SECURITIES & EXCHANGE COMMISSION EDGAR FILING
LIGHTPATH TECHNOLOGIES INC
Form: 10-K
Date Filed: 2013-09-05
Corporate Issuer CIK: 889971
© Copyright 2018, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2013
OR
❑ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 000-27548
LIGHTPATH TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
86-0708398
( I.R.S. Employer Identification No)
http://www.lightpath.com
2603 Challenger Tech Court, Suite 100
Orlando, Florida 32826
(Address of principal executive offices, including zip code)
(407) 382-4003
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of each class)
None
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
Series D Participating Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES ❑ NO ☑
YES ❑ NO ☑
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES ☑ NO ❑
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
YES ☑ NO ❑
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check
One):
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Large accelerated filer ❑ Accelerated filer ❑ Non-accelerated filer ❑ Smaller reporting company ☑
Indicate by check mark whether the registrant is a shell company, (as defined in Rule 12b-2 in the Exchange Act). YES ❑ NO ☑.
The aggregate market value of the registrant’s voting stock held by non-affiliates (based on the closing sale price of the registrant’s Common Stock on the
NASDAQ Capital Market, and for the purpose of this computation only, on the assumption that all of the registrant’s directors and officers are affiliates as well as
one party filing on Form SC 13-G) was approximately $8,810,858 as of December 31, 2012.
As of September 3, 2013, the number of shares of the registrant’s Class A Common Stock outstanding was 13,790,957.
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LightPath Technologies, Inc.
Form 10-K
Table of Contents
PART I
Item 1.
Item 2.
Item 3.
PART II
Item 5.
Item 7.
Item 8.
Item 9.
Item 9A.
PART III
Item 10.
Item 11
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Business
Properties
Legal Proceedings
Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Directors, Executive Officers of the Registrant and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions, and Director Independance
Principal Accountant Fees and Services
Exhibits, Financial Statement Schedules
Index to Consolidated Financial Statements
Signatures
Certifications
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3
3
8
9
9
9
10
20
20
20
21
21
25
34
36
36
37
37
F-1
S-1
See Exhibits
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Item 1. Business.
General
PART I
LightPath Technologies, Inc. (“LightPath”, the “Company”, “we”, “our”, or “us”) manufactures optical components and higher level assemblies including precision
molded glass aspheric optics, isolators assemblies, proprietary high performance fiber-optic collimators, GRADIUM glass lenses and other optical materials used
to produce products that manipulate light. We design, develop, manufacture and distribute optical components and assemblies utilizing advanced optical
manufacturing processes. Our products are incorporated into a variety of applications by our 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, telecom, machine vision
and sensors, among others. All the products that we produce enable lasers and imaging devices to function more effectively. For example:
·
·
·
·
Molded glass aspheres are used in various high performance optical applications primarily based on laser technology;
Infrared molded lenses and assemblies using short (SWIR), mid (MWIR) and long (LWIR) wave materials imaging with applications in firefighting,
predictive maintenance, homeland security, surveillance, automotive and defense;
Collimators are assemblies that are used to straighten and make parallel diverging light as it exits a fiber, and are used in laser delivery
applications like fiber lasers; and
GRADIUM extends the performance of a spherically polished glass lens technology improving optical performance so that it approximates
aspheric lens performance.
In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd (“LPOI”), a wholly-owned manufacturing subsidiary, located in Jiading,
People’s Republic of China. The manufacturing operations are housed in a 16,000 square foot facility located in the Jiading Industrial Zone near Shanghai. This
plant increased our overall production capacity and enabled LightPath to compete for larger production volumes of optical components and assemblies, and
strengthened our partnerships within the Asia/Pacific region.
We also believe the glass aspheres and infrared systems product markets provide significant growth opportunities over the next several years. We have targeted
specific applications in each of these areas: laser tools, gun sights, biomedical instruments and telecommunication subsystems for the glass aspheres market;
laser line generators, industrial tools, optical cutting/welding, scientific lasers, semiconductors metrology systems and telecommunication subsystems for the
specialty optics market; and thermal imaging, security cameras, thermography, gas sensing and defense targeting and tracking for the infrared optics
market. Within the larger overall markets which are estimated to be in the multi-billions of dollars, we believe there is a market of approximately $450 million for
our current products and capabilities.
Given these specific markets and applications, our strategy is to leverage our technology, know-how, established low cost manufacturing capability and
partnerships to grow our business.
We plan to accomplish this growth by:
❑ Continuing our penetration into high-volume applications by leveraging our low cost structure;
❑ Introducing new value-added products;
❑ Expanding our market presence by broadening our customer base and leveraging our Shanghai subsidiary to gain direct access to the Asian
market;
❑ Adding new products for industrial tools, laser based measurement tools and laser based gas sensing instruments;
❑ Leveraging our expanded sales distribution channels worldwide; and
❑ Expanding our offering of molded infrared lenses and assembly products which will enable future revenue growth.
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Precision Molded Aspheric Lenses. Aspheric lenses are known for their optimal performance. LightPath’s glass molding technology has enabled the production
of high volumes of aspheric optics while still maintaining the highest quality at an affordable price. Because molding is the most consistent and economical way
to produce aspheres in large volumes, LightPath has perfected this method to offer the most precise aspheric lens available. We anticipate growth in our
precision molded aspheres product revenues as we add new product lenses and applications for the industrial tool market, telecommunications and medical
instruments. In addition, we see new growth opportunities in the area of commercial projectors using laser light boxes for illumination. These growth
opportunities are well diversified and include laser tools, telecom transceivers, micro-projectors, scientific and bench top lasers, range finders, medical devices,
bar code scanners and laser based spectrometers.
Infrared Molded Glass Aspheric Lenses & Assemblies. Advances in chalcogenide materials have enabled compression molding for mid- and long-wavelength
infrared (MWIR & LWIR) optics in a process similar to precision molded lenses. LightPath’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. Traditional Germanium or Zinc
Selenide aspheres are manufactured by diamond turning, which is a time-consuming and expensive process. Diamond turned lenses are made one at a time
and the lenses suffer from variations in surface figure resulting in variations of performance from lens to lens. The infrared optics molding process allows lenses
to be manufactured in high volume with a highly repeatable, consistent performance and allows for sophisticated beam shaping or achromatization over a range
of wavelengths to be molded directly into the surfaces of the lens.
Overall, we anticipate the growth of infrared optics and increased requirements for systems requiring molded aspheric optics over traditional ground and polished
lenses. Infrared systems, which include thermal imaging cameras, gas sensing devices, spectrometers, night vision systems, automotive driver awareness
systems such as blind spot detection, thermal weapon gun sights and infrared counter measure systems, represent a market that is forecasted to grow to greater
than $20 billion at the complete systems level by 2014. As infrared imaging systems become widely available, the cost of optical components needs to decrease
before the market demand will increase. LightPath’s aspheric molding process is an enabling technology for the cost reduction and commercialization of infrared
imaging systems because the aspheric shape of our lenses enables system designers to reduce the lens element in a system and provide similar performance
at a lower cost.
Specialty Products & Assemblies. LightPath has a group of products that take advantage of our unique technologies and capabilities. These include custom
optical designs, mounted lenses, assemblies, isolator assemblies, collimators and GRADIUM lenses.
Collimators. We are specifically targeting and selling high power collimators in diverse markets such as fiber laser systems, Nd:YAG laser cutting and welding
systems and communications systems. Our collimator products provide higher performance in back reflection and insertion loss and can withstand in excess of
ten watts of optical power. Customers have passively tested our collimators to over 100 watts in the forward direction. The process to manufacture these
collimators uses patented laser fusion technologies and robotics. These products may incorporate aspheric molded optics and GRADIUM lenses.
GRADIUM Lenses. We developed GRADIUM glass as an optical quality glass material with axially varying refractive index, capable of reducing optical
aberrations inherent in conventional lenses and performing with a single lens tasks traditionally performed by multi-element, conventional lens systems. Typical
applications include surgical lasers, high power YAG lasers for welding, cutting and marking, defense-market uses, and test and measurement. GRADIUM has a
unique capability to handle up to 10 kilowatts of power and is servicing a niche market for laser high-power cutting and laser welding.
Optical Assemblies. We produce optical assemblies based on our proprietary technologies. We design, build and sell optical assemblies into markets for test
and measurement, medical devices, military, industrial and communications. Many of our assemblies consist of several products that LightPath
manufactures. The OASIS product line consists of an optical isolator that is aligned and mounted to a molded aspheric lens. This product has been particularly
well received in the communications market for its value in reducing assembly time and component count for the customer.
Sales and Marketing
Extensive product diversity and varying levels of product maturity characterize the optics industry. Product markets range from consumer (e.g., cameras, copiers)
to industrial (e.g., lasers, data storage, infrared imaging), from products where the lenses are the central feature (e.g., telescopes, microscopes, lens systems) to
products incorporating lens components (e.g., robotics, semiconductor production equipment) and communications (various optics are required for bandwidth
expansion and improved data transfer for the optical network). As a result, we market our products across a wide variety of customer groups including laser
systems manufacturers, laser OEMs, infrared-imaging systems vendors, industrial laser tool manufacturers, telecommunications equipment manufacturers,
medical and industrial measurement equipment manufacturers, government defense agencies and research institutions worldwide.
Sales Organization We have regional sales forces that market and sell our products directly to customers in North America and China. We also have a master
distributor in Europe. We have formalized relationships with fourteen industrial, laser, and optoelectronics distributors and channel partners located in the United
States and foreign countries to assist in the distribution of our products in highly specific target markets and have reseller arrangements with the top three
product catalogs in the optics and opto-electronics market. In addition, we also maintain our own product catalog and internet website (www.lightpath.com) as
vehicles for broader promotion of our products. We make use of print media advertisements in various trade magazines and participate in appropriate domestic
and foreign trade shows.
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All of our partners work diligently to expand opportunities in emerging geographic markets and through alternate channels of distribution. We believe that we
provide a high level of support in developing and maintaining our long-term relationships with our customers. Customer service and support are provided through
our offices and those of our partners that are located throughout the world.
Trade Shows. We display our product line additions and enhancements at one or more trade shows each year. For example, we participated in several United
States based shows including Society of Photographic Instrumentation Engineers (“SPIE”) Photonics West in January 2013 and SPIE Defense, Security and
Sensing in May 2013. We also participate in shows in China such as the China International Optoelectronic Exposition in Shenzhen. In addition, we partner with
key distributors to attend exhibitions such a Laser World of Photonics in Munich, Germany. Such a strategy underscores LightPath’s strategic directive of
broadening our base of innovative optical components and assemblies. These trade shows provide an opportunity to meet with and enhance existing business
relationships, meet and develop potential customers, and to distribute information and samples regarding our products.
Competition
The market for optical components generally is highly competitive and highly fragmented. We compete with manufacturers of conventional spherical lenses and
optical components, providers of aspheric lenses and optical components and producers of optical quality glass. To a lesser extent, we compete with developers
of specialty optical components and assemblies. Many of these competitors have greater financial, manufacturing, marketing and other resources than we do.
We believe our unique capabilities in optical design engineering that are available on the merchant market, our low cost structure and our substantial presence in
Asia, particularly in China, provides us with a competitive edge and assists us in securing business. Additionally, we believe that we offer value to some
customers as a second or backup source of supply in the United States should they be unwilling to commit all of their source of supply of a critical component to
a foreign production source. We also have a broad product offering in addition to the molded aspheric lenses with proprietary GRADIUM lens glass, collimators,
infrared lenses and assembly technology.
Precision Molded Aspheric Lenses. Manufacturers of conventional lenses and optical components include companies such Nikon, Olympus Optical Company,
Carl Zeiss and Leica AG. Our products compete with products currently produced by these companies. In addition to being substantial producers of optical
components, these companies are also some of the primary customers for such components, incorporating them into finished products for sale to end-users.
Consequently, these competitors have significant control over certain markets for our products.
Aspheric lenses that improve the shortcomings of conventional lenses significantly compete with our molded glass aspheric lenses. Aspheric lens system
manufacturers include Panasonic, ALP’s, Hoya Corporation, as well as newer competitors from China and Taiwan such as E-pin Optical Industry Co. and Kinik
Company. The use of aspheric surfaces provides the optical designer with a powerful tool in correcting spherical aberrations and enhancing performance in
state-of-the-art optical products. However, we believe that our optical design expertise and our flexibility in providing custom high performance optical
components at a low price are key competitive advantages for us over these competitors.
Plastic molded aspheres and hybrid plastic/glass aspheric optics, such as those manufactured by Anteryon, on the other hand, allow for high volume
production, but primarily are limited to low cost consumer products that do not place a high demand on performance (such as plastic lenses in disposable or
mobile phone cameras). Molded plastic aspheres appear in products that stress cost or weight as their measure of success over performance and
durability. Our low cost structure allows us to compete with these lenses based on higher performance and durability from our glass lenses at only a small
premium in price over plastic or plastic/glass hybrid lenses.
Infrared Molded Glass Aspheric Lenses & Assemblies. LightPath’s infrared molded aspheric optics competes with traditional infrared lenses manufactured from
germanium such as those produced by Janos Technologies, Ophir Optics or Elcan Optical Technologies. These lenses can either be polished spherical or are
diamond turned aspherical. LightPath’s molded lenses compete with spherical lenses because like all aspheres they can replace doublets or triplets based on
the higher performance of an aspheric lens. Diamond turned aspheres from germanium are expensive to produce in high volumes and time consuming to
manufacture. LightPath’s molded aspheric lenses compete with these technologies through our low cost, high volume lens business strategy.
Our molded infrared optics competes with products manufactured by Umicore. We believe that our optical design expertise and our flexibility in providing custom
high performance infrared optical components are key advantages over Umicore. A specific advantage over Umicore, a foreign company, is that the infrared
market is highly dependent on the United States defense industry, which prefers to purchase from United States based companies such as LightPath.
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GRADIUM. GRADIUM lenses are a well-established technology that has successfully competed in the niche market for high power laser optics. GRADIUM is
derived from unique technology that no other manufacturer possesses to produce lenses in the high power laser optics market. However, there are other
competing technologies such as traditional fused silica doublets and triplets as well as newer large diameter aspheres, such as those manufactured by
Asphericon or Edmund Optics.
Collimators. LightPath’s collimator line focuses on high performance and high durability fiber optic systems for lasers and optical systems. There are currently
only a handful of direct competitors for our collimators, such as Optoskand and Oz Optics. The key difference between our collimators and our competitors’
collimators is in our fiber fusion technology. This fusion technology eliminates the air interface at the tip of a fiber providing a more robust, reliable construction
than our competition.
Manufacturing
Facilities. Our manufacturing is performed in a 22,000 square foot production facility in Orlando, Florida and in a 16,000 square foot production facility in
Shanghai. With space remaining in the Shanghai and Orlando facilities, we believe our facilities are adequate to accommodate our needs over the next year.
However increased demand creates a need for additional space we are prepared to negotiate new leases in Orlando and Shanghai. For example, since our unit
growth plans indicate the need for additional production space in Shanghai, we have begun to review our options as our current Shanghai lease expires in April
2014. Both facilities feature areas for each step of the manufacturing process including coating work areas, preform manufacturing and a clean room for pressing
and integrated assembly. Both facilities include new product development laboratories and space that includes development and metrology equipment. Our
Shanghai facility has anti-reflective coating equipment to coat our lenses in-house.
Production and Equipment. Our Orlando facility contains a manufacturing area for our molded glass aspheres, a tooling and machine shop to support new
product development, commercial production requirements for our machined parts and the fabrication of proprietary press work stations and mold equipment. We
also have glass coring equipment to meet our current needs of GRADIUM product sales worldwide. Our Orlando facility includes a clean room for our collimator
assembly workstations. The facility is also International Traffic in Arms and Regulation (ITAR) compliant. LPOI’s Shanghai facility features a molded glass
aspheres manufacturing area and clean room. Both facilities are ISO 9001:2008 certified. For more information regarding our facilities, please see Item 2.
Properties in this Annual Report.
Subcontractors and Strategic Alliances. We believe that low-cost manufacturing will be crucial to our long-term success. In that regard, we have generally used
subcontractors in our production process to accomplish certain processing steps requiring specialized capabilities. For example, we presently use a number of
qualified subcontractors for fabricating, polishing, and coating certain lenses as necessary. We have taken steps to protect our proprietary methods of repeatable
high quality manufacturing by patent disclosures and internal trade secret controls.
