Q2 2024 LightPath Technologies Inc Earnings Call

Operator: Good afternoon, everyone, and welcome to the Lightpath Technologies Fiscal Second Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode.

Good afternoon, everyone and welcome to the Lightpath technologies fiscal second quarter 'twenty 'twenty four financial results conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your telephone keypad.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: To withdraw your question, please press star then 2. Please note, this event is being recorded. At this time, I'd like to turn the conference over to Al Miranda, Lightpth's Chief Financial Officer. Please go ahead, Al. Thank you. Good afternoon, everyone.

Please note this event is being recorded.

At this time I'd like to turn the conference over to Al Miranda like past Chief Financial Officer. Please go ahead al.

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 our current expectations involve various risks and uncertainties as discussed in its periodic SEC filings.

Al Miranda: 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 our current expectations and involve various risks and uncertainties as discussed in this periodic SEC file. Although the company believes that these assumptions underlying these statements are reasonable, any of them can be proven to be inaccurate, and there can be no assurances that the projected results will be realized. In addition, references may be made to certain financial measures that are not in accordance with generally accepted accounting principles.

Although the company believes that these assumptions underlying these statements are reasonable any of them can be proven to be inaccurate and there can be no assurances that the projected results would be realized in.

In addition references may be made to certain financial measures that are not in accordance with generally accepted accounting principles, we referred to ease as non-GAAP financial measures.

Al Miranda: We refer to these as non-GAAP financial measures; please refer to our SEC reports and certain of our press releases, which include reconciliation of non-GAAP financial measures and associated disclaimers. Sam will begin today's call with an overview of the business and recent developments for the company. I will then review the financial results for the quarter. Following our prepared remarks, there will be a formal question and answer session. I would now like to turn the conference over to Sam Rubin, Lightpath's President and Chief Executive Officer. Thank you, Al.

Please refer to our SEC reports and certain of our press releases, which include reconciliation of non-GAAP financial measures and associated disclaimers.

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 will be a formal question and answer session. I would now like to turn the conference over to Sam Rubin, Lightpath, President and Chief Executive Officer.

Sam Rubin: Good afternoon to everyone and welcome to Lightpth Technology's Fiscal Quarter 2024 Financial Results Conference Call. Our financial results press release was issued after the market closed today and posted on our corporate website. First, I'd like to apologize for any coughing or horsey sound. My throat is still recovering from COVID I had recently.

Thank you Alan and good afternoon to everyone and welcome to Lightpath Technologies' fiscal quarter 2020, full financial results conference call.

Our financial results press release was issued after the market closed today and posted on our corporate website.

First I'd like to apologize for any coughing or whole thief sound like photos still recovering from Covid I had recently.

Sam Rubin: The second quarter was underscored by a key first order in our partnership with Lockheed Martin for an imaging engineered solution, the ongoing integration of the vis-a-vis acquisition, and progress with customers transitioning from the use of germanium to the use of our black diamond material. All these developments continue to highlight our strategic shift from a component manufacturer to a value-added solution provider. To recap for our investors, Lightpath 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, whose differentiators are mostly technology.

Second quarter was underscored by a key first order now with partnership with Lockheed Martin for an imaging intranet solution the ongoing integration of <unk>.

Acquisition.

Progress with customers transitioning from the use of germanium did they use the verbal black diamond it's material.

But all of these developments continue to highlight our strategic shift from a component manufacturer to a value added solutions provider.

Yeah.

To recap fire away investors lifestyle has been transitioning in the last few years from a pure components manufacturer focused on being the lowest cost provider to value added partner for complete solutions based on optical technologies, whose differentiators are mostly technological.

Sam Rubin: Along those lines, we have been focusing on three pillars of growth, imaging solutions, such as cameras, growth in new markets, such as automotive, and growth specifically in our market share in the defense business, all of which are driven by our unique technologies and materials. All three pillars of growth tie and support our transition from a component manufacturer to a provider of engineered solutions based on our proprietary technology. This transition began a couple of years ago, starting with customized lens assemblies, which are what we call Lightpath 2.0, through Camera Solutions, the first of which was our innovative Mantis broadband infrared camera, and the rest of the team. Thank you.

And along those lines, we have been focusing on fleet pulling some crooks.

Imaging solutions, such as cameras girlfriend, new markets, such as automotive and go specifically about what market share in the defense business.

All of which are driven by unique technology by our unique technologies and materials.

All three pillars of growth call. It support that would transition from a components manufacturer to a provider of engineered solutions based on our proprietary technologies.

This trend that they shouldn't be gone a couple of years ago, starting from customized lens assemblies, which is all what we call liked off two point, though who camera solutions. The first of which was our innovative Memphis Portland infrared camera.

[laughter].

Sam Rubin: Thank you, which enables both new applications and capabilities for our customers and significant growth in that direction coming from the Visamit acquisition. Rizomit Technologies, a small engineering firm based in Dallas, Texas, does to the back end of thermal cameras what Lightpath has been doing for the front end of those cameras. Lightpath has been tailoring and customizing the optics for cameras based on our base optical technology, and Vizamit customizes and tailors the video processing engine and support electronics for the same camera.

Which enable enable new applications and capabilities for our customers and significant growth in that direction.

Coming from the visit made acquisition.

<unk> technology is a small engineering firm based out of Dallas, Texas does to the back end of thermal cameras, what lifestyle has been doing for the front end of those catalysts.

Like Bob has been tailoring and customizing the optics for cameras based on our wood based optical technologies and visited customize and tailor the video processing engine and support electronics for the same cameras.

Sam Rubin: Like Lightfast's business model for customizing optical assemblies to be used in infrared cameras, Visamit established itself as the go-to for customizing the electronics and software part of an uncooled infrared camera. In fact, Visamit has customized four light bulbs, the electronics, and software of our MantisCam. Together with Visamit, we now extend our offering to customize imaging solutions to include wholly integrated camera modules, increasing the offering to existing customers and providing us a bigger share of those customers' spend. During the second quarter, we continued the integration of BISMID with a focus on new products in fire, safety, and defense. This acquisition added the capability to produce end-to-end custom imaging cores and new engineering capabilities that allow us to be involved earlier with our customers' design cycle and increase our likelihood of servicing those designs through to manufacturers.

Like late Pos business multiple customizing optical assemblies to be used in infrared cameras visit made established itself as the go to for customized for customized things like electronics.

And software part of Uncalled infrared cameras.

In fact with some it is customized for liked Boston Tronic, some software that would meant its camera.

Together with visit admit we now extend our offering to customized imaging solutions to include wholly integrated camera module.

Increasing the offerings to existing customers and providing us the biggest share of customer spend.

Oh.

During the second quarter, we continued the integration of intimate with a focus on new products and fire safety and defense.

This acquisition added the capability to produce end to end customer imaging course, and the new engineering capabilities that allow us to be involved earlier with our customers' design cycle and increase their likelihood of servicing design through manufacturing.

Sam Rubin: We are integrating Vizimid's custom imaging cores into new camera products, several of which were demonstrated at the recent SHOT Show in Las Vegas, and some we're working with customers to develop customized solutions. All these products utilize Spismid's unique video engine in conjunction with our optics to develop low-rate, high-efficiency solutions for drones, UAVs, as well as industrial applications such as gas leak sensing, process control, and early fire It's real. It's very real. It's real.

We are integrating visited customers in custom imaging cores into new camera products several of which demonstrated that the recent shot show in Las Vegas, and some we're working to customers with customers to develop customized solutions.

All of these products are utilizing spends amid unique.

Unique video engine in conjunction with our optics to develop low weight high efficiency solutions for drones, Uavs as well as industrial applications, such as guests leak sentencing process control and early fire detection.

Sam Rubin: Shortly after the acquisition of Vizimid, Lockheed Martin awarded Vizimid and Lightpath a major project for the design, development, and later on the manufacturing of a complete imaging system for a new project in their missile division. With the award came what would be up to $7.5 million in development funding. $4.7 million of that was already in a formal purchase order and is now part of our backing, www.LightpthTech.com. In this project, Lockheed Martin is competing against another prime defense contractor to develop a new missile system. At first, the development portion of this project was expected to last until 2028, at which point the end customer would decide if the production would be awarded to Lockheed Martin or its competitors. However, there is significant pressure now to shorten this timeline as much as possible, and as such, the decision point has recently been pulled in, and we now expect that the decision regarding the production award will be as early as 2026. Two years ahead of the schedule we shared during the announcement of our initial, If Lockheed Martin is selected for the production, we expect an initial production order for around 10,000 units. Our ASB per unit is between $5,000 to $10,000.

Shortly after the acquisition of intimate Lockheed Martin awarded visit it and liked off a major project for the design development and later on the manufacturing of a complete imaging system for a new project and say Misfile Division.

Whereas the award came what we'd be up to seven months, a half million dollars filter development money $4 7 million of that was already in a formal purchase order and it's now part of our backlog.

[laughter].

