About LightPath Technologies

LightPath Technologies, Inc. (LightPath) is a global company with major facilities in the United States, the People’s Republic of China and the Republic of Latvia. LightPath operates as a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared aspheric lenses, and other optical components used to produce products that manipulate light. LightPath designs, develops, manufactures, and distributes optical components and assemblies utilizing advanced optical manufacturing processes. LightPath products are incorporated into a variety of applications by customers in many industries, including defense products, medical devices, laser aided industrial tools, automotive safety applications, barcode scanners, optical data storage, hybrid fiber coax datacom, telecommunications, machine vision and sensors, among others. Subsidiaries LightPath Optical Instrumentation (Shanghai) Co., Ltd (LPOI) is a wholly-owned subsidiary the company, which is located in Jiading, People’s Republic of China. The LPOI facility (the Shanghai Facility) is primarily used for sales and support functions. LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (LPOIZ) is a wholly-owned subsidiary that is located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s manufacturing facility (the Zhenjiang Facility) serves as the company’s primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies. In December 2016, the company acquired ISP Optics Corporation, a New York corporation (ISP), and its wholly-owned subsidiary, ISP Optics Latvia, SIA (ISP Latvia). ISP is a vertically integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. Strategy Historically, the company operated with a focus on optical component manufacturing, and specifically on its leadership position as a precision molded lens manufacturer for visual light applications. While still positioned as a component provider, the company expanded its addressable market with the acquisition of ISP, a manufacturer of infrared optical components, in 2016. Product Groups and Markets The company’s business is organized into three product groups: precision molded optics (PMOs), infrared products and specialty products. These product groups are supported by the company’s major product capabilities: molded optics, thermal imaging optics, and custom designed optics. The company’s PMO product group consists of visible precision molded optics with varying applications. The company’s infrared product group is consisted of infrared optics, both molded and diamond-turned, and thermal imaging assemblies. This product group also includes both conventional and CNC ground and polished lenses. Between these two product groups, the company has the capability to manufacture lenses from very small (with diameters of sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2000 millimeters. In addition, both product groups offer catalog and custom designed optics. The company’s specialty product group is consisted of value-added products, such as optical subsystems, assemblies, collimators, and non-recurring engineering (NRE) products, consisting of those products it develops pursuant to product development agreements that it enters into with customers. Typically, customers approach the company and requests that it develops new products or applications utilizing its existing products to fit their particular needs or specifications. The timing and extent of any such product development requests are outside of the company’s control. Product Groups There is a product manager for each of the company’s major product capabilities: molded optics, thermal imaging optics and custom designed optics. Product management is principally a portfolio management process that analyzes products within the product capability areas as defined above. This function facilitates choosing investment priorities to help strategically align the company’s competencies with strategic industry revenue opportunities. Over the long term, this function will also help ensure successful product life cycle management. The following sections further discuss the various products the company offers and certain growth opportunities it anticipates for each such product. PMO Product Group: Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine. The company’s glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price. Molding is the most consistent and economical way to produce aspheres and the company has perfected this method to offer the most precise molded aspheric lenses available. Infrared Product Group: The company’s infrared product group is consisted of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials. Advances in chalcogenide materials have enabled compression molding for mid-wave (MWIR), and long-wave (LWIR), optics in a process similar to precision molded lenses. The company’s molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods. Utilizing precision molded aspheric optics significantly reduces the number of lenses required for typical thermal imaging systems and the cost to manufacture these lenses. Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required. Through ISP, its wholly-owned subsidiary, the company also offers germanium, silicon or zinc selenide aspheres and spherical lenses, which are manufactured by diamond turning. This manufacturing technique allows the company to offer larger lens sizes and the ability to use other optical materials that cannot be effectively molded. ISP’s capabilities increase the company’s ability to meet complex optical challenges that demand more exotic optical substrate materials that are non-moldable, as well as larger size optics. The company also has the ability to manufacture chalcogenide glass from which it produces infrared lenses. The company developed this glass and melt it internally to produce its Black Diamond glass, which has been trademarked, and is marketed as BD6. Historically, the majority of the company’s thermal imaging products have been germanium-based, which is subject to market pricing and availability. Overall, the company anticipates continued growth for its infrared optics, particularly as BD6 continues to be adopted into new applications and new designs. Infrared systems, which include thermal imaging cameras, temperature sensing, gas sensing devices, spectrometers, night vision systems, automotive driver awareness systems, such as blind spot detection, thermal weapon sights, and infrared counter measure systems, is an area that is growing rapidly and the company is selling products that are utilized in a number of these applications. The company’s aspheric molding process is an enabling technology for the cost reduction and commercialization of infrared imaging systems utilizing smaller lenses because the aspheric shape of its lenses enables system designers to reduce the lens element in a system and provide similar performance at a lower cost. In addition, there is a trend toward utilizing smaller size sensors in these devices, which require smaller size lenses and that fits well with its molding technology. Specialty Product Group: The company offers a group of custom specialty optics products and assemblies that take advantage of its unique technologies and capabilities. These products include custom optical designs, mounted lenses, optical assemblies, and collimator assemblies. Collimator assemblies are utilized in applications involving light detection and ranging (LIDAR) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment. This continues to be an emerging market with long-term growth potential for the company. The company also expects growth from medical programs and commercial optical sub-assemblies. The company designs, builds, and sells optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on its proprietary technologies. Many of the company’s optical assemblies consist of several products that it manufactures. Sales and Marketing Marketing: Extensive product diversity and varying levels of product maturity characterize the optics industry. Product verticals range from consumer (e.g., AR/VR, cameras, cell phones, gaming, and copiers) to industrial (e.g., lasers, data storage, and infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, and lens systems) to products incorporating lens components (e.g., 3D printing, machine vision, LIDAR, robotics and semiconductor production equipment) and communications (e.g., fiber and laser based). As a result, the company markets its products across a wide variety of customer groups, including laser systems manufacturers, laser OEM’s, infrared-imaging systems vendors, automotive OEMs (large equipment manufacturers), industrial laser tool manufacturers, telecommunications equipment manufacturers, medical instrumentation manufacturers and industrial measurement equipment manufacturers, government defense agencies, and research institutions worldwide. The company’s marketing efforts include a global unification of its messaging with the use of digital advertising, branding activities that utilize social media, its website and direct marketing activities. As its focus shifts from the sale of components and standard products to being a value-add supply partner for customized solutions, the company’s marketing activities also shift from a focus on technical aspects of standard components to a focus on best practice use cases, the overall outcome from its solutions and end user benefit. The company’s market messaging will look to inspire interest and promote engagement. Sales Model and Structure: To align the organization to better serve its new solution strategy and for accountability of its key corporate objectives, the company has made organizational changes designed to ensure customer satisfaction and operational efficiency. The company’s organizational structure includes a product management function that enables the close coordination of supply with demand to help it leverage its core offerings and coordinate its engineering development efforts that will leverage and expand its portfolio of capabilities. The company has also transitioned from a business unit focus to a unified global direct sales team that promotes the overall company portfolio and is standardized on a problem solving, needs analysis process. The team went through Sandler Training to help with this shift and to empower action with improved communication techniques. The company has added technical program managers and product life cycle management (PLCM) to better support the new customized customer programs and the transition from prototype engineering to full scale manufacturing. Sales Team and Channel: The company has aligned its sales engineering efforts to be account based and application focused. The company has taken a more proactive approach to its direct selling efforts to increase its customer engagement, especially within Europe, where it transitioned away from working exclusively through a distributor. The company has expanded its standard product offerings with the top two catalog companies in the world for optics and photonics, which increases its exposure to new revenue opportunities. In addition, the company continues to enhance its website (www.lightpath.com), which is its main communication vehicle for broader promotion of the company, value-add capabilities, growing chalcogenide material portfolio, and similarly have optimized social media assets. The company makes use of digital and print media plus participate in many key industry associations and global trade shows. Trade Shows: The company displays its standard products, promote new innovative offerings and meet with industry influencers at a number of trade shows each year throughout North America, Europe and Asia. As a result of coronavirus (COVID-19), some of these annual trade shows have been rescheduled or modified into virtual online exchanges. So far in 2022, the company participated in a few virtual shows plus several in person shows which included the SHOT Show in Las Vegas, the largest professional event for the sport shooting, hunting and outdoor industry in North America; SPIE Photonics West in San Francisco, where LightPath won a PRISM Award, which honors the best new optics and photonics products on the market; SPIE DCS, AUVSI, which promotes emerging technologies supporting autonomous vehicles, drones and robotics; and Laser World of Photonics in Munich. These trade shows provide the company an opportunity to further expand its brand, network to enhance business relationships and gain valuable insight into technology trends in its target markets. Competition Engineered Solutions The market for non-captive optical engineered solutions is emerging. As companies, such as LightPath begin transitioning their offering from components to engineered solutions, the company competes on several fronts: Engineered Solutions Companies: While there are not many, companies, such as Excelitas Technologies Corp. and Jenoptik AG offer optical engineered solutions to the market, with a specific focus on solutions in visible and ultraviolet light bands, and with a vertical industry focus, such as life sciences and semiconductor systems. Engineering firms. Though less popular, in some cases customers prefer to work with engineering firms that provide design services, which then the customer produces or sub-contracts to third-party component manufacturers. An example of such companies providing engineering services are Lighthouse Imaging, LLC, Optikos Corporation, and Photon Engineering, LLC. Optical Components PMO Product Group: The company’s PMO products compete with conventional lenses and optical components manufactured from companies, such as Asia Optical Co., Inc., Anteryon BV, Rochester Precision Optics, and Sunny Optical Technology (Group) Company Limited. Aspheric lens system manufacturers include Panasonic Corporation, Alps Electric Co., Ltd., Hoya Corporation, as well as other competitors from China and Taiwan, such as E-Pin Optical Industry Co., Ltd., and Kinik Company. Infrared Product Group: The company’s infrared optical components compete with optical products produced by Janos Technology LLC, Ophir Optronics Solutions Ltd. (a subsidiary of MKS Instruments, Inc.), Clear Align, II-VI, Inc. and a variety of Eastern European and Asian manufacturers. The company’s molded infrared optics competes with products manufactured by Umicore N.V., Rochester Precision Optics, and a number of Asian and European manufacturers. Suppliers The company utilizes a number of glass compositions in manufacturing its molded glass aspheres and lens array products. These glasses or equivalents are available from a large number of suppliers, including CDGM Glass Company Ltd., Ohara Corporation, and Sumita Optical Glass, Inc. Customers In fiscal year 2022, the company had sales to three customers that consisted of an aggregate of approximately 35% of its annual revenue with one customer at 19% of its sales, another customer at 9% of its sales, and the third customer at 7% of its sales. In fiscal year 2021, the company had sales to three customers that consisted of an aggregate of approximately 38% of its annual revenue with one customer at 18% of its sales, another customer at 10% of its sales, and the third customer at 10% of its sales. In fiscal year 2022 (year ended June 30, 2022), 61% of the company’s net revenue was derived from sales outside of the U.S., with 95% of its foreign sales derived from customers in Europe and Asia. Research and Development For the year ended June 30, 2022, the company incurred expenditures for new product development approximately $2.1 million. History LightPath Technologies, Inc. was founded in 1985. The company was incorporated in Delaware in 1992.