Suppliers. We utilize a number of glass compositions in manufacturing our molded glass aspheres and lens array products. These glasses or equivalents are
available from a large number of suppliers including CDGM Glass Company, Ohara and Sumita. Base optical materials, used in both GRADIUM and collimator
products, are manufactured and supplied by a number of optical and glass manufacturers. Optical fiber and collimator housings are manufactured and supplied
by a number of manufacturers. We believe that a satisfactory supply of such production materials will continue to be available at reasonable prices, although
there can be no assurance in this regard.
We also rely on local and regional vendors for component materials and services such as housings, fixtures, magnets, chemicals and inert gases, specialty
ceramics, UV and AR coatings, and other specialty coatings. In addition, certain products require external processing such as anodizing and metallization. To
date, we are not dependent on any of these manufacturers and have found a suitable number of qualified vendors and suppliers for these materials and services.
We currently purchase a few key materials from single or limited sources. We believe that a satisfactory supply of production materials will continue to be
available at competitive prices, although there can be no assurance in this regard.
Patents and Other Proprietary Intellectual Property
Our policy is to protect our technology by, among other things, patents, trade secret protection, trademarks and copyrights. The products and technologies that
we employ use patents that are either owned and maintained by us or licensed to us by others. Patents have been issued, and/or patent applications have been
filed, in the areas of glass composition, glass molding, gradient geometries, and certain production processes such as fiber attachment and micro-fabrication.
The first of our issued patents expired in 2006; the remainder expire at various times through 2023.
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Issued patents owned or available to us may not afford adequate protection to us or may be challenged, invalidated, infringed or circumvented. Patent
applications relating to our products may not result in patents being issued. Patent rights granted to us for technologies that we may license in the future may not
provide competitive advantages to us. Patents that are owned or licensed by us that are issued in one jurisdiction may not be issued in any other jurisdiction.
The validity of any of our patents may not be upheld if challenged by others in litigation or if such litigation alleges that our activities infringe upon patents owned
by others.
In addition to patent protection, certain process inventions, lens designs and innovations are retained as trade secrets. A key feature of GRADIUM glass is that,
once fabricated, it does not reveal our formula upon inspection and, to our knowledge, cannot be reverse-engineered.
We own several registered and unregistered service marks and trademarks which are used in the marketing and sale of our products. The following sets forth
our registered and unregistered service marks and trademarks, whether it is a service mark or trademark, whether it is registered or unregistered, if registered,
the country in which the mark is filed, and the renewal date for such mark.
Mark
LightPath®
GRADIUM™
Circulight
BLACK DIAMOND
GelTech
Oasis
Type
service mark
trademark
trademark
trademark
trademark
trademark
Environmental and Governmental Regulation
Registered
Yes
Yes
No
No
No
No
Country
United States
United States
—
—
—
—
Renewal
Date
November 10, 2014
February 5, 2017
—
—
—
—
Currently, emissions and waste from our manufacturing processes are at such low levels that no special environmental permits or licenses are required. In the
future, we may need to obtain special permits for disposal of increased waste by-products. The glass materials we utilize some toxic elements in a stabilized
molecular form. However, the high temperature diffusion process results in low-level emissions of such elements in gaseous form. If production reaches a
certain level, we believe that we will be able to efficiently recycle certain of our raw material waste, thereby reducing disposal levels. We believe that we are
presently in compliance with all material federal, state and local laws and regulations governing our operations and have obtained all material licenses and
permits necessary for the operation of our business.
We also utilize certain chemicals, solvents and adhesives in our manufacturing process. We believe we maintain all necessary permits and believe we are in full
compliance with all applicable regulations.
To our knowledge there are currently no United States federal, state or local regulations that restrict the manufacturing and distribution of our products. Certain
end-user applications require that the complete optical systems receive government approval, such as United States Food and Drug Administration approval for
use in endoscopy. In these cases, we will generally be involved on a secondary level and the OEM customer will be responsible for the license and approval
process.
New Product Development
For many years, we were engaged in basic research and development that resulted in the invention of GRADIUM glass and certain proprietary processes for
fabricating GRADIUM glass lenses. Thereafter, new product development efforts were broadened or acquired that led to the development of our capabilities in
molded aspheric lenses, infrared lenses, isolator assemblies and collimators. However, in recent years, including fiscal 2013, we conducted very limited basic
research and development due to our cash conservation strategy. We incurred expenditures for new product development during fiscal years 2013 and 2012 of
approximately $939,000 and $1.05 million, respectively. Our efforts in this area were concentrated on product development to support existing and new
customers in the design and manufacture of items in two of our product lines: lenses and collimators. In fiscal 2013 our infrared product development efforts were
in connection with part of the Raytheon purchase order and the costs associated with this product development were charged to cost of goods sold.
Our present new product development efforts are focused on infrared optics products for imaging and sensing, blue lens applications, fiber lasers, defense,
medical devices, industrial, optical data storage, machine vision, sensors and environmental monitoring. We currently plan to expend approximately $1.24 million
for new product development during fiscal 2014, which could vary depending upon revenue levels, customer requirements and perceived market opportunities.
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For more difficult or customized products, we bill our customers for engineering services as a non-recurring engineering fee.
Concentration of Customer Risk
In fiscal 2013, we had sales to five customers that individually comprised at least 5% of our annual revenue: Crimson Trace at 7%, Thorlabs at 9%, AMS at 10%,
IPG Photonics at 6% and Red Digital at 6%. In fiscal 2012, we had sales to four customers that individually comprised at least 5% of our annual revenue:
Crimson Trace at 10%, Thorlabs at 9%, AMS at 9% and Raytheon Missile Systems at 5%. The loss of any of these customers, or a significant reduction in sales
to any such customer, would adversely affect our revenues.
In fiscal 2013, 35% of our net revenue was derived from sales outside of the United States, with 79% of our foreign sales occurring to customers in Europe and
Asia.
Employees
As of June 30, 2013, we had 171 full-time equivalent employees, with 56 in Florida and 115 in China. Any employee additions or terminations over the next
twelve months will be dependent upon the actual sales levels realized during fiscal 2014. We have 21 employees engaged in management, administrative and
clerical functions, 14 in new product development, 9 in sales and marketing and 127 in production and quality functions. We have used and will continue utilizing
part-time help, temporary employment agencies and outside consultants, where appropriate, to qualify prospective employees and to ramp up production as
required from time to time. None of our employees are represented by a labor union.
Item 2. Properties.
We occupy a 22,000 square foot facility in Orlando, Florida, which includes a 6,000 square foot clean room and houses our corporate headquarters, engineering,
marketing, internal sales, manufacturing management and some manufacturing operations. At our Orlando facility, our molded glass aspheres manufacturing
area includes lens pressing equipment, high precision mold production equipment, advanced metrology and inspection equipment and coating facilities. It also
features a tooling and machine shop, which can support new product development, commercial production requirements for our machined parts and the
fabrication of propriety press workstations and mold equipment. Our Orlando facility has glass coring equipment for our current needs of GRADIUM product sales
and also includes a clean room for our collimator assembly workstations which include our proprietary laser fusion and housing equipment, automated testing
processes, and laser polishing stations. Our Orlando facility is International Traffic in Arms Regulations (ITAR) compliant.
Our rental payments for our Orlando facility are approximately $40,000 per month through April 2015, which includes all charges, including common area
maintenance, escalation, and certain pass-through of taxes and other operating costs.
Due to the transfer of manufacturing for over 90% of our production requirements for our precision molded optic line and our isolator assembly product line to
LPOI’s Shanghai facility, we previously reduced the leased space in our Orlando facility from 41,063 square feet to 21,557 square feet, as reflected in the third,
fourth and fifth amendments to the Orlando facility lease, effective December 1, 2007, May 1, 2009 and May 1, 2012, respectively. The lease term was also
extended from November 30, 2008, to April 30, 2015, and minimum rental rates for the extension term were established based on annual increases of three
percent. Additionally, there are two 3-year extension options exercisable by the Company. The minimum rental rates for such additional extension options will be
determined at the time an option is exercised and will be based on a “fair market rental rate” as determined in accordance with the third lease amendment.
Our wholly-owned subsidiary, LPOI, also leases a 16,000 square foot facility located in Jiading, People’s Republic of China. In May 2009, the Chinese
government paid LPOI to move to a new facility in the Jiading Industrial Zone near Shanghai. LPOI’s Shanghai facility features a molded glass aspheres
manufacturing area, which includes lens pressing equipment, advanced metrology and inspection equipment and coating facilities. The clean room in LPOI’s
Shanghai facility features assembly manufacturing equipment and automated dispensing systems. The Shanghai facility also houses our precision dicing
equipment and anti-reflective coating equipment. The facility is used primarily for our manufacturing operations and has increased our overall production
capacity, enabling us to compete for larger production volumes of optical components and assemblies and strengthen partnerships within the Asia/Pacific
region. It has also provided a launching point to drive our sales expansion in the Asia/Pacific region.
LPOI signed a five year lease that will expire April 30, 2014. The Shanghai facility houses 115 employees. The rent is approximately $6,600 per month.
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We are ISO 9001:2008 certified at both the Orlando and Shanghai facilities. Much of our product qualification is performed in-house at both facilities. Our test
and evaluation capabilities include damp heat, high/low temp storage, and a thermal shock oven, which are representative of the equipment required to meet
Telecordia requirements and other customer required product specifications. Our New Product Development department has computer aided design (CAD)
tools and technical support. The continuing implementation of various statistical process controls (SPCs) is being pursued to improve product yields and allows
us to reduce costly manual testing operations. Quality control in manufacturing to ensure a quality end product is critical to our ability to bring our products to
market, as our customers may demand rigorous testing prior to their purchase of our products.
With space remaining in the Shanghai and Orlando facilities, we believe our facilities are adequate to accommodate our needs over the next year. If increased
demand creates a need for additional space we are prepared to negotiate new leases in Orlando and Shanghai. Current production levels for both of our
facilities are at 98% of manned capacity. We are in the process of adding additional production equipment and additional work shifts to increase the capacity and
meet forecasted demand.
The territorial sales personnel maintain an office from their homes to serve their geographical territories.
Item 3. Legal Proceedings.
The Company is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions
and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .
Market Information
Our Class A common stock is traded on the NASDAQ Capital Market (“NCM”) under the symbol “LPTH”.
The following table sets forth the range of high and low bid prices for the Class A common stock for the periods indicated, as reported by NCM. The quotation
information below reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions. The closing ask price
on June 30, 2013 was $1.24 per share.
Fiscal Year Ended June 30, 2013
Quarter ended June 30, 2013
Quarter ended March 31, 2013
Quarter ended December 31, 2012
Quarter ended September 30, 2012
Fiscal Year Ended June 30, 2012
Quarter ended June 30, 2012
Quarter ended March 31, 2012
Quarter ended December 31, 2011
Quarter ended September 30, 2011
Holders
Class A Common
Stock
High
Low
$
$
$
$
$
$
$
$
1.46
0.92
1.02
1.04
1.44
2.05
1.59
2.44
$
$
$
$
$
$
$
$
0.72
0.72
0.82
0.92
1.02
0.88
0.90
1.41
As of August 19, 2013, we estimate there were approximately 245 holders of record and approximately 4,647 street name holders of our Class A common stock.
Dividends
We have never declared or paid any cash dividends on our Class A common stock and do not intend to pay any cash dividends in the foreseeable future. We
currently intend to retain all future earnings in order to finance the operation and expansion of our business. In addition, the payment of dividends, if any, in the
future, will depend on our earnings, capital requirements, financial conditions and other relevant factors.
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Securities Authorized For Issuance Under Equity Compensation Plans
The following table sets forth information with respect to compensation plans under which equity securities of the Company are authorized for issuance as of the
end of fiscal 2013:
Equity Compensation Arrangement
Amended and Restated Omnibus Incentive Plan
Employee Stock Purchase Plan
Award Shares
Authorized
Award Shares
Outstanding
at June 30,
2013
Available for
Issuance
at June 30,
2013
2,715,625
200,000
1,419,709
—
2,915,625
1,419,709
848,012
109,457
957,469
Please see section titled “Equity Compensation Plan Information” in Item 12 of this Annual Report on Form 10-K for information relating to compensation plans
approved and not approved by our stockholders.
Recent Sales of Unregistered Securities
On October 29, 2012, we issued a Common Stock Purchase Warrant to purchase 25,000 shares of Class A common stock to Hayden IR, LLC for services
rendered as a consultant. The warrant is exercisable at an exercise price of $0.95 for a period of three years beginning April 30, 2013. The warrant may also be
exercised on a “cashless” basis. We did not receive any cash proceeds from the issuance of the warrant. The issuance was exempt from the registration
requirements of the Act pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”) (in that warrant and the shares of Class A common
stock underlying the warrant were issued by the Company in a transaction not involving any public offering). The warrant and the shares of Class A common
stock underlying the warrant have not been registered for sale under the Act.
On March 25, 2013, the Company and the holders of our 8% Senior Secured Convertible Debentures (the “Debentures”) holding approximately 93.10% of the
outstanding principal amount of the Debentures executed a conversion agreement (the “Conversion Agreement”) in connection with the early conversion of the
Debentures. The Conversion Agreement provided, among other things, for the issuance of 559,448 shares of Class A common stock as an incentive to convert
the remaining Debentures into shares of common stock. The Company did not receive any cash proceeds from the issuance of the shares of Class A common
stock. The issuances were exempt from the registration requirements of the Act, pursuant to Section 4(a)(2) of the Act (in that the shares of Class A common
stock were issued by the Company in a transaction not involving any public offering). The shares of Class A common stock have not been registered for sale
under the Act.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. All statements
in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, other than statements of historical
facts, which address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as future capital
expenditures, growth, product development, sales, business strategy and other similar matters are forward-looking statements. These forward-looking
statements are based largely on our current expectations and assumptions and are subject to a number of risks and uncertainties, many of which are beyond our
control. Actual results could differ materially from the forward-looking statements set forth herein as a result of a number of factors, including, but not limited to,
our products current stage of development, the need for additional financing, competition in various aspects of its business and other risks described in this
report and in our other reports on file with the Securities and Exchange Commission. In light of these risks and uncertainties, all of the forward-looking
statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by us
will be realized. We undertake no obligation to update or revise any of the forward-looking statements contained in this report.
Liquidity and Capital Resources
History and Background:
We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs. From February 1996 (when our
initial public offering occurred) through the end of our fiscal 2013, inclusive, we have raised a net total of approximately $104 million from the issuance of
common and preferred stock, the sale of convertible debt and the exercise of options and warrants for our common stock.
10
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In 2006, the Company implemented a cash conservation strategy by reducing its operating costs, which included restructuring its manufacturing operations. Our
cash conservation strategy has also included measures such as extending payment terms with certain of our suppliers, delaying purchases for as long as
practicable using just-in-time ordering practices and managing headcount and salaries for our staff to reflect order demand. This business strategy has resulted
in the fundamentals of the Company improving each year. Fiscal 2013 was the first profitable year in the Company’s history. In fiscal 2012, we achieved
positive cash flow from operations. Cash provided by operations was approximately $556,000 and $406,000 during fiscal 2013 and fiscal 2012, respectively. The
improvements in cash flows from operations are as a result of increased revenues from the additional markets we are able to address due to our lower cost
structure as well as manufacturing and product efficiencies. Although we reported net income for fiscal 2013 we had recurring losses from operations in previous
years. As of June 30, 2013, we had an accumulated deficit of approximately $204 million. Our accumulated deficit was approximately $205 million for fiscal year
2012. On September 3, 2013 we had a book cash balance of $2,766,910.
Management has developed an operating plan for fiscal 2014 and believes the Company has adequate financial resources for achievement of this plan and to
sustain its current operations in the coming year. The fiscal 2014 operating plan and related financial projections we have developed anticipate sales growth
primarily from precision molded optics, with the emphasis on low-cost, high-volume applications, optical assemblies including our redesigned collimator product
line and infrared products. We expect further margin improvements based on production efficiencies and yield improvements.