Interest project Lockheed Martin is competing against another prime defense contractor to develop a new missile system.

That's for the development portion of this project was expected to last until 2028 at which point the end customer would decide if there's a production it's awarded to Lockheed Martin or its competitor.

However, the significant question out to shorten that timeline as much as possible.

And as such the decision point is recently being pulled in and.

And we now expect that the decision regarding the production of what would be the earliest 2026.

Two years ahead of the schedule, we shared during today's announcement of our initial award.

If Lockheed Martin and selected for the production, we expect an initial production order for around 10000 units.

Our ASP per unit is between $5000 $10000.

Sam Rubin: That will put the initial expected production order to be north of $50 million. That is the production order to Lightpth. Additionally, the volumes for follow-up production have also increased, with the potential now for tens of thousands of units of UNIT. Demand and the shortened timeline for the project are being impacted by recent geopolitical escalation. However, results so far are very positive.

That's what puts the initial expected production well, that's being north of $50 million that is the production where the two liked cough.

Additionally, the volumes follow up production have also increased with the potential now for tens of thousands of units of units.

The demand and shorten the time line for the project are being impacted by recent geopolitical escalations.

Results. So far are very positive and our customers in fact, very confident and so confident about our solution.

Sam Rubin: And our customers, in fact, are very confident and so confident about the solution that they're looking to begin investing in production of the units, even before an official decision is made. As such, we expect that Lightpath might start building up the production line this year already. Thank you. Bye-bye.

Looking to begin investing in production of the units even before an official decision is made.

As such we expect that light path might start building up the production line this year already.

Yeah.

Sam Rubin: The basic infrastructure for this production line has already been prepared and paid for as part of our recent expansion of our Orlando facility, and the specific equipment that will be needed is expected to be paid for by the Department. Once in production, we will be delivering this assembly in volume, estimated tens of thousands of assemblies over the program lifetime, and again with ASPs for Lightpath, between $5,000 to $10,000 per system. With thousands of dollars per unit and tens of thousands of units expected in that program, the ultimate selection of Lockheed Martin by the military would likely result in a substantial revenue opportunity for us. This is exactly the direction we've been looking to transform the company with the new strategy, and it is now happening.

The basic infrastructure for this production line has already been prepared and painful as part of our recent expansion of our Orlando facility.

And the specific equipment that would be needed is expected to be paid for by department of defense.

Once in production, we will be delivering this assembly and volume estimated at tens of thousands of assembly. So visit program lifetime and again with Asp's for light path between 5000 to $10000 per system.

With thousands of dollars per unit and tens of thousands of units expected in such program. The ultimate selection of light of Lockheed Martin Vice of military would likely result in a substantial revenue opportunity for us.

This is exactly the direction, we've been looking to transform the company to which the new strategy and it is now happening.

Okay.

Sam Rubin: Lockheed's decision to outsource the development of such an important part of their system is due to, was due to, Visamit's technical capabilities. Yet the decision to further engage with us at the scale they're now engaging, and the potential manufacturing of this, is due to the combination of Lightpath and Vizimit, with our manufacturing capabilities, capacities, and, most important, the ability to integrate the entire system. And while our strategy for having three pillars of growth is designed such that we don't put all our eggs in one basket or one product, for that matter.

Look its decision to outsource the development of such an important part of this system is due to what's due to visit amidst the technical capability.

Yet the decision to further engage with us at the scales, though now engaging and the potential manufacturing goes. This is due to the combination of light path for them to visit with Atwood manufacturing capabilities capacities and most importantly, the ability to integrate to the entire system.

And why not a strategy for having three pillars of growth designed such that we don't put all our eggs in one basket or one product does that matter.

Sam Rubin: This award by a major prime with the massive potential for revenue on the manufacturing side is seen by us as a big win for our strategy, and the execution of that FUSA acquisition of BISMID and our own investment in expansion in the U.S. and development of camera technology. I could probably spend this entire call only on this specific project and activity, given that we expect it to lead to tens of millions of dollars in annual revenue. But this is only one of multiple projects and multiple opportunities we have going on, all of which are at similar scales. So we'll talk briefly about some of the rest, www.

This award by a major prime with the massive potential for revenue on the manufacturing side. It is seen by us as a big wind tower strategy and good execution, what was that foods acquisition of Smith, and our own investment and expansion in the U S and development of camera technologies.

I could probably spend this entire colt O&M. This specific project activity given that we expect it to lead to tens of millions of dollars in annual revenue.

But this is only one of multiple projects and multiple opportunities we have going on.

All of which are in stimulus scale.

So I will talk briefly about some of the best.

Sam Rubin: LightpthTech.com Turning to the automotive market, as previously mentioned, our lens assembly system has already been qualified by one of the largest car companies. Since then, we have shipped samples for qualification by another large tier one and begun the qualification process that is expected to take a few months. Last call we shared with the first company, they were re-evaluating their timeline in light of recent changes to the EV market. While our technology is not specific to EV, we found that most of our automotive Tier 1 customers were looking to roll out this technology in their EVs, as that was their main focus.

[laughter].

Turning to the automotive market as previously mentioned our lens Assembly system has already been qualified by one of the largest car companies.

Since then we have shipped samples for qualification.

The large tier one and began a qualification process that is expected to take a few months.

Last call we shared that it's the first company with reevaluating their timeline in light of recent changes does the EV market.

While I won't technology, it's not specific to EV, we found that most of them have automotive tier one customers. We're looking to roll out this technology in E N E V.

And that was the main focus at the time.

Sam Rubin: With the dynamics of the market now changing, we expect that some of our Tier 1 customers will begin rolling out this technology in more traditional vehicles. We're also seeing signs from the market that the automotive companies are waiting for further development in the Department of Transportation's announcement from May on their intention of mandating emergency braking systems and mandating improvement for that technology in nighttime operations. We don't expect any major developments in the very short term, but we're still confident that this technology is going to be implemented in the automotive space and that we're one of the leaders in this technological innovation. Therefore, we will still see this as something that would lead to the same volumes we spoke about before, which are over a million assemblies a year for each one of the car companies, with ASBs up to $50 per vehicle for Lightpth, cough To recap, Lightbulb has developed over the years, and mainly over the last two years, some exclusive, unique materials that can be used instead of germanium in infrared imaging systems. China announced on July 4th export restrictions on germanium.

With dynamics of the market now changing we expect that some of that with tier one customers will begin rolling out this technology and more traditional vehicles.

We also seeing signs from the market. That's ultimately give companies are waiting for further development and the department of Transportation's announcements from May almost every intention of mandating emergency braking system and mandating improvement for that technology and nighttime operation.

We don't expect any major development since the very short term, but we're still confident that this technology is going to be implemented to insult to motive space.

And it's one of the leaders in this technology and to escape.

Therefore, we will still see we will still see this as something that would lead to the same volumes, we spoke about before which are over a million assemblies C. J for each one of the car companies with Asp's up to $50 per vehicle for light cough.

Yeah.

Last thing I will update on input materials in replacing germanium.

To recap lifestyle has developed over the years and mainly over the last two years. Some exclusive unique materials that can be used instead of germanium infrared imaging systems.

China announced on July 4th export restrictions on Iranian and with China being the largest exporter of this material. This has become a big deal.

Sam Rubin: And with China being the largest exporter of this material, this has become a big deal. Since then, and even prior to that, actually, we've been working diligently with customers to have their systems redesigned to use our materials instead of Chumani's. We even took a step a few months ago of proactively canceling some customer orders for Germania to free up our capacity for making optics from these new materials. This has paid off well, with customers now fully engaged in the process and focused on the redesign of this, testing our prototypes, and starting to order systems with new options. Two specific examples I'd like to share.

Since then and even play up does that actually we've been working diligently to cope with customers to have the systems redesigned.

To use our materials instead of germanium, we even took a step a few months ago of proactively canceling some customer orders for germanium optics to free up our capacity for making optics from decent materials.

This has paid off well with customers now fully engaged in the process and focused on the redesign of the system.

Testing out with prototypes and starting to order systems with new optics.

Two specific examples I'd like to share one includes our largest customer which makes imaging devices for supporting.

Sam Rubin: One of these customers is our largest customer, which makes imaging devices for sports. This customer began by evaluating the use of our material in only one of their products, and has recently let us know that they would like to now work with us on all of them. Another customer, who is in the defense business, has announced at the recent SHOT Show a new gunsight product that uses only our black diamond glass in it with no germanium. And they have even gone as far as saying, publicly, that going forward, all new products are going to be designed only with black diamond material, a major win for our direction. All of this, we have so far been using mainly our existing BD6 material. In December, we finally took delivery of a piece of equipment called a refractometer, a measurement system for optical glass.

This customer begun by evaluating the use of our material and only one of their products and has recently, let us know that they would like to now work with us on all of their products.

Another customer who is in the defense business has announced in the recent shot show a new gun fight to product.

That is using only our black diamond glass in it we've no germanium and say I've, even going as far as saying publicly that going forward all new products are going to be designed only with black diamond material.

