, we entered into that certain First Amendment to Loan Agreement, effective February 26, 2019, with BankUnited (the “First Amendment”). The First Amendment amended the definition of the fixed charge coverage ratio to more accurately reflect the parties’ understandings at the time the Loan Agreement was executed.

On September 9, 2021, we entered into a letter agreement with BankUnited (the “Letter Agreement”). The Letter Agreement: (i) reduced the fixed charge coverage ratio to 1.0 for the quarter ending September 30, 2021 and to 1.1 for the quarter ended December 31, 2021; (ii) modified the calculation for both the fixed charge coverage ratio and the total leverage ratio to provide for adjustments related to expenses incurred in connection with the employee matters that occurred during fiscal 2021 at LPOI and LPOIZ, which expenses must be approved by BankUnited; (iii) terminated the Guidance Line; and (iv) required approval from BankUnited prior to our being able to draw upon the Revolving Line, subject to our compliance with the fixed charge coverage ratio for the quarters ending September 30, 2021 and December 31, 2021. The Letter Agreement also granted us a waiver of default arising prior to the Letter Agreement for our failure to comply with the fixed charge coverage ratio measured on June 30, 2021. Based on the waiver, we were no longer in default of the Amended Loan Agreement as of June 30, 2021. Finally, in connection with the Letter Agreement, we paid BankUnited a fee equal to $10,000.

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On November 5, 2021, we entered into a letter agreement with BankUnited (the “Second Letter Agreement”). In accordance with the Second Letter Agreement, the parties agreed to initiate discussions regarding a possible modification, forebearance, or other resolution of the Amended Loan Agreement (as defined below), which resolution would occur on or before December 31, 2021. On December 20, 2021, we entered into the Second Amendment to the Loan Agreement dated February 26, 2019 (the “Second Amendment”), which further amended the Loan Agreement with BankUnited. In accordance with the Second Amendment, the parties agreed to the following terms, among others: (i) a maturity date of April 15, 2023 with respect to the Term Loan (as defined in the Amended Loan Agreement); (ii) an increased monthly payment amount of $100,000 commencing on November 1, 2022; (iii) beginning on December 20, 2021, each facility will bear interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (3.0% as of March 31, 2022), as adjusted from time to time, (iv) the Term Loan will bear a higher interest rate commencing on August 1, 2022; (v) an exit fee equal to 4% of the outstanding principal balance of the Term Loan on April 15, 2023 (to the extent the Term Loan is still outstanding on such date and has not been refinanced with another lender); and (vi) a fee of $50,000 payable upon execution of the Second Amendment. The Second Amendment also granted us a waiver of compliance for the Financial Covenants (as set forth in the Amended Loan Agreement) for the periods ended December 31, 2021, March 31, 2022 and June 30, 2022.

On May 11, 2022, we entered into the Third Amendment to the Loan Agreement dated February 26, 2019 (the “Third Amendment” and, together with the First Amendment, the Letter Agreement and the Second Letter Agreement, the “Amended Loan Agreement”), which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on the respective dates and has not been refinanced with another lender).

We have commenced discussions with other lenders, with the intent of refinancing our credit facility prior to maturity with reasonable commercial terms, of which there can be no assurance. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. For additional information, see Note 14, Liquidity.

BankUnited Revolving Line

Pursuant to the Amended Loan Agreement, BankUnited agreed to make loan advances under the BankUnited Revolving Line to us up to a maximum aggregate principal amount outstanding not to exceed $2,000,000, which proceeds could have been used for working capital and general corporate purposes. There were no amounts outstanding on the BankUnited Revolving Line as of June 30, 2021 and no amounts were due upon its expiration on February 26, 2022.

BankUnited Term Loan

Pursuant to the Amended Loan Agreement, BankUnited advanced us $5,813,500 to satisfy in full the amounts owed to Avidbank, including the outstanding principal amount and all accrued interest under the acquisition term loan and to pay the fees and expenses incurred in connection with closing of the BankUnited Loans. The Term Loan was for a 5-year term, but co-terminus with the BankUnited Revolving Line should the BankUnited Revolving Line not be renewed beyond February 26, 2022. Pursuant to the Second Amendment, the maturity date of the Term Loan was April 15, 2023, and pursuant to the Third Amendment, the maturity date of the Term Loan is April 15, 2024. The Term Loan initially bore interest at a per annum rate equal to 2.75% above the 30-day LIBOR. However, pursuant to the Second Amendment, beginning on December 20, 2021, each facility bears interest at BankUnited’s then-prime rate of interest minus fifty (50) basis points (3.0% as of March 31, 2022), as adjusted from time to time. Equal monthly principal payments of approximately $48,446, plus accrued interest, are due and payable, in arrears, on the first day of each month during the term. Pursuant to the Second Amendment, the monthly payment, including principal and interest, will increase to $100,000, commencing November 1, 2022. Upon maturity, all principal and interest shall be immediately due and payable.

Security and Guarantees

Our obligations under the Amended Loan Agreement are collateralized by a first priority security interest (subject to permitted liens) in all of our assets and the assets of our U.S. subsidiaries, GelTech, Inc. (“GelTech”), and ISP, pursuant to a Security Agreement granted by GelTech, ISP, and us in favor of BankUnited. Our equity interests in, and the assets of, our foreign subsidiaries are excluded from the security interest. In addition, all of our subsidiaries have guaranteed our obligations under the Amended Loan Agreement and related documents, pursuant to Guaranty Agreements executed by us and our subsidiaries in favor of BankUnited.

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General Terms

The Amended Loan Agreement contains customary covenants, including, but not limited to: (i) limitations on the disposition of property; (ii) limitations on changing our business or permitting a change in control; (iii) limitations on additional indebtedness or encumbrances; (iv) restrictions on distributions; and (v) limitations on certain investments. The Amended Loan Agreement also contains certain financial covenants, including obligations to maintain a fixed charge coverage ratio of 1.25 to 1.00 and a total leverage ratio of 4.00 to 1.00. Pursuant to the Second Amendment, compliance for both the fixed charge coverage ratio and total leverage ratio was waived for the quarter ended March 31, 2022, and we were in compliance with all other required covenants, as amended.

We may prepay any or all of the BankUnited Loans in whole or in part at any time, without penalty or premium. Late payments are subject to a late fee equal to five percent (5%) of the unpaid amount. Amounts outstanding during an event of default were to accrue interest at a rate of five percent (5%) above the 30-day LIBOR applicable immediately prior to the occurrence of the event of default. Pursuant to the Second Amendment, beginning on December 20, 2021, the default rate was converted to five percent (5%) above BankUnited’s then-prime rate of interest minus fifty (50) basis points, as adjusted from time to time. The Amended Loan Agreement contains other customary provisions with respect to events of default, expense reimbursement, and confidentiality.