We expect this continued growth in our precision molded optic lenses due to what we believe is the beginning of a multi-year growth cycle of the optical
market. This multi-year growth cycle is driven by four major trends: cloud computing; video distribution via digital technology; wireless broadband; and machine
to machine connection. Cloud computing is causing a shift in enterprise technology with increased spending for software-as-a-service (“SAAS”) and
infrastructure-as-a-service (“IAAS”) capital investments. Delivery of applications and technology using SAAS or IAAS requires larger and faster network
bandwidth. The explosion of mobile devices, which includes smartphones and tablet devices, is also requiring the expansion of network bandwidth as users are
receiving and transferring larger amounts of data via their mobile devices. The number of mobile devices will exceed the global population by 2016 and is
estimated to be a 1.4 devices per person. Individuals are also streaming more video on their mobile devices or through their smart TVs. This type of video
distribution, which is estimated to be 70% of all network traffic by 2016, is creating a huge demand for larger and faster bandwidth. Finally, machine to machine
connection technology allows wireless and wired systems to communicate with other devices of the same type. This type of networking often requires
bandwidth in order for the machines to communicate with each other. All of these trends require the expansion of bandwidth, and thus, the growth of optical
communication networks. LightPath produces products, such as our precision molded optic lenses, that can be used as a component in optical communication
networks. These trends combined with the excellent value proposition that we bring to our customers with competitive prices and superior quality are the
reasons we believe we are experiencing in increase in demand for our precision molded optic lenses and why we have confidence in our continued growth in
the future.
We expect continued improvement of overhead absorption as we increase the volume of products produced and lower material costs since we will be able to
purchase materials in higher volumes. We also will continue to implement cost reductions with programs to improve tool life and lower anti-reflective coating
costs by coating the lenses at our facilities. We have established milestones that will be tracked to ensure that as funds are being used that we are achieving
results before additional funds are committed. Management will be monitoring the operating plan closely during the year and should the plan objectives not be
met, remedial actions will be initiated.
We continue to face financial challenges along with many in the industries we do business with, as the slow recovery of the global economy continues to create
instability in the market. We continue efforts to keep costs under control as we seek renewed sales growth. Our efforts are directed toward reaching positive
cash flow and profitability. If these efforts are not successful, we will need to raise additional capital. Should capital not be available to us at reasonable terms,
other actions may become necessary in addition to cost control measures and continued efforts to increase sales. These actions may include exploring strategic
options for the sale of the Company, the sale of certain product lines, the creation of joint ventures or strategic alliances under which we will pursue business
opportunities, the creation of licensing arrangements with respect to our technology, or other alternatives.
We execute all foreign sales from our Orlando facility and inter-company transactions in United States dollars, mitigating the impact of foreign currency
fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Renminbi, are translated at rates of exchange prevailing
on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. During the years ended June 30, 2013 and
2012, we incurred a loss of $35,522 and a gain of $37,665 on foreign currency translation, respectively.
During fiscal 2013 we decided to no longer market our isolator product line and we reserved all isolator inventories at 100%.
11
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Cash Flows - Financings:
Convertible Debentures
On March 25, 2013, the Company and holders of our Debentures holding approximately 93.10% of the outstanding principal amount of the Debentures executed
the Conversion Agreement in connection with the early conversion of the Debentures. The Debenture holder’s party to the Conversion Agreement were Steven
Brueck, J. James Gaynor, Louis Leeburg, Robert Ripp and Gary Silverman, all of whom are directors or officers of the Company, and Berg & Berg Enterprises,
LLC (“BBE”), a greater than 5% beneficial stockholder of the Company. The Conversion Agreement provided, among other things, for the issuance of 559,448
shares of Class A common stock as an incentive to convert the Debentures into shares of common stock. All of the holders party to the Conversion Agreement,
except for BBE, fully converted their Debentures. In order to ensure BBE did not exceed a 19.9% beneficial ownership limitation, it partially converted its
Debenture, and the Company repaid $105,000, representing the outstanding principal amount due under its Debenture. The remaining holder not party to the
Conversion Agreement was repaid $75,000, representing the outstanding principal amount due under its Debenture. As of June 30, 2013, none of the
Debentures remain outstanding.
Private Placement
On June 11, 2012, we executed a Securities Purchase Agreement (the “SPA”) with 19 institutional and other accredited investors with respect to a private
placement of an aggregate of 1,943,852 shares of the Company’s Class A common stock, at $1.02 per share, and warrants to purchase 1,457,892 shares of
common stock. The warrants had an initial exercise price of $1.32 (subsequently adjusted to $1.26), are exercisable for a period of five years beginning
December 11, 2012, and contain customary, weighted-average anti-dilution protection with respect to the exercise price (subject to a floor price of $1.15).
The Company received gross cash proceeds from the issuance of the common stock (exclusive of proceeds from any future exercise of the warrants) in the
amount of approximately $1,982,727. The Company is required by the terms of the SPA to use the funds for general working capital purposes to support the
continued growth of the Company’s business, with the primary uses of the funds used for expansion of our infrared molding capacity and enhancement of our
glass preparation processes and test and measurement capability. The funding will also support new product development and the acquisition of new
equipment, also critical to the Company’s growth plans.
The Company paid a commission to the exclusive placement agent for the offering, Meyers Associates, LP, in an amount equal to $198,273, plus a non-
accountable marketing and expense fee of $20,000, and reimbursement of up to $10,000 of its legal and due diligence expenses related to the private
placement offering. The Company also issued the placement agent and its designees warrants to purchase an aggregate of 194,385 shares of common stock
at an initial exercise price equal to $1.32, subsequently adjusted to $1.26 per share. The warrants have a five-year term and were exercisable after December
11, 2012.
The private placement was exempt from the registration requirements of the Act, pursuant to Section 4(a)(2) of the Act (in that the shares of common stock,
warrants, and shares of common stock underlying the warrants were sold by the Company in a transaction not involving any public offering) and pursuant to
Rule 506 of Regulation D promulgated thereunder. On June 20, 2012 we filed a registration statement to register the shares of common stock, warrants and the
shares of common stock underlying the warrants. The registration statement was declared effective on July 2, 2012.
Warrant Exercises
During July and August 2013 the Company received $1,304,678 in proceeds from the exercise of warrants. The Company issued 829,178 shares of common
stock in connection with these exercises. The exercise prices ranged from $0.87 to $1.89 per share of common stock.
Cash Flows – Operating and Investing:
Cash flow provided by operations was approximately $556,000 for the year ended June 30, 2013, an increase of approximately $150,000 from fiscal 2012. Our
cash flow provided by operations was approximately $622,000 for the fourth quarter of fiscal 2013. Our fiscal 2014 operating plan and related financial
projections anticipate continued improvement in our cash flows in future years due to sales growth and continuing margin improvements based on production
efficiencies and reductions in product costs, offset by marginal increases in selling, administrative and new product development expenditures. For example, we
expect lower glass costs as a result of replacing internally fabricated material with purchased materials from suppliers in Asia and lower coating costs due to
larger unit volumes and due to our ability to coat the lenses in-house rather than out-sourcing this service.
During fiscal 2013, we expended approximately $1.10 million for capital equipment as compared to $629,000 during fiscal 2012. The majority of our capital
expenditures during both fiscal 2013 and fiscal 2012 were related to the purchase of equipment used to enhance or expand our production capacity and tooling
for our precision molded products. We anticipate increasing our expenditures during fiscal 2014 to enhance or expand our production capacity; however, the
total amount expended will depend on opportunities and circumstances.
12
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Results of Operations
Operating Results for Fiscal Year Ended June 30, 2013 compared to the Fiscal Year Ended June 30, 2012:
Revenue for fiscal 2013 totaled $11.78 million compared to $11.28 million for fiscal 2012, an increase of 4%. This increase was primarily attributable to revenue
from precision molded lenses for the telecommunications and laser tool markets and custom optics. The number of units of precision molded optics sold
increased by 35% due to the Company’s increased production capability and the pursuit of the low-cost, high-volume lens business. We expect continued growth
in sales to be derived primarily from our precision molded optics product line, particularly our low-cost lenses sold in Asia, and the Company’s infrared and
collimator product lines.
Gross margin percentage for fiscal 2013 was 44% compared to 36% in fiscal 2012. Total manufacturing costs of $6.61 million were approximately $642,000
lower in fiscal 2013 as compared to fiscal 2012. This decrease in manufacturing costs resulted from an increase in direct costs of $31,000 for materials, labor
and outside services due to higher revenues offset by a decrease of $219,000 in labor costs, a decrease of $304,000 in tooling costs, a decrease of $92,000 in
freight costs and a decrease of $55,000 in supplies. Direct costs, which include material, labor and services, were 24% of revenue in fiscal 2013, as compared to
25% of revenue in fiscal 2012.
We plan to continue emphasizing unit cost reductions by efficiently purchasing raw materials and increasing sourcing of coating services in China. We also
continue to have improvements in productivity due to a more experienced workforce at LPOI’s Shanghai facility and press efficiencies due to higher unit volumes.
Selling, general and administrative expenses increased by approximately $110,000 to $3.99 million in fiscal 2013 from $3.88 million in fiscal 2012. This increase
is due to $78,000 in higher wages and benefits, $58,000 in higher legal fees, $163,000 in higher fees for consulting services for IT support, $72,000 in higher
fees for investor relations, offset by lower depreciation of $41,000 and the write-off of $221,000 in expenses in fiscal 2012 related to our withdrawn shelf offering
in fiscal 2012. Our operating plan for fiscal 2014 projects an increase in selling, general and administrative expenses due a projected higher level of sales. We
plan to manage our workforce size to meet profit and cash flow goals.
New product development costs in fiscal 2013 decreased by approximately $107,000 to $939,000. This decrease was primarily due to a decrease in wages and
materials purchased for projects as our staff continued to work on the purchase order for Raytheon Vision Systems (“Raytheon”). Our operating plan for fiscal
2014 projects an increase in product development spending due to enhanced efforts in the development of the infrared product line.
In fiscal 2013, our amortization of intangibles remained at approximately $33,000 and is expected to remain at this level for fiscal 2014. Interest expense was
approximately $100,000 for fiscal 2013 as compared to approximately $92,000 for fiscal 2012. The Debentures accounted for all of the interest expense during
fiscal 2013 and 2012. This represented periodic interest of 8% per annum, amortization and the write-off of the debt issuance costs and debt discount.
In fiscal 2013 and 2012, we recognized a $15,000 loss and a $103,000 gain, respectively, related to the change in the fair value of derivative warrants issued in
our June 2012 private placement. This fair value will be re-measured each reporting period throughout the five year life of the warrants, or until exercised.
Investment and other income increased by approximately $72,000 to $120,000 in fiscal 2013 primarily from a $54,000 in royalty income.
Net income for fiscal 2013 was approximately $215,000 compared with a net loss of approximately $865,000 in fiscal 2012, a change of approximately $1.08
million. This improvement of net income was comprised principally of an increase in revenues of $499,000 and a decrease of $642,000 in cost of goods sold,
resulting in a $1.14 million increase in gross margin.
13
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Key Performance Indicators
How we operate
We have continuing sales of two basic types: occasional sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and
the more challenging and potentially more rewarding business of customer product development. In this latter type of business we work with a customer to help
them determine optical specifications and even create certain optical designs for them, including complex multi-component designs that we call “engineered
assemblies.” This is followed by “sampling” small numbers of the product for the customer’s test and evaluation. Thereafter, should the customer conclude that
our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket
purchase order” type or a supply agreement. The strategy is to create an annuity revenue stream that makes the best use of our production capacity as
compared to the turns business, which is unpredictable and uneven. This annuity revenue stream can also generate low-cost, high-volume type orders. A key
business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:
· Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff;
·
The fact that as our customers take products of this nature into higher volume, commercial production (for example, in the case of molded
optics, this may be volumes over one million pieces per year) they begin to work seriously to reduce costs – which often leads them to turn to
larger or overseas producers, even if sacrificing quality; and
· Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints
imposed by the need to make additional capital expenditures – in other words, because of our limited cash resources and cash flow, we may not
be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures.
Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique
capabilities in optical design engineering that we make available on the merchant market, a market that we believe is underserved in this area of service offering.
Additionally, we believe that we offer value to some customers as a source of supply in the United States should they be unwilling to commit their entire source
of supply of a critical component to foreign merchant production sources. We also continue to have the proprietary GRADIUM lens glass technology to offer to
certain laser markets.
Our key indicators
Usually on a weekly basis, management reviews a number of performance indicators. Some of these indicators are qualitative and others are quantitative. These
indicators change from time to time as the opportunities and challenges in the business change. They are mostly non-financial indicators such as units of
shippable output by major product line, production yield rates by major product line and the output and yield data from significant intermediary manufacturing
processes that support the production of the finished shippable product. These indicators can be used to calculate such other related indicators as fully yielded
unit production per-shift, which varies by the particular product and our state of automation in production of that product at any given time. Higher unit production
per shift means lower unit cost and therefore improved margins or improved ability to compete where desirable for price sensitive customer applications. The
data from these reports is used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted,
are proprietary information.
The discussions of our results as presented in this Annual Report include use of the non-GAAP terms “EBITDA” and “gross margin.” EBITDA is discussed
below. Gross margin is determined by deducting the cost of sales from operating revenue. Cost of sales includes manufacturing direct and indirect labor,
materials, services, fixed costs for rent, utilities and depreciation, and variable overhead. Gross margin should not be considered an alternative to operating
income or net income, which are determined in accordance with GAAP. We believe that gross margin, although a non-GAAP financial measure, is useful and
meaningful to investors as a basis for making investment decisions. It provides investors with information that demonstrates our cost structure and provides
funds for our total costs and expenses. We use gross margin in measuring the performance of our business and have historically analyzed and reported gross
margin information publicly. Other companies may calculate gross margin in a different manner.
Financial indicators that are usually reviewed at the same time include the major elements of the micro-level business cycle:
·
·
·
·
sales backlog;
EBITDA;
inventory levels; and
accounts receivable levels and quality.
These indicators are similarly used to determine tactical operating actions and changes and are discussed in more detail below.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Sales Backlog:
Sales growth has been and continues to be our best indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order
book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what
percent of the backlog is scheduled by the customer for date-certain delivery. We define our “12-month backlog” as that which is requested by the customer for
delivery within one year and which is reasonably likely to remain in the backlog and be converted into revenues. This includes customer purchase orders and
may include amounts under supply contracts if they meet the aforementioned criteria. Generally, higher 12-month backlog is better for us.
The 12-month backlog, as defined above, has been as follows in the preceding eight fiscal quarters:
Fiscal
Quarter
Q4-2013
Q3-2013
Q2-2013
Q1-2013
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Ended
6/30/2013
3/31/2013
12/31/2012
9/30/2012
6/30/2012
3/31/2012
12/31/2011
9/30/2011
Approximate 12-
month Backlog
$
$
$
$
$
$
$
$
4,144,000
5,014,000
4,640,000
5,458,000
4,892,000
4,391,000
3,827,000
4,203,000
Our 12-month backlog at June 30, 2013 was approximately $4.14 million compared to $4.89 million as of June 30, 2012. We believe this decrease in the 12-
month backlog is temporary as there were three large orders expected in the fourth quarter of 2013 that were delayed until the first quarter of 2014 totaling over
$700,000. Bookings and quote activity have continued to increase for our industrial low-cost lenses in Asia and we project continued production and shipment
growth for these low-cost lenses in Asia during fiscal 2014.
We continue to diversify our business by entering into additional markets such as digital imaging, laser tools, telecommunications, digital projectors, industrial
equipment, weapon sights and green lasers. We expect to show increases in revenue for fiscal 2014 as a result of this diversification.
EBITDA:
EBITDA is a non-GAAP financial measure used by management, lenders and certain investors as a supplemental measure in the evaluation of some aspects of
a corporation's financial position and core operating performance. Investors sometimes use EBITDA as it allows for some level of comparability of profitability
trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also
does not include changes in major working capital items such as receivables, inventory and payables, which can also indicate a significant need for, or source of,
cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow,
EBITDA is not a good indicator of a business's cash flows. We use EBITDA for evaluating the relative underlying performance of the Company's core operations
and for planning purposes. We calculate EBITDA by adjusting net income (loss) to exclude net interest expense, income tax expense or benefit, depreciation and
amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”
We also calculated an Adjusted EBITDA which excludes the effect of the non-cash expense associated with the mark-to-market adjustments related to our June
2012 Warrants. We believe this Adjusted EBITDA is helpful for investors to better understand the financial results of our business operations.