A major win for what directions there.

All of this all of these have so far been using mainly our existing BD six material.

In December we finally took delivery of a piece of equipment called a refractometer and measurement system for optical glass. This will now enable us to speed up the manufacturing readiness someone who's the new materials, we license for many of it.

Sam Rubin: This will now enable us to speed up the manufacturing readiness of some of the new materials we licensed from NRS. We expect the first material, BDNL4, to be formally released later this month. BDNL4 is an example of a material that not only replaces germanium but actually offers advantages versus germanium by having a negative thermo-optic coefficient, that is, the change of the optical index as a function of temperature.

We expect the first material B D and that'll fall to be formally released later this month.

Median affords an example of immaterial, but not only replaces germanium, but actually offers advantages vis is germanium.

By having a negative. Furthermore, optic coefficient that is the change of the optical index is a function of temperature.

Sam Rubin: BDNL4 enables optical designers to design optical systems that are optically and passively compensated for changes in temperature. This is a big deal for airborne systems, for example, where changes in ambient temperature at different altitudes require refocusing the cameras to compensate for this. BDNL-4 is expected to become an important material for thermal cameras in drones and other airborne systems that experience a large range of temperatures. To conclude, our shift in strategic direction is beginning to show the results we were looking for, both in winning some major programs and in revenue growth in that area. At the same time, our three separate areas of growth, solutions, defense, and automotive, continue to generate multiple independent opportunities, many of them with the potential for tens of millions of dollars of new revenue per opportunity, resulting in a healthy pipeline of large-scale opportunities, any of them alone can be transformative to our business. Thanks for watching!

BD a little for enable optical designers to design optical systems that are optically and passively compensated for changes in temperature.

This is a big deal for Airborne systems for example, where today changes in ambient temperature at different altitudes require a refocusing the cameras to compensate for this.

<unk> four is expected to become an important material fulfillment cameras and drones and other airborne systems.

Variance a large range of temperatures.

Yeah.

To conclude our shift in strategic direction is beginning to show. The results. We were looking for both in winning some major programs and in revenue growth in that area.

At the same time, our free separate areas of growth.

<unk> defense and automotive continued to generate multiple independent opportunities.

Many of them have the potential for tens of billions of dollars of new revenue.

Opportunity.

Resulting in a healthy pipeline of large scale opportunities.

Is that any of them alone can be transformative to our business.

[laughter].

Sam Rubin: Last, I would like to welcome Kim Kreider, who joined our Board of Directors last week as an independent director, replacing Lou Lieberg, who retired after 25 years with the company. I would like to thank Mr. Lieberg for his diligent work over the years and welcome Ms. Kreidel. Kim was formerly the Chief Technology Officer for the U.S. Space Force and has retired as a two-star general.

Last I would like to welcome Kim quite a who joined our board of directors last week as an independent director, replacing Lully book that had retired after 25 years since the company I would like Frank Mr. Liebelt trades diligent work over the years and welcome Mr. Kato.

Kim was formerly the Chief Technology Officer for the U S space Force and hence we tie up is a two star channel having.

Al Miranda: Having a person like Ms. Kreider on our Board of Directors is important as we continue to move forward with our focus on becoming a systems company with a strong focus on defense. And, as always, I would like to thank our employees and stakeholders who have continued to work diligently through the various transitions and hurdles we have encountered. We see a bright future and a growing company because of their dedication, patience, and hard work. Now, I will return the call to our CFO, Alan Miranda, to review our second quarter financial results. Thank you, Sam. You can rest your voice for a little bit.

Having a person as Mr. Kato won't have a board of directors is important as we continue to move forward with our focus on becoming a systems company with a strong focus on defense.

And as always I would like to focus our employees 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.

Now I will live in terms of call to our CFO Vanda to review second quarter financial results.

Well. Thank you Sarah you can rest your voice for a little bit. Thank you 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.

Al Miranda: Thank you. 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 everyone to visit our website at lightpath.com to access these documents and to see some of our new products. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist investors in analyzing them. On a consolidated basis, revenue for the fiscal second quarter was $7.3 million, compared to $8.5 million in the year-ago period.

I encourage everyone to visit our website and white past dot com to access these documents and to see some of our new products.

I will discuss some of the primary financial performance metrics and provide additional color on them to better assist assist investors in analyzing the company.

On a consolidated basis revenue for the fiscal second quarter were $7 3 million compared to $8 5 million in the year ago period.

Al Miranda: Sales of infrared components were $3.6 million, or 49% of the company's consolidated revenue in the fiscal second quarter. Revenue from visible components was $2.7 million, and revenue from Assemblies was $1.5 million. And solutions revenue was $1 million, or 13% of total company revenue; revenue from engineering services was 0.1 million, or 1% of total company revenue. Infrared component sales increased approximately 283,000, or 9%, primarily due to an increase in shipments against an annual contract for an international military program. This contract was also renewed during the first quarter of fiscal 2024 for a higher dollar value than in the past. However, visible component sales decreased approximately 1.2 million, or 31%.

Sales of infrared components were $3 6 million or 49% of the Companys consolidated revenue in the fiscal second quarter.

Revenue from visible components was $2 7 million or 37%.

Revenue.

Revenue from assemblies.

Solutions were $1 million or 13% of total company revenue.

Revenue from Engineering services was point $1 million or 1% of total company revenue.

Yeah.

Infrared component sales increased approximately 283000 or 9%.

Primarily due to an increase in shipments against an annual contract for an international military program.

This contract was also renewed during the first quarter of fiscal 2024 for a higher dollar value than in the previous year.

Visible component sales decreased approximately $1 2 million or 31%.

Al Miranda: All this is primarily due to the ongoing trend in China and the telecom industry in general. This quarter, we also experienced declines in Europe due to recessionary conditions, particularly in Germany, and in the US due to the timing of defense contract delivery. Assembly Solutions revenue decreased approximately 241,000, or 20%, and that was primarily due to timing of shipments against a multi-year contract with a defense customer, that was partially offset by the addition of Visumed revenue. Gross margin in the second quarter of fiscal 2024 was approximately $2.2 million, a decrease of 1.1 million, or 33% as compared to the same quarter of the prior fiscal year.

This is primarily due to the ongoing trend in China.

Excuse me.

In the telecom industry in general.

This quarter, we also experienced declines in Europe due to recessionary conditions, particularly in Germany and in the U S. Due to the timing of defense contract deliveries.

Assembly solutions revenue decreased approximately 241000, or 20% and that's primarily due to timing of shipments against the multiyear contract with the defense customer that was partially offset by the addition of <unk> revenue.

Gross margin in the second quarter of fiscal 2024 was approximately $2 2 million a decrease of $1 1 million or 33% as compared to the same quarter of the prior fiscal year.

Al Miranda: Total cost of sales was approximately $5.1 million for the second quarter of fiscal 2024, and approximately $5.2 million for the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 30% for the second quarter of fiscal 2024 compared to 38% for the same quarter 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 IR components product group, which comprised a greater portion of our sales for the second quarter of fiscal 2024. Selling general administrative costs were approximately $2.9 million for the second quarter of fiscal 2024, a decrease of approximately $172,000 to approximately $3 million in the same quarter of the entire fiscal year.

Total cost of sales was approximately $5 1 million for the second quarter of fiscal 2024 compared to approximately $5 2 million for the same quarter of the prior fiscal year.

Gross margin as a percentage of revenue was 30% for the second quarter of fiscal 2024 compared to 38% for the same quarter 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 IR components product group.

Which comprised a greater portion of our sales for the second quarter of fiscal 2024.

Selling general and administrative costs were approximately $2 9 million for the second quarter of fiscal 'twenty 'twenty four a decrease of approximately 172000 or 6% as compared to approximately $3 million.

Same quarter.

Fiscal year.

Al Miranda: The decrease in SG&A costs is primarily due to a decrease in stock-based compensation, partially offset by an increase in... Net loss for the second quarter of fiscal 2024 was approximately $1.7 million, or $0.05 basic and diluted loss per share, compared to $0.7 million basic and diluted loss per share for the same quarter of the prior, The increase in net loss of approximately 1 million for the second quarter of fiscal 2024, as compared to the same quarter of the prior fiscal year, primarily due to the decrease in revenue and gross margin, partially offset by other income of approximately $190,000 from our Chinese subsidiary for the return of funds previously misappropriated by our former Chinese manager, as a result of the ongoing legal procedure. This is the last bit of activity that we expect to have related to that situation. Our EBITDA for the quarter ended December 31st, 2023 was a loss of approximately $454,000 compared to an income of $207,000 for the same quarter of the prior fiscal year.

The decrease in SG&A costs was primarily due to a decrease in stock based compensation, partially offset by an increase in wages.

Net loss for the second quarter of fiscal 2024 was approximately $1 7 million.

Or five basic and diluted loss per share compared to <unk> 7 million.

Basic and diluted loss per share for the same quarter of the prior fiscal year.

