Q1 2024 LightPath Technologies Inc Earnings Call
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Speaker 1: Good afternoon everyone and welcome to the Life Path Technology's fiscal first quarter 2024 financial results conference.
Good afternoon, everyone and welcome to the Lightpath technologies fiscal first quarter 2024 financial results Conference call.
Speaker 1: Please note that today's event is being recorded. And at this time, I'd like to turn the floor over to Al Miranda Light Pass Chief Financial Officer. Please go ahead out.
Please note that today's event is being recorded.
At this time I'd like to turn the floor over to Al Miranda like past Chief Financial Officer. Please go ahead.
Speaker 2: Thank you. Good afternoon, everyone. Before we get started, I'd like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectations and various risks and uncertainties as discussed in its periodic SEC violence.
Thank you good afternoon, everyone before we get started I'd like to remind you that during the course of this conference call. The company will be making a number of forward looking statements that are based on current expectations involve various risks and uncertainties.
As discussed in its periodic SEC filings.
Speaker 2: Although the company believes that the assumptions underlining these statements are reasonable, and they have been proven to be inaccurate.
Although the company believes that the assumptions underlying these statements are reasonable any of them can be proven to be inaccurate.
And there can be no assurances that the projected result would be realized in addition references may be made to certain financial measures that are not in accordance with generally accepted accounting principles or GAAP.
We refer to these as non-GAAP financial measures. Please refer to our SEC reports and certain of our press releases, which include reconciliations of non-GAAP financial measures.
Sam will begin today's call with an overview of the business and recent developments for the company I will then review financial results for the quarter. Following our prepared remarks there'll be a formal question and answer session.
I would now like to turn the conference over to Sam Rubin like past President and CEO.
Thank you al good afternoon, everyone and welcome to Lightpath technologies fiscal first quarter 2024 Financial result conference call.
Our financial results press release was issued after the market closed today and posted on our corporate website.
The first quarter was highlighted by our acquisition of visibility and with it the windows a significant project for an imaging engineered solution.
Both are significant step with strategic shift from a component manufacturer to a value added solutions provider.
To recap our Investor Lightbox has been transitioning in the last few years from a pure component manufacturer focused on being the lowest cost provider to a value added partner for complete solutions based on optical technology.
Who differentiate as well mostly based on technology.
Along those lines, we have been focusing on the three pillars of growth imaging solution.
Shift such as cameras.
New market.
Automotive and specifically growth in our market share on the defense business.
All three pillars of growth probably into and support our transition from a component manufacturer to a provider of engineered solutions based on these proprietary technology.
This transition begun a couple of years ago, starting from customized lens assemblies, which are what we call today like Bob to Quinto, who camera solutions or lifestyle three point to the first of which ones that we're innovative mantis broadband infrared timber, which we announced in December and which is.
And which enables new applications and capabilities for our customers.
Yeah.
The latest step in this transition its acquisition of intimate technologists vitamin C. Vitamin technologies small engineering firm based out of Dallas, Texas does the back end of thermal cameras and does what lifestyle has been doing for the front end on the same campus.
Bob has been tailored tailoring and customizing the optics for cameras based on our optical technologies and <unk> has been customizing and tailoring the video processing engine and support electronics for the same cameras.
Similar cameras.
Like for like Pos business multiples customizing optical assemblies to be using infrared cameras.
<unk> has established itself as the go to for customized customizing, So electronics and software part of Uncalled infrared cameras.
In fact, our relationship goes back a bit where vis amid has customized for like bumps that electronics and software firewood Memphis kabala tie up to the acquisition.
Together with a light pulse can now extend our offering of customized solutions to include wholly wholly integrated camera modules, increasing their offering to existing customers and providing us a bigger share of those customers bill of materials.
Shortly after the acquisition of intimate Lockheed Martin a major prime contractor in the defense World awarded visible light call a major project in the design development and later on the manufacturing will be complete camera module for a new project in say a midsized division.
Wednesday Award team, what would it be up to seven and a half million of development work over the next three years.
