LightPath Technologies(LPTH) - 2020 Q3 - Quarterly Report

Cautionary Note Concerning Forward-Looking Statements This report contains forward-looking statements subject to numerous risks and uncertainties beyond the company's control - This report contains forward-looking statements based on current expectations and assumptions. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control[11] - Key risks highlighted include the duration and scope of the COVID-19 pandemic, its impact on product demand and supply chains, government and individual responses to the pandemic, and general economic uncertainty[11] Part I Financial Information Financial Statements The unaudited condensed consolidated financial statements for the period ended March 31, 2020, reflect improved financial performance and asset growth Unaudited Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2020, shows increased total assets and stockholders' equity, with decreased liabilities Condensed Consolidated Balance Sheet Highlights (unaudited) | Balance Sheet Item | March 31, 2020 ($ million) | June 30, 2019 ($ million) | | :--- | :--- | :--- | | Total Current Assets | $19.80 | $19.61 | | Total Assets | $46.06 | $45.97 | | Total Current Liabilities | $6.14 | $6.36 | | Total Liabilities | $12.14 | $12.51 | | Total Stockholders' Equity | $33.91 | $33.46 | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) For Q3 2020, revenue increased 10% to $8.7 million, with net income of $0.82 million, reversing a prior-year loss Financial Performance Summary (unaudited) | Metric | Q3 2020 ($) | Q3 2019 ($) | Nine Months 2020 ($) | Nine Months 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $8,708,981 | $7,905,582 | $25,860,823 | $25,003,810 | | Gross Margin | $4,012,176 | $3,105,669 | $10,332,274 | $9,689,985 | | Operating Income (Loss) | $1,062,812 | $20,818 | $1,507,366 | $(63,252) | | Net Income (Loss) | $816,017 | $(352,018) | $209,977 | $(918,633) | | EPS (diluted) | $0.03 | $(0.01) | $0.01 | $(0.04) | Unaudited Condensed Consolidated Statement of Changes in Stockholders' Equity Total stockholders' equity increased from $33.5 million to $33.9 million, primarily due to net income and stock-based compensation - Stockholders' equity rose to $33.91 million at March 31, 2020, from $33.46 million at June 30, 2019[19] - The change was primarily due to net income of $0.21 million for the nine months ended March 31, 2020, and stock-based compensation of $0.29 million[19] Unaudited Condensed Consolidated Statements of Cash Flows For the nine months ended March 31, 2020, net cash from operations was $1.9 million, a significant improvement, while investing and financing activities used cash Cash Flow Summary (Nine Months Ended March 31) | Cash Flow Activity | 2020 ($) | 2019 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,869,783 | $25,947 | | Net cash used in investing activities | $(1,318,035) | $(1,356,732) | | Net cash used in financing activities | $(727,039) | $(1,154,048) | | Change in cash and cash equivalents | $(222,988) | $(1,867,163) | | Cash and cash equivalents, end of period | $4,381,713 | $4,641,457 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, including ASC Topic 842 adoption, revenue breakdown by product group, debt structure, and foreign cash holdings - The company adopted lease accounting standard ASC Topic 842 on July 1, 2019, recognizing operating lease right-of-use assets of $1.7 million and corresponding operating lease liabilities of $2.3 million[28] Revenue by Product Group (Nine Months Ended March 31) | Product Group | 2020 ($ million) | 2019 ($ million) | | :--- | :--- | :--- | | PMO | $10.75 | $10.59 | | Infrared Products | $13.26 | $12.52 | | Specialty Products | $1.85 | $1.89 | | Total revenue | $25.86 | $25.00 | - In December 2019, the company declared and paid a $2 million intercompany dividend from its Chinese subsidiary LPOIZ, resulting in $0.2 million of accrued Chinese withholding taxes[45] - As of March 31, 2020, the company was in compliance with all covenants for its BankUnited loans, including a term loan, revolving line of credit, and guidance line[71] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 10% revenue increase in Q3 2020 to $8.7 million, improved gross margin, and a net income of $0.82 million Overview LightPath is a global manufacturer of optical components and assemblies across three product groups, with recent organizational changes to enhance product portfolio management - The company's business is organized into three product groups: Precision Molded Optics (PMO), infrared products, and specialty products[90] - Recent organizational changes were designed to better leverage expanded capabilities and manage a broader product portfolio, including a new product management function[89] Results of Operations For Q3 2020, revenue grew 10% to $8.7 million, with gross margin increasing to 46%, resulting in a net income of $0.82 million, a significant turnaround Q3 2020 vs Q3 2019 Performance | Metric | Q3 2020 ($) | Q3 2019 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenue | $8.7M | $7.9M | +10% | | Gross Margin | $4.0M (46%) | $3.1M (39%) | +29% | | Net Income (Loss) | $816K | $(352K) | +$1.17M | - The increase in Q3 PMO revenue was driven by sales to medical and telecommunications markets, while infrared revenue growth was fueled by molded products for applications like fever detection[95] - For the nine months ended March 31, 2020, net income was $0.21 million, compared to a net loss of $0.92 million in the prior-year period, primarily due to a $1.6 million improvement in operating income[111] Liquidity and Capital Resources As of March 31, 2020, the company had working capital of $13.7 million and cash of $4.4 million, with $1.9 million in cash flow from operations - At March 31, 2020, working capital was $13.7 million and cash and cash equivalents were $4.4 million[113] - Cash flow from operations was approximately $1.9 million for the first nine months of fiscal 2020, compared to only $26K for the same period in fiscal 2019[119] - Capital expenditures for the nine-month period were $1.5 million, mainly for expanding BD6 material production and infrared coating capacity[120] Sales Backlog The 12-month sales backlog as of March 31, 2020, increased 17% year-over-year to $20.0 million, driven by new orders and contract renewals 12-Month Sales Backlog Trend | Quarter | Backlog ($ K) | Change From Prior Quarter End | | :--- | :--- | :--- | | Q3 2019 | $17,137 | -6% | | Q4 2019 | $17,121 | 0% | | Q1 2020 | $15,390 | -10% | | Q2 2020 | $19,095 | +24% | | Q3 2020 | $20,012 | +5% | - The 12-month backlog at March 31, 2020 was approximately $20.0 million, a 17% increase compared to March 31, 2019[133] Non-GAAP Financial Measures The company uses EBITDA as a non-GAAP measure, with Q3 2020 EBITDA at $1.9 million, more than double the prior year, reflecting improved operating performance EBITDA Reconciliation (unaudited) | Metric | Q3 2020 ($) | Q3 2019 ($) | Nine Months 2020 ($) | Nine Months 2019 ($) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $816,017 | $(352,018) | $209,977 | $(918,633) | | Depreciation & Amortization | $827,095 | $857,287 | $2,587,315 | $2,540,963 | | Income tax provision (benefit) | $203,369 | $161,870 | $673,556 | $(40,493) | | Interest expense | $85,464 | $275,233 | $273,262 | $573,535 | | EBITDA | $1,931,945 | $942,372 | $3,744,110 | $2,155,372 | Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal controls - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2020[148] - No material changes were made to internal control over financial reporting in the quarter, with the company monitoring COVID-19's impact on controls[149] Part II Other Information Legal Proceedings The company reported no legal proceedings during the period - No legal proceedings were reported[150] Risk Factors No material changes to risk factors were reported, except for a new risk factor concerning the potential adverse effects of pandemics like COVID-19 - A new risk factor was added to address the potential adverse impact of pandemics like COVID-19[151] - The company is considered an "essential business" but acknowledges the pandemic could still materially affect operations, supply chain, and customer demand, with uncertain financial impact[152] Unregistered Sales of Equity Securities and Use of Proceeds During the quarter, 5,000 shares of Class A common stock were issued to a consultant at $1.23 per share, exempt from registration - Issued 5,000 shares of Class A common stock to a consultant for services, at a price of $1.23 per share[153] Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[154] Exhibits This section lists all exhibits filed with the quarterly report, including corporate governance documents and certifications - The exhibits filed with the report include certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and XBRL data files[157] Signatures - The report was duly signed and authorized by Shmuel Rubin, President and CEO, and Donald O. Retreage, Jr., CFO, on May 7, 2020[159][161]