lpth_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________

FORM 10-K

___________________________

(Mark One)

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

	For the fiscal year ended June 30, 2022

	OR

☐	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 Court, Suite 100

Orlando, Florida 32826

(407) 382-4003

(Address of principal executive offices, including zip code)

(Registrant’s telephone number, including area code)

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 CommonStock, par value $0.01		LPTH		The Nasdaq Stock Market, LLC

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

Series D Participating Preferred Stock Purchase Rights

(Title of Class)

___________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ☐ No ☒

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 and 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 for 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, non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

The aggregate market value of the registrant’s voting stock held by non-affiliates (based on the closing sale price of the registrant’s Class A Common Stock on The NASDAQ Capital Market) was approximately $64,792,006 as of December 31, 2021.

As of September 9, 2022, the number of shares of the registrant’s Class A Common Stock outstanding was 27,071,929.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Fiscal 2022 Annual Meeting of Stockholders are incorporated by reference in Part II and Part III.

LightPath Technologies, Inc.

Form 10-K

Table of Contents

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	14
Item 2.	Properties	23
Item 3.	Legal Proceedings	23

PART II		24
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 8.	Financial Statements and Supplementary Data	37
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	38
Item 9A.	Controls and Procedures	38
Item 9B.	Other Information	38

PART III		39
Item 10.	Directors, Executive Officers and Corporate Governance	39
Item 11.	Executive Compensation	39
Item 12.	Security Ownership of Certain Beneficial Owners and Management	39
Item 13.	Certain Relationships and Related Transactions, and Director Independence	39
Item 14.	Principal Accountant Fees and Services	39

PART IV		40
Item 15.	Exhibits, Financial Statement Schedules	40
Item 16.	Form 10-K Summary	43

Index to Consolidated Financial Statements		F-1

Signatures		S-1

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

Certain statements and information in this Annual Report on Form 10-K 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. These forward-looking statements include, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events, or performance, statements related to the expected effects on our business from the coronavirus (“COVID-19”) pandemic, and underlying assumptions and other statements, which are not statements of historical facts. 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 on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent management’s beliefs and assumptions only as of the date of this Annual Report on Form 10-K. You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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PART I

Item 1. Business.

General

Our Company

LightPath Technologies, Inc. (“LightPath”, the “Company”, “we”, “our”, or “us”) was incorporated under Delaware law 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 corporate headquarters is located in Orlando, Florida.

Subsidiaries

In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd (“LPOI”), a wholly-owned subsidiary, located in Jiading, People’s Republic of China. The LPOI facility (the “Shanghai Facility”) is primarily used for sales and support functions.

In December 2013, we formed LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s manufacturing facility (the “Zhenjiang Facility”) serves as our primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies.

In December 2016, we acquired ISP Optics Corporation, a New York corporation (“ISP”), and its wholly-owned subsidiary, ISP Optics Latvia, SIA, a limited liability company founded in 1998 under the Laws of the Republic of Latvia (“ISP Latvia”). ISP is a vertically integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. Since June 2019, ISP’s manufacturing operation has been located at our corporate headquarters facility in Orlando, Florida (the “Orlando Facility”). ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s manufacturing facility is located in Riga, Latvia (the “Riga Facility”).

Industry

We and our customers support a wide range of industries, including automotive, telecommunications, defense, medical, bio-technology, industrial, consumer goods and more. A commonality among these industries is the use of photonics as an enabling technology in their products.

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Over the last ten years we have witnessed a pivotal shift in the adoption of photonics in new applications. In the early days of the photonics industry the technology was a specialty, which was both expensive and required highly specialized technical knowledge, leading to low adoption of the technology into industries other than defense and high-end medical applications. Starting with the commercialization of fiber optic communication, and further driven by significant cost reduction in key technologies such as sensors and lasers, the adoption of the technology into more industries and applications began rapidly growing.