However, the real significant subset. The board lies in what would come after the development completed.
Once in production, we will produce thing this device in Vulcan estimated tens of thousands of units over the program lifetime.
And within a S. B four lifestyles of thousands of dollars per unit.
I will let the thinking of the second thousands of dollars per unit tens of thousands of units in the program. This is a major achievement for like Paulson visit mid and can be very very significant for our future.
The decision of this volume to outsource the development of such an important part of the system has been the first purely due to visit them its technical capabilities.
However, the decision because they engage with us at the scale. They are now engaging and the potential manufacturing both deep units and volume is really due to the combination of light path and fitbit, bringing our manufacturing capabilities capacities and most importantly, our ability to produce it.
Integrate the entire subsystem.
And while our strategy and having.
The three pillars of growth for design, such that we don't put all our eggs in one basket or one product. This award by a major prime with just massive potential for revenue on the factoring side is seen by us as a big win talent strategy and the execution of that food acquisition.
Pitching it.
So this was one significant development that touches on two of our pillars of growth the defense industry and the integrated engineered solutions.
In other areas, we continue to make progress summit's better piece of it.
Yeah.
In total motive market, we continue to work with new potential customers for the integration of thermal imaging into safety system.
And specifically emergency braking systems.
Though we have not had any significant development in the area since our last call two months ago.
We do note that some of the timelines of our end customers, meaning to automotive companies themselves might be impacted by what seems like a possible slowdown in the EV market.
Though we do not have anything specific to report on this we do expect that some of the rollout might get delayed by a year or more with some of those customers.
They are just they are older rolled out two new modules and the sulfate Oh well of these new systems.
Okay.
During the last two months since our September call. We have continued to make progress on some of the new offerings and our camera or solution every other cool apps.
Applications for Atwood meant camera continue to garner interest and we are actively engaged with several customers developing version.
Pacific did they use cases for example in industrial monitoring of high temperature processes.
Paul.
Our innovative use cases, the flame detection, you would think Atwood Manta, which I mentioned in the last call is now being actively evaluated by customers, which.
With the goal of first proving the value proposition of the technology before we dive into building specific tailored solutions for their executive escapes.
Loved the plastic recycling applications. We had previously discussed it's taking longer than expected due to the complexity of the integration of what is called technically a hyper spectral system.
We still expect this to be a valuable application, but developing it would require a partner that will do the heavy lifting on the software development side.
The first being above the globe and that is the defense market and specifically around our unique block black diamond materials and they use as an alternative to Joe made him. This is on track as we continue to move forward with qualifying our new materials and having some integrated into D O D.
Nick.
Noted in this area is the renewal of an order we announced at the beginning of October.
That $3 $4 million of water is one of the first projects, we know of in which Joe many of them would design out well designed Alps purposely.
Similar to that we have other projects in which systems are being redesigned to reduce or completely removed germanium.
In some cases, we are involved or even do is actually redesign work in other cases, we know of customers working on this and are collaborating with them to expedite it as much as possible.
On that same topic, we note that while the exports of Joe Minium have finally with zoomed out of China. The puts us towards the export license in China, It's cumbersome and also it seems to vary considerably between different vendors and different export ports in China.
When does that in mind, we have decided to try and to reduce our own exposure to the bulk of it.
Do you think our own work on components made of germanium for customers.
A reminder, among other things we produce custom components in which we optically machine or form lenses out of Joe maintenance.
We have already communicated the cat customers proactively that we will be reducing our offering of components made from Joe Mania, and we continue to work with those same customers are designing and developing alternatives made of our own materials.
We expect that this might have a short term impact on our infrared component to revenue as we discontinued some germanium book and gradually replace it with new work.
However, our defendants revenue continues to grow particularly in the U S. But non defense revenue continues to be soft in China and somewhat softening.
In Europe.
It is perfect separated by the germanium supply and decisions around that.
We all think slowdowns and delays in nondefense sector globally, and anticipate continued softness for the next few quarters in those segments specifically.