15
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
The following table sets forth a reconciliation of net income (loss) to EBITDA as well as to adjusted EBITDA for the preceding eight quarters:
Adjusted
EBITDA
Depreciation
& Amorization
Warrant
Adjustment
Net Income
(Loss)
Fiscal Quarter Ended
Interest Exp.
EBITDA
6/30/2013
3/31/2013
12/31/2012
9/30/2012
6/30/2012
3/31/2012
12/31/2011
9/30/2011
6/30/2011
3/31/2011
12/31/2010
9/30/2010
(243,765)
217,094
140,772
101,221
195,864
(518,985)
(343,299)
(198,447)
429
(375,728)
(373,714)
(852,950)
211,900
193,039
199,658
208,637
266,317
286,014
326,269
245,438
257,798
227,861
215,727
211,543
428
53,083
15,500
31,306
22,659
22,582
22,566
24,220
23,058
89,560
113,127
380,510
(31,437)
463,216
355,930
341,164
484,840
(210,389)
5,536
71,211
281,285
73,477
(44,860)
(260,897)
502,827
(222,766)
(169,552)
(95,784)
(103,364)
—
—
—
—
—
—
—
471,390
240,450
186,378
245,380
381,476
(210,389)
5,536
71,211
281,285
73,477
(44,860)
(260,897)
The primary reason for the improvement in Adjusted EBITDA in the fourth quarter of fiscal 2013 from the same period in fiscal 2012 is due to higher revenue,
improved margins and the warrant adjustment resulting in net income. The primary reason for the decline in EBITDA in the fourth quarter of fiscal 2013 from the
same period in fiscal 2012 is due to net losses.
Inventory levels:
We manage inventory levels to minimize investment in working capital but still have the flexibility to meet customer demand to a reasonable degree. We review
our inventory for obsolete items quarterly. While the mix of inventory is an important factor, including adequate safety stocks of long lead-time materials, an
important aggregate measure of inventory in all phases of production is the quarter’s ending inventory expressed as a number of days’ worth of the quarter’s
cost of sales, also known as “days cost of sales in inventory,” or “DCSI.” It is calculated by dividing the quarter’s ending inventory by the quarter’s cost of goods
sold, multiplied by 365 and divided by 4. Generally, a lower DCSI measure equates to a lesser investment in inventory and therefore more efficient use of capital.
The table below shows our DCSI for the immediately preceding eight fiscal quarters:
Fiscal
Quarter
Q4-2013
Q3-2013
Q2-2013
Q1-2013
Fiscal 2013 average
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Fiscal 2012 average
Ended
6/30/2013
3/31/2013
12/31/2012
9/30/2012
6/30/2012
3/31/2012
12/31/2011
9/30/2011
DCSI (days)
94
110
96
85
98
74
75
90
100
76
Our average DCSI for fiscal 2012 was 76, compared to 98 for fiscal 2013. This increase in DCSI for fiscal 2013 as compared to fiscal 2012 was due to higher
inventory balances as we ramped up production for higher sales forecasts and the impact of a decrease in cost of goods sold due to our continued cost reduction
efforts. We will continue to review inventory balances and sales forecast quarterly in order to manage our inventory levels more effectively.
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Accounts receivable levels and quality:
Similarly, we manage accounts receivable levels to minimize investment in working capital. We escalate our collection efforts when invoices are fifteen days past
the due date. Weekly, we also review all receivables that are sixty days past terms. These past due accounts are contacted and all future shipments to them are
placed on hold. We measure the quality of receivables by the proportions of the total that are at various increments past due from our normally extended terms,
which are generally 30-45 days. The most important aggregate measure of accounts receivable is the quarter’s ending balance of net accounts receivable
expressed as a number of days’ worth of the quarter’s net revenues, also known as “days sales outstanding,” or “DSO.” It is calculated by dividing the quarter’s
ending net accounts receivable by the quarter’s net revenues, multiplied by 365 and divided by 4. Generally, a lower DSO measure equates to a lesser
investment in accounts receivable and therefore more efficient use of capital. The table below shows our DSO for the preceding eight fiscal quarters:
Fiscal
Quarter
Q4-2013
Q3-2013
Q2-2013
Q1-2013
Fiscal 2013 average
Q4-2012
Q3-2012
Q2-2012
Q1-2012
Fiscal 2012 average
Ended
6/30/2013
3/31/2013
12/31/2012
9/30/2012
6/30/2012
3/31/2012
12/31/2011
9/30/2011
DSO (days)
62
72
75
69
66
63
79
62
69
68
Our average DSO for fiscal 2013 was 66 compared to 68 for fiscal 2012. For the past two years over 47% of our quarterly sales are shipped in the third month
of each quarter. These revenues will not be collected before the quarter ends, which negatively impacts our DSO. Also international sales which are
approximately one third of our revenues have a longer collection cycle. We plan to monitor our collections efforts to keep this key indicator as low as reasonably
possible. We strive to have DSO no higher than 65.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of income and expense during the reporting periods presented. Our significant estimates include the allowance for
trade receivables which is made up of reserves for bad debts, inventory reserves for obsolescence, revenue recognition, valuation of compensation expense on
stock-based awards and beneficial conversion and warrant valuation related to convertible debentures. Although we believe that these estimates are reasonable,
actual results could differ from those estimates given a change in conditions or assumptions that have been consistently applied.
Management has discussed the selection of critical accounting policies and estimates with our board of directors, and the board of directors has reviewed our
disclosure relating to critical accounting policies and estimates in this prospectus. The critical accounting policies used by management and the methodology for
its estimates and assumptions are as follows:
Allowance for accounts receivable, is calculated by taking 100% of the total of invoices that are over 90 days past due from the due date and 10% of the total
of invoices that are over 60 days past due from the due date. Accounts receivable are customer obligations due under normal trade terms. We perform
continuing credit evaluations of its customers’ financial condition. Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt
expense in the period the payment is collected. If our actual collection experience changes, revisions to its allowance may be required. After all attempts to
collect a receivable have failed, the receivable is written off against the allowance.
Inventories, which consist principally of raw materials, work-in-process and finished lenses, collimators and assemblies are stated at the lower of cost or market,
on a first-in, first-out basis. Inventory costs include materials, labor and manufacturing overhead. Acquisition of goods from our vendors has a purchase burden
added to cover customs, shipping and handling costs. Fixed costs related to excess manufacturing capacity have been expensed. We look at the following
criteria for parts to consider for the inventory reserve: items that have not been sold in two years or that have not been purchased in two years or of which we
have more than a two year supply. These items as identified are reserved at 100%, as well as reserving 50% for other items deemed to be slow moving within
the last twelve months and reserving 25% for items deemed to have low material usage within the last six months. The parts identified are adjusted for recent
order and quote activity to determine the final inventory reserve. In the third quarter of fiscal 2013 we placed a 100% reserve on our isolator inventories due to
our current sales forecast for this product line.
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Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets ranging from
one to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets using the straight-
line method.
Long-lived assets, such as property, plant, and equipment, tooling and purchased intangibles subject to amortization, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying
amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of the balance sheet.
Deferred rent relates to certain of our operating leases containing predetermined fixed increases of the base rental rate during the lease term being recognized
as rental expense on a straight-line basis over the lease term. We have recorded the difference between the amounts charged to operations and amounts
payable under the leases as deferred rent in the accompanying consolidated balance sheets.
Deferred revenue relates to a $1.1 million purchase order from Raytheon for which revenue is recognized on a percentage of completion basis. The Company is
using the “cost-to-cost method” to allow it to measure progress toward completion based on the ratio of costs incurred to date to total estimated costs. The
Company recorded in deferred revenue, or other receivables, in the accompanying consolidated balance sheet, based on the difference between the amounts
invoiced on the project and the amount recognized into revenue or expenses incurred. As of June 30, 2013, the Company invoiced $743,500 and recognized
$1,097,030 as revenue with the difference of $353,530 recorded as other receivables. At June 30, 2013, we had no billed accounts receivable outstanding with
respect to this purchase order. The project is expected to be completed by December 2013.
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are computed on the basis of differences
between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based upon enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances have been established to reduce
deferred tax assets to the amount expected to be realized.
We have not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or penalties has
not been provided since there is no unrecognized benefit or penalty since the date of adoption. If there were an unrecognized tax benefit or penalty, we would
recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. We are no longer subject to U.S. federal, state, local, or
non-U.S. income tax examinations by tax authorities for years before 2010.
Revenue is recognized from product sales when products are shipped to the customer, provided that we have received a valid purchase order, the price is fixed,
title has transferred, collection of the associated receivable is reasonably assured, and there are no remaining significant obligations. Revenues from product
development agreements are recognized as milestones and are completed in accordance with the terms of the agreements and upon shipment of products,
reports or designs to the customer. Invoice amounts for sales or VAT taxes are posted to the balance sheet and not included in revenue.
New product development costs are expensed as incurred.
Stock based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite
service period. We estimate the fair value of each stock option and restricted stock unit as of the date of grant using the Black-Scholes-Merton pricing model.
Most awards granted under our Amended and Restated Omnibus Incentive Plan vest ratably over two to four years and generally have four to ten-year contract
lives. The volatility rate is based on four-year historical trends in Class A common stock closing prices and the expected term was determined based primarily
on historical experience of previously outstanding awards. The interest rate used is the United States Treasury interest rate for constant maturities. The
likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable then
the compensation expense will be amortized over the remaining vesting period.
Management makes estimates and assumptions during the preparation of our consolidated financial statements that affect amounts reported in the financial
statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which in turn could
impact the amounts reported and disclosed herein.
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Financial instruments. We account for financial instruments in accordance with the Financial Accounting Standards Board (“FASB”) ASC 820, Fair Value
Measurements and Disclosures (“ASC 820”), which provides a framework for measuring fair value and expands required disclosure about fair value
measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the
assumptions that market participants would use in pricing.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2013. We
use the market approach to measure fair value for its Level 1 financial assets and liabilities, which include cash equivalents of $728,000 and $1.77 million at June
30, 2013 and 2012, respectively. The market approach uses prices and other relevant information generated by market transactions involving identical or
comparable assets and liabilities.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments which include cash,
trade receivables, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they
are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
The Company values its warrant liabilities based on open-form option pricing models which, based on the relevant inputs, render the fair value measurement at
Level 3. The Company bases its estimates of fair value for warrant liabilities on the amount it would pay a third-party market participant to transfer the liability
and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable
companies maximizing the use of observable inputs when available.
The Company does not have any other financial or non-financial assets or liabilities that would be characterized as Level 2 or Level 3 instruments.
Derivative financial instruments. The Company accounts for derivative instruments in accordance with FASB ASC 815, Derivatives and Hedging (“ASC 815”),
which requires additional disclosures about the Company’s objectives and strategies for using derivative instruments, how the derivative instruments and related
hedged items are accounted for, and how the derivative instruments and related hedging items affect the financial statements.
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt instruments are
reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the
host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with
corresponding changes in fair value recorded in current period operating results.
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative
instruments. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to
be classified as equity or as a derivative liability.
Comprehensive income (loss) of the Company is defined as the change in equity (net assets) of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners
and distributions to owners. Comprehensive income (loss) has two components, net income (loss) and other comprehensive income (loss), and is included on
the statement of operations and comprehensive income. Our other comprehensive income (loss) consists of the foreign currency translation adjustment.
Business segments are required to be reported by the Company. As we only operate in principally one business segment, no additional reporting is required.
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Recent accounting pronouncements issued by FASB (including Emerging Issues Task Force (“EITF”)), the American Institute of Certified Public Accountants
(“AICPA”) and the Securities and Exchange Commission (“SEC”) did not or are not believed by management to have a material impact on the Company’s
present or future financial statements.
In July 2013 the FASB issued ASU 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists,” which amends ASC 740, “Income Taxes.” This new guidance requires that a liability related to an unrecognized tax benefit be
offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if certain criteria are met. The provisions of
this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The
amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The
Company will adopt this guidance during fiscal 2015 and does not expect the adoption to have a material effect on our financial position, results of operations or
cash flows.
Item 8. Financial Statements and Supplementary Data.
See index at page F-1 for the Financial Statements for each of the years in the two-year period ended June 30, 2013.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the fiscal year ended June 30, 2013, LightPath carried out an evaluation, under the supervision and with the participation of members of our
management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of
LightPath’s disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Our CEO and our CFO
have concluded, based on their evaluation, that as of June 30, 2013, our disclosure controls and procedures were effective at the end of the fiscal year to
provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit with the SEC under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our
management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
LightPath’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting
principles. Our management assessed our internal control over financial reporting based on the Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of this assessment, our management concluded that our
internal control over financial reporting was effective as of June 30, 2013 based on such criteria.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met under all potential conditions, regardless of how remote, and may not prevent or detect all errors and all fraud. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within LightPath have been
prevented or detected. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Auditor’s Report on Internal Control over Financial Reporting
This annual report does not include an attestation report of LightPath’s independent registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit
LightPath to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes-Oxley Act,
we continue to review, test and improve the effectiveness of our internal controls. There have not been any changes in LightPath’s internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter and since the year ended June 30, 2013
that have materially affected, or are reasonably likely to materially affect, LightPath’s internal control over financial reporting.
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Item 10. Directors, Executive Officers and Corporate Governance .
PART III
Each of our directors and officers serves until his or her successor is elected and qualified. The names and ages of our directors and officers, the years they
became directors or officers, their principal occupations or employment for at least the past five years and certain of their other directorships is set forth below.
The Class I directors’ term expires at the annual meeting of stockholders proposed to be held in fiscal 2014. The Class II directors’ term expires at the annual
meeting of stockholders proposed to be held in fiscal 2016. The Class III directors’ term expires at the annual meeting of stockholders proposed to be held in
fiscal 2015.
Class I Directors
Robert Ripp, 72
Director (Chairman of the
Board)
J. James Gaynor, 62
President & Chief Executive
Officer,
Director
Mr. Ripp has served as a director of the Company since 1999 and as Chairman of the Board since
November 1999. During portions of fiscal year 2002 he also served as the Company’s Interim
President and Chief Executive Officer. Mr. Ripp held various executive positions at AMP
Incorporated (“AMP”) from 1994 to 1999, including serving as Chairman and Chief Executive Officer
from August 1998 until April 1999, when AMP was sold to TYCO International Ltd. Mr. Ripp
previously spent 29 years with IBM of Armonk, New York. He held positions in all aspects of
operations within IBM culminating in the last four years as Vice President and Treasurer. He retired
from IBM in 1993. Mr. Ripp graduated from Iona College and received a Masters of Business
Administration degree from New York University. Mr. Ripp is currently on the board of directors of
Ace, Ltd., PPG Industries and Axiall Corporation, all of which are listed on the New York Stock
Exchange. Mr. Ripp also serves on the Company’s Compensation and Finance Committees. Mr.
Ripp has dedicated over ten years of service to the Company. Mr. Ripp’s extensive business,
executive management, and financial expertise gained from various executive positions coupled with
his ability to provide leadership skills to access strategic plans, business operational performance,
and potential mergers and acquisitions, qualify him for service as a director of our Company.
Mr. Gaynor was appointed as President, Chief Executive Officer and as a director on February 1,
2008 and prior to that served as Interim Chief Executive Officer commencing on September 18, 2007.
Mr. Gaynor previously served as the Company’s Corporate Vice President of Operations since July
2006. Mr. Gaynor is also a director of LPOI. Mr. Gaynor is a mechanical engineer with over 25 years
business and manufacturing experience in volume component manufacturing in the electronics and
optics industries. Prior to joining the Company, from August 2002 to July 2006, Mr. Gaynor was
Director of Operations and Manufacturing for Puradyn Filter Technologies. Previous to that, he was
Vice President of Operations and General Manager for JDS Uniphase Corporation’s Transmission
Systems Division. He has also held executive positions with Spectrum Control, Rockwell
International and Corning Glass Works. His experience includes various engineering, manufacturing
and management positions in specialty glass, electronics, telecommunications components and
mechanical assembly operations. His global business experience encompasses strategic planning,
budgets, capital investment, employee development, cost reduction programs with turnaround and
startup companies, acquisitions and management. Mr. Gaynor holds a Bachelor of Mechanical
Engineering degree from the Georgia Institute of Technology and has worked in the manufacturing
industries since 1976. Mr. Gaynor has an in-depth knowledge of the optics industry gained through
over 25 years of working in various capacities in the industry and understands the engineering
aspects of our business, due to his engineering background. Mr. Gaynor’s experience and knowledge
is necessary to lead our Company and qualify him for service as a director.