Financing costs incurred related to the BankUnited Loans were recorded as a discount on debt and will be amortized over the term. Amortization of approximately $33,400 and $13,900 is included in interest expense for the nine-month periods ended March 31, 2022 and 2021, respectively.

In December 2020, ISP Latvia entered into an equipment loan with a third party (the “Equipment Loan”), which party is also a significant customer, and which the Equipment Loan is subordinate to the BankUnited Loans, and collateralized by certain equipment. The initial advance under the Equipment Loan was 225,000 EUR (or USD $275,000), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. An additional 225,000 EUR (or USD $267,000) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months. The Equipment Loan bears interest at a fixed rate of 3.3%.

Future maturities of loans payable are as follows:

	Bank United Term Loan		Equipment Loan		Unamortized Debt Costs			Total
Fiscal year ending:
June 30, 2022 (remaining three months)	$	145,337	$	27,243		(18,561	)	$	154,019
June 30, 2023		931,289		108,969		(58,773	)		981,485
June 30, 2024		2,992,824		108,969		-			3,101,793
June 30, 2025		-		108,969		-			108,969
After June 30, 2025		-		45,405		-			45,405
Total payments	$	4,069,450	$	399,555	$	(77,334	)		4,391,671
Less current portion									(902,601	)
Non-current portion								$	3,489,070

12. Foreign Operations

Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $2.0 million and $2.1 million as of March 31, 2022 and June 30, 2021, respectively. We also recognized net foreign currency transaction losses of $67,000 and $17,000 during the three months ended March 31, 2022 and 2021, respectively. During the nine months ended March 31, 2022 and 2021, we recognized net foreign currency transaction losses of approximately $107,000 and $38,000, respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.”

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Our cash and cash equivalents totaled approximately $5.2 million at March 31, 2022. Of this amount, greater than 50% was held by our foreign subsidiaries in China and Latvia. These foreign funds were generated in China and Latvia as a result of foreign earnings. With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the respective subsidiary must equal at least 50% of its registered capital before any funds can be repatriated through dividends. As of March 31, 2022, LPOIZ had approximately $4.8 million in retained earnings available for repatriation, and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of March 31, 2022.

Assets and net assets in foreign countries are as follows:

	China		Latvia
	March 31, 2022	June 30, 2021	March 31, 2022	June 30, 2021
Assets	$20.5 million	$20.1 million	$12.6 million	$11.3 million
Net assets	$16.4 million	$16.6 million	$9.9 million	$9.0 million

13. Contingencies

Legal

The Company from time to time is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.

In April 2021, 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. 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 its investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. These expenses, which included legal, consulting and other transitional management fees, totaled $718,000 during the year ended June 30, 2021. During the three and nine months ended March 31, 2022, we incurred an additional $45,000 and $526,000, respectively. Such expenses were recorded as SG&A expenses in the accompanying unaudited Condensed Consolidated Statement of Comprehensive Income (Loss).

We also identified a further liability in the amount of $210,000, which could have been incurred in the future due to the actions of these employees. This amount was accrued as of June 30, 2021, pending further investigation, and was included in “Other Expense, net” in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. During the third quarter of fiscal 2022, it was determined that our Chinese subsidiary would not be responsible for this amount. As such, this accrual was reversed and is included in the accompanying unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net” for the three and nine months ended March 31, 2022.

Knowing that employee transitions in international subsidiaries can lead to lengthy legal proceedings that can interrupt the subsidiary’s ability to operate, compounded by the fact that our officers could not travel to China to oversee the transitions because of the travel restrictions imposed by COVID-19, we chose to enter into severance agreements with certain of the employees at the time of termination. Pursuant to the severance agreements, LPOIZ and LPOI agreed to pay such employees severance of approximately $485,000 in the aggregate, to be paid over a six-month period. After the execution of the severance agreements, we discovered additional wrongdoing by the terminated employees. As a result, LPOIZ and LPOI have not yet paid the severance payments and have disputed the employees’ rights to such payments. However, based on the likelihood that the courts in China will determine that our subsidiaries will ultimately be obligated to pay these amounts, we accrued for these payments as of June 30, 2021. Such expenses were recorded as SG&A expenses in the Consolidated Statement of Comprehensive Income (Loss) for the year ended June 30, 2021. This amount remains accrued as of March 31, 2022.

We have transitioned the management of LPOI and LPOIZ to a new management team without any significant detrimental effects on the ability of those subsidiaries to operate. Management does not expect any material adverse impact to the business operations of LPOI or LPOIZ as a result of the transition. We expect to incur additional legal fees and consulting expenses in future periods as all legal options and remedies are pursued; however, such future fees are expected to be at lower levels than have been incurred to date.

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Although we have taken steps to minimize the business impacts from the termination of the management employees and transition to new management personnel, we have experienced some short-term adverse impacts on LPOIZ’s and LPOI’s domestic sales in China and results of operations in the three-month period ended June 30, 2021 and the nine-month period ended March 31, 2022, which management anticipates may continue for the next few quarters. The Company has not experienced, nor does management anticipate, any material adverse impact on LPOIZ’s or LPOI’s production and supply of products to its other subsidiaries for their customers.

COVID-19

Our business, results of operations financial condition, cash flows, and the stock price of our Class A common stock can be adversely affected by pandemics, epidemics, or other public health emergencies, such as the recent outbreak of COVID-19, which spread from China to countries across the world, including the United States.

The duration of the COVID-19 pandemic continues to impact global economic conditions, even as restrictions have lifted in many places throughout the world. Currently, China continues to experience rolling COVID-19 lockdowns in efforts to mitigate the spread of COVID-19. These lockdowns are resulting in global supply chain issues. To date, our facilities have not been directly impacted by these lockdowns; however, many of our customers located in China have delayed receipt of orders while the customers are closed for business. Even though these customers have not cancelled any orders with us, the delayed receipt of orders has impacted our revenue and we expect it to continue to impact our revenue in future periods while China has these rolling lockdowns. Additionally, some areas have imposed travel restrictions, which may impact some aspects of our operations that depend on travel, such as recruitment of senior positions, and travel of service providers to maintain our production equipment. Management is actively monitoring this situation and any impact on our financial condition, liquidity, and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2022 or beyond.