The increase in net loss of approximately $1 million for the second quarter of fiscal 2024 as compared to the same quarter of the prior fiscal year was primarily due to the decrease in revenue and gross margin, partially offset by other income of approximately 190.

From our Chinese subsidiary for the return of funds previously misappropriated by our former Chinese management team as a result of the ongoing legal proceedings. This is the last bit of activity that we expect to have related to that situation.

Yeah.

Our EBITDA for the quarter ended December 31, 2023 was a loss of approximately 454000 compared to an income of 207000 for the same quarter of the prior fiscal year.

Al Miranda: The decrease in EBITDA in the second quarter of fiscal 2024 was primarily due to lower sales and gross margin, again, partially offset by the... training. Thank you. Turning to the results for the first half of fiscal 2024, revenue was $15.4 million, only a 3% decrease from $15.8 million in the same period of the prior fiscal year.

The decrease in EBITDA in the second quarter of fiscal 2024 was primarily due to lower sales and gross margin.

Partially offset by the you mentioned Chinese.

Yeah.

Turning to the results for the first half of fiscal 2024 revenue was $15 4 million only a 3% decrease from $15 8 million in the same period of the prior fiscal year.

Al Miranda: Sales of infrared components were $7.4 million, or 48% of the company's consolidated revenue for the first half of fiscal 2024. Revenue from visible components was $5.4 million, or 35% of consolidated revenue. Revenue from assemblies and solutions was $2.2 million, or 15% of total company revenue.

Sales of infrared components were $7 4 million or 48% of the company's consolidated revenue for the first half of fiscal 2020 for revenue from visible components was $5 4 million or 35% of consolidated revenue.

Revenue from assemblies, and solutions were $2 2 million or 15% of the total company revenue.

Al Miranda: And revenue from engineering services was $0.4 million, or 2% of total company revenue. In the first half of the fiscal year, infrared component sales increased almost $1 million, or 14%, primarily due to an increase in shipments against an annual contract for an international military program. Visible component revenue decreased approximately 1.8 million, or 25%.

And revenue from Engineering services was <unk> 4 million or 2% of total company revenue.

In the first half of the fiscal year infrared component sales increased almost $1 million or 14%.

Primarily due an increase in shipments against an annual contract for an international military program.

Visible component revenue decreased approximately $1.8 million or 25% again. This is primarily due to the ongoing trend in China in the telecom industry in general However.

Al Miranda: Again, this is primarily due to the ongoing trend in China and the telecom industry in general. However, We also experienced declines in Europe due to recessionary conditions, and in the US due to the timing of defense contract shipments. Assembly Solutions revenue increased approximately 150,000 or 7%, primarily due to the addition of Vizimed revenue, which was partially offset by a decrease in shipments against the multi-year contract I mentioned regarding the court. If I take a step back and look at revenue, our visible components are declining. However, in the first half, revenue increased for infrared components, assemblies, and solutions and engineering services, which aligns well with our strategic plan. As of December 31, 2023, we had working capital of approximately 9.1 million and total cash, cash equivalents, and restricted cash, approximately $5.9 million, of which greater than 25% of our cash and cash equivalents was held by our former subsidiaries; cash provided by operations was approximately $851,000 for the first half of Cash provided by operations for the first half of fiscal 2024 was largely driven by a decrease in accounts receivable.

We also experienced declines in Europe, due to recessionary conditions and in the U S. Due to timing of defense contracts shipments.

Assembly solutions revenue increased approximately 150000 or 7% primarily due to the addition of <unk> revenue, which was partially offset by a decrease in shipments against the multiyear contract I mentioned regarding the quarter.

If I take a step back and look at rental revenue.

Our visible components are declining however in the first half revenue increased an infrared components assemblies and solutions and engineering services, which aligns well with our strategic plans.

As of December 31, 2023, we had working capital of approximately $9 1 million and total cash cash equivalents and restricted cash of approximately $5 9 million of which greater than 25% of our cash and cash equivalents was held by our full.

Subsidiaries.

Cash provided by operations was approximately 851000 for the first half of fiscal 2024 compared to cash used in operations of approximately 751000 for the same period of the prior fiscal year.

Cash provided by operations for the first half of fiscal 2024 was largely driven by a decrease in accounts receivable as sales were higher in the fourth quarter of fiscal 2023 and in each of the first two quarters of fiscal 2024.

Al Miranda: Sales were higher in the fourth quarter of fiscal 2023 than in each of the first two quarters of fiscal 2024. Cash used in operations in the first half of fiscal 2023 reflected a decrease in accounts payable and accrued liabilities during that period, resulting from the payment of certain expenses related to previously disclosed events that occurred at our Chinese subsidiary. Capital expenditures were approximately $1.5 million for the first half of fiscal 2024, compared to approximately $412,000 in the same period of the prior fiscal year. Spending in the first half of fiscal 2024 was largely driven by the Orlando facility expansion, where we constructed additional kinds of improvements in our Orlando facility, subject to our continuing lease, of which the landlord agreed to provide $2.4 million in tenant improvement allowance. The balance of the tenant improvement cost is estimated to be $3.7 million.

Cash used in operations in the first half of fiscal 2023 reflected a decrease in accounts payable and accrued liabilities during that period, resulting from the payment of certain expenses related to previously disclosed events that occurred at our Chinese subsidiaries.

Capital expenditures were approximately $1 5 million for the first half of fiscal 2024 compared to approximately 412000 in the same period of the prior fiscal year. The spending in the first half of fiscal 'twenty 'twenty four is largely driven by the Orlando facility.

Sure.

[noise] excuse me, where we constructed additional tenant improvements at Orlando facility subject to our continuing lease of which the landlord agreed to provide $2 4 million and tenant improvement allowances the balance of the tenant improvement cost is estimated to be $3 7 million during.

Al Miranda: During the first half of fiscal 2024, we expended $994,000 towards this project, with the remaining estimated $380,000 expected to be expended during the second half of fiscal 2020, pending final construction. We also expended approximately $722,000 net of cash acquired to acquire Vizumed during the first half of fiscal 2024. Our total backlog at December 31st, 2023 was approximately 21.2 million, a decrease of 28% as compared to 29.4 million as of December 31st, 2022. Compared to the end of fiscal 2023, our total backlog decreased by 2% during the first half of fiscal 2024.

In the first half of fiscal 2024, we expanded 994000 towards this project with the remaining estimated 380000 expected to be expended. During this second half of fiscal 2024 pending the final construction invoices.

We also expanded approximately 722000 net of cash acquired to acquire a busy made during the first half of fiscal 2024.

Our total backlog at December 31, 2023 was approximately $21 2 million a decrease of 28% as compared to $29 4 million as of December 31, 2022.

Compared to the end of fiscal 2023, our total backlog decreased by 2% during the first half of fiscal 2024.

Operator: The decrease in backlog during the first half of fiscal 2024 is primarily due to shipments of several annual and multi-year contract renewals, which orders were added, to the backlog and prior period, in the second quarter of previous. We have typically received a contract renewal from our largest customer for infrared products made out of germanium. However, as previously discussed, we've decided to reduce the amount of optics we produce from germane, to reduce our risk of supply chain disruption and, more importantly, to work with customers to convert their systems to use optics made of our own black diamond, as such, and the second quarter of fiscal year 2024 we did not book our typical annual renewal order for germanium optics for this, Instead, we continue to work with this customer, as well as other customers, to convert their systems to use Black Diamond Optics.

The decrease in backlog during the first half of fiscal 2024 is primarily due to shipments of several annual and multiyear contract renewals.

Which orders were added to the backlog in prior periods.

In the second quarter of previous years, we've typically received a contract renewal from our largest customer for infrared products meet all germanium.

However, as previously discussed we decided to reduce the amount of optics, we produce from Germania boast to rigid we do reduce our risk of supply chain disruption and more importantly to work with customers to convert their systems to use optics universe.

On Black Diamond materials as such in the second quarter of fiscal 2024, we did not book our typical annual renewal order for germanium optics pointed this customer instead, we continue to work with us.

As well as other customers to convert their systems to use black Diamond optics.

Operator: With this review of our financial highlights and recent developments concluded, I'll now turn the call over to the operator to begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

With this review of our financial highlights and recent developments concluded.

I'll now turn the call over to the operator to begin the question and answer session.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

Jason Schmidt: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Jason Schmidt on Lake Street. Please go ahead.

At this time, we will pause momentarily to assemble our roster.

Our first question is from Jason Schmidt with Lake Street. Please go ahead.

Sam Rubin: Hey guys, thanks for taking my questions. I just want to start with the Lockheed program. And you mentioned units, production units might begin even before the decision date. Just curious if this is something you're hearing from the customer, or is this industry chatter, or I guess a combination of both? Oh, yeah, directly from the customer.

Hey, guys. Thanks for taking my questions I just wanted to start with the Lockheed program and you mentioned unit.

Production units might be getting even before the decision date just curious if this is something you're hearing from the customer or is this industry chatter or I guess a combination of both.