With the accelerated rate of adoption and highly diversified industries and applications utilizing an expanding array of photonics technologies, comes a change in both the needs of the customers and the supply chain, to support those needs. In the past, we and other component suppliers mostly served customers that specialized in photonics. The large equipment manufacturers (“ OEMs”) focused on component companies as their supply chain for optical parts and minor fabrication and assemblies. OEMs typically produced their own designs and relied on the supply chain to fulfill their needs without any strategic product planning or collaboration. This supply chain was fragmented and consisted of a large number of small companies, many of which had particular specialties in the fabrication process.

As the industry has evolved and sensory, visualization and imaging capabilities have become differentiators, if not a necessity for an expanding array of products in a myriad of industries, the specialized requirements of customers are no longer being adequately addressed. With the wider adaptation of the technology, and with customers that now possess different expertise in different technologies, the needs are different, as is often the case with a mature supply chain. In our case, the change has created opportunities to now serve OEM customers for which photonics is only one of several technologies they embed into their product, and that have or are transitioning from a distributed supply chain that would provide all components for the bill of materials (“BOM”) to a highly diversified and fragmented global customer base in which the optical parts of their system are only a part of multiple technologies integrated together. As a result, the expanding market of original equipment and end market manufacturers are increasingly requiring an ecosystem around them to support their needs for domain knowledge, design, assembly and supply of their optical components. We refer to this ecosystem as “optical engineered solutions,” and believe we are positioned to serve as a single source, global optical solutions provider with leading engineering and manufacturing capabilities. This has led to our development of a new strategy and organizational alignment as discussed below, which we have begun to implement in recent months with significant initial success, including a return to double digit annual revenue growth, multiple new product designs and key multinational customer contract wins.

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 of 2020, our Board of Directors (our “Board”) recruited Mr. Sam Rubin, an industry veteran with a proven track record for delivering high growth through organic and inorganic means, to assume the role of Chief Executive Officer and to develop and implement a new strategy going forward. In the fall of 2020, Mr. 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.

Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems. In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with many component manufacturers into a solution-focused industry with the potential for partnerships for solution development and production. We believe such partnerships can start with us as the supplier. We have in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities. We believe we can develop these partnerships by working closely with the customer throughout their design process, designing an optical solution that is tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we currently own, such as optical molding, fabrication, system design, and proprietary manufacturing technologies, along with other technologies that we may acquire or develop in the future, to create tailored solutions for our customers.

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Our domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, freeing them from the need to develop subject matter expertise in optics. By providing the bridge into the optical solution world, we are able to partner with our customers on a long-term basis, create value for our customers, and capture that value through the long-term supply relationships we seek to develop.

Organizational Alignment

Along with the development of a new strategic direction, we are focused on the execution of such strategic plan. First, we have taken steps to align the organization with the strategic plan. Such alignment has been ongoing in all levels of the organization, starting at the leadership level through the creation of a new position, Vice President of Operations, and hiring Peter Grief, an expert at building and scaling manufacturing operations, in April 2022 to fill such position. We also hired Albert Miranda, who has strong experience in financial management and mergers and acquisitions in the optical industry, as our Chief Financial Officer in May 2022 , to replace our former Chief Financial Officer who retired. We believe that these actions will enhance our focus on building a strong foundation that is aligned with our strategic plan and create an operation that will be ready to take on significant growth, both organic and inorganic. We also appointed S. Eric Creviston, who has extensive experience with wireless and mobile technology and the semiconductor industry, as a new director to our Board.

To execute our new strategic plan, we also need, among other things, a strong manufacturing and technical organization that provides the domain expertise in photonics, from the design of an optical engineered solution tailored for the customer’s needs through the manufacturing, assembly and testing of such a sub-system. Given the fast pace of advancements in photonics technologies, achieving a sustainable advantage will also depend on having unique capabilities and technologies that allow our team to design and deliver the best tailored solutions. To support those goals, we began a few different organization-wide efforts, including standardizing and optimizing our processes and systems, taking steps to realigning our organizational structure, such as breaking down our single combined engineering group into the separate engineering functions that are a part of and better support operations, and creating a new product development group that focuses on developing capabilities and technologies that allow us to design and deliver better solutions. By having a small, focused new product development group, we are able to develop unique technologies that allow us to design solutions that we believe are better than what is otherwise available. Such unique technologies include developing tailored and optimized optical coatings, and advanced fabrication techniques such as freeform optical components, custom materials not available elsewhere, and cutting edge optical design capabilities.

In the longer term, we have identified capabilities and technologies that could be important differentiators, including, for example, optical detectors and active optical components such as lasers, motion systems, and more. The collection of many such unique technologies is what will allow us to differentiate our optical solution, and provide the customer with a product that is tailored exactly to their needs.

In addition to all of the organizational alignment initiatives we are implementing, we have also had a leadership transition and operational enhancements at our Chinese subsidiaries. As discussed in more detail in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, we terminated certain of our management employees at our Chinese subsidiaries, LPOIZ and LPOI, in late fiscal year 2021, and transitioned to new management personnel. These events adversely impacted domestic sales in China beginning in late fiscal year 2021 through fiscal year 2022.

Technologies

We believe that to be the preferred partner to fulfill the photonics needs of our customers, domain expertise in photonics is the key element. Optics and photonics require multidisciplinary skills, including physics, mechanical engineering, material sciences, electrical engineering, and chemistry, among others. This is part of what makes using photonics so complicated, and at the same time part of what we see as the opportunity. Knowing what can and cannot be produced, designing the architecture and detailed design of the optical system, including electrical and mechanical interfaces, choosing and executing advanced manufacturing technologies, and delivering both the engineering prototypes that are needed, as well as producing a high volume of goods for the long-term, are all part of the domain expertise required. Additionally, to design the best solution for a customer, we not only need to know what can be produced and how to design it, we also must have unique capabilities that differentiate our solutions and allow us to design and produce a better solution that is more profitable than what may otherwise be available.

Along those lines, we continue to focus on developing new, innovative capabilities and technologies in all of our engineering and manufacturing groups, including systems design and testing, optical fabrication of components, material production, optical coatings, and electro mechanical design and production.

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Among the manufacturing technologies we own are:

	·	*High precision molded lenses.* Historically, precision molding of lenses is the key technology we have built upon. Precision molding of optics is a unique technology that is well suited for both high volume production of optical components, as well as production of optics with unique shapes, which otherwise would require a very lengthy and complex process to individually polish each lens to shape. Precision molded optics (“PMOs”) is a technology in which we continuously invest to pursue advancements in what materials can be molded and the shapes and sizes of the optics we can mold. Although there are several other competitors that can mold optical elements, we have an established leadership position in this area as the original developer of the technology, and we believe we are the preferred vendor for the most complex, high-end projects of many of our customers. Some recent advancements we have made in precision molded optics include molding of non-symmetric shapes such as freeform optical components, and qualifying new materials for availability as moldable materials.
	·	*Traditional polishing, and diamond turned optics.* Our capabilities include a wide range of traditional fabrication processes. These include CNC (computer numerical control) grinding and polishing of optical elements, traditional grinding and polishing of lenses, and diamond turning of infrared materials.
	·	Materials. Materials play an important role in providing design flexibility and allow tradeoffs between optical performance, weight, and performance in varying conditions. Traditionally, infrared applications have only a small number of materials, all of which are crystal based. However, the introduction of synthetic chalcogenide glass in recent years, which allows for synthesizing of different materials, has created a larger library of materials to design with. We produce four materials: BD6, our flagship chalcogenide glass; (ii) BD2, which we have been producing for over 15 years; (iii) NaCl and (iv) KBr crystals. We believe that having a larger selection of optical materials will provide us more tools to design better solutions than exists with current materials, and we plan to continue to invest in our materials development. In addition, through a grant from Space Florida’s Space Foundation and Israel’s Ministry of Science received in August 2021, we are in the process of qualifying our chalcogenide glass for space applications and in particular thermal imaging from space, which is a fast-growing application. As part of our continued focus on adding unique, value added technologies that will enable us to design and produce better optical systems, we had licensed from US Navy Research Laboratories, on an exclusive basis, their portfolio of Infrared Materials that they have developed in recent years. We believe this expansion of our portfolio of materials places us in a unique position for the rapidly growing market of infrared imaging. The exclusive license enables us to develop, use and sell materials that have been specifically developed to improve overall performance, cost, size and weight of infrared systems, and in particular to enable to new application of multi spectral infrared imaging.
	·	Optical coatings. Thin film coatings are designed to reduce losses and protect the optical material, which are a key part of any optical system. Through our recent investments, we have the ability to coat lenses in all of our facilities, providing efficient, high quality antireflective coatings, as well as reflective and protective coatings. Our coating facilities employ both physical vapor deposition techniques as well as chemical vapor deposition techniques. In addition to our library of dozens of standard coatings, our coating engineers often design coatings specific for an application, optimizing the performance of the system for a specific customer use. One of our most known advanced coatings is Diamond Like Carbon (“DLC”), which provides materials such as chalcogenide glass significant environmental protection. This coating is currently available only at a small number of vendors, and is an example of a capability that we believe gives us a competitive advantage by allowing us to design better optical solutions.
	·	*Assembly and testing.* In recent years, we have invested significantly in capabilities for sub-system level assemblies and testing in two of our facilities. Even more recently, we have added capabilities of active alignment, and extended testing including environmental testing, to support our growing business of optical assemblies and engineered solutions. We expect to continue to invest in this area as activity grows, particularly in volume manufacturing and testing of assemblies.

New Product Development

Consistent with our new strategic direction, our development efforts during fiscal years 2021 and 2022 also shifted to focus on developing products, technologies and capabilities that allow us to provide better solutions, using the most fit technology for each customer and with alignment to customer product lifecycle. This includes developing unique materials, processing techniques, optical coating offerings and more, which allow us to design a better optical system for customers than we believe is available elsewhere or through in-house/captive capabilities. Examples of such development efforts include our development of the Freeform optics technology, which won us the esteemed industry prism award, the development of new infrared materials, and continuing to stretch and improve our capabilities in all existing technologies, such as optical coating, fabrication and assembly. We generally rely on trade secret protection for technology we develop, but do pursue patents for certain of such technology. In many cases the benefits of patent protection is offset by the requirement to disclose in detail the processes, and so we intend to apply for a patent only in the case when we believe the patent is enforceable and does not compromise our trade secrets and intellectual properties developed over three decades.

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We incurred expenditures for new product development during fiscal years 2022 and 2021 of approximately $2.1 million and $2.2 million, respectively.

In some cases our product and technology development is supported through billing of engineering services, such as non-recurring engineering (“NRE”) fees. In other cases we receive external funding, such as our previously announced funding from Space Florida’s Space Foundation and Israel’s Ministry of Science. Our efforts are self-funded in all other cases.

As part of our product development and research and development efforts, we have over 50 employees with engineering and related advanced degrees located in our facilities in the United States, China and Latvia. Our facilities in Orlando, Florida and Zhenjiang, China are located in or near industrial technology campuses with substantial access to optical industry constituencies, including a major university. This enables us and our staff to remain on the cutting edge of industry design trends and to enter into collaborative engagements.

Product Groups and Markets

Overview

Our business is organized into three product groups: PMOs, infrared products and specialty products. These product groups are supported by our major product capabilities: molded optics, thermal imaging optics, and custom designed optics.

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 catalog and custom designed optics.

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

Product Groups

There is 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 facilitates choosing investment priorities to help strategically align our competencies with strategic industry revenue opportunities. Over the long term, this function will also help ensure successful product life cycle management. The following sections further discuss the various products we offer and certain growth opportunities we anticipate for each such product.