Impact of Russian-Ukraine Conflict

In February 2022, Russian military forces invaded Ukraine. This conflict has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of our customers and suppliers. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of the Russian-Ukraine conflict on our financial condition, results of operations or cash flows into the foreseeable future.

14. Liquidity

We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. As discussed in in Note 11, Loans Payable, we have commenced discussions with other lenders, and we anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. If we are unable to refinance the credit facility with other commercial lenders prior to maturity, we may need to raise additional equity financing, source financing through non-commercial lenders or further reduce certain operating expenses and capital expenditures. We filed a shelf registration statement, effective March 1, 2022, which is available for equity offerings. There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, greater than 50% of our cash and cash equivalents is held by our foreign subsidiaries and, although we regularly repatriate cash, it may not be readily available to repay liabilities in the U.S. We will also continue efforts to keep costs under control as we seek renewed sales growth. Our efforts are directed toward generating positive cash flow and profitability.

If these efforts are not successful, we may need to raise additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended June 30, 2021, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

Potential Impact of COVID-19

In March 2020, the World Health Organization (“WHO”) declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. Thereafter, COVID-19 spread throughout world, including the United States. Throughout the COVID-19 pandemic, our manufacturing facilities in China, Latvia, and the United States have continued to operate substantially as normal. Some of our United States- and Latvia-based non-manufacturing employees are continuing to work remotely, either on a full or partial basis. Where possible, we have staggered shifts to reduce contact within shifts and between different shifts, and have minimized interaction and physical proximity between employees working within the same building. Those measures are continuously adjusted in each of our locations, according to local conditions and guidelines.

The duration of the COVID-19 pandemic continues to impact global economic conditions, even as restrictions have lifted in many places throughout the world. Currently, China continues to experience rolling COVID-19 lockdowns in efforts to mitigate the spread of COVID-19. These lockdowns are resulting in global supply chain issues. To date, our facilities have not been directly impacted by these lockdowns; however, many of our customers located in China have delayed receipt of orders while the customers are closed for business. Even though these customers have not cancelled any orders with us, the delayed receipt of orders has impacted our revenue and we expect it to continue to impact our revenue in future periods while China has these rolling lockdowns. Additionally, some areas, such as China, have imposed travel restrictions, which may impact some aspects of our operations that depend on travel, such as recruitment of senior positions, and travel of service providers to maintain our production equipment. Management is actively monitoring this situation and any impact on our financial condition, liquidity, and results of operations. However, given the daily evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not presently able to estimate the effects of the COVID-19 pandemic on our future results of operations, financial, or liquidity for the remainder of fiscal year 2022 and, possibly, beyond.

Introduction

We were incorporated in Delaware in 1992 as the successor to LightPath Technologies Limited Partnership, a New Mexico limited partnership, formed in 1989, and its predecessor, Integrated Solar Technologies Corporation, a New Mexico corporation, formed in 1985. 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 capabilities include precision molded optics, thermal imaging optics, custom designed optics, and the design and manufacturing of optical assemblies and subsystems. These capabilities allow us to manufacture optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared aspheric lenses and other optical materials used to produce products that manipulate light. We design, develop, manufacture and integrate optical components and assemblies utilizing advanced optical manufacturing processes. Product verticals range from consumer (e.g., cameras, cell phones, gaming, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications. As a result, we market our products across a wide variety of customer groups, including laser systems manufacturers, laser OEMs, infrared-imaging systems vendors, industrial laser tool manufacturers, telecommunications equipment manufacturers, medical instrumentation manufacturers and industrial measurement equipment manufacturers, government defense agencies, and research institutions worldwide.

Subsidiaries

In November 2005, we formed LPOI, a wholly-owned subsidiary, located in Jiading, People’s Republic of China. LPOI provides sales and support functions. In December 2013, we formed LPOIZ, a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s 55,000 square foot 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.

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In December 2016, we acquired ISP, and its wholly-owned subsidiary, ISP Latvia. 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. Historically, ISP’s facility located in Irvington, New York functioned as its global headquarters for operations, while also providing manufacturing capabilities, optical coatings, and optical and mechanical design, assembly, and testing. In June 2019, we completed the relocation of this facility to our existing Orlando Facility and our facility 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. ISP Latvia’s Riga Facility functions as its manufacturing facility.

For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

Product Groups

Our business is organized in three product groups: PMO, infrared products and specialty products. These product groups are supported by our major product capabilities: molded optics, thermal imaging optics, and custom designed optics. Beginning in late 2019, we implemented a product management function, with a product manager for each of our major product capabilities: molded optics, thermal imaging optics and custom designed optics. Product management is principally a portfolio management process that analyzes products within the product capability areas as defined above. This function has begun to facilitate choosing investment priorities to help strategically align our competencies with strategic industry revenue opportunities. Over the longer term, this function will also help ensure successful product life cycle management.

Our PMO product group consists of visible precision molded optics with varying applications. Our infrared product group is comprised of infrared optics, both molded and diamond-turned, and thermal imaging assemblies. This product group also includes both conventional and CNC ground and polished lenses. 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 both catalog and custom designed optics.

Our specialty product group is comprised of value-added products, such as optical subsystems, assemblies, and collimators, and non-recurring engineering (“NRE”) products, consisting of those products we develop pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications for our existing products to fit their particular needs or specifications. The timing and extent of any such product development is outside of our control.

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. 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. Sam Rubin to assume the role of Chief Executive Officer and to develop and implement a new strategy going forward. In the fall of 2020, Mr. Rubin led our Board and the leadership team in collaborative discussions with the purpose of defining a new comprehensive strategy for our business. 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. 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.

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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 become their partner for the optical engine of their system. In our view, as the use of photonics evolves, so do the needs evolve. The industry is transforming from a fragmented industry with many component manufacturers into a solution focused industry, with the potential for partnerships for solution development and production. We believe such a partnership starts with us, as the supplier. We have in-house domain expertise in photonics, knowledge and experience in the most advanced technologies and the necessary manufacturing techniques. We can then further develop these partnerships by working closely with the customer throughout their design process, designing an optical solution that is tailored to their needs, often times using unique technologies we own, and supplying the customer with the corresponding complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we both currently own, such as optical molding, fabrication, and system design along with other technologies we may acquire or develop in the future to create tailored solutions for our customers, which often are based on proprietary manufacturing technologies.

Providing the domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, without needing to develop subject matter expertise in optics. 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.

Further information about our strategic direction can be found in our recent Annual Report on Form 10-K for the fiscal year ended June 30, 2021.