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Class II Directors
Sohail Khan, 59
Director
Dr. Steven Brueck, 69
Director
M. Scott Faris, 48
Director
Mr. Khan has served as a director of the Company since February 2005. Since May 2013, he has
served as the Chief Executive Officer of Lilliputin Systems a developer of portable power products for
consumer electronics. From July 2011 to April 2013 he was the owner of K5 Innovations, a
technology consulting venture from July 2011 to April 2013. He was the President and Chief
Executive Officer and a member of the board of directors of SiGe Semiconductor (“SiGe”), a leader in
silicon based radio frequency front-end solutions which was acquired by Skyworks Solutions Inc. in
June 2011. Prior to SiGe, Mr. Khan was Entrepreneur in Residence and Operating Partner of
Bessemer Venture Partners, a venture capital group focused on technology investments. From 1996
to 2006 he held various executive positions with Agere Systems/Lucent Technologies ending as
Executive Vice President and Chief Strategy & Development Officer of Agere Systems. Mr. Khan has
also held various management positions at NEC Electronics, Intel and the National Engineering
Services of Pakistan. Mr. Khan received a Bachelor of Science in Electrical Engineering from the
University of Engineering and Technology in Pakistan. Additionally, he received a Masters of
Business Administration from the University of California at Berkeley. From 2007 to 2012, Mr. Khan
served on the board of directors for Gainspan Corporation. Mr. Khan also serves on the Company’s
Compensation Committee. Mr. Khan’s experience in venture financing, specifically technology
investments, is an invaluable asset Mr. Khan contributes to the Board composition. In addition, Mr.
Khan’s significant experience in executive management, profit and loss management, mergers and
acquisitions, and capital raising, as well as his background in engineering qualifies him for service as
a director of our Company.
Dr. Brueck has served as a director of the Company since July 2001. He is the Director of the Center
for High Technology Materials (CHTM) and Distinguished Professor of Electrical and Computer
Engineering and Professor of Physics at the University of New Mexico in Albuquerque, New Mexico,
which he joined in 1985. He is a graduate of Columbia University with a Bachelor of Science degree
in Electrical Engineering and a graduate of the Massachusetts Institute of Technology where he
received his Masters of Science degree in Electrical Engineering and Doctorate of Science degree in
Electrical Engineering. Dr. Brueck is a fellow of The Optical Society, the Institute of Electrical and
Electronics Engineers and the American Association for the Advancement of Science. Dr. Brueck
serves on the Company’s Audit Committee. Dr. Brueck’s expertise in optics and optics applications,
as well as his extensive research experience in nanoscale lithography, visible infrared optics and
semiconductor components, qualify him for service as a director of our Company.
Mr. Faris has served as a director of the Company since December 2011. Mr. Faris is an
experienced entrepreneur with almost
two decades of operating, venture-financing and
commercialization experience, involving more than 20 start-up and emerging-growth technology
companies. Mr. Faris is the founder and CEO of MicroVapor Devices, LLC, a privately held developer
and manufacturer of advanced medical devices since June 2013. Mr. Faris also founded the Astralis
Group, a strategy advisor, in 2002 and he provides consulting to start-up companies. Mr. Faris was
the founder and Chief Executive Officer of Planar Energy, a company that developed transformational
ceramic solid state battery technology and products. Planar Energy is a spin-out of the U.S.
Department of Energy’s National Renewable Energy Laboratory. Mr. Faris founded Planar Energy in
June 2007. From October 2004 to June 2007, Mr. Faris was a partner with Corporate IP Ventures
(formerly known as MetaTech Ventures), an early stage venture fund specializing in defense
technologies. From September 2001 to October 2004, Mr. Faris was the Chairman and Chief
Executive Officer of Waveguide Solutions, a developer of planar optical light wave circuit and micro
system products, a spin out of the University of North Carolina, Charlotte. From August 1997 to
September 2001, he was a director and Chief Operating Officer of Ocean Optics, Inc., a precision-
optical-component and fiber-optic-instrument spin out of the University of South Florida. Mr. Faris
was also the founder and Chief Executive Officer of Enterprise Corporation, a technology accelerator
and served as a director of the Florida Seed Capital Fund and Technology Commercialization at the
Center for Microelectronics Research. Mr. Farris received a Bachelor of Science degree in
Management Information Systems from Penn State University in 1988. Mr. Faris is currently on the
board of directors of MicroVapor Devices, LLC, Spectra Health, Inc. and Open Photonics, Inc., all of
which are private companies. Mr. Faris also serves on the Company’s Audit Committee. Mr. Faris’s
significant experience in executive management positions at various optical component companies,
his experience in the commercialization of optical and opto-electronic component technology and his
background in optics, technology and venture capital qualify him for service as a director of our
Company.
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Class III Directors
Louis Leeburg, 59
Director
Gary Silverman, 74
Director
Mr. Leeburg has served as a director of the Company since May 1996. Mr. Leeburg is currently a
self-employed business consultant. From 1988 until 1993 he was the Vice President for Finance of
The Fetzer Institute, Inc. From 1980 to 1988 he was in financial positions with different organizations
with an emphasis in financial management. Mr. Leeburg was an audit manager for Price
Waterhouse & Co. until 1980. Mr. Leeburg received a Bachelor of Science degree in Accounting
from Arizona State University. He is a member of Financial Foundation Officers Group and the
treasurer and trustee for the John E. Fetzer Memorial Trust Fund and The Institute for Noetic
Sciences. Mr. Leeburg also serves on the Company’s Audit and Finance Committees. Mr. Leeburg
has a broad range of experience in accounting and financial matters. His expertise gained in various
roles in financial management and investment oversight for over thirty years coupled with his
knowledge gained as a CPA add invaluable knowledge to our Board and qualify him for service as a
director of our Company.
Mr. Silverman has served as a director of the Company since September 2001. Mr. Silverman is
currently the managing partner of GWS Partners, established in 1995 to conduct searches for senior-
level executives and board of director candidates for a broad cross section of publicly held
corporations. From 1983 to 1995 he worked for Korn/Ferry International as an executive recruiter
and held the position of Managing Director. He spent fourteen years with Booz, Allen & Hamilton, and
in his last position as Vice President and Senior Client Officer was responsible for generation of new
business, the management of client assignments and the development of professional staff. Mr.
Silverman is a graduate of the University of Illinois with both a Bachelor of Science degree and
Masters of Science degree in Finance. Mr. Silverman also serves on the Company’s Compensation
Committee and Audit Committee. Mr. Silverman contributes a unique attribute to our Board in that he
has extensive experience in human resource management, financial management and control and
strategic management. Mr. Silverman’s background in advising companies in the development of
professional staff qualifies him for service as a director of our Company.
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Executive Officers Who Do Not Serve as Directors
Dorothy Cipolla, 57
Chief Financial Officer,
Secretary and Treasurer
Alan Symmons, 41
Corporate Vice President of Engineering
Ms. Cipolla has been the Company’s Chief Financial Officer, Secretary and Treasurer since February
2006. Ms. Cipolla has also been a director of LPOI since 2006. Ms. Cipolla was Chief Financial
Officer and Secretary of LaserSight Technologies, Inc., (“LaserSight”) from March 2004 to February
2006. Prior to joining LaserSight, she served in various financial management positions. From 1994
to 1999, she was Chief Financial Officer and Treasurer of Network Six, Inc., a NASDAQ-listed
professional services firm. From 1999 to 2002, Ms. Cipolla was Vice President of Finance with
Goliath Networks, Inc., a privately held network consulting company. From 2002 to 2003, Ms. Cipolla
was Department Controller of Alliant Energy Corporation, a regulated utility. She received a Bachelor
of Science degree in Accounting from Northeastern University and is a Certified Public Accountant in
Massachusetts.
Mr. Symmons has been the Company’s Director of Engineering since October 2006. In September
2010, he was promoted to Corporate Vice President of Engineering. Prior to joining LightPath, Mr.
Symmons was Engineering Manager for Aurora Optical, a subsidiary of Multi-Fineline Electronix,
(“MFLEX”), dedicated to the manufacture of cell phone camera modules. From 2000 to 2006, Mr.
Symmons worked for Applied Image Group – Optics, (“AIG/O”), a recognized leader in precision
injection molded plastic optical components and assemblies, working up to Engineering Manager.
AIG/O was purchased by MFLEX in 2006. Prior to 2000, Mr. Symmons held engineering positions at
Ryobi N.A., SatCon Technologies and General Dynamics. Mr. Symmons has a Bachelor of Science
degree in Mechanical Engineering from Rensselaer Polytechnic Institute and a Masters of Business
Administration degree from the Eller School of Management at the University of Arizona.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires that our directors and executive officers and persons who
beneficially own more than 10% of our common stock (referred to herein as the “Reporting Persons”) file with the SEC various reports as to their ownership of
and activities relating to our common stock. To the best of our knowledge, all Reporting Persons complied on a timely basis with all filing requirements applicable
to them with respect to transactions during the period covered by this report except with respect to Berg & Berg Enterprises, LLC, a beneficial owner of more
than 10% of our common stock. Berg & Berg Enterprises, LLC failed to file a Form 4 during fiscal 2013 with respect to the sale of shares of common stock and
the exercise of certain warrants. In making these statements, the Company has relied solely on its review of copies of the reports furnished to the Company,
representations that no other reports were required and other knowledge relating to transactions involving Reporting Persons.
Code of Ethics
The Company has adopted a Code of Ethics that applies to all of its employees, including our principal executive officer, principal financial officer and principal
accounting officer or controller, or persons performing similar functions. The text of the Company’s Code of Conduct and Ethics is available on the Company’s
website at www.lightpath.com or may be obtained free of charge by writing to: Secretary, LightPath Technologies, Inc., 2603 Challenger Tech CT, Suite 100,
Orlando, FL 32826. A copy of our Code of Ethics is filed as an exhibit to this Annual Report on Form 10-K.
Audit Committee and Audit Committee Financial Expert
The Audit Committee, which consists of Dr. Steven Brueck, M. Scott Faris, Louis Leeburg (Chairman) and Gary Silverman, met four times during fiscal 2013,
which meetings included discussions with management and with the Company’s independent auditors to discuss the interim and annual financial statements and
the annual report of the Company, and the effectiveness of the Company’s financial and accounting functions and organization. The Audit Committee acts
pursuant to a written charter adopted by the Board of Directors, a copy of which is available on the Company’s website at www.lightpath.com. The Audit
Committee’s responsibilities include, among others, direct responsibility for the engagement and termination of the Company’s independent accountants, and
overseeing the work of the accountants and determining the compensation for their engagement(s). The Board of Directors has determined that the Audit
Committee is comprised entirely of independent members as defined under applicable listing standards set out by the SEC, the National Association of
Securities Dealers (NASD) and the NCM. The Board of Directors has also determined that at least one member of the Audit Committee, Mr. Leeburg, is an
“audit committee financial expert” as defined by SEC rules. Mr. Leeburg’s business experience that qualifies him to be determined an “audit committee financial
expert” is described above.
24
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Item 11. Executive Compensation.
Summary Compensation Table for Executive Officers
The following table sets forth certain compensation awarded to, earned by or paid to (i) the Chief Executive Officer and (ii) the two other most highly
compensated executive officers of the Company serving as executive officers at the end of fiscal 2013, which includes the Chief Financial Officer. The Company
did not have any individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer of the
Company as of the end of fiscal 2013.
Name and Position
(a)
J. James Gaynor
President & Chief Executive Officer
Dorothy M. Cipolla
Chief Financial Officer, Treasurer &
Secretary
Alan Symmons
Corporate Vice President of Engineering
Fiscal
Year
(b)
2013
2012
2013
2012
2013
2012
Salary
($)
(c)
214,616
218,943
157,385
159,289
133,538
135,154
Option
Awards
($)**
(f)
37,385
37,702
10,081
9,587
9,409
8,460
All Other
Compensation
Compensation
($) *
(i)
—
—
—
—
—
—
Total
($)
(j)
252,001
256,645
167,466
168,876
142,947
143,614
Notes:
* Other Compensation, as defined by SEC rules does not include the amounts that qualify under the applicable de minimis rule for all periods presented. The de
minimis rule does not require reporting of perquisites and other compensation that totals less than $10,000 in the aggregate. The nature of these compensatory
items include the Company’s contribution toward the premium cost for employee and dependent medical, dental, life and disability income insurances.
** For valuation assumptions on restricted stock units and stock option awards refer to note 9 to the Consolidated Financial Statements of this Annual Report on
Form 10-K for fiscal 2013. The disclosed amounts reflect the dollar amount recognized for financial statement reporting purposes for the fiscal year ended
June 30, 2013 in accordance with FASB ASC Topic 718 and thus may include amounts from awards granted in and prior to fiscal 2013.
Narrative Discussion of Summary Compensation Table of Executive Officers
The following is a narrative discussion of the material information which we believe is necessary to understand the information disclosed in the foregoing
Summary Compensation Table. The following narrative disclosure is separated into sections, with a separate section for each of our executive officers. Each
executive officer receives a base salary, and is eligible for an incentive bonus based on attaining certain goals and long-term equity incentive awards, which are
designed to reward executive officers for achieving strategic milestones, as well as for retaining executive officers and other key employees.
The goals set for the fiscal 2012 and 2013 incentive bonus plans were not met, so no bonus payments were made to the executive officers. The Compensation
Committee did award discretionary stock options to the executive officers for fiscal 2012 and 2013.
J. James Gaynor
Cash Compensation (Base Salary).
Mr. Gaynor earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $214,616. This represents his annual base salary for
fiscal 2013. The base salary paid to Mr. Gaynor for fiscal 2013 constituted approximately 85% of the total compensation paid to Mr. Gaynor as set forth in the
“Total” column in the Summary Compensation Table.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Stock Option Awards.
On November 6, 2007, Mr. Gaynor was granted an option to purchase 15,000 shares, all of which is now vested. Based on the vesting schedule of the option,
we recognized compensation expense of $2,066 in fiscal 2012 under ASC Topic 718, Stock Compensation.
On January 31, 2008, Mr. Gaynor was granted an option to purchase 30,000 shares, all of which is now vested. Based on the vesting schedule of the option, we
recognized $4,241 of compensation expense for fiscal 2012 under ASC Topic 718, Stock Compensation.
On February 4, 2010, Mr. Gaynor was granted an option to purchase 50,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $17,762 of compensation expense for fiscal 2012 and
$17,762 in fiscal 2013. We expect to recognize compensation expense of approximately $10,363 in fiscal 2014 under ASC Topic 718, Stock Compensation.
On November 3, 2010, Mr. Gaynor was granted an option to purchase 25,000 shares. One-fourth of the option shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $8,388 of compensation expense for fiscal 2012 and
$8,388 for fiscal 2013. We expect to recognize compensation expense of approximately $8,388 in fiscal 2014 and $2,797 in fiscal 2015 under ASC Topic 718,
Stock Compensation.
On October 27, 2011, Mr. Gaynor was granted an option to purchase 40,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $5,245 of compensation expense for fiscal 2012 and $6,992
for fiscal 2013. We expect to recognize compensation expense of approximately $6,992 in each of fiscal 2014 and fiscal 2015 and $1,747 in fiscal 2016 under
ASC Topic 718, Stock Compensation.
On October 25, 2012, Mr. Gaynor was granted an option to purchase 40,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $3,565 of compensation expense for fiscal 2013. We expect
to recognize compensation expense of approximately $4,752 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $1,188 in fiscal 2017 under ASC Topic 718,
Stock Compensation.