World event, and the economics play out playing golf confirms our decision to focus on defense and on solutions and assemblies.
Yeah.
To conclude our shift in strategic direction is beginning to show the results. We're looking for both in winning some major programs and in revenue growth in Batavia.
We will talk about our new product classification, and how we will now communicate the new product grouping to support this strategy.
At the same time, our three separate areas for growth.
Dilution defense and automotive continued to generate multiple independent <unk>.
Large scale opportunities that many of them have the potential for tens of millions of dollars of new revenue.
Resulting in what we feel is a healthy pipeline of large scale opportunities that any of them alone can be transformative and have a significant positive impact on our business.
Yeah.
As always I'd like to thank our employees and stakeholders, who have continued to work diligently through the various transitions and hurdles we have endured.
We see a bright future and a growing company because of their dedication patience and hard work.
With that in mind I will now pass the call onto al our CFO to review first quarter financial.
Okay.
Thank you Sam.
I'd like to remind everyone that much of the information. We're discussing during this call is also included in our press release issued earlier today and will be included in the 10-Q for the period.
I encourage you to visit our website at White pass Dot com to access these documents.
I will discuss some of the primary financial performance metrics and provide additional color on them to better assist investors in analyzing the company.
For the first quarter we've made.
Significant changes to our product groups. We previously organize our products in three groups, which were precision molded optics or PMO infrared products and specialty products.
We've been considering changing revenue reporting along the new product lines for some time to align with our strategy.
With the addition of Disney made in July it became clear that the timing was right to make the change.
We believe the new revenue groupings lend more visibility of our progress against our strategic goals. Therefore, we reorganize our products to four product groups. One is infrared components, two visible components, three assemblies and modules and four.
Engineering services.
[noise] assemblies and modules were previously included in PMO infrared or specialty product groups, depending on the Wednesday night, we basically carved it out.
So you can think of the new reporting as components being.
White path 1.0 assemblies and modules as white past 2.0, and 3.0 and engineering services as the activity that will create new revenue and assemblies and modules.
With that said on a consolidated basis revenues for first quarter were $8 1 million compared to seven 4 million in the year ago period.
Sales of infrared components were $3 8 million or 47% of the company's consolidated revenue.
Fiscal.
First quarter revenue revenue from visible components was $2 7 million or 33% of consolidated revenue.
Revenue from assemblies of modules were $1 3 million or 16% of total company revenue and revenue from engineering services was <unk> 3 million or 4% of total company revenue.
The increase in infrared component sales was primarily due to an increase in shipments against it.
Annual contract.
International Military program.
This contract was renewed during the first quarter of fiscal 2024 for a higher dollar value than the previous contract.
The decrease in revenue generated by visible components is primarily due to a decrease in sales to customers in the telecommunications industry in China.
Approximately one third of the increase from assemblies modules is due to the addition of <unk> product sales the.
The remaining increase was driven by sales to customers in the defense industry and increased sales of custom visible lens assembly to a medical customer for which we have an end of life order and backlog going into fiscal 2025.
Approximately 175000 of the increase from engineering services is due to the addition of <unk> sales.
The remaining increase was driven by revenue from one of our space related funded research contracts.
Gross margin in the first quarter of fiscal 2024 was approximately $2 3 million, an increase of 4% as compared to approximately $2 2 million in the same period of the prior fiscal year.
Total cost of sales was approximately $5 7 million for the first quarter of fiscal 2024.
Compared to approximately $5 1 million for the same period of the prior fiscal year.
Gross margin as a percentage of revenue was 29% for the first quarter of fiscal 2024 compared to 30% for the same period of the prior fiscal year.
The decrease in gross margin as a percentage of revenue is due to the decrease in visible component sales, which typically have higher margins than our infrared component product group.
Which comprised a greater portion of our sales for the first quarter of fiscal 2024.
Selling general and administrative costs were approximately $2 7 million for the first quarter of fiscal 2024, an increase of approximately 23000 or 1%.