Results of Operations

Revenue

Three months ended March 31, 2022, compared to three months ended March 31, 2021

Revenue for the third quarter of fiscal 2022 was approximately $8.3 million, a decrease of approximately $2.4 million, or 22%, as compared to approximately $10.7 million in the same period of the prior fiscal year. Revenue generated by infrared products was approximately $3.7 million in the third quarter of fiscal 2022, a decrease of approximately $2.7 million, or 42%, as compared to approximately $6.5 million in the same period of the prior fiscal year. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers in the industrial market, for temperature sensing applications, for which demand peaked during the third quarter of fiscal 2021. The decrease is also partially due to lower revenue from a large annual contract which was renewed in the second quarter of fiscal 2022. Revenue generated by PMO products was approximately $4.0 million for the third quarter of fiscal 2022, an increase of approximately $128,000, or 3%, as compared to approximately $3.9 million in the same period of the prior fiscal year. The increase is driven by sales through catalog and distribution channels, as well as increases in sales to customers in the industrial market. Sales of PMO products in China have improved sequentially each quarter of fiscal 2022, driven in part by other telecommunications customers, as well as increased sales to customers in the industrial and commercial industries. This improvement partially offset decreases in sales of PMO products to a large customer beginning in the third quarter of fiscal 2021. Revenue generated by our specialty products was approximately $547,000 in the third quarter of fiscal 2022, an increase of approximately $213,000, or 64%, compared to $334,000 in the same period of the prior fiscal year. This increase is primarily due to NRE projects for customers in the industrial and defense industries during the third quarter of fiscal 2022.

Nine months ended March 31, 2022, compared to nine months ended March 31, 2021

Revenue for the first nine months of fiscal 2022 was approximately $26.7 million, a decrease of approximately $3.5 million, or 12%, as compared to approximately $30.1 million in the same period of the prior fiscal year. Revenue generated by infrared products was approximately $13.7 million in the first nine months of fiscal 2022, a decrease of approximately $2.3 million, or 14%, as compared to approximately $16.0 million in the same period of the prior fiscal year. The decrease in revenue is primarily driven by a decrease in sales to customers in the industrial market. Revenue generated by PMO products was approximately $11.6 million for the first nine months of fiscal 2022, a decrease of approximately $1.3 million, or 10%, as compared to approximately $12.9 million in the same period of the prior fiscal year. As previously discussed, PMO sales for the first nine months of fiscal 2022 demonstrate sequential recovery as compared to the fourth quarter of fiscal 2021. The decreases in telecommunications and other domestic sales in China were partially offset by an increase in sales through catalog and distribution channels, as well as increases in sales to customers in the industrial and commercial industries. Although sales of PMO products in China have improved sequentially each quarter of fiscal 2022, these sales are still lower as compared to the first three quarters of fiscal 2021. Revenue generated by our specialty products was approximately $1.4 million in the first nine months of fiscal 2022, an increase of approximately $158,000, or 13%, compared to $1.2 million in the same period of the prior fiscal year. This increase is primarily driven by an increase in NRE projects for customers in the commercial and defense industries.

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Cost of Sales and Gross Margin

Three months ended March 31, 2022, compared to three months ended March 31, 2021

Gross margin in the third quarter of fiscal 2022 was approximately $3.0 million, a decrease of 22%, as compared to approximately $3.9 million in the same period of the prior fiscal year. Total cost of sales was approximately $5.3 million for the third quarter of fiscal 2022, compared to approximately $6.8 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 37% for the third quarter of fiscal 2022, compared to 36% for the same period of the prior fiscal year. The increase in gross margin as a percentage of revenue is primarily due to the mix of products sold in each respective period. PMO products, which typically have higher margin than infrared products, comprised 49% of revenue for the third quarter of fiscal 2022, as compared to 36% of revenue for the third quarter of fiscal 2021, whereas infrared products comprised 45% of revenue for the third quarter of fiscal 2022, as compared to 60% of revenue for the third quarter of fiscal 2021. This favorable change in mix resulted in slightly higher gross margin as a percentage of revenue, despite the significantly lower revenue level in the third quarter of fiscal 2022, as compared to the third quarter of fiscal 2021.

Nine months ended March 31, 2022, compared to nine months ended March 31, 2021

Gross margin in the first nine months of fiscal 2022 was approximately $9.0 million, a decrease of 21%, as compared to approximately $11.4 million in the same period of the prior fiscal year. Total cost of sales was approximately $17.6 million for the first nine months of fiscal 2022, compared to approximately $18.7 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 34% for the first nine months of fiscal 2022, compared to 38% for the same period of the prior fiscal year. Although the product mix is similar for PMO and infrared products for the first nine months of fiscal 2022, as compared to the first nine months of fiscal 2021, the gross margin as a percentage of revenue is unfavorably impacted by the 12% decrease in revenue, which resulted in under-utilized capacity in some areas. Infrared product margins also reflect increased costs associated with the completion of the coating department in our Riga Facility, which will improve over time as that facility works through the qualification stages and begins to produce at volume.

Selling, General and Administrative

Three months ended March 31, 2022, compared to three months ended March 31, 2021

Selling, general and administrative (“SG&A”) costs were approximately $2.6 million for the third quarter of fiscal 2022, a decrease of approximately $187,000, or 7%, as compared to approximately $2.8 million in the same period of the prior fiscal year. The decrease in SG&A costs is primarily due to a decrease of approximately $149,000 of expenses associated with the previously described events that occurred at our Chinese subsidiaries, including legal and consulting fees. Please refer to Note 13, Contingencies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information. The remaining decrease in SG&A costs, as compared to the same period of the prior fiscal year, is due to decreases in non-recurring personnel-related costs incurred in the third quarter of the prior fiscal year.

Nine months ended March 31, 2022, compared to nine months ended March 31, 2021

For the first nine months of fiscal 2022, SG&A costs were approximately $8.4 million, an increase of approximately $426,000, or 5%, as compared to approximately $8.0 million in the same period of the prior fiscal year. The increase in SG&A costs is primarily due to an increase of approximately $380,000 of expenses incurred associated with the previously described events that occurred at our Chinese subsidiaries, including legal and consulting fees, as compared to the same period of the prior fiscal year. Please refer to Note 13, Contingencies, in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information. In addition, SG&A costs for the first nine months of fiscal 2022 include certain VAT and related taxes owed by one of our Chinese subsidiaries from prior years, which was identified and settled during the first nine months of fiscal 2022. These increases were partially offset by the absence of approximately $400,000 of non-recurring additional compensation to our former Chief Executive Officer which was included in SG&A for the second quarter of fiscal 2021, and previously disclosed in the Current Report on Form 8-K filed with the SEC on November 18, 2020.

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New Product Development

New product development costs were approximately $590,000 in the third quarter of fiscal 2022, a decrease of approximately $50,000, or 8%, as compared to the same period of the prior fiscal year. For the first nine months of fiscal 2022, new product development costs were approximately $1.6 million, a decrease of $51,000 as compared to the same period of the prior fiscal year. The decreases are primarily due to timing of certain development project expenses, for which costs were higher in the prior fiscal year periods.

Other Income (Expense)

Interest expense, net, was approximately $55,000 for the third quarter of fiscal 2022, as compared to $53,000 for the same period of the prior fiscal year. For the first nine months of fiscal 2022, interest expense, net, was approximately $151,000, as compared to $166,000 for the same period of the prior fiscal year. The decrease in interest expense is due to lower interest rates and a reduction in our total debt of 18% as of the quarter ended March 31, 2022, as compared to the quarter ended March 31, 2021.

Other income, net, was approximately $180,000 for the third quarter of fiscal 2022, as compared to other expense, net, of $29,000 for the same period of the prior fiscal year. For the first nine months of fiscal 2022, other income, net was approximately $140,000, as compared to other expense, net, of $23,000 for the same period of the prior fiscal year. Other expense, net, for the third quarter and the first nine months of fiscal 2022 includes a benefit of $210,000, which represents the reversal of a potential liability related to the actions of the terminated employees of our subsidiaries in China, as previously discussed. This potential liability was accrued as of June 30, 2021, pending further investigation, and it was determined in the third quarter of fiscal 2022 that our Chinese subsidiary would not be responsible for this amount.

The remainder of other income and expenses are primarily comprised of net gains losses on foreign exchange transactions. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. During the third quarter of fiscal 2022, we incurred net foreign currency transaction losses of approximately $67,000, compared to $17,000 for the same period of the prior fiscal year. During the first nine months of fiscal 2022, we incurred net foreign currency transaction losses of $107,000, as compared to $38,000 for the same period of the prior fiscal year.

Income Taxes

During the third quarter of fiscal 2022, income tax expense was approximately $163,000, compared to approximately $308,000 for the same period of the prior fiscal year. During the first nine months of fiscal 2022, income tax expense was approximately $328,000, as compared to $984,000 in the same period of the prior fiscal year. Income tax expense is primarily related to income taxes from our operations in China, including estimated Chinese withholding taxes associated with intercompany dividends declared by LPOIZ and payable to us as its parent company. The decrease is due to lower taxable income in that jurisdiction.

Net Loss

Net loss for the third quarter of fiscal 2022 was approximately $495,000, or $0.02 basic and diluted loss per share, compared to $223,000, or $0.01 basic and diluted loss per share, for the third quarter of fiscal 2021. The decrease in net income for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year, was primarily attributable to lower revenue and gross margin, partially offset by lower operating expenses. The resulting decrease in operating income was partially offset by the aforementioned other income item of $210,000, and a decrease in the provision for income taxes of approximately $145,000, as compared to the same period of the prior fiscal year.

Net loss for the first nine months of fiscal 2022 was approximately $2.2 million, or $0.08 basic and diluted loss per share, compared to $272,000, or $0.01 basic and diluted loss per share, for the first nine months of fiscal 2021. The decrease in net income for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year, was primarily attributable to lower revenue and gross margin and increased SG&A expenses, including expenses incurred related to the previously described events that occurred in our Chinese subsidiaries. The resulting decrease in operating income was partially offset by the aforementioned other income item of $210,000, and a decrease in the provision for income taxes of approximately $655,000, as compared to the same period of the prior fiscal year.

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Weighted-average common shares outstanding were 27,033,578, basic and diluted, in the third quarter of fiscal 2022, compared to 26,366,651, basic and diluted, in the third quarter of fiscal 2021. Weighted-average common shares outstanding were 27,011,943, basic and diluted, in the first nine months of fiscal 2022, compared to 26,153,839, basic and diluted, in the first nine months of fiscal 2021. The increase in the weighted-average basic common shares was due to the issuance of shares of Class A common stock (i) under the 2014 ESPP, (ii) upon the exercises of stock options, and (iii) underlying vested RSUs.

Liquidity and Capital Resources

As of March 31, 2022, we had working capital of approximately $11.0 million and total cash and cash equivalents of approximately $5.2 million, of which, greater than 50% of our cash and cash equivalents was held by our foreign subsidiaries.

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. However, during fiscal 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we also plan to repatriate a portion of their earnings. During fiscal 2020, we began to accrue for these taxes on the portion of earnings that we intend to repatriate.

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. We repatriated approximately $2.2 million and $3.0 million from LPOIZ during the nine-month periods ended March 21, 2022 and 2021, respectively. As of March 31, 2022, LPOIZ had approximately $4.8 million available for repatriation and LPOI did not have any earnings available for repatriation, based on earnings accumulated through December 31, 2021, the end of the most recent statutory tax year, that remained undistributed as of March 31, 2022.

Loans payable consists of the BankUnited Term Loan and the BankUnited Revolving Line, both pursuant to the Amended Loan Agreement, and the subordinated Equipment Loan. As of March 31, 2022, the outstanding balance on the BankUnited Term Loan was approximately $4.1 million, and there were no borrowings outstanding on the BankUnited Revolving Line. The outstanding balance on the Equipment Loan was approximately $400,000 as of March 31, 2022.

The Amended Loan Agreement and the Letter Agreement includes certain customary covenants. As of March 31, 2022, we obtained a waiver of compliance for both the fixed charge coverage ratio and total leverage ratio, and we were in compliance with all other covenants, as amended. For additional information, see Note 11, Loans Payable, to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

In February 2022, we filed a shelf registration statement to facilitate the issuance of our Class A common stock, warrants exercisable for shares of our Class A common stock, and/or units up to an aggregate offering price of $75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A common stock up to an aggregate offering price of $25.2 million from time to time, decreasing the aggregate offering price available under our shelf registration statement to $50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. We have not issued any shares of our Class A common stock pursuant to the at-the-market equity program.

We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay the BankUnited Term Loan. We anticipate refinancing our debt obligations with a new lender prior to the maturity date of the Term Loan, of which there can be no assurances. There are a number of factors that could result in the need to raise additional funds, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. We will also continue efforts to keep costs under control as we seek renewed sales growth. Our efforts are directed toward generating positive cash flow and profitability. If these efforts are not successful, we may need to raise additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.

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Cash Flows – Operating:

Cash provided by operations was approximately $352,000 for the first nine months of fiscal 2022, compared to approximately $3.1 million for the same period of the prior fiscal year. The decrease in cash flows from operations during the first nine months of fiscal 2022 is due to the decrease in net income and a decrease in accounts payable and accrued liabilities, partially offset by a reduction in inventory. The decrease in accounts payable and accrued liabilities was primarily due to the previously described events that occurred at our Chinese subsidiaries, for which certain expenses were accrued as of June 30, 2021, many of which were paid during the first nine months of fiscal 2022, as well as payment of certain bonuses earned by our executive officers and other employees during fiscal 2021 and the first installment payment of payroll taxes deferred in fiscal 2020 under the Coronavirus Aid, Relief, and Economic Security Act.

Cash Flows – Investing:

During the first nine months of fiscal 2021, we expended approximately $1.5 million in investments in capital equipment, compared to approximately $2.7 million in the same period of the prior fiscal year. The majority of our capital expenditures during the first nine months of fiscal 2022 were related to the continued expansion of our infrared coating capacity as well as increasing our lens diamond turning capacity to meet current and forecasted demand. Overall, we anticipate that the level of capital expenditures during fiscal 2022 will be less than fiscal 2021, however, the total amount expended will depend on opportunities and circumstances.

Cash Flows – Financings:

Net cash used in financing activities was approximately $425,000 for the first nine months of fiscal 2022, compared to approximately $313,000 in the same period of the prior fiscal year. Cash used in financing activities for the first nine months of fiscal 2022 reflects approximately $682,000 in principal payments on our loans and finance leases and loan costs of approximately $61,000 associated with the restructure of the BankUnited Term Loan, offset by proceeds of approximately $267,000 from the Equipment Loan and approximately $52,000 in proceeds from the sale of Class A common stock under the 2014 ESPP. Cash used in financing activities for the first nine months of fiscal 2021 reflects approximately $761,000 in principal payments on our loans and capital leases, offset by proceeds of approximately $275,000 from the Equipment Loan, and approximately $173,000 in proceeds from the exercise of stock options and the sale of Class A common stock under the 2014 ESPP.

Contractual Obligations and Commitments

As of March 31, 2022, our principal commitments consisted of obligations under operating and finance leases, and debt agreements. No material changes occurred during the first nine months of fiscal 2022 in our contractual cash obligations to repay debt or to make payments under operating and finance leases, or in our contingent liabilities as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2021.

Off Balance Sheet Arrangements

We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates during the nine months ended March 31, 2022 from those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended June 30, 2021.

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How We Operate

We have continuing sales of two basic types: sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and the more challenging and potentially more rewarding business of customer product development. 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. Thereafter, should a customer conclude that our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket purchase order” type or a supply agreement. 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. A key business objective is to convert as much of our business to the design win and annuity model as is possible. 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 focus on reducing 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.

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. 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. For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in our Annual Report on Form 10-K dated June 30, 2021.

Our Key Performance Indicators:

Typically, on a weekly basis, management reviews a number of performance indicators, both qualitative and quantitative. These indicators change from time to time as the opportunities and challenges in the business change. These indicators are used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted, are proprietary information.

Financial indicators that are considered key and reviewed regularly are as follows:

	·	Sales backlog;

	·	Revenue dollars and units by product group; and

	·	Other key indicators.

These indicators are also used to determine tactical operating actions and changes and are discussed in more detail below. Management is evaluating these key indicators as we transition to our new strategic plan, and is implementing certain changes and updates as further described below.

Sales Backlog

We believe our sales growth has been and continues to be our best indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what percent of the backlog is scheduled by the customer for date-certain delivery. 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.

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Our total backlog at March 31, 2022 was approximately $19.7 million, an increase of 1%, as compared to $19.5 million as of March 31, 2021. Compared to the end of fiscal 2021, our total backlog decreased by 8% during the first nine months of fiscal 2022. Backlog change rates for the last five fiscal quarters are:

Quarter	Total Backlog ($ 000)		Change From Prior Year End			Change From Prior Quarter End
Q3 2021	$	19,498		-11	%		-18	%
Q4 2021	$	21,329		-3	%		9	%
Q1 2022	$	19,265		-10	%		-10	%
Q2 2022	$	21,929		3	%		14	%
Q3 2022	$	19,678		-8	%		-10	%

The decrease in backlog during the first nine months of fiscal 2022 was largely due to timing of the renewal of a large annual contract for infrared products. Consistent with prior years, we received the renewal of this contract in the fiscal second quarter, and began shipping against this contract in the fiscal third quarter. The timing of other contract renewals may not be as consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and the total backlog is subsequently drawn down as shipments are made against these orders. Our annual and multi-year contracts are expected to renew 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 new BD6 material. With the global supply of germanium currently sourced from Russia and China, recent global events are generating renewed interest in BD6 as an alternative to germanium. We expect to maintain moderate growth in our visible PMO product group by continuing to diversify and offer new applications, with a cost competitive structure; however, we believe that the terminations of certain of our management employees in our China subsidiaries, LPOIZ and LPOI, and transition to new management personnel, has adversely impacted the domestic sales in China of these subsidiaries over the past two quarters, which could continue for a few more quarters, and which would affect potential growth in our PMO lens business for that period. Our former employees, including management personnel, maintained relationships with certain of our customers in China and we expect that until our new sales and management personnel establish relationships with these customers, of which there can be no assurance, domestic sales in China may be adversely impacted. Although the recovery is taking longer than initially expected, we have begun to recapture some customers. Our sales and management team in China was enhanced in October 2021 with two key new hires, and we are beginning to see more progress in this area.

Revenue Dollars and Units by Product Group

The following table sets forth revenue dollars and units for our three product groups for the three and nine-month periods ended March 31, 2022 and 2021:

	(unaudited)
	Three Months Ended March 31,				Nine Months Ended March 31,				Quarter			Year-to-date
	2021		2020		2021		2020		% Change			% Change
Revenue
PMO	$	4,033,218	$	3,904,857	$	11,608,665	$	12,940,919		3	%		-10	%
Infrared Products		3,725,684		6,462,527		13,688,770		15,995,133		-42	%		-14	%
Specialty Products		546,510		333,978		1,354,494		1,196,453		64	%		13	%
Total revenue	$	8,305,412	$	10,701,362	$	26,651,929	$	30,132,505		-22	%		-12	%

Units
PMO		586,528		680,825		1,600,836		2,816,370		-14	%		-43	%
Infrared Products		89,476		174,811		337,773		457,436		-49	%		-26	%
Specialty Products		5,075		6,742		14,869		24,079		-25	%		-38	%
Total units		681,079		862,378		1,953,478		3,297,885		-21	%		-41	%

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Three months ended March 31, 2022

Our revenue decreased by approximately $2.4 million, for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year, primarily due to a decrease in infrared product sales, partially offset by an increase in PMO product sales.

Revenue generated by the PMO product group during the third quarter of fiscal 2022 was $4.0 million, an increase of approximately $128,000, or 3%, as compared to the same period of the prior fiscal year. The increase is driven by sales through catalog and distribution channels, as well as increases in sales to customers in the industrial market, partially offset by a reduction in orders from a key customer in the telecommunications market, due to a decrease in that customer’s market share. Sales of PMO units decreased by 14%, as compared to the same period of the prior fiscal year, and average selling prices increased by 20%. The volume decrease was largely driven by a lower mix of telecommunications products, which typically have lower average selling prices. The unit volume for telecommunications products decreased by approximately 44% for the third quarter of fiscal 2022, as compared to the same period of the prior fiscal year.

Revenue generated by the infrared product group during the third quarter of fiscal 2022 was $3.7 million, a decrease of approximately $2.7 million, or 42%, as compared to the same period of the prior fiscal year. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers in the industrial market for temperature sensing applications, for which demand peaked during the third quarter of fiscal 2021. During the third quarter of fiscal 2022, sales of infrared units decreased by 49%, as compared to the prior year period. The decrease in units is due primarily due to the mix of products shipped, as the prior year period included more molded infrared lenses which are lower in volume and higher in price than the larger diamond-turned lenses.

In the third quarter of fiscal 2022, our specialty products revenue increased by $213,000, or 64%, as compared to the same period of the prior fiscal year, primarily due to NRE projects for customers in the industrial and defense industries during the third quarter of fiscal 2022.

Nine months ended March 31, 2022

Our revenue decreased by approximately $3.5 million for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year, due to decreases in both PMO and infrared product sales.

Revenue generated by the PMO product group during the first nine months of fiscal 2022 was $11.6 million, a decrease of approximately $1.3 million, or 10%, as compared to the same period of the prior fiscal year. The decrease in revenue is primarily attributed to a reduction in orders from a key customer in the telecommunications market, due to a decrease in that customer’s market share. This decrease was partially offset by an increase in sales through our catalog and distribution channels, as well as increases in sales to customers in the industrial and commercial industries. Sales of PMO units decreased by 43%, as compared to the same period of the prior fiscal year, and average selling prices increased by 58%. The volume decrease was largely driven by a lower mix of telecommunications products, which typically have lower average selling prices. The unit volume for telecommunications products decreased by approximately 60% for the first nine months of fiscal 2022, as compared to the same period of the prior fiscal year.

Revenue generated by the infrared product group during the first nine months of fiscal 2022 was $13.7 million, a decrease of approximately $2.3 million, or 14%, as compared to the same period of the prior fiscal year. The decrease in revenue is primarily driven by sales to customers in the industrial market. During the first nine months of fiscal 2022, sales of infrared units decreased by 26%, as compared to the prior year period. The decrease in units is due primarily due to the mix of products shipped, as the prior year period included more molded infrared lenses which are lower in volume and higher in price than the larger diamond-turned lenses. Industrial applications, firefighting cameras, and other public safety applications continue to be the primary drivers of demand for infrared products, including thermal imaging assemblies. During fiscal 2020 and 2021, we saw an increase in demand for medical and temperature sensing applications, such as fever detection. Demand for temperature sensing applications were accelerated by COVID-19, and although the demand has leveled off since the initial spike, it remains elevated.

In the first nine months of fiscal 2022, our specialty products revenue increased by $158,000, or 13%, as compared to the same period of the prior fiscal year, primarily driven by an increase in NRE projects for customers in the commercial and defense industries.

Other Key Indicators

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. They are mostly non-financial indicators, such as evaluating the pipeline of sales opportunities, on time delivery trends, units of shippable output by major product line, production yield rates by major product line, and the output and yield data from significant intermediary manufacturing processes that support the production of the finished shippable product. These indicators can be used to calculate such other related indicators as fully-yielded unit production per-shift, which varies by the particular product and our state of automation in production of that product at any given time. Higher unit production per shift means lower unit cost and, therefore, improved margins or improved ability to compete, where desirable, for price sensitive customer applications. The data from these reports is used to determine tactical operating actions and changes. Management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP measures. These non-GAAP measures are described in more detail below under the heading “Non-GAAP Financial Measures.”

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Non-GAAP Financial Measures

We report our historical results in accordance with GAAP; however, our management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. 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

EBITDA is a non-GAAP financial measure used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA, as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not necessarily a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. 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.”

We believe EBITDA is helpful for investors to better understand our underlying business operations. The following table adjusts net loss to EBITDA for the three and nine months ended March 31, 2022 and 2021:

	(unaudited)
	Quarter Ended March 31,						Nine Months Ended March 31,
	2022			2021			2022			2021
Net loss	$	(495,003	)	$	(222,564	)	$	(2,182,391	)	$	(272,041	)
Depreciation and amortization		924,219			917,308			2,763,620			2,608,472
Income tax provision		163,059			307,834			328,328			983,586
Interest expense		54,984			52,795			151,064			166,491
EBITDA	$	647,259		$	1,055,373		$	1,060,621		$	3,486,508
% of revenue		8	%		10	%		4	%		12	%

Our EBITDA for the three months ended March 31, 2022 was approximately $647,000, compared to earnings of $1.1 million for the same period of the prior fiscal year. The decrease in EBITDA in the third quarter of fiscal 2022 was primarily attributable to lower revenue and gross margin, partially offset by the aforementioned other income item of $210,000.

Our EBITDA for the nine months ended March 31, 2022 was approximately $1.1 million, compared to $3.5 million for the same period of the prior fiscal year. The decrease in EBITDA in the first nine months of fiscal 2022 was primarily attributable to lower revenue and gross margin and increased SG&A expenses, including expenses incurred related to the previously described events that occurred in our Chinese subsidiaries.

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Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2022, the end of the period covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022 in reporting on a timely basis information required to be disclosed by us in the reports we file or submit under the Exchange Act.

There have not been any significant changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2021, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the quarter ended March 31, 2022, there have been no material changes from the risk factors previously disclosed under Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2021, except as follows:

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. Although we have no direct operations in Russia or Ukraine, the broader consequences of this conflict have negatively affected, and are expected to continue to negatively affect, the global economy, including the imposition of sanctions, cyber incidents or information technology failures, supply disruptions, increases in inflation rates, changes to foreign currency exchange rates, constraints, volatility, or disruption in financial markets, the availability of raw materials, supplies, freight, and labor, and uncertainty about economic and global stability. Historically, we have sourced Germanium from suppliers located in Russia and China. Going forward, we intend to source Germanium from suppliers located in China to the extent the Russian-Ukraine conflict continues. Though we do not anticipate any challenges from sourcing Germanium solely from suppliers in China, we cannot provide any assurances that we will be able to obtain adequate supplies in the future or, if adequate supplies are available, that the timing or costs of obtaining such raw materials will be acceptable to us. Further, some of our major customers in Europe may be directly impacted by the Russian-Ukraine conflict, which could impact the amount and frequency of orders they place with us, as well as impact the timing and ability to pay for products ordered from us. Any material impacts to our customers could have a material adverse effect on our business and operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

On May 11, 2022, we entered into the Third Amendment, which further amended the Loan Agreement with BankUnited. In accordance with the Third Amendment, the parties agreed to the following terms, among others: (i) an amended maturity date of April 15, 2024 with respect to the Term Loan (as defined in the Amended Loan Agreement); and (ii) an amended exit fee equal to (a) 2% of the outstanding principal balance of the Term Loan on September 30, 2022, (b) 1% of the outstanding principal balance on December 31, 2022, (c) 1% of the outstanding principal balance on March 31, 2023, and (d) 4% of the outstanding principal balance on April 15, 2024 (to the extent the Term Loan is still outstanding on each of the respective dates and has not been refinanced with another lender). Further, in accordance with the Third Amendment, we paid BankUnited a fee equal to $25,000, and will pay for all attorney fees, costs, and expenses incurred by BankUnited in connection with the Third Amendment.

The foregoing description of the Third Amendment is a summary only and is qualified in its entirety by reference to the complete text of the Third Amendment filed herewith as Exhibit 10.3

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Item 6. Exhibits

The following exhibits are filed herewith as a part of this report.

Exhibit Number			Description

3.1.1			Certificate of Incorporation of LightPath Technologies, Inc., filed June 15, 1992 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.1 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.

3.1.2			Certificate of Amendment to Certificate of Incorporation of LightPath Technologies, Inc., filed October 2, 1995 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.2 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.

3.1.3			Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock of LightPath Technologies, Inc., filed November 9, 1995 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.3 to our Annual Report on Form 10-K (File No. 000-27548) filed with the Securities and Exchange Commission on September 10, 2020, and is incorporated herein by reference thereto.

3.1.4			Certificate of Designation of Series A Preferred Stock of LightPath Technologies, Inc., filed July 9, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.4 to our Annual Report on Form 10-KSB40 filed with the Securities and Exchange Commission on September 11, 1997, and is incorporated herein by reference thereto.

3.1.5			Certificate of Designation of Series B Stock of LightPath Technologies, Inc., filed October 2, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto.

3.1.6			Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed November 12, 1997 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Quarterly Report on Form 10-QSB (File No. 000-27548) filed with the Securities and Exchange Commission on November 14, 1997, and is incorporated herein by reference thereto.

3.1.7			Certificate of Designation of Series C Preferred Stock of LightPath Technologies, Inc., filed February 6, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No. 333-47905) filed with the Securities and Exchange Commission on March 13, 1998, and is incorporated herein by reference thereto.

3.1.8			Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc. filed April 29, 1998 with the Secretary of State of Delaware, which was filed as Exhibit 1 to our Registration Statement on Form 8-A (File No. 000-27548) filed with the Securities and Exchange Commission on April 28, 1998, and is incorporated herein by reference thereto.

3.1.9			Certificate of Designation of Series F Preferred Stock of LightPath Technologies, Inc., filed November 2, 1999 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Registration Statement on Form S-3 (File No: 333-94303) filed with the Securities and Exchange Commission on January 10, 2000, and is incorporated herein by reference thereto.

3.1.10			Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed February 28, 2003 with the Secretary of State of Delaware, which was filed as Appendix A to our Proxy Statement (File No. 000-27548) filed with the Securities and Exchange Commission on January 24, 2003, and is incorporated herein by reference thereto.

3.1.11			Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed March 1, 2016 with the Secretary of State of Delaware, which was filed as Exhibit 3.1.11 to our Quarterly Report on Form 10-Q (File No: 000-27548) filed with the Securities and Exchange Commission on November 14, 2016, and is incorporated herein by reference thereto.

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3.1.12		Certificate of Amendment of Certificate of Incorporation of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto.

3.1.13		Certificate of Amendment of Certificate of Designations of Class A Common Stock and Class E-1 Common Stock, Class E-2 Common Stock, and Class E-3 Common Stock of LightPath Technologies, Inc., filed October 30, 2017 with the Secretary of State of Delaware, which was filed as Exhibit 3.2 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on October 31, 2017, and is incorporated herein by reference thereto.

3.1.14		Certificate of Amendment of Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of LightPath Technologies, Inc., filed January 30, 2018 with the Secretary of State of Delaware, which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 1, 2018, and is incorporated herein by references thereto.

3.2.1		Second Amended and Restated Bylaws of LightPath Technologies, Inc., which was filed as Exhibit 3.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 3, 2021, and is incorporated herein by reference thereto.

10.1		Sales Agreement, dated February 15, 2022, by and between LightPath Technologies, Inc. and A.G.P./Alliance Global Partners, which was filed as Exhibit 10.1 to our Current Report on Form 8-K (File No: 000-27548) filed with the Securities and Exchange Commission on February 16, 222, and is incorporated herein by reference thereto.

10.2		Investor Relations Consulting Agreement, dated April 11, 2022, by and between LightPath Technologies, Inc. and MZHCI, LLC*

10.3		Third Amendment to Loan Agreement, dated May 11, 2022, by and between LightPath Technologies, Inc. and BankUnited, N.A.*

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934*

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code*

101.INS	Inline XBRL Instance Document	*

101.SCH	Inline XBRL Taxonomy Extension Schema Document	*

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	*

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	*

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	*

101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document	*

104	Cover Page Interactive Data File – formatted in Inline XBRL and contained in Exhibit 101	*

*filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LIGHTPATH TECHNOLOGIES, INC.

Date: May 12, 2022	By:	/s/ Shmuel Rubin
		Shmuel Rubin
		President and Chief Executive Officer

	Company Name

Date: May 12, 2022	By:	/s/ Albert Miranda.
		Albert Miranda
		Chief Financial Officer