On January 31, 2013, Mr. Gaynor was granted an option to purchase 13,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the options, we recognized $678 of compensation expense for fiscal 2013. We expect
to recognize compensation expense of approximately $1,355 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $677 in fiscal 2017 under ASC Topic 718,
Stock Compensation.
All Other Compensation.
Mr. Gaynor is eligible to participate in COBRA health insurance and in any other benefits generally available to our employees. He received “other
compensation” for these benefits generally available to all of our employees, including insurance payments for health insurance, dental insurance, life insurance,
short term disability and long term disability premiums.
Change of Control Agreement.
Mr. Gaynor is eligible to receive twenty-four months compensation in the event of a change-of-control. For additional details, please see the section titled
“Potential Payments Upon Termination or Change-of-Control”.
Dorothy Cipolla
Cash Compensation (Base Salary).
Ms. Cipolla earned total cash compensation for her services to the Company in fiscal 2013 in the amount of $157,385. This represents her annual base salary
for fiscal 2013. The base salary paid to Ms. Cipolla for fiscal 2013 constituted approximately 94% of the total compensation paid to Ms. Cipolla as set forth in the
“Total” column in the Summary Compensation Table.
Stock Option Awards.
On November 6, 2007, Ms. Cipolla was granted an option to purchase 10,000 shares, all of which are now vested. Based on the vesting schedule of the option,
the Company recognized compensation expense of $1,375 in fiscal 2012 under ASC Topic 718, Stock Compensation.
On February 4, 2010, Ms. Cipolla was granted an option to purchase 10,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $3,553 in fiscal 2012
and approximately $3,553 in fiscal 2013 and expects to recognize $2,072 in fiscal 2014 under ASC Topic 718, Stock Compensation.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
On November 3, 2010, Ms. Cipolla was granted an option to purchase 9,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $3,020 in fiscal 2012
and $3,020 in fiscal 2013 and expects to recognize compensation expense of approximately $3,020 in fiscal 2014 and $1,007 in fiscal 2015 under ASC Topic
718, Stock Compensation.
On October 27, 2011, Ms. Cipolla was granted an option to purchase 12,500 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $1,640 in fiscal 2012
and $2,185 in fiscal 2013 and expects to recognize compensation expense of approximately $2,185 in each of fiscal 2014 and fiscal 2015 and $545 in fiscal
2016 under ASC Topic 718, Stock Compensation.
On October 25, 2012, Ms. Cipolla was granted an option to purchase 12,500 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $1,114 of compensation expense for fiscal 2013. We expect
to recognize compensation expense of approximately $1,485 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $371 in fiscal 2017 under ASC Topic 718,
Stock Compensation.
On January 31, 2013, Ms. Cipolla was granted an option to purchase 4,000 shares. One-fourth of the option shares vests on each of the first, second, third and
fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $209 of compensation expense for fiscal 2013. We expect to
recognize compensation expense of approximately $417 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $208 in fiscal 2017 under ASC Topic 718, Stock
Compensation.
All Other Compensation.
Ms. Cipolla is eligible to participate in COBRA health insurance and in any other benefits generally available to our employees. She received “other
compensation” for these benefits generally available to all of our employees, including insurance payments for health insurance, life insurance, short term
disability and long term disability premiums.
Change of Control Agreement.
Ms. Cipolla is eligible to receive three months compensation in the event of a change-of-control. For additional details, please see the section titled “Potential
Payments Upon Termination or Change-of-Control”.
Alan Symmons
Cash Compensation (Base Salary).
Mr. Symmons earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $133,538. This represents his annual base salary
for fiscal 2013. The base salary paid to Mr. Symmons for fiscal 2013 constituted approximately 93% of the total compensation paid to Mr. Symmons as set forth
in the “Total” column in the Summary Compensation Table.
Stock Options Awards.
On December 3, 2007, Mr. Symmons was granted an option to purchase 5,000 shares, all of which are now vested. Based on the vesting schedule of the
option, the Company recognized compensation expense of approximately $919 in fiscal 2012 under ASC Topic 718, Stock Compensation.
On February 4, 2010, Mr. Symmons was granted an option to purchase 10,000 shares. One-fourth of the option shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $3,553 in fiscal
2012 and fiscal 2013 and expects to recognize compensation expense of approximately $2,072 in fiscal 2014 under ASC Topic 718, Stock Compensation.
On November 3, 2010, Mr. Symmons was granted an option to purchase 7,000 shares. One-fourth of the option shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $2,349 in fiscal
2012 and $2,349 in fiscal 2013 and expects to recognize compensation expense of approximately $2,349 in fiscal 2014 and $784 in fiscal 2015 under ASC Topic
718, Stock Compensation.
On October 27, 2011, Mr. Symmons was granted an option to purchase 12,500 shares. One-fourth of the option shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, the Company recognized compensation expense of $1,640 in fiscal
2012 and $2,185 in fiscal 2013 and expects to recognize compensation expense of approximately $2,185 in each of fiscal 2014 and fiscal 2015 and $545 in
fiscal 2016 under ASC Topic 718, Stock Compensation.
On October 25, 2012, Mr. Symmons was granted an option to purchase 12,500 shares. One-fourth of the option shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $1,114 of compensation expense for fiscal 2013. We
expect to recognize compensation expense of approximately $1,485 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $371 in fiscal 2017 under ASC Topic
718, Stock Compensation.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
On January 31, 2013, Mr. Symmons was granted an option to purchase 4,000 shares. One-fourth of the options shares vests on each of the first, second, third
and fourth anniversaries of the grant date. Based on the vesting schedule of the option, we recognized $209 of compensation expense for fiscal 2013. We
expect to recognize compensation expense of approximately $417 in each of fiscal 2014, fiscal 2015 and fiscal 2016 and $208 in fiscal 2017 under ASC Topic
718, Stock Compensation.
All Other Compensation.
Mr. Symmons is eligible to participate in COBRA health insurance and in any other benefits generally available to our employees. He received “other
compensation” for these benefits generally available to all of our employees, including insurance payments for health insurance, life insurance, short term
disability and long term disability premiums.
Change of Control Agreement.
Mr. Symmons is eligible to receive three months compensation in the event of a change-of-control. For additional details, please see below.
Potential Payments Upon Termination or Change-of-Control
The following table provides change-of-control payments due to the executive officers named in the Summary Compensation Table. These payments would be
due to the executive officers in the event of a change-of-control.
Executive Officer
J. James Gaynor (2)
Dorothy Cipolla (3)
Alan Symmons (3)
Amount of Payment Upon
A Change of Control (1)
$
$
$
450,000
41,250
35,000
All unvested stock options for Mr. Gaynor immediately vests upon a change of control. If Mr. Gaynor is terminated without cause, he is entitled to three months
paid COBRA benefits.
(1) A change-of-control is defined as any of the following transactions occurring:
·
·
·
·
·
The dissolution or liquidation of the Company,
The stockholders of the Company approve an agreement providing for a sale, lease or other disposition of all or substantially all of the assets
of the Company and the transactions contemplated by such agreement are consummated,
A merger or a consolidation in which the Company is not the surviving entity,
Any person acquires the beneficial ownership of securities of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors, and
The individuals who, prior to the transaction, are members of the Board (the “Incumbent Board”) cease for any reason to constitute at lease
fifty percent (50%) of the Board, except that if the election of or nomination for election by the stockholders of any new director was approved
by a vote of at least fifty percent (50%) of the Incumbent Board, such new director shall be deemed to be a member of the Incumbent Board.
Notwithstanding the foregoing, a public offering of the common stock of the Company shall not be considered a change-of-control.
(2) Payments made pursuant to a change of control to Mr. Gaynor would be paid in a lump sum and would only be paid out in the event Mr. Gaynor was
no longer employed by the Company.
(3) Payments made pursuant to a change-of-control to Ms. Cipolla or Mr. Symmons would occur according to our normal payroll schedule and would only
be paid out in the event they were no longer employed by the Company.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Outstanding Equity Awards at Fiscal Year-End
(a)
Name
(c)
(b)
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised Unexercised
Options (#)
Exercisable Unexercisable
Options (#)
(e)
Option
Exercise
Price ($)
Vesting
Schedule
(f)
Option
Expiration
Date
J. James Gaynor
Dorothy Cipolla
Alan Symmons
15,000
20,000
15,000
30,000
37,500
12,500
10,000
—
—
15,000
20,000
10,000
7,500
4,500
3,125
—
—
5,000
5,000
7,500
3,500
3,125
—
—
— $
— $
— $
— $
12,500 $
12,500 $
30,000 $
40,000 $
13,000 $
$
—
$
—
$
—
2,500
$
4,500 $
9,375 $
12,500 $
4,000 $
$
—
$
—
2,500
$
3,500 $
9,375 $
12,500 $
4,000 $
3.47
4.80
3.05
2.10
2.66
2.69
1.39
0.98
0.87
4.53
4.80
3.05
2.66
2.69
1.39
0.98
0.87
5.24
3.27
2.66
2.69
1.39
0.98
0.87
2 year cliff
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
2 year cliff
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
4 year cliff
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
25%/yr for 4 yrs
7/24/2016
10/27/2016
11/6/2017
1/31/2018
2/4/2020
11/3/2020
10/27/2021
10/25/2022
1/31/2023
2/28/2016
10/27/2016
11/6/2017
2/4/2020
11/3/2020
10/27/2021
10/25/2022
1/31/2023
10/18/2016
12/3/2017
2/4/2020
11/3/2020
10/27/2021
10/25/2022
1/31/2023
The stock options are issued pursuant to the Company’s Amended and Restated Omnibus Incentive Plan and have a ten year life. The awards will terminate 90
days after termination of employment.
Director Compensation
The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on its Board of Directors. In
setting director compensation, the Company considers the significant amount of time that directors expend in fulfilling their duties to the Company as well as the
skill-level required by the Company of members of the Board of Directors.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Cash Compensation Paid to Board Members
For fiscal year 2005 and beyond, all non-employee members of the Board of Directors receive a retainer of $2,000 per month, paid quarterly. There are no
meeting attendance fees paid unless, by action of the Board of Directors, such fees are deemed advisable due to a special project or other effort requiring extra-
normal commitment of time and effort. Additionally, the following fees are paid to the Chairman of the Board and Committee Chairmen on a quarterly basis for
their responsibilities overseeing their respective functions:
Chairman of the Board
Audit Committee Chairman
Compensation Committee Chairman
Finance Committee Chairman
Amount
15,000
2,000
1,000
1,000
$
$
$
$
The Directors earned the amounts above for fiscal 2013, which amounts reflect a 5% reduction from the normal base fee amount. This reduction was put in
place when the Orlando staff received a pay reduction in April 2012. The board fees reverted to the normal base fee amounts when the Orlando pay reduction
was eliminated in the fourth quarter of fiscal 2013. Directors who are employees of the Company receive no compensation for their service as directors.
Stock Option/Restricted Stock Program
All directors are eligible to receive equity incentives under the Company’s Amended and Restated Omnibus Incentive Plan, including stock options, restricted
stock awards or units. In fiscal 2013, the following directors received grants under the Company’s Amended and Restated Omnibus Incentive Plan:
Name of Director
Number of Units
Granted
Grant Date
Fair Value Price
Per Share
Restricted Stock Units
Dr. Steve Brueck
Sohail Khan
Louis Leeburg
Robert Ripp
Gary Silverman
M. Scott Faris
Director Summary Compensation Table
40,000
40,000
40,000
40,000
40,000
40,000
240,000
1/31/2013
1/31/2013
1/31/2013
1/31/2013
1/31/2013
1/31/2013
$
$
$
$
$
$
0.87
0.87
0.87
0.87
0.87
0.87
The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended June 30, 2013.
(a)
Name (1)
Robert Ripp
Sohail Khan
Steve Brueck
Louis Leeburg
Gary Silverman
M. Scott Faris
Fees Earned or
Paid in Cash
($)(2)
(b)
Stock
Awards
($)(3)
(c)
$
$
$
$
$
$
79,800
22,800
22,800
30,400
26,600
22,800
$
$
$
$
$
$
38,461
38,461
38,461
38,461
38,461
10,717
$
$
$
$
$
$
All Other
Compensation
($)
(g)
11,594(4)
—
—
—
—
—
Total
($)
(h)
$
$
$
$
$
$
129,855
61,261
61,261
68,861
65,061
33,517
(1)
J. James Gaynor, the Company’s President and Chief Executive Officer during fiscal 2013, is not included in this table as he was an employee of the
Company and thus received no compensation for his services as director. The compensation received by Mr. Gaynor as an employee of the Company is
shown in the Summary Compensation Table on page 26.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(2)
(3)
(4)
Total fees earned for fiscal 2013, includes all fees earned, including earned but unpaid fees. The amounts of unpaid fees for each director are as follows:
Mr. Ripp - $19,950, Mr. Leeburg - $7,600, Mr. Silverman - $6,650, Dr. Brueck - $5,700, Mr. Khan - $5,700 and Mr. Faris - $5,700.
Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 30, 2013 in accordance with ASC Topic
718 and thus may include amounts from awards granted in and prior to 2013.
Mr. Ripp’s “other compensation” includes monies received for travel reimbursement for fiscal 2013. This amount includes parking, mileage and toll
expenses for Company related meetings and leased aircraft fees for travel to one board meeting.
Narrative Disclosure of Summary Compensation Table of Directors
The following is a narrative discussion of the material information which we believe is necessary to understand the information disclosed in the previous
tables. The following narrative disclosure is separated into sections, with a separate section for each of our directors, expect for Mr. Gaynor.
Robert Ripp
Cash Compensation (Base Fees and Position Fees) .
Mr. Ripp earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $79,800 of which $19,950 was due in accounts
payable at year end. This represents his retainer and chairman fees for fiscal 2013. The base fees to Mr. Ripp for fiscal 2013 constituted approximately 61% of
the total fees paid to Mr. Ripp as set forth in the “Total” column in the Summary Compensation Table.
Long-Term Equity Incentive Awards.
On February 4, 2010, Mr. Ripp was granted a restricted stock unit for 15,000 shares, all of which are now vested. Based on the vesting schedule of the stock,
the Company recognized compensation expense of $9,950 in fiscal 2012 and $5,807 in fiscal 2013 in accordance with ASC Topic 718, Stock Compensation.
On November 3, 2010, Mr. Ripp was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $13,450 in fiscal 2012 and
$13,450 in fiscal 2013 and expects to recognize $4,487 in fiscal 2014 in accordance with ASC Topic 718, Stock Compensation.
On October 27, 2011, Mr. Ripp was granted a restricted stock unit for 29,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $10,078 in fiscal 2012 and
$13,437 in fiscal 2013 and expects to recognize $13,437 in fiscal 2014 and $3,358 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Mr. Ripp was granted a restricted stock unit for 40,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
Sohail Khan
Cash Compensation (Base Fees and Position Fees) .
Mr. Khan earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $22,800 of which $5,700 was due in accounts payable
at year end. This represents his retainer for fiscal 2013. The base fees to Mr. Khan for fiscal 2013 constituted approximately 37% of the total fees paid to
Mr. Khan as set forth in the “Total” column in the Summary Compensation Table.
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EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Long-Term Equity Incentive Awards.
On February 4, 2010, Mr. Khan was granted a restricted stock unit for 15,000 shares, all of which are now vested. Based on the vesting schedule of the stock,
the Company recognized compensation expense of $9,950 in fiscal 2012 and $5,807 in fiscal 2013 in accordance with ASC Topic 718, Stock Compensation.
On November 3, 2010, Mr. Khan was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $13,450 in fiscal 2012 and
$13,450 in fiscal 2013 and expects to recognize $4,487 in fiscal 2014 in accordance with ASC Topic 718, Stock Compensation.
On October 27, 2011, Mr. Khan was granted a restricted stock unit for 29,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $10,078 in fiscal 2012 and
$13,437 in fiscal 2013 and expects to recognize $13,437 in fiscal 2014 and $3,358 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Mr. Khan was granted a restricted stock unit for 40,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
Steven Brueck
Cash Compensation (Base Fees and Position Fees) .
Dr. Brueck earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $22,800 of which $5,700 due in accounts payable at
year end. This represents his retainer for fiscal 2013. The base fees to Dr. Brueck for fiscal 2013 constituted approximately 37% of the total fees paid to
Dr. Brueck as set forth in the “Total” column in the Summary Compensation Table.