But directly from the customer this is the customer is actually.

Sam Rubin: This is because the customer is actually extremely confident in the solution and the superiority of the solution. And they want us to start setting up the production line, the physical production line in Orlando, where we're going to do production in the very near future to start gearing up to that. The expectation is that once a decision is made, the army will want units as soon as possible.

I am really confident and the solution and the superiority of our solution.

And they want us to start setting up the production lines of physical production line in Orlando, where we're going to do production in the very near future to start gearing up to that expectation is that once the decision is made.

Army will want units as soon as possible and they're willing to make some bets in that direction.

Sam Rubin: And they're willing to make some bets in that direction. Gotcha. No, that's really good to hear. And that leads me to my next question, which I know is going to be dependent on the program.

Gotcha, No that's really good to hear and that leads me to my next question and I know, it's going to be dependent on the program, but at a high level. How should we think about your total revenue capacity now with the expansion completed in Orlando.

Sam Rubin: But at a high level, how should we think about your total revenue capacity now with the expansion completed in Orlando? Yeah, exactly. As you said, that's very dependent on the program.

Yeah.

Exactly as you said that the very dependent on the program.

Sam Rubin: If we were to continue with the current business mix, meaning not a lot of cameras in and mainly growth coming from infrared assemblies, then revenue capacity in Orlando or altogether would probably go to as much as 50 million, I think, or even more with the current expansion. I think we could do 60 to 70 million. Okay, but it's very, very dependent on where that comes from. If it's individual components, probably less.

If if we were to continue with the current business bank, meaning lots and lots of camera that in the end.

And mainly growth coming from infrared assemblies, then revenue capacity in Orlando or altogether would probably go to could go to as much as $50 million.

Pink or even or even more with the current expansion I think we could do $60 million to $70 million, okay, but very very dependent on where thats comfortable.

If its individual components.

[laughter], probably less the more complicated things.

Sam Rubin: The more complicated things are, the less space per dollar of revenue that they take, and the more we would grow. The assembly of the Lockheed, for example, or any of the cameras, actually doesn't require an enormous amount of space. A lot of it is very automated calibration systems and assembly processes. And so we can probably serve this entire Lockheed program from the extra clean room space we built in Orlando and still have room to expand in other programs. Gotcha. That's really helpful. And then just the last one from me, and I'll jump back into Q. I know China is becoming less of a focus for you guys, but just curious if you think that business has bottomed yet. Yeah, I definitely think it's a health bottom.

The less space per dollar of revenues that they take and the more we would come out of that.

Many of the Lockheed for example, or any of the cameras actually doesn't require an enormous amount of space a lot of it is very automated calibration systems and assembly processes.

And so we can probably serve this entire Lockheed program from.

Clean room extra cleaning space, we built in Orlando and still have room to expand in other programs as well.

And the multi machine gotcha.

Yeah.

That's really helpful. And then just the last one from me and I'll jump back into queue. I know, China is becoming less of a focus for you guys, but just curious if do you think that business has bottomed yet.

Yeah, I definitely think it has bottomed then.

Sam Rubin: I mean, in reality... You know, at least if you talk about China, Asia, most of our revenue in what we call the Chinese operation actually comes out of China, from Thailand, from Vietnam, customers over there that we call, we bundle it in the Chinese part, but it's not really in China. Our revenue in China is very low, and you know, we're not counting on that part, really recovering, if you would, to anything near what it was. I mean, just to recap, the China operation was delivering about 12 million in revenue in 2020, and it is down to 3 million. So all that $9 million of revenue that vanished in China was really made up for in the US and Europe, and which is why, you know, the growth in the US and Europe is very strong, even if the consolidated numbers don't show it. Okay, I understand. Thanks a lot, guys.

In reality.

You know at least if you can talk about China or Asia, most of that revenue into what we call. The China operation actually comes out of out of China.

From Thailand from Vietnam customers over there that we call we bundle it into the China part, but it's not really in China, our revenue in China is very low.

And you know we're not counting on that part really recovering if you would to anything near what it was I mean, just to recap the China operation.

Delivering about 12 million of revenue in 2020, and it is down to $3 million. So.

So all of that $9 billion of revenue that vanished in China was really made up for in the U S and deal with and which is why you know the growth in U S. Yogurt book is very strong even if the consolidated number that stopped chipset.

Okay understood.

Thanks, a lot guys.

Sam Rubin: Thank you. The next question comes from Scott Buck with H.G. Wainwright. Please go ahead.

Thank you Jason.

The next question comes from Scott Buck with H C. Wainwright. Please go ahead.

Scott Buck: Hi, good afternoon, guys. Thanks for taking my question. Sam, you mentioned in the release and on the call here the acceleration to production for the Lockheed project. I'm curious whether the geopolitical environment is causing you to see...

Hi, Good afternoon, guys. Thanks for taking my question, Dan you mentioned in the release and on the call here the acceleration to production for the Lockheed.

Project I'm curious where did the geopolitical environment has caused you to see you know kind of similar.

Sam Rubin: Similar uptick in demand or acceleration of interest in other parts Yeah, definitely. I mean, we've had uptake in some areas of the business. For example, customers in Israel that build some of the systems, vision systems for the Israeli military, and so on, had a big push on orders to rebuild some systems that were destroyed on October 7th and during the war. And, of course, Ukraine continues to indirectly drive some demand for some of the optics, and that's just beginning to grow. I think the U.S. is only now really starting to replenish some of the inventories that it has depleted. Unfortunately, we don't make ammunition directly, which is, from what I understand, one of the things that is in most shortage.

Take in demand or acceleration of interest in other parts of the business.

Yeah definitely I mean, we've had a uptake and in some areas of the business for example customers in Israel that are build some of the.

Okay.

Systems vault vision systems, Israeli military and so on had had a big push on the order to rebuild some systems that were destroyed the.

The October 7th and during the war.

And of course, Ukraine continues indirectly to drive some demand for some of the optics and so it's just beginning to grow I think that the U S. The only now really starting to replenish some of the inventories that are depleted.

Unfortunately, we don't make ammunition directly which is from what I understand one of the things that has been most shortage.

Sam Rubin: But definitely, the optics and the cameras that go on some of these drones and loitering ammunition are in growing demand. That's helpful. And a follow-up to an earlier question. It sounds like you guys have the capacity to be able to handle not just the Lockheed project but perhaps one of these other potential deals you're working on as well, right? Yeah, absolutely. I think when it comes to those kind of projects that are tens of millions of dollars in potential revenue, we, with the capacity we have worldwide and balancing things worldwide, can probably handle two, maybe even three of them. And then last one for me, Al, I'm curious about the unrestricted cash balance here and how that, you know, bridges you to 2026 and beyond when maybe some of these larger, you know, you'll take it. It's a big thing for this quarter.

But definitely the optics on the camera to go on some of these the drones and loitering munition Oh growing demand.

Alright, that's helpful. I'll follow up to an earlier question. It sounds like you guys have the capacity to be able to handle not just.

Ah the Lockheed project, but also perhaps one of these other potential deals you're working on as well right.

Yeah, absolutely I think and when it comes to those kind of projects that are tens of millions of dollars in potential revenue, we probably with the capacity we have worldwide and balancing things worldwide can probably handle to maybe even free up something.

Great and then last one for me Oh I'm curious you know how are you thinking about the unrestricted cash balance here and how that <unk>.

Bridges, you to 2026 and beyond when maybe some of these larger.

Deals kick in.

So baked into this quarter yeah, great great question, so baked into this quarter, we actually were or this first half of the year, where operating cash flow positive and we will continue to be operating cash flow positive.

Al Miranda: Yeah, great, great question. So baked into this quarter, we actually were, or this first half of the year, we were operating cash flow positive, and will continue to be operating cash flow positive. Cash has gone down, in the first half.

Cash has gone down.

In the first half that's largely because of the Orlando facility, we're still still paying invoices still receiving a paying invoices there.

Al Miranda: That's largely because of the Orlando facility. We're still paying invoices, still receiving and paying invoices there. And the investment of another coding machine that we made in Riga, the big chunks of that CapEx spend for this fiscal year are over. So in the second half of the fiscal year, we're just going to dribble out the normal, actually below average, cap.

And the investment of another coating machine that we made in Riga.

But the big chunks of that Capex spend for this fiscal year's over.

So in the second half of the fiscal year, we're just going to dribble out the normal actually below average capex.

Al Miranda: So, from a cash flow perspective, I feel pretty confident that we'll be okay. All right, perfect. That's it for me, guys. Thanks a lot.

So from a cash flow perspective, I feel pretty confident that we'll be okay.

Alright, perfect. That's it for me guys. Thanks, a lot alright.

Scott Buck: Thank you, Scott. The next question is from Brian Kinstlinger with Alliance Global. Please go ahead. Hi there, this is Trevor Nonford Bryant.

Thank you Scott.

The next question is from Brian Kinsinger with Alliance Global Please go ahead.

Hi, there. This is Trevor on for Brian My first question pertains to your backlog last you mentioned that it's like a lost revenue renewals for your germanium contracts that youre working on transitioning those amid to drive some meaningful backlog starting in.

Trevor Nonford: My first question pertains to your backlog. Last quarter, you mentioned that despite a lot of revenue and renewals for your germanium contracts, you're working on transitioning Visamid to drive some meaningful backlog starting in 2Q. Did that happen this quarter?

In <unk> did that happen this quarter and if so is there a sizable portion of the backlog that's attributable visited that you quantified.

Sam Rubin: And if so, is there a sizable portion of the backlog that's attributed to Visamid that you can quantify? Yeah, definitely. Lockheed Martin's 4.7 million portion of the backlog that entered during Q2 is purely vis-a-vis, as well as a few other smaller projects, but right now, I'd say around 5 million of the backlog probably is about physical. Thank you. And then secondly, with the Lockheed partnership, just wanted to clarify, is Lightpath competing with anyone for the component that you're creating for Lockheed? Or is it guaranteed that if Lockheed selects Lightpath, it will be in every delivery? The latter.

Yeah definitely the Lockheed Martin and $4 7 million portion of the backlog that enter during Q2 is purely visit.

As well as a few other smaller projects, but but right now I'd say around 5 million of the backlog probably it's about the cause of it.

Okay. Thank you and then secondly, with the Lockheed partnership just wanted to clarify is lightpath competing with anyone for the component that you're creating for Lockheed, whereas you're guaranteed that it's Lockheed selected that lightpath will be in every delivered himself.

Sam Rubin: We're the sole source for the Lockheed part. It's a very big deal, that's why Lockheed actually was extremely supportive of our acquisition of Visamid. From their point of view, it's a significant bet that they made in that direction, and at the time they decided, or were going to decide on it, Visamid was a stand-alone nine-person company, and so the acquisition of Visamid by Lightpath actually played a major role in this, and sort of gave peace of mind to Lockheed in that. But we are definitely the only one developing that part for Lockheed. Right. It's great to hear from you.

The latter we were the sole thoughts on Lockheed part.

It's a very big deal that's why Lockheed actually was extremely supportive of our acquisition of <unk> from that point of view, it's a significant bet that they made in that direction and at the times, they decided or we're going to decide on it because they made was the standalone nine people company and so.

The acquisition of the <unk> visited by light path actually played a major role in this.

And sort of gave peace of mind to Lockheed.

But we are definitely I'm, the only one developing such path for Lockheed.

Great.

Sam Rubin: Last question. Well, I appreciate the strong demand from the defense industry. Although we know it's like, you know, lumpy and can be unpredictable, your products, and Mantis specifically, have really strong commercial applications like the flame detection recycling centers that you've mentioned in the past couple quarters. So how do you go about building a healthy portion of a backlog that is more predictable?

Great to hear last question.

Well I appreciate the strong demand from the defense industry.

Although we know its like you know are lumpy and can be unpredictable your products and manta, specifically has really strong commercial applications like the flame detection recycling centers that you had mentioned in the past couple of quarters. So how do you go about building a healthy portion of our backlog that is more predictable like are you doing anything there like looking at hiring more personnel increased marketing spend et cetera, just trying to get an idea.

Sam Rubin: Like, are you doing anything there like looking to hire more personnel, increase marketing spend, etc., just trying to get an idea? No, that's a great question. And really, a lot of our focus now is on sales, and soon it will be on the marketing of those products. So, you know, if you look at myself as the CEO, I tend to move around the business and focus my time on where it's needed.

Yeah no.

That's a great question and really a lot of our focus now is the valve sales and soon we'll be able to the marketing of those products. So you know.

If you look at myself and C E O I tend to move around with the business and focus my time on where it is needed and right now absolutely. My time is focused on the sales of these new cameras in new products.

Sam Rubin: And right now, absolutely, my time is focused on the sales of these new cameras and new products. We're building up more in the sales team, we're gearing up to align ourselves with that, and we're working very hard to lock in some strategic partnerships in some of those areas. Again, we can't do everything. We're just, you know, we're not going to build a sales team now that will go after, you know, 500 different camera companies, companies, and customers for cameras.

We're building up more in the sales team with tooling up to align ourselves to that and we're working very hard to lock in some strategic partnerships in some of those areas again, we we can't do everything. It's we're just you know we're not going to build a sales team now.

You said will go off the <unk>.

500 different camera companies company customers for cameras, and so the strategic relationship and alliances with key players in some of those areas firefighting of process control of drones.

Sam Rubin: And so the strategic relationships and alliances with key players in some of those areas of firefighting, of process control of drones, they're going to be key to for scaling up. Well, and then in relation to the backlog, in fire detection, for which we already have a running business for those cameras, they're not going to give us an annual order. They give us a forecast, and we work off of that. So we'll never see that in the back.

Is that going to be key for scaling up there.

And then in <unk>.

Relation to the backlog.

The fire detection for which we already have a running business for those cameras. They are not going to give us annual order.

Can you give us a forecast and when you work off of that.

So we will never see that in the backlog.

Yeah.

Sam Rubin: All right, great. Makes sense. Thanks, guys. Thanks. The next question is from Glenn Mattson with Lattenberg. Please go ahead.

Alright, great makes sense thanks, guys.

Thanks.

The next question is from Glenn Mattson with Ladenburg. Please go ahead.

Glenn Mattson: Hi, yeah, thanks for taking the question. So it was about seven or eight months ago that China made the announcement of the export ban on germanium. So at the time, I think you, Sam, might have mentioned a timeframe of like how long it takes your customers to design in your alternatives, kind of a nine to 12 month timeframe. And so I guess, you know, I'm curious about how that's going and if there should be some expectation of that to start to kick in, kind of in the second calendar half of this year.

Hi, yes, thanks for taking the question.

So it was about seven or eight months ago that China made the announcement of the export ban.

Romania so.

At the time I think you mentioned a timeframe of like how long it takes to your customers to design in.

Yeah, you alternatives.

Nine to 12 month timeframe and so I guess.

I'm curious about how that's going and if there should be some expectation of a <unk> of that to start to kick in kind of in the second calendar half of this year and.

Sam Rubin: And, you know, that may also relate to the one customer who didn't renew yet on the backlog side, just to, you know, you could use him as an example, but just across the customer set in general. Could you just give us a sense of how that process is playing out? Yeah. No, that's a great question. Thank you. It's going really well.

And you know that May also relate to the one customer I didnt renew yet on the backlog side just to you know you could use them as an example, but just across the customer set in general can you just give us a sense of how that process is.

No. That's a great question I think it's going really well I mentioned a couple of customers. As an example, one of them is that largest customer for the sporting thought you.

Sam Rubin: I mentioned a couple of customers as an example. One of them is the largest customer for the sporting part. You know, typically, our annual orders from that customer have been between $4 to $6 million, as much as $6.5 million, I think, in one year. And we haven't renewed that.

You know typically are what annual orders from that customer have been between four to 6 million that's as much as six months or half a million I think on one year and we haven't renewed that our.

Sam Rubin: Our expectation now is for the entire product line of that customer to possibly convert to using black diamond material. What we're seeing is that things have gotten even worse with geomanium. At first, I think many customers were still accessing geomanium through inventories. Geomanium maybe was making its way out of China in different ways, in different, I don't know, creative ways, let's say, but that is decreasing significantly. And as of now, from what we know, China has given zero export licenses to any geomanium at its final destination in the U.S.

<unk> now is really for.

The entire product line of that customer to possibly convert to using black diamond materials.

What we're seeing is that things have gone gotten even worse with germanium at first I think many customers would still accessing germanium through inventories germanium, maybe even making its way out of China in different ways and different creative ways to play.

But that is decreasing significantly and as of now from what we know China has given they will export licenses to any germanium fits its final destination in the U S.

Sam Rubin: So they're very, very specific in sort of what they're going after there. And so we have two large customers for handheld devices, gun sights, binoculars, and so on. They probably have around $10 million of potential revenue between the two of them.

And so they're very very specific instead of what they're going after that and so we have two large customers for a handheld devices gun sights binoculars and so on they probably have around $10 million of potential revenue between the two of them both of them were working very hard.

Sam Rubin: Both of them are working very hard to convert over. Next week, I think we're actually shipping some more samples to them. One of them had already converted one product. Sorry, which I mentioned during the SHOT Show. They announced it as a new product, and they also made it very clear at the SHOT Show to us and anyone else that was asking that all new products were being designed only with black diamonds. So I think we're going we're doing very well. I wish it could be faster than the time it takes.

Hard to convert over.

Next week I think we're actually shipping some more samples to the tune of them one of them already converted one product.

Sorry, which I mentioned at during the shot show was the announcement of the new product and they also made it very clear at the shot show to ourselves and anyone else that was asking that all new products are being designed only with black Diamond now. So I think we're going we're doing very well I wish it could be faster.

And then the time it takes but but unfortunately doing some of that was also required some of the capacity and capabilities that is used for day to day production and we can disrupt the too much. So it's a balance we play, but I think sort of Glenn it took.

Sam Rubin: But Unfortunately, doing some of those also requires some of the capacity and capability that is used for day to day production, and we can't disrupt that too much. So it's a balance.

Al Miranda: But I think, Sir Glenn, it took. The Chinese made the announcement in July, and I would say, and Sam, you can disagree, that it took until maybe November and December for the customers to start feeling the pain of that announcement and start to scramble looking for a solution. And our conversations with those customers didn't give them confidence that they were going to continue to get Jermaine.

The Chinese made the announcement in July.

And I would say Sam you can disagree okay.

It took until maybe November and December for the customers to start feeling yes, absolutely of that announcement.

And start the scramble looking for a solution and.

And our conversations with those customers.

Didn't give them confidence that they were going to continue to get germanium alright.

Al Miranda: Right. So when it was clear that we weren't going to be able to solve their germanium problem, that prompted them to take action. But it took, I would say, a good six months before they realized it was real.

Alright, so when it was clear that we werent going to solve werent going to be able to solve their germanium problem.

That prompted them to you know to take action, but it took I would say it took a good six months before they they realized it was real yeah, which is why our largest customer first wanted to just one product redesigned but as we were working on is that they started realizing how difficult the situation is.

Sam Rubin: Yeah. Which is why our largest customer at first wanted just one product redesigned. But as we were working on that, they started realizing how difficult the situation was and immediately switched over to saying, "let's redesign everything." Right, right. Okay, great. That's very helpful in the background.

And immediately switched over to saying Thats redesign everything.

Right right, Okay, great. That's very helpful on the backdrop.

Al Miranda: And I don't know if this would be for Sam or Al, but can you give us a sense of, as you look at the back half of your fiscal year, you know? You mentioned in the prepared remarks a little bit about the European recessionary conditions and things like that. Can you just give us a sense of how you feel about all the factors coming together with the potential. I don't know if there's any potential further disruption from the lack of supply or the supply drying up on the germanium side, and maybe the new design's not kicking in yet, or maybe there's some revenue coming through on the mantis side and things like that. Can you just give us a general sense of how you're feeling about the revenue top line in 2H versus 1H?

And I don't know if.

This would be for Sam or al but could you give us a sense of.

So as you look at your back half of your fiscal year.

You know.

You mentioned in the in the prepared remarks about European recessionary conditions.

And things like that can you just give us a sense of how you feel about.

Well all the factors you know.

Coming together with the potential if there is I don't know if there's any potential further disruption from the lack of supply or the supply driving up on the germanium side or.

You know and then maybe the new design is not kicking in yet or maybe there is some revenue coming through on them and decided and things like that can you just give us a general sense of how you're feeling about the revenue top line in two eight versus one H.

Al Miranda: Yes, so it's interesting that the situation, the softening in Europe is really more around visible optics, where there's a lot more competition globally and a lot of price pressure, a lot of production capacity, and all that kind of good stuff. And those products tend to have industrial applications that sort of deliver, you know, next, where the, you know, deliver more to consumer-oriented products. And that's where we're seeing the

So it's interesting that the situation the softening.

And Europe is really more around the visible optics, where there's a lot more competition globally, a lot a lot of price pressure a lot of production capacity and all that kind of good stuff and those products tend to have industrial applications that sort of deliver next worthy.

Do you ever more to a consumer oriented products and Thats, where were seeing the softening the infrared side because the infrared.

Al Miranda: The infrared side, because the infrared components, even without the major contract, on the infrared side, we're still seeing growth in Europe and in the US for infrared components, and assemblies and solution types have started, but where we're seeing sort of the economic impact is on the visible component side. And again, they tend to lead to a more direct path to a consumer product. So that's where we're seeing it in Europe. And I don't. I don't have a crystal ball. And they don't say the recession word.

Even without the major.

The major contract on the infrared side, we're still seeing growth in Europe and in the U S and demand in Europe, and the U S for infrared components and assemblies and solution type started the business.

But where we're seeing the sort of the economics impact is on the visible component side and again.

They tend to lead towards more direct path to a consumer product.

So that's where we're seeing it and in Europe.

And I don't I don't have a crystal ball.

And they don't say the recession word if you Google It Europeans are like we were a year ago nobody wants to say the recession word but there their economies are contracted.

Al Miranda: You know, if you Google it, Europeans are like, you know, we were a year ago; nobody wants to say the recession, but their economies are contracting. Right, great. That's helpful. So then, when you factor that in, plus all the other moving parts, and when you think about the top line outlook, can you give us any general sense of how you feel about the second half versus the first? and that's it for me. So. My gut tells me that this past Q2 was the softest quarter we're going to experience.

Right right. That's helpful. So then when you factor that in plus all the other moving parts of it when you think about the top line outlook can you give us any general sense of Directionally, how you feel about the second half versus first half and that's it for me.

My gut tells me that this this past Q2 was the softest corner, we're going to experience. So in Q3, we should see a little bit of an uptick in Q4, a little bit of an uptick.

Al Miranda: So in Q3, we should see a little bit of an uptick. And in Q4, a little bit of an uptick. Again, it's the visible components that sort of we worry about, and you kind of nailed it with that. But they're in decline regardless.

Again, it's the visible components that sort of are we worried about you kind of nailed it with that.

But during decline regardless so.

Happening a bit faster than we would have predicted six months or a year ago.

Al Miranda: So it's just happening a bit faster than we would have predicted six months or a year ago. Okay, great, thanks. Again, if you have a question, please press star then 1. The next question comes from Jean Inger with IngerLetter.com. Please go ahead. Mr. Inger, your line is open. Do you have it muted on your end?

Okay, great. Thanks.

Again, if you have a question. Please press Star then one.

The next question comes from Gene Inger with Ingrid letter Dot Com. Please go ahead.

Mr. Andrew Your line is open right you Didnt mean it on your end.

Jean Inger: Can you hear me now? Yes, we do. Thank you. I apologize. I muted it as a courtesy.

You hear me now, yes, we do thank you.

Apologize I muted that as a courtesy.

Sam Rubin: Sam, I hope you're feeling better. Hi Al, as well. And the first question I'd like to start with is something you haven't touched on, which is the annual meeting and the paperwork that was pending due to problems from the previous management before you guys began the enormous task of turning around this small company. And I'm wondering if you can tell us if all of that is not of concern to shareholders. Yeah, absolutely. Thanks. I appreciate it.

Sam I hope, you're feeling better hi, al as well.

My first question I'd like to start with something you haven't touched on which is the annual meeting and the paperwork that was pending due to that.

Problems from the previous management before you guys began an enormous task of turning around this small company and I'm wondering if you can tell us if all of that is not of concern to shareholders.

Yeah, absolutely. Thanks, I appreciate that definitely could have touched on that.

Sam Rubin: Definitely could have touched on that. I'm very, very glad to say that it's all completely resolved now. And to recap, it was pointed out to us by some external group that there were some problems in the registration of the company that went back all the way to 1995 when a 7 to 1 split or reverse split was done and was done incorrectly or so. We had to postpone the annual shareholder meeting for that, file with the Delaware court, chancellery court, for a correction of the registration since we couldn't go back and locate all shareholders from 1995 to have them

Very very glad to say that it's all completely resolved now.

And to recap it was pointed out by some external group that there were some problems in the registration of the company that went back all the way to 1995, when they are 7% to one split the reverse split was done and was done incorrectly.

So and so.

We had to postpone the annual shareholder meeting to it filed with the Delaware Court Chancellery Court for a collection of the registrations since we couldn't go back and locate all shareholders from 1919 five to have that revoked that.

Sam Rubin: All of that is behind us. Last week, the day before the annual shareholder meeting, the court ruled on that, fixed the legislation, and we're all done. We're in very good standing now, and I think I can say that at this point, every single issue that we found in the last three years has been fixed.

All of that is behind US last week the day before the annual shareholder meeting the court ruled on that.

<unk>.

Nation, and well done we're in very good standing now and I think I can say is that the at this point every single issues that we have found in the last three years has been fixed good very briefly let me ask you a couple more questions one Scott Ferris chairman of the board.

Sam Rubin: Very briefly, let me ask you a couple more questions. One, Scott Ferris, chairman of the board, and I appreciate the new board members, by the way, the former major general, as well as a business manager, I believe, brought over from Luminar. Are you intentionally bringing in more people intentionally from Luminar?

Ford and I appreciate the new board members by the way.

The former major general as well as a business manager I believe brought over from Illumina. A are you bringing in more people intentionally from alumina and B is there any linkage between lightpath.

Sam Rubin: And B, is there any linkage between Lightpath and the private company that Scott is the CEO of called Inflection? And I mention that because the Pentagon is in the process of jump-starting several key applications, and I wonder, and some of that includes quantum computing and photonics, and I wonder if this is or can involve Lightpath in the future. Yeah, well, first of all, we're not poaching specifically on Luminar.

And the private company that Scott is the CEO of called inflection, but and I mentioned that because the Pentagon is in the process of Jumpstarting.

Several key applications I wonder.

Some of that includes quantum computing photonics and I wonder if this is or can involve lightpath into future.

Yeah.

Well first of all we're not poaching, specifically on alumina and and I don't think we're targeting specifically it doesn't happen to be the luminal has recruited some great people over the years.

Sam Rubin: And, and I don't think we're targeting specifically, it does happen to be that Luminar has recruited some great people over the years. And there are some opportunities that have come up in which we recruit people that were in the past in Luminar, even the near past of the long-term past. But some great people joined us from there.

And there are some opportunities that have come up and which we recruited people that were in the past in luminal, even the near past of a long term path.

But some great people joined us from third and.

Sam Rubin: And, secondly, as it comes to Scott's new venture, which is extremely interesting, and I'd encourage everyone to take a look at that in Fliction. Like many things, it is extremely heavy on photonics and quantum; all things quantum, quantum sensors, quantum computing, quantum communication, they are all very photonics-oriented and driven. We have a very strong presence these days in free-space optical communication, primarily in space, and that ties very much directly into some of the quantum communication and also indirectly into some of the quantum sensor work that's being worked on by many companies, inflection being one of them. And we're, you know, always very, very happy to see optics finding more uses and more places. To me, I get extreme joy out of even the simplest things, like seeing that the quantum engine might be replacing something as simple as the radio receiver, and that's mind-blowing to see optics play a role in something like radio communication. Can any of this relate as well to enemy submarines and to detection systems, because I know you're doing spacecraft linkage and communication. You haven't really touched on that with any more specificity, have you?

Secondly, as it comes to Scott the new venture, which is extremely interesting about encourage everyone to take a look at that inflection.

Like many things that is extremely heavy on the photonics and quantum all things quantum quantum sensors quantum computing quantum communication they.

They are all very photonics oriented in Japan, we have a very strong person steeds days in fleet space optical communication, primarily in space and that ties very much directly into someone say quantum communication.

And also we can directly into some of the quantum sense of work that's being worked on by many companies infliction being one of them and we have you know all.

Always very very happy to see optics find finding more usage and more places it's a.

To me I get to an extreme joy out of even the simplest thing where things that the quantum engine might be replacing something as simple as the radio with fever soon.

And it's mind blowing to see uptick play a role in and something like radio communication.

And any of this relate as well too.

Enemy submarines and to detection systems, because I know youre doing spacecraft.

Communication, you haven't really touched on that with any more specificity can you can you elaborate.

Sam Rubin: Can you elaborate? Yeah, we have actually a couple of camera systems that are one of them; we're going to release a version of Mantis any day now, I think, that are of extreme interest for threat detection, counter UAS detection, detection of cruise missiles as they come in, and other things. All of those, you know; we have two separate camera systems that we're working with customers on that show very, very promising results in that direction. Do these relate to the U.S. Navy licenses we haven't heard much more about?

Yeah, we have actually a couple of camera systems that all.

One of them, we're gonna any day now I think version of Mantas that we can never leave the door.

Interest for the full threat detection.

Counter UAS detection detection detection of cruise missiles as they come in.

And other thing all of those you know we have two cameras. That's the two separate camera systems that we're working with customers on that show very very promising with them and they've actually do these relate to the U S. Navy licenses, we havent heard much more about.

Sam Rubin: Yeah, the US Navy license enabled a lot of that. And as I mentioned, we expect within the next two, three weeks to release the first material formally from the Navy license, the BDNL-4. But in reality, the Mantis camera has already been using those materials for over a year now. We simply are now formally announcing it. The material is available to others. I think you have mentioned one to 200 Mantis cameras likely to be produced or sold this year. Does this year mean fiscal year? Or are you talking about this calendar year?

Yes, the U S, leaving license enables a lot of that and as I mentioned, we expect within the next two three weeks or at least the first material formerly from the from the Navy license IBD another four but in reality the Mantas camera.

It has already been using those materials for for over a year now we simply are now formally announced that yet.

Serialized available to others I think you have mentioned.

One <unk> hundred Mantas cameras likely produced or sold this year are this year, meaning fiscal year are you talking about this calendar year.

Sam Rubin: This fiscal year, pretty much on track for that. Now, I would like to ask you just an overview. The military has been stunned by the Gaza War and by Ukraine because they see the swarming of drones and how that offsets not only jet fighter aircraft, and maybe you're working on the F-35, maybe not, improvements, but also, you don't want to fire a million-dollar missile to intercept a $5,000 cheap drone, as we've learned in the Red Sea.

This fiscal year pretty much on track for that I think are okay, and now I would like to ask you just an overview. The military has been stunned by the Gaza War and by Ukraine, because they see the swarming of drones and how that offsets.

Not only jet fighter aircraft and maybe Youre working on the F 35, maybe not.

But also there you don't want to fire a million dollars Miss on the intercept for $5000 cheap drawn and that we've learned in the Red Sea, So I wonder whether lifetime benefits or suffers from the prospect of fewer costly missiles.

Sam Rubin: So I wonder whether Lightpth benefits or suffers from the prospect of fewer costly missile systems that would intercept or work autonomously in the future.

That would intercept or work autonomy.

Uh huh.

In the future yeah, yeah well.

Sam Rubin: Well, once we are done with the development of the Lockheed missile, and hopefully once that missile is awarded to Lockheed, my personal wish is that they fire a missile on everything they see, a drone or even a butterfly. But realistically, I think what we're seeing is a very strong drive towards integrating more and more passive detection capabilities such as infrared cameras for detecting some of those drones. Today, you simply cannot use a radar to detect the drones coming in. That's something that Ukraine has taught us and we have learned, unfortunately, in a very hard way. Israel doesn't suffer that because they're fighting an adversary that is a terror organization and not a state. But in the Ukraine-Russia war, for example, in what is called...

One we are done with the development of the Lockheed missile and hopefully one Smith such as the <unk>.

Wanted to locate my my personal wishes, they fire missile and everything that I see at <unk>, even a butterfly, but realistically.

Realistically.

I think what we're seeing is a very strong drive towards integrating more and more passive detection capabilities such as infrared cameras for detecting some of those drones today, you simply cannot use a radar for detecting the dwelling.

<unk> coming in but something that Ukraine has taught us and have learned unfortunately, it's very hard way Israel doesn't buffer because of fighting an adversary that is a teva organization and not a state.

But in Ukraine, Russia War for example, and what it's called.

In our.

Sam Rubin: In a near adversary or an adversary that has capabilities close to yours, you suddenly realize you cannot use a radar to detect drones because the moment you turn it on, a missile is locked onto the radar and will hit you within minutes, seconds. And so the use of cameras is very important. Two of our cameras that I mentioned for detecting threats from a distance, one version of Mantis and one version of a different camera, are of extreme importance because they can do that for $10,000 as opposed to a $50,000 camera that is often used today. So I think we have something very unique there that will pay off really well. Sam and Al, thank you. I feel better, and I appreciate the aspirational goals that you have outlined in the presentations as well lately. And I know it takes time, and I know how hard it is.

Near the adversary or an adversary that has capabilities close to yours, you suddenly realize they cannot use a radar to detecting drones because the moment you turn autonomy with wireless locked onto the Vito and will hit you within minutes seconds and so as the use of cameras is very important to have our cameras that I.

I mentioned for detecting threats from a distance one version of Mantas, one version of a different camera.

Of extreme importance because they can do that in $10000 as opposed to a 50000 dollar camera that is often used to date. So I think we have something very unique.

That will pay off really well.

Sam and al. Thank you I I feel better and I appreciate the aspirational goals that you have outlined in the presentations as well lately and I know it takes time and I know how hard it is so good luck and we'll keep watching it.

Gene: So good luck, and we'll keep watching you. Thank you, Gene. Thank you, Gene. This concludes our question and answer session. I would like to turn the conference back over to Sam Rubin for any closing remarks. Thank you. I appreciate everyone joining the call and the patience that our shareholders show as we are not only turning around the company but also plotting the new direction and now finally delivering on it big time. The Lockheed Martin, the automotives, the cameras, each one of those is tens of millions of dollars in annual revenue that will be coming down the road. Very big deal. The company is going to look completely different a few years from now, and I'm excited to continue along this path. Thank you, everyone. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. www.lightpthtech.com, Lightpth Tech Lightpth Tech

Thank you James Thank you very well.

This concludes our question and answer session I would like to turn the conference back over to Sam Rubin for any closing remarks.

Thank you I appreciate everyone joining the call and the patients that they were shareholders show as we are not only Tony go around with the company, but also clothing, the new direction and now finally, delivering on that big time, the Lockheed Martin the Automotives the cameras each one of those 10 of them.

Millions of dollars in annual revenue that will be coming down to the vote very big deal. The company is going to look completely different a few years from now and I'm excited to continue along desktop. Thank you everyone.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

[music].