PMO Product Group. Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine. Our glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price. Molding is the most consistent and economical way to produce aspheres and we have perfected this method to offer the most precise molded aspheric lenses available.

Infrared Product Group. Our infrared product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. Advances in chalcogenide materials have enabled compression molding for mid-wave (“MWIR”), and long-wave (“LWIR”), optics in a process similar to precision molded lenses. Our molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods. Utilizing precision molded aspheric optics significantly reduces the number of lenses required for typical thermal imaging systems and the cost to manufacture these lenses. Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required.

Through ISP, our wholly-owned subsidiary, we also offer germanium, silicon or zinc selenide aspheres and spherical lenses, which are manufactured by diamond turning. This manufacturing technique allows us to offer larger lens sizes and the ability to use other optical materials that cannot be effectively molded. ISP’s capabilities increase our ability to meet complex optical challenges that demand more exotic optical substrate materials that are non-moldable, as well as larger size optics.

We also have the ability to manufacture chalcogenide glass from which we produce infrared lenses. We developed this glass and melt it internally to produce our Black Diamond glass, which has been trademarked, and is marketed as BD6. Historically, the majority of our thermal imaging products have been germanium-based, which is subject to market pricing and availability. BD6 offers a lower-cost alternative to germanium, which we expect will benefit the cost structure of some of our current infrared products and allow us to expand our product offerings in response to the markets’ increasing requirement for low-cost infrared optics applications.

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Overall, we anticipate continued growth for our infrared optics, particularly as BD6 continues to be adopted into new applications and new designs. Infrared systems, which include thermal imaging cameras, temperature sensing, gas sensing devices, spectrometers, night vision systems, automotive driver awareness systems, such as blind spot detection, thermal weapon sights, and infrared counter measure systems, is an area that is growing rapidly and we are selling products that are utilized in a number of these applications. As infrared imaging systems become widely available, market demand will increase as the cost of components decreases. Our aspheric molding process is an enabling technology for the cost reduction and commercialization of infrared imaging systems utilizing smaller lenses because the aspheric shape of our lenses enables system designers to reduce the lens element in a system and provide similar performance at a lower cost. In addition, there is a trend toward utilizing smaller size sensors in these devices which require smaller size lenses and that fits well with our molding technology.

Specialty Product Group. We offer a group of custom specialty optics products and assemblies that take advantage of our unique technologies and capabilities. These products include custom optical designs, mounted lenses, optical assemblies, and collimator assemblies. Collimator assemblies are utilized in applications involving light detection and ranging (“LIDAR”) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment. This continues to be an emerging market with long-term growth potential for us. We also expect growth from medical programs and commercial optical sub-assemblies.

We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies. Many of our optical assemblies consist of several products that we manufacture.

In connection with our new strategic direction and the expanding portfolio of products and services, we are evaluating the ways in which we may optimize the financial reporting of our product groups.

Sales and Marketing

Marketing. Extensive product diversity and varying levels of product maturity characterize the optics industry. Product verticals range from consumer (e.g., AR/VR, cameras, cell phones, gaming, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications (e.g., fiber and laser based). As a result, we market our products across a wide variety of customer groups, including laser systems manufacturers, laser OEM’s, infrared-imaging systems vendors, automotive OEMs, industrial laser tool manufacturers, telecommunications equipment manufacturers, medical instrumentation manufacturers and industrial measurement equipment manufacturers, government defense agencies, and research institutions worldwide. Our marketing efforts include a global unification of our messaging with the use of digital advertising, branding activities that utilize social media, our website and direct marketing activities. As our focus shifts from the sale of components and standard products to being a value-add supply partner for customized solutions, our marketing activities also shift from a focus on technical aspects of standard components to a focus on best practice use cases, the overall outcome from our solutions and end user benefit. Our market messaging will look to inspire interest and promote engagement.

Sales Model & Structure. To align the organization to better serve our new solution strategy and for accountability of our key corporate objectives, we have made organizational changes designed to ensure customer satisfaction and operational efficiency. Our organizational structure includes a product management function that enables the close coordination of supply with demand to help us leverage our core offerings and coordinate our engineering development efforts that will leverage and expand our portfolio of capabilities. We have also transitioned from a business unit focus to a unified global direct sales team that promotes the overall company portfolio and is standardized on a problem solving, needs analysis process. The team recently went through Sandler Training to help with this shift and to empower action with improved communication techniques. We have added technical program managers and product life cycle management (“PLCM”) to better support the new customized customer programs and the transition from prototype engineering to full scale manufacturing.

Sales Team & Channel. We have aligned our sales engineering efforts to be account based and application focused. We have taken a more proactive approach to our direct selling efforts to increase our customer engagement, especially within Europe, where we recently transitioned away from working exclusively through a distributor. We have expanded our standard product offerings with the top two catalog companies in the world for optics and photonics which increases our exposure to new revenue opportunities. In addition, we continue to enhance our website (www.lightpath.com), which is our main communication vehicle for broader promotion of our company, our value-add capabilities, our growing chalcogenide material portfolio, and similarly have optimized our social media assets. We make use of digital and print media plus participate in many key industry associations and global trade shows.

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Trade Shows. We display our standard products, promote new innovative offerings and meet with industry influencers at a number of trade shows each year throughout North America, Europe and Asia. As a result of COVID-19, some of these annual trade shows have been rescheduled or modified into virtual online exchanges. So far in 2022, we participated in a few virtual shows plus several in person shows which included the SHOT Show in Las Vegas, the largest professional event for the sport shooting, hunting and outdoor industry in North America; SPIE Photonics West in San Francisco, where LightPath won a PRISM Award which honors the best new optics and photonics products on the market; SPIE DCS, AUVSI which promotes emerging technologies supporting autonomous vehicles, drones and robotics; and Laser World of Photonics in Munich. These trade shows provide us an opportunity to further expand our brand, network to enhance business relationships and gain valuable insight into technology trends in our target markets.

Competition

Engineered Solutions

The market for non-captive optical engineered solutions is emerging. As companies such as LightPath begin transitioning their offering from components to engineered solutions, we compete on several fronts:

	·	Engineered solutions companies. While there are not many, companies such as Excelitas Technologies Corp. and Jenoptik AG offer optical engineered solutions to the market, with a specific focus on solutions in visible and ultraviolet light bands, and with a vertical industry focus, such as life sciences and semiconductor systems.
	·	Engineering firms. Though less popular, in some cases customers prefer to work with engineering firms that provide design services, which then the customer produces or sub-contracts to third-party component manufacturers. An example of such companies providing engineering services are Lighthouse Imaging, LLC, Optikos Corporation, and Photon Engineering, LLC.
	·	In-house or captive design. The most common approach today is for customers to design the optical system internally by the OEM. This requires customers to have expertise in optical system and component design capabilities, along with knowledge of the most advanced available technologies, however limited the scope of their capabilities or the profitability of their solutions may be.

Our key differentiator is our unique technologies that allow us to design better solutions.

Optical Components

In our optical components business, the market for optical components generally is highly competitive and highly fragmented. We compete with manufacturers of conventional spherical lenses and optical components, providers of aspheric lenses and optical components, and producers of optical quality glass. While the global market for component supply is fragmented and highly competitive, we maintain advantages through our unique technologies that often build on our leadership in precision molded optics, as well as our vertical integration in infrared optics, from raw materials through assemblies.

PMO Product Group. Our PMO products compete with conventional lenses and optical components manufactured from companies such as Asia Optical Co., Inc., Anteryon BV, Rochester Precision Optics, and Sunny Optical Technology (Group) Company Limited. Aspheric lens system manufacturers include Panasonic Corporation, Alps Electric Co., Ltd., Hoya Corporation, as well as other competitors from China and Taiwan, such as E-Pin Optical Industry Co

SEC Form 10-K filed by LightPath Technologies Inc.