Long-Term Equity Incentive Awards.
On February 4, 2010, Dr. Brueck was granted a restricted stock unit for 15,000 shares, all of which are now vested. Based on the vesting schedule of the stock,
the Company recognized compensation expense of $9,950 in fiscal 2012 and $5,807 in fiscal 2013 in accordance with ASC Topic 718, Stock Compensation.
On November 3, 2010, Dr. Brueck was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $13,450 in fiscal 2012 and
$13,450 in fiscal 2013 and expects to recognize $4,487 in fiscal 2014 in accordance with ASC Topic 718, Stock Compensation.
On October 27, 2011, Dr. Brueck was granted a restricted stock unit for 29,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $10,078 in fiscal 2012 and
$13,437 in fiscal 2013 and expects to recognize $13,437 in fiscal 2014 and $3,358 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Dr. Brueck was granted a restricted stock unit for 40,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
Louis Leeburg
Cash Compensation (Base Fees and Position Fees) .
Mr. Leeburg earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $30,400 of which $7,600 was due in accounts
payable at year end. This represents his retainer and fee for audit committee chair for fiscal 2013. The base fees to Mr. Leeburg for fiscal 2013 constituted
approximately 44% of the total fees paid to Mr. Leeburg as set forth in the “Total” column in the Summary Compensation Table.
Long-Term Equity Incentive Awards.
On February 4, 2010, Mr. Leeburg was granted a restricted stock unit for 15,000 shares, all of which are now vested. Based on the vesting schedule of the
stock, the Company recognized compensation expense of $9,950 in fiscal 2012 and $5,807 in fiscal 2013 in accordance with ASC Topic 718, Stock
Compensation.
32
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
On November 3, 2010, Mr. Leeburg was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $13,450 in fiscal 2012 and
$13,450 in fiscal 2013 and expects to recognize $4,487 in fiscal 2014 in accordance with ASC Topic 718, Stock Compensation.
On October 27, 2011, Mr. Leeburg was granted a restricted stock unit for 29,000 shares. One-third of the shares on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $10,078 in fiscal 2012 and
$13,437 in fiscal 2013 and expects to recognize $13,437 in fiscal 2014 and $3,358 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Mr. Leeburg was granted a restricted stock unit for 40,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
Gary Silverman
Cash Compensation (Base Fees and Position Fees) .
Mr. Silverman earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $26,600 of which $6,650 was due in accounts
payable at year end. This represents his retainer and fee for compensation committee chair for fiscal 2013. The base fees to Mr. Silverman for fiscal 2013
constituted approximately 41% of the total fees paid to Mr. Silverman as set forth in the "Total" column in the Summary Compensation Table.
Long-Term Equity Incentive Awards.
On February 4, 2010, Mr. Silverman was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $9,950 in fiscal 2012 and
$5,807 in fiscal 2013 in accordance with ASC Topic 718, Stock Compensation.
On November 3, 2010, Mr. Silverman was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $13,450 in fiscal 2012 and
$13,450 in fiscal 2013 and expects to recognize $4,487 in fiscal 2014 in accordance with ASC Topic 718, Stock Compensation.
On October 27, 2011, Mr. Silverman was granted a restricted stock unit for 29,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $10,078 in fiscal 2012 and
$13,437 in fiscal 2013 and expects to recognize $13,437 in fiscal 2014 and $3,358 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Mr. Silverman was granted a restricted stock unit for 40,000 shares. One-third of the shares on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
M. Scott Faris
Cash Compensation (Base Fees and Position Fees) .
Mr. Faris earned total cash compensation for his services to the Company in fiscal 2013 in the amount of $22,800 of which $5,700 was due in accounts payable
at year end. This represents his retainer and fee for compensation committee chair for fiscal 2013. The base fees to Mr. Faris for fiscal 2013 constituted
approximately 68% of the total fees paid to Mr. Faris as set forth in the "Total" column in the Summary Compensation Table.
Long-Term Equity Incentive Awards.
On December 23, 2011, Mr. Faris was granted a restricted stock unit for 15,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $2,889 in fiscal 2012 and
$4,950 in fiscal 2013 and expects to recognize $4,950 in fiscal 2014 and $2,061 in fiscal 2015 in accordance with ASC Topic 718, Stock Compensation.
On January 31, 2013, Mr. Faris was granted a restricted stock unit for 40,000 shares. One-third of the shares vests on each of the first, second and third
anniversaries of the grant date. Based on the vesting schedule of the stock, the Company recognized compensation expense of $5,767 in fiscal 2013 and
expects to recognize $11,533 in fiscal 2014 and fiscal 2015 and $5,766 in fiscal 2016 in accordance with ASC Topic 718, Stock Compensation.
33
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Item 12. Security Ownership of Certain Beneficial Owners and Management .
Equity Compensation Plan Information
The following table sets forth as of June 30, 2013, the end of the Company's most recent fiscal year, information regarding (i) all compensation plans previously
approved by our stockholders and (ii) all compensation plans not previously approved by our stockholders:
Equity Compensation Plans
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
Weighted average exercise and
grant price of outstanding
options, warrants and rights
Number of securities remaining
available for future issuance
2,715,625
$
—
2.38
—
848,012
—
Plan category
Equity compensation plans approved
by security holders
Equity compensation plans not
approved by security holders
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of September 5, 2013, the number and percentage of outstanding shares of the Company's Class A common stock, owned by:
(i) each director (which includes all nominees) at such date, (ii) each of the named executive officers named in the Summary Compensation Table for Executive
Officers in Item 11 above, (iii) directors and named executive officers of the Company as a group, and (iv) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Class A common stock of the Company.
The number of shares beneficially owned by each director, named executive officer and greater than 5% beneficial owner is determined under SEC rules, and the
information is not necessarily indicative of the beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares to which
the individual has the sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of
September 5, 2013, through the exercise of any stock option or other right to purchase, such as a warrant. Unless otherwise indicated, each person has sole
investment and voting power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. In certain instances, the
number of shares listed may include, in addition to shares owned directly, shares held by the spouse or children of the person, or by a trust or estate of which
the person is a trustee or an executor or in which the person may have a beneficial interest. The table that follows is based upon information supplied in a
questionnaire completed by each named executive officer and director. The information for our stockholders beneficially owning greater than 5% of our Class A
common stock is based on previous information supplied or filed by such stockholders.
34
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Class A Common Stock
Securities
Percent
Owned
(% )
Unrestricted
Warrants
Options
Amount of
Shares of Class
A Common
Stock
Beneficially
Owned
579,526
44,955
57,898
—
42,919
—
43,442
—
—
131,581
3,158
455
—
3,158
—
3,386
36,100
21,100
6,100
6,100
6,100
—
248,000
902,907(3) (4)
(5)
224,913
(6)
220,153
(7)
163,000
(8)
207,877
55,000
294,828
(9)
—
93,000
—
56,000
93,000
56,000
6.1%
1.6%
1.6%
1.2%
1.5%
0.4%
1.5%
*
*
Restricted
(2)
155,700
155,700
155,700
156,900
155,700
55,000
—
—
—
834,700
768,740
141,738
472,500
2,217,678
13.1%
—
2,574,007
—
1,021,855
—
—
—
—
2,574,007 (10)
18.5%
1,021,855 (11)
6.9%
Name and Address (1)
Robert Ripp, Director
Gary Silverman, Director
Louis Leeburg, Director
Sohail Khan, Director
Dr. Steven Brueck, Director
M. Scott Faris, Director
J. James Gaynor, President & CEO
Dorothy Cipolla, CFO, Secretary &
Treasurer
Alan Symmons, Vice President of
Engineering
All directors and named executive
officers currently holding office as a
group (9 persons)
Berg & Berg Enterprises, LLC
Pudong Science and Technology (Cayman)
Co., Ltd.
* less than 1%
Notes:
(1) Except as otherwise noted, each of the parties listed above has sole voting and investment power over the securities listed. The address for all
directors and officers is "in care of" LightPath Technologies, Inc., 2603 Challenger Tech Court, Suite 100, Orlando, FL 32826. The address for Berg & Berg
Enterprises, LLC, as filed on a Schedule 13G filed February 14, 2008, is 10050 Bandley Drive, Cupertino, CA, 94014. The address for Pudong Science and
Technology (Cayman) Co. Ltd., as filed on a Schedule 13G filed August 15, 2013, is 13 Building, No. 439, Chunxiao Rd., Zhangjiang High-tech park, Pudong,
Shanghai 201203, PRC.
(2) Restricted stock units awarded to our directors vest over three years. All directors have elected to defer receipt of the shares until after they leave the
Board, either by reason of resignation, termination or otherwise, therefore these shares remain unissued. All unvested restricted stock units for directors will vest
upon their resignation or termination from the Board. The amount of restricted stock above reflects both vested and unvested shares included in the restricted
stock unit awards. The amounts of vested shares for each director are as follow: Mr. Ripp – 91,366, Mr. Silverman – 91,366, Mr. Leeburg – 91,366, Mr. Khan –
92,566, Dr. Brueck – 91,366 and Mr. Faris – 5,000.
(3) Does not include 7,812 shares of Class A common stock and warrants to purchase 15,000 shares of Class A common stock which are owned by trusts
for Mr. Ripp's adult children and for which he disclaims beneficial ownership.
(4) Includes 167,681 shares of Class A common stock with respect to which Mr. Ripp has the right to acquire. Mr. Ripp holds warrants which are currently
exercisable for an aggregate of 131,581 shares of Class A common stock and options which are currently exercisable for an aggregate of 36,100 shares of Class
A common stock.
(5) Includes 24,258 shares of Class A common stock with respect to which Mr. Silverman has the right to acquire. Mr. Silverman holds warrants which are
currently exercisable for an aggregate of 3,158 shares of Class A common stock and options which are currently exercisable for an aggregate of 21,100 shares
of Class A common stock.
(6) Includes 6,555 shares of Class A common stock with respect to which Mr. Leeburg has the right to acquire. Mr. Leeburg holds warrants which are
currently exercisable for an aggregate of 455 shares of Class A common stock and options which are currently exercisable for an aggregate of 6,100 shares of
Class A common stock.
(7) Includes 6,100 shares of Class A common stock with respect to which Mr. Khan has the right to acquire. Specifically, Mr. Khan holds options which are
currently exercisable for an aggregate of 6,100 shares of Class A common stock.
35
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(8) Includes 9,258 shares of Class A common stock with respect to which Dr. Brueck has the right to acquire. Dr. Brueck holds warrants which are
currently exercisable for an aggregate of 3,158 shares of Class A common stock and options which are currently exercisable for an aggregate of 6,100 shares of
Class A common stock.
(9) Includes 251,386 shares of Class A common stock with respect to which Mr. Gaynor has the right to acquire. Mr. Gaynor holds warrants which are
currently exercisable for an aggregate of 3,386 shares of Class A common stock and options which are currently exercisable for an aggregate of 248,000 shares
of Class A common stock.
(10) Excludes 199,556 shares of Class A common stock with respect to which Berg & Berg Enterprises, LLC ("BBE") may have the right to acquire in the
future. BBE holds warrants which would be exercisable for an aggregate of 199,556 shares of Class A common stock. However, neither BBE nor the Company
is able to effect any exercise of the warrants to the extent that after giving effect to such issuance after exercise BBE would beneficially own in excess of 4.99%
of the number of shares of Class A common stock outstanding immediately after giving effect to the issuance of shares issuable upon exercise warrants. Given
that BBE currently holds 18.5% of the issued and outstanding share of Class A common stock, the warrants cannot be exercised.
(11) Pudong Science and Technology (Cayman) Co., Ltd. is wholly owned by Shanghai Pudong Science and Technology Investment Co., Ltd., and for
purposes hereof is also deemed as beneficial owner of the shares.
There are no arrangements known to the Company which may at a subsequent date result in a change-in-control.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
When the Company is contemplating entering into any transaction in which any executive officer, director, nominee or any family member of the foregoing would
have any direct or indirect interest, regardless of the amount involved, the terms of such transaction have to be presented to the full Board of Directors (other
than any interested director) for approval. The Board has not adopted a written policy for related party transaction review but when presented with such
transaction, they are discussed by the full Board of Directors and documented in the board minutes.
There were no transactions with related persons during fiscal 2013 that are required to be disclosed pursuant to applicable SEC rules.
Director Independence
In accordance with NCM and SEC rules, the Board of Directors affirmatively determines the independence of each director and nominee for election as a director
in accordance with guidelines it has adopted, which include all elements of independence set forth in the NCM listing standards. Based on these standards, the
Board of Directors has determined that each of the following non-employee directors is independent and has no relationship with the Company, except as a
director and stockholder of the Company.
Robert Ripp
Gary Silverman
Louis Leeburg
Steven Brueck
Sohail Khan
M. Scott Faris
All of the members of the audit and compensation committees are also independent.
Item 14. Principal Accountant Fees and Services.
The following table presents fees paid or to be paid for professional audit services rendered by Cross, Fernandez & Riley, LLP ("CFR") for the audit of the
Company's annual financial statements during the years ended June 30, 2013 and 2012, and fees billed for other services rendered by CFR:
Audit Fees (1)
Audit-Related Fees
Tax Fees
All Other Fees
Total All Fees
Fiscal 2013
Fiscal 2012
118,650
—
—
—
118,650
$
119,385
—
14,250
133,635
$
36
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
(1)
Audit Fees consisted of fees billed for professional services rendered for the audit of the Company's annual financial statements and review of the interim
financial statements included in quarterly reports, and review of other documents filed with the SEC within those fiscal years. Other fees in fiscal 2012
related to fees for a withdrawn shelf offering.
The Audit Committee has adopted policies and procedures to oversee the external audit process including engagement letters, estimated fees and solely pre-
approving all permitted audit and non-audit work performed by CFR. The Audit Committee has pre-approved all fees for audit and non-audit work performed.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) The following documents are filed as part of this report:
(1) Financial Statements – See Index on page F-1
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets—As of June 30, 2013 and 2012
Consolidated Statements of Operations and Comprehensive Income—For the years ended June 30, 2013 and 2012
Consolidated Statements of Stockholders' Equity—For the years ended June 30, 2013 and 2012
Consolidated Statements of Cash Flows—For the years ended June 30, 2013 and 2012
Notes to Consolidated Financial Statements
(b) The following exhibits are filed herewith as a part of this report.