As compared to approximately $2 6 million.
In the same period of the prior fiscal year the.
The increase in SG&A cost is primarily due to costs of approximately 83000 associated with the acquisition of Dizzy Med, which closed in July of 2023.
These costs were partially offset by a decrease in stock compensation.
Net loss for the first quarter of fiscal 2024 was approximately $1 3 million or four cents per basic and diluted loss per share compared to $1 4 million or five basic and diluted loss per share for the same quarter of the prior fiscal year.
Decrease in net loss of approximately 38000 for the first quarter of fiscal 2024.
As compared to the same period of the prior fiscal year was primarily attributable to favorable change in the provision for income taxes.
We believe EBITDA a non-GAAP financial measure is helpful for investors EBITDA loss for the quarter ended September 32023 was approximately 432000 compared to 392000 for the same period of the prior fiscal year the decrease in EBITDA.
In the first quarter of fiscal 2024 was primarily attributable to other income and expenses non operating expenses.
As of September 30th 2023, we had working capital of approximately 11 4 million and total cash cash equivalents and restricted cash of approximately $6 9 million.
All of which greater than 25% was held by our foreign subsidiaries.
Cash provided by operations was approximately $1 1 million for the first quarter of fiscal 2024.
Compared to cash used in operations of approximately 415000 for the same period of the prior fiscal year.
Cash provided by operations for the first quarter of fiscal 2024 was largely driven by decrease in accounts receivable as sales were higher in the fourth quarter of fiscal 2023 and in the first quarter of fiscal 2024.
Comparatively cash used in operations in the first quarter of fiscal 2023, reflecting a decrease in accounts payable and accrued liabilities during such period, resulting from the payment of certain expenses related to previously disclosed events that occurred in our Chinese subsidiaries, which had been accrued.
In prior periods.
Total backlog as of September 32023 was approximately $21 3 million a decrease of 7% as compared to $23 million as of September 32022.
Compared to the end of fiscal 2023, our total backlog decreased by 2% during the first quarter of fiscal 2024.
Decrease in backlog during the first three months of fiscal 2024 is primarily due to shipments against several annual and multiyear contract renewals, which orders were added to the backlog in prior periods.
With this review of our financial highlights and recent developments concluded I will now turn the call over to the operator to begin the question and answer session.
Ladies and gentlemen at this time, if you would like to ask a question. Please press star and then one using a touch tone telephone.
Draw your questions you May press star and two.
If you are using a speaker phone would you ask that you. Please pick up your handset prior to pressing the key to ensure the best sound quality.
Once again that is star and then wanted to join the question queue.
Our first question today comes from Glenn Mattson from Ladenburg Thalmann. Please go ahead with your question.
Hi, Yeah, thanks for taking the questions.
So I'm curious Sam you talked about the automotive and the possibility that the.
That the you know order that you've talked about in the past could get pushed out due to some slowdown in the production schedules for Pete for Somebody's Detroit guys E V lines, but did you. So two things first of all what do you think that the delay up to this point was it at all related to some early hesitation by those customers.
In terms of like how the how fast they're going to move forward.
It seems like.
Things did change abruptly in Detroit for the EV models in general So you.
You know curious about that but then you know I guess Furthermore, do you have like some hard discussions that you've had with people are just from what you're reading in the news and in that kind of thing.
Leave that there'll be.
You know potentially a slower uptake.
Yeah sure absolutely.
First of all you know I'll start by just framing this and saying that in the situation or the use case of adding a new technology like thermal imaging into a cause.
Car manufacturers that we work with all tending to add this into the EV line simply because of the new models new platforms, sometimes new architecture altogether it.
It doesn't mean that.
They would not promoted it helped in the internal combustion engine called.
It also depends on where it's going to go with the proposed rule are mandating doubled it.
But as of now what we've been working on all tend to be around the EV platforms, even those with larger car manufacturers.
That produced far far more than just E P.
So that's one part and then to answer the question I think there's a few different things that play into the delays to begin with the initial delay compared to where we were nearly a year ago, where we were we thought we're going to get the supply agreement almost any day that came from the almost.
That's the direction that came from the car manufacturer that decided to.
Roll this out instead of being one car model in five car models and therefore, all the timeline got shuffled around because we were suddenly talking about much larger volumes about the scaling more quickly than we were before so we went back to the drawing board we have to redesign actually something into the mechanics of the <unk>.
The module to to fit the type of car module.
And therefore started renegotiating everything.
At some point already after that delays they were more because of us not moving fast enough.
On the negotiation of supply agreement coming from a point that we wanted to understand exactly all the parameters are and automotive as new fluff and at that level, we wanted to be sure with.
Crossing all the Ts and dotting all the is properly.
And with respect you know think babies that the car company was not pushing aggressively on up.
Point to sign maybe it would've been already a bit of an indication that you know they.
There might be further delayed.
That said, what I'm reporting or sharing now or form direct conversations of myself with the customers. So this is we know exactly where the car company is we know exactly what the situation is.
We know that the company has been.
Hum.
Are they finding challenges in integration of some of the technologies together there isn't they didn't have any technical problem with the system definitely not with Atwood.
But some of the other elements.
Two.
Seemed to have complicated things and.
They've decided as of now to try and review what they're rolling out in terms of the features when we don't have a specific date or delay, but in most likelihood. We're looking at one year push out of the start date of volt out simply because of.
The car companies either.
The challenge is.
The system architecture, and integrating multiple things together.
And and can you give any further color on what gives you confidence that.
You know once.
It starts back up in the conversation begins again.
They'll be able to clear those hurdles well nothing yeah.
Nothing changed in the form of the you know the one at any point with no discussion at all or comments made in the form of a we're not sure. If we'll even include it anymore or anything like that it's not at all.
And so technical dialogue continues.
And you have other automotive customers with which we also have a technical dialogues and we have also new designs that are that were building as we speak actually for one specific automotive customer.
But the sense is that everyone is a little bit.
No in terms of pushing on the dates and so on.
And then my own interpretation from thing in reading and getting the volume from people that I talk to them and then the 300 and customers is that part of it is due to the EV.
Sort of.
I don't know.
Direction of Detroit.
Yeah.
Okay. Thanks for that color, there and I'll just one second.
The second one on the other kind of issue that you raised on the germanium side is that.
It's a little cumbersome to get through.
Through the process of.
Oh yeah.
Whatever it is is that.
So is it is it a little trickier to get germanium is that driving the yeah. Yeah. So this is a process or was it more just that.
Essentially being a problem down the road and so you're trying to get ahead of it well first of all it's tricky to get germanium and while we have not had to push out deliveries of anything because luckily enough. We had enough inventory working progress and manage to eventually get shipment Joe Mania.
If we actually I think last week for the first time.
What we're seeing doesn't you know.
Doesn't give us the confidence that that the play is necessarily going to be smooth now I mean, they'll give you a few examples one is.
We started applying for export licenses in July when they announced it even though it wasn't supposed to go into effect in August until August, but they still stopped all shipments in July already.
We're now mid November and don't need now did we ever think for chip.
When we first applied for licenses we were told that every license. It's good for a year. Then we were told that that'd be license per order. If you have an order for a year it would be for you.
Now the last shipment.
<unk> was in southern China, I think I counted under.
Which one of those which but one vendor of himself wanted to the north.
One vendor managed to ship and keeps the license open another window was told by custom that he gets one shipments on this license and Thats it.
So I think they don't know yet what exactly you said doing and where we're also hearing a belt.
Custom stopping compounds, sometimes which are you know.
The raw material, but if something includes germanium in it the they've been awesome stopping at that some point. So I think there's knowing China and how long it takes them until they figure out to two and what's what I want to reduce that way exposures that I also wanted to.
Free up capacity for the work that is happening on converting customers over to the other materials and then one of each to the point that a customer wants to know which over to a assembly made of BD sick.
Capacity is all tied up into machining diamond turned germanium because the orders they have at that point. So we're proactively.
Where do you think that even to say extent of canceling.
Some of part of an order we had with a customer.
And we will be cautious and I wonder how much Joe me them, we take comp.
That's great color and then just follow up on that and the last one for me and just the is the.
So is that a level of germanium that you've received.
Is there could you give us there.
The tune of impact that you would expect revenue this year based on this shift that you're Oh I think as of now we're looking at a million 2 million in the half.
All the in the next two quarters, maybe I think that we canceled.
Something like that.
Three one point for your bank, so yeah 1.3.
But we also you know if you remember December November December is usually the time of annual renewal for.
Two of our largest customers for infrared components and one of them is very heavy on germanium. So so even though.
What we did so far it's only for the short term impacts that we're probably not going to renew that contract of 11. It was before at least pumped and Joe Mania.
Do want to note that our two largest germanium customers.
Or working with us very.
Very actively designing and testing alternatives made a BDC or all of our black Diamond altogether.
No.
We wouldn't do this if we wouldn't have we.
We wouldn't feel likes to be.
We have a potential very very soon to to fill that capacity up with better work.
And so.
I think it goes hand in hand, but it's sort of sometimes instead of a band aid do you have to rip and and stopped working on it.
Okay. Thanks for all that color.
Absolutely. Thank you.
Once again, if you would like to ask a question. Please press star and one our next question comes from Brian <unk> from Alliance Global Partners. Please go ahead with your question.
Hi, there this is a sure Ben on for Brian.
Congrats on a solid quarter I mean, just hop right in here.
So I know that backlog can be lumpy given the timing of multi year contract renewals isn't always consistent.
Now with vitamin opening your addressable markets, even more commercial applications. When can we expect to get more consistent growth in the backlog, specifically and do you see it coming from a specific product.
Yeah.
Currently thinks that the visit mid fault and sort of the higher Asp's that's come both from visit Amir.
All that would transition into more engineered solution.
Could mean, two things really slow in terms of the backlog one is again larger chunks being added in at the time, because the Asp's, Ohio, but it could also extend of eight that would grow from topline again also because the asp's. So much higher so booking an order for 100 and Mantas.
Camber $7000 each.
Have a big chunk of the backlog, even though by volume it's nowhere near in order of hundreds of thousands of lenses for example.
So I think we're going to start seeing more and more sense I think that the new reporting group.
Talk shows that <unk> presented and that we're starting to work with will help give much more visibility into that.
Yes, the one thing I would add is.
Disney made prior to acquisition.
Wasn't.
It wasn't really geared towards sort of the long term contracts with customers.
Kind of wasn't their focus.
Mueller company.
The owner sort of relied on relationship and handshakes that things would come through and they did.
It worked.
But technically.
That's not a backlog.
A couple of emails in our promised.
It is not backlog so we're going to we're sort of transitioning the customers, which are large customers and accustomed to doing it. They just had not been in.
Going forward.
To get.
Longer longer term orders or 12 month orders or what have you we.
We will start seeing that in Q2 coming from busy med.
The first of which would be the Lockheed.
Contract that Sam mentioned.
Great transitioning into Lockheed maybe you could detail what you guys expect a potential timeline would be like like how long is this design period and what comes next and how many company companies are you competing with if any and what are the risks from tablets to reaching there.
Tens of thousands of units at <unk> that you guys were talking about.
Sure absolutely. So first of all the initial proof of concept would done all of that day and delivered by visit mid Playa acquisition. So this is a project we sort of knew was already in the works, we kind of monitor that from a fall but.
But it's been something that Jason and the team at <unk> has been working on for a long time on developing the core technology behind it which is very very unique.
From this point I think we have now about three years during which time we develop.
That we develop the technology further into <unk> DVT.
I believe we're going to we're going to deliver during that four year period. Some doesn't solve all the units you know maybe even 100 so far.
Following that the expected to be significant testing by Lockheed customer.
In which by the end of that and it could take up to with told it could take up to 2028, so it could take up to a year and a half almost.
I will compare.
Our customers product with a different company.
It is developing a similar method.
To compete on this.
And we will choose one over to the split between the two.
The tens of thousands of units come from what we know and it's public information even on I can't name it, but then existing products, but this is going to replace.
And so.
It's not something completely new this is really a new version of a if you will than existing weapon system.
And at the end of it it would either be Lockheed on the other one also very very likely split between the two.
Great that's good to hear.
So what's the next question what are the next steps in getting all of your BD products fully qualified and what should investors anticipate from a timeline perspective of widespread adoption of our germanium, especially when you're saying that to remain it's getting harder and harder to obtain yep, yeah, absolutely. So.
The path is to.
Validate or for manufacturing readiness of our new materials include.
They they significant testing essentially found some sample if you would that's what the defense Logistics agency DLA is essentially bankrolling and what we're working on there's one key piece of equipment called and refractory to <unk>.
If a technical Uh huh.
It's really expensive piece of equipment I believe it is only two of those in the U S T.
To give to.
To give a sense of just how specialized statistics, we are waiting for the delivery of ballots.
Once it comes which should be anytime in the next six to eight weeks I hope we have already prepared a a lot of samples testing.
Testing, it and will essentially be paying someone down to a chair next to it and he doesn't leave until he measures all the time.
[laughter] sort of thing so we have a enormous amount of.
Samples and material.
Been preparing for many different measurement, but that reflects a me too is probably the most important.
Piece of equipment for the measurement and for ongoing quality control of some of those material lead to them.
This will provide.
I believe sort of book of data if you would for optical design of showing not only if you'd give a parameter or what is the cte coefficient of thermal expansion.
Not just provide one number in theaters.
And that's it but actually provide with it some statistical information showing this is coming out with the result of measuring gets on the 150 different samples from 10 different lots and produced in different places in different ways, making sure. It's as you know we take into account the variability.
And then they have a significant statistical data behind it we're sort of fighting an uphill battle in a way where Joe mania.
Materials.
The history of 60 years of usage. So there's a lot of data out there that all the optical device. There's no debate on that is comes out of many many years of using it new materials, new obviously and so we want to.
Jump start the process of getting embedded into systems by providing a lot of statistical data that otherwise probably people would just wait and watch slowly with it until they gain enough data and enough confidence with it.
Does that seem to medicine really what DLA defense Logistics agency strategic material is its financing here. That's the portion that it's a very very well defined set of data that we already started to collect with a game that key key information reliance on one piece.
The equipment that we are just waiting for it to survive.
And as a side note on the equipment.
We could outsource the measuring its very expensive.
Nearly that the project will cost was nearly the cost of the machine.
It would take months, so the longer and more expensive and DLA as funding about half of the machine costs.
In addition to other expenses.
Alright.
Hmm.
Really quickly with germanium being so hard to get those.
Export licenses you guys mentioned last quarter that you started selling raw materials to clients, who might want that do you see maybe an uptick in demand for those raw materials to replace them.
Germanium that might be hard to obtain or am I getting now.
Yeah, not as much as I would hope so so.
We've definitely had some work around that and different route.
<unk> seen positively by like customers.
But you know I wouldn't say that we have set up the floodgates opened and and someone is buying golar would capacity for glass heartbeat that mhm.
Alright, let's see but I think it'll a a correct thinking though to our customer.
But you know just how committed we all did that direction to dose and.
In two D O D DLA and NRL Yep.
Great.
Okay. Thank you.
Yeah.
And ladies and gentlemen, with that we'll be concluding today's question and answer session I'd like to turn the floor back over to management for any closing remarks.
Thank you everyone for taking the time to today to follow like pump technologists. We appreciate the trust placed warehouse by our stakeholders.
Shareholders in schools and look forward to future calls, where we will further discuss the fruits of our efforts to retool that business and move the company forward.
Thank you and have a good day.
Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.