Exhibit
Number
Description
3.1.1
Certificate of Incorporation of Registrant, filed June 15, 1992 with the Secretary of State of Delaware
3.1.2
Certificate of Amendment to Certificate of Incorporation of Registrant, filed October 2, 1995 with the Secretary of State of Delaware
3.1.3
Certificate of Designations of Class A common stock and Class E-1 common stock, Class E-2 common stock, and Class E-3 common stock
of Registrant, filed November 9, 1995 with the Secretary of State of Delaware
3.1.4
Certificate of Designation of Series A Preferred Stock of Registrant, filed July 9, 1997 with the Secretary of State of Delaware
3.1.5
Certificate of Designation of Series B Stock of Registrant, filed October 2, 1997 with the Secretary of State of Delaware
3.1.6
Certificate of Amendment of Certificate of Incorporation of Registrant, filed November 12, 1997 with the Secretary of State of Delaware
3.1.7
Certificate of Designation of Series C Preferred Stock of Registrant, filed February 6, 1998 with the Secretary of State of Delaware
3.1.8
Certificate of Designation, Preferences and Rights of Series D Participating Preferred Stock of Registrant filed April 29, 1998 with the
Secretary of State of Delaware
3.1.9
Certificate of Designation of Series F Preferred Stock of Registrant, filed November 2, 1999 with the Secretary of State of Delaware
37
Notes
1
1
1
2
3
3
4
5
6
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
3.1.10
Certificate of Amendment of Certificate of Incorporation of Registrant, filed February 28, 2003 with the Secretary of State of Delaware
3.2
4.1
4.2
Bylaws of Registrant
Rights Agreement dated May 1, 1998, between Registrant and Continental Stock Transfer & Trust Company
First Amendment to Rights Agreement dated as of February 28, 2008, between LightPath Technologies, Inc. and Continental Stock
Transfer & Trust Company
10.1
Directors Compensation Agreement dated November 11, 1999 between Robert Ripp and LightPath Technologies, Inc. and First
Amendment thereto
10.2
Amended and Restated Omnibus Incentive Plan dated October 15, 2002
7
1
5
12
8
9
10.3
Employee Letter Agreement dated June 12, 2008, between LightPath Technologies, Inc., and J. James Gaynor, its Chief Executive Officer
10
& President
10.4
Form of Common Stock Purchase Warrant dated as of December 31, 2008, issued by LightPath Technologies, Inc., to certain investors
10.5
Form of Common Stock Purchase Warrant dated August 19, 2009 issued by LightPath Technologies, Inc., to certain investors
10.6
Form of Common Stock Purchase Warrant dated as of April 8, 2010, issued by LightPath Technologies, Inc. to certain investors
10.7
2004 Employee Stock Purchase Plan dated December 6, 2004
10.8
Form of Common Stock Purchase Warrant dated as of June 11, 2012, issued by LightPath Technologies, Inc. to certain investors
10.9
Securities Purchase Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc. and certain investors
10.10
Registration Rights Agreement dated as of June 11, 2012, by and among LightPath Technologies, Inc., and certain investors
10.11
Memorandum of Understanding Governing the License of Intellectual Property and Manufacturing, Sales and Distribution of
Gradium dated as of September 11, 2012, by and among LightPath Technologies, Inc., and Hubei, New HuaGuang Information Materials
Company, Ltd. (NHG)
10.12
Conversion Agreement dated March 25, 2013 between the Company and certain debenture holders of our 8% convertible debentures
14.1
21.1
23.1
24
31.1
31.2
Code of Ethics
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
38
11
13
14
15
16
16
16
17
18
19
*
*
*
*
*
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
32.1
32.2
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 of Chapter 63 of Title 18 of the United States Code
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Presentation Linkbase Document
Notes:
*
*
*
*
*
*
*
*
1. This exhibit was filed as an exhibit to our Registration Statement on Form SB-2 (File No: 33-80119) filed with the Securities and Exchange Commission on
December 7, 1995 and is incorporated herein by reference thereto.
2. This exhibit was filed as an exhibit to our annual report on Form 10-KSB40 filed with the Securities and Exchange Commission on September 11, 1997 and
is incorporated herein by reference thereto.
3. This exhibit was filed as an exhibit to our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 1997 and is
incorporated herein by reference thereto.
4. This exhibit was filed as an exhibit to our Registration Statement on Form S-3 (File No. 333-47905) filed with the Securities and Exchange Commission on
March 13, 1998 and is incorporated herein by reference thereto.
5. This exhibit was filed as an exhibit to our Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 28, 1998 and is
incorporated herein by reference thereto.
6. This exhibit was filed as an exhibit to our Registration Statement on Form S-3 (File No: 333-94303) filed with the Securities and Exchange Commission on
January 10, 2000 and is incorporated herein by reference thereto.
7. This exhibit was filed as an exhibit to our Proxy Statement filed with the Securities and Exchange Commission on January 24, 2003 and is incorporated
herein by reference thereto.
8. This exhibit was filed as an exhibit to our annual report on Form 10-KSB filed with the Securities and Exchange Commission on August 31, 2000 and is
incorporated herein by reference thereto.
9. The Amended and Restated Omnibus Incentive Plan, dated October 15, 2002 was filed as an exhibit to our Proxy Statement filed with the Securities and
Exchange Commission on September 12, 2002. Amendment No. 1, dated October 20, 2004 and Amendment No. 2, dated December 6, 2004, were filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-121389) filed with the Securities and Exchange Commission on December 17, 2004.
Amendment No. 3, dated November 1, 2007 and Amendment No. 4, dated January 31, 2013, were filed as an exhibit to our Proxy Statement filed with the
Securities and Exchange Commission on December 10, 2012.
10. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2008, and is
incorporated herein by reference thereto.
11. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 6, 2009, and is
incorporated herein by reference thereto.
12. This exhibit was filed as amendment number 1 to Form 8-K/A filed with the Securities and Exchange Commission on February 28, 2008, and is incorporated
herein by reference thereto.
39
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
13. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 20, 2009, and is
incorporated herein by reference thereto.
14. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 9, 2010, and is
incorporated herein by reference thereto.
15. This exhibit was filed as an exhibit to our Registration Statement on Form S-8 (File No, 333-121385) filed with the Securities and Exchange Commission on
December 17, 2004, and is incorporated herein by reference thereto.
16. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on June 11, 2012, and is
incorporated herein by reference thereto.
17. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2012, and is
incorporated herein by reference thereto.
18. This exhibit was filed as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 27, 2013, and is
incorporated herein by reference thereto.
19. This exhibit was filed as an exhibit to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on September 16, 2009, and is
incorporated herein by reference thereto.
* Filed herewith.
40
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies, Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 2013 and 2012
Consolidated Statements of Operations and Comprehensive Income for the years ended June 30, 2013 and 2012
Consolidated Statements of Stockholders' Equity for the years ended June 30, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended June 30, 2013 and 2012
Notes to Consolidated Financial Statements
F-1
F-2
F-3
F-4
F-5
F-6
F-7
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
The Board of Directors
LightPath Technologies, Inc.
Report of Independent Registered Public Accounting Firm
We have audited the accompanying consolidated balance sheets of LightPath Technologies, Inc., and its subsidiaries (the "Company") as of June 30, 2013 and
2012, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing our audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30,
2013 and 2012, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Cross, Fernandez and Riley, LLP
Certified Public Accountants
Orlando, Florida
September 5, 2013
F-2
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LIGHTPATH TECHNOLOGIES, INC.
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Trade accounts receivable, net of allowance of $20,617 and $18,214
Inventories, net
Other receivables
Prepaid interest expense
Prepaid expenses and other assets
Total current assets
Property and equipment, net
Intangible assets, net
Debt costs, net
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities
Accrued payroll and benefits
Deferred revenue
Capital lease obligation, current portion
Total current liabilities
Capital lease obligation, less current portion
Deferred rent
Warrant liability
8% convertible debentures to related parties
8% convertible debentures
Total liabilities
Stockholders' equity:
Preferred stock: Series D, $.01 par value, voting; 5,000,000 shares authorized; none issued
and outstanding
Common stock: Class A, $.01 par value, voting; 40,000,000 shares authorized; 12,958,239
and 11,711,952 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive income
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying notes are an integral part of these consolidated statements.
F-3
June 30,
2013
June 30,
2012
$
$
$
1,565,215
2,126,907
1,770,681
353,530
—
262,236
6,078,569
2,235,781
35,397
—
27,737
8,377,484
1,065,651
110,628
440,462
1,966
3,602
1,622,309
3,302
220,216
1,102,021
—
—
2,947,848
2,354,087
2,133,079
1,513,384
41,000
7,250
201,459
6,250,259
1,920,950
68,265
3,882
27,737
8,271,093
1,129,708
183,910
386,234
37,750
3,602
1,741,204
6,903
345,726
1,087,296
1,012,500
75,000
4,268,629
—
—
129,582
209,645,126
52,736
(204,397,808)
5,429,636
8,377,484
$
117,120
208,410,216
88,258
(204,613,130)
4,002,464
8,271,093
$
$
$
$
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LIGHTPATH TECHNOLOGIES, INC.
Consolidated Statements of Operations and Comprehensive Income
Product sales, net
Cost of sales
Gross margin
Operating expenses:
Selling, general and administrative
New product development
Amortization of intangibles
Loss on disposal of equipment
Total costs and expenses
Operating income (loss)
Other income (expense)
Interest expense
Interest expense - debt costs
Change in fair value of warrant liability
Investment and other income
Net income (loss)
Income (loss) per share - basic
Number of shares used in per share calculation- basic
Income (loss) per common share - diluted
Number of shares used in per share calculation- diluted
Foreign currency translation adjustment
Comprehensive income (loss)
The accompanying notes are an integral part of these consolidated statements.
F-4
Year ended
2013
2012
$
11,783,539
6,608,288
5,175,251
11,284,869
7,250,098
4,034,771
3,990,927
939,025
32,868
2,273
4,965,093
210,158
(96,435)
(3,882)
(14,725)
120,206
215,322
0.02
12,102,124
0.02
12,959,218
(35,522.00)
179,800.00
$
$
$
$
$
3,880,667
1,045,535
32,868
—
4,959,070
(924,299)
(88,729)
(3,298)
103,364
48,095
(864,867)
(0.09)
9,861,596
(0.09)
9,861,596
37,665.00
(827,202.00)
$
$
$
$
$
$
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LIGHTPATH TECHNOLOGIES, INC.
Consolidated Statement of Stockholders' Equity
Years ended June 30, 2013 and 2012
Balance at June 30, 2011
Issuance of common stock for:
Employee stock purchase plan
Interest payment on convertible
debentures
Warrant issued for consulting services
Stock based compensation on stock options
and restricted stock units
Sale of common stock and warrants, net
Net loss
Foreign currency translation adjustment
Class A
Common Stock
Shares
9,713,099
Amount
$
97,131
Additional
Paid-in
Capital
$ 207,636,440
Accumulated
Other
Comprehensive
Accumulated Stockholders'
Total
Income
Deficit
$
50,593
$ (203,748,263)
$
Equity
4,035,901
13,169
41,832
—
—
1,943,852
—
—
132
418
—
—
19,439
—
—
13,463
86,582
15,000
272,044
386,687
—
—
—
—
—
—
—
—
37,665
—
—
—
—
—
(864,867)
—
13,595
87,000
15,000
272,044
406,126
(864,867)
37,665
Balance at June 30, 2012
11,711,952
$
117,120
$ 208,410,216
$
88,258
$ (204,613,130)
$
4,002,464
Issuance of common stock for:
Employee stock purchase plan
Exercise of employee stock options
Conversion of debentures, net of costs
Interest payment on convertible
debentures
Warrant issued for consulting services
Stock based compensation on stock options
and restricted stock units
Net income
Foreign currency translation adjustment
10,567
2,511
1,148,738
84,471
—
—
—
—
106
25
11,487
844
—
—
—
—
8,875
2,587
855,985
86,156
13,000
268,307
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(35,522)
—
215,322
—
8,981
2,612
867,472
87,000
13,000
268,307
215,322
(35,522)
Balance at June 30, 2013
12,958,239
$
129,582
$ 209,645,126
$
52,736
$ (204,397,808)
$
5,429,636
The accompanying notes are an integral part of these consolidated statements.
F-5
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LIGHTPATH TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
Year ended
June 30,
2013
2012
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
$
215,322
$
(864,867)
Depreciation and amortization
Interest from amortization of debt costs
Warrants issued to consultant
Loss on disposal of property and equipment
Stock based compensation
Change in provision for doubtful accounts receivable
Change in fair value of warrant liability
Deferred rent
Changes in operating assets and liabilities:
Trade accounts receivables
Other receivables
Inventories
Prepaid expenses and other assets
Accounts payable and accrued liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Cash flows from financing activities
Proceeds from exercise of stock options
Proceeds from sale of common stock, net of costs
Proceeds from sale of common stock from employee stock purchase plan
Costs associated with settlement of debentures
Repayments of debentures
Payments on capital lease obligation
Net cash provided by (used in) financing activities
Effect of exchange rate on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of cash flow information:
Interest paid in cash
Income taxes paid
Supplemental disclosure of non-cash investing & financing activities:
Prepaid interest on convertible debentures through the issuance of common stock
Issuance of common stock through the conversion of 8% debentures
Fair value of warrants issued to consultant
The accompanying notes are an integral part of these consolidated statements.
F-6
$
$
$
$
$
$
813,234
3,882
—
2,273
268,307
2,403
14,725
(125,510)
3,769
(312,530)
(257,297)
46,473
(83,111)
(35,784)
556,156
(1,097,470)
2,612
—
8,981
(40,028)
(180,000)
(3,601)
(212,036)
(35,522)
(788,872)
2,354,087
1,565,215
1,874
2,350
87,000
907,500
13,000
$
$
$
$
$
1,124,038
3,298
7,500
—
272,044
10,969
(103,364)
(118,536)
(311,004)
(10,057)
109,253
82,671
166,039
37,750
405,734
(628,593)
—
1,596,786
13,595
—
—
—
1,610,381
37,665
1,425,187
928,900
2,354,087
1,670
4,174
87,000
—
15,000
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
1. Organization and History; Management's Plans
Organization and History
LightPath Technologies, Inc. ("LightPath", the "Company", "we", "us" or "our") was incorporated in Delaware in 1992. It was the successor to LightPath
Technologies Limited Partnership formed in 1989, and its predecessor, Integrated Solar Technologies Corporation formed in 1985. On April 14, 2000, the
Company acquired Horizon Photonics, Inc. ("Horizon"). On September 20, 2000, the Company acquired Geltech, Inc. ("Geltech"). The Company completed its
initial public offering ("IPO") during fiscal 1996. In November 2005, we formed LightPath Optical Instrumentation (Shanghai) Co., Ltd ("LPOI"), a wholly-owned
manufacturing subsidiary, located in Jiading, People's Republic of China. The manufacturing operations are housed in a 16,000 square foot facility located in the
Jiading Industrial Zone near Shanghai. This plant increased our overall production capacity and enabled LightPath to compete for larger production volumes of
optical components and assemblies, and strengthened our partnerships within the Asia/Pacific region.
LightPath is a manufacturer and integrator of families of precision molded aspheric optics, high-performance fiber-optic collimator, GRADIUM glass lenses
and other optical materials used to produce products that manipulate light. The Company designs, develops, manufactures and distributes optical components
and assemblies utilizing the latest optical processes and advanced manufacturing technologies. The Company also performs research and development for
optical solutions for the traditional optics markets and communications markets. As used herein, the terms LightPath, the Company, we, us or our, refer to
LightPath individually or, as the context requires, collectively with its subsidiaries on a consolidated basis.
Managements Plans
The Company has previously incurred recurring losses from operations. As of June 30, 2013 the Company has an accumulated deficit of approximately
$204 million. Cash flow from operations was approximately $556,000 and $406,000 during fiscal 2013 and 2012, respectively. Fiscal 2013 was the first profitable
year in the Company's history. The improvements in the cash provided by operations are partly as a result of increased revenues from the additional markets we
are able to address due to our low cost structure as well as manufacturing an product efficiencies. In 2006, we also implemented our cash conservation strategy,
which included reducing labor, material costs and discretionary expense spending. In addition, starting in fiscal 2009 we redesigned certain product lines –
collimators and precision molded optics, increased sales prices on GRADIUM products, obtained more favorable material costs by sourcing some purchased
components in China, and instituted more efficient management techniques, all of which have improved our product yields. Management believes these factors
will contribute towards achieving profitability, assuming we meet our sales targets.
Management has developed an operating plan for fiscal 2014 and believes the Company has adequate financial resources for achievement of that plan
and to sustain its current operations in the coming year. The fiscal 2014 operating plan and related financial projections we have developed anticipate sales
growth primarily from our precision molded optics product line, particularly our low-cost lenses sold in Asia, and the Company's infrared and collimator product
lines. We have been targeting these markets since fiscal 2009. We expect margin improvements based on production efficiencies and reductions in product
costs as a result of the shifting of our manufacturing operations to Shanghai, offset by marginal increases in selling, administrative and new product development
expenditures. However, there is no assurance we will be able to achieve the necessary sales growth and gross margin improvements to sustain operations.
Factors which could adversely affect cash balances in future quarters include, but are not limited to, a decline in revenue or a lack of anticipated sales growth,
increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and
liability insurance premiums and increases in other discretionary spending, particularly sales and marketing related.
Management will be monitoring the plan closely during the year and should the plan objectives not be met during the year, remedial actions will be
initiated. The Company had a cash balance of approximately $1.57 million at June 30, 2013. As discussed in Note 17, during fiscal 2012, the Company raised
approximately $1.6 million from the sale of common stock and warrants. The Company may still seek external debt or equity financing if it can be obtained in an
amount and on terms that are acceptable; however, the Company may be required to seek external financing regardless of whether the terms would otherwise
be acceptable if the Company's financial resources are not sufficient to sustain its operations or to pursue its business plan.
2. Summary of Significant Accounting Policies
Consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Cash and cash equivalents consist of cash in the bank and temporary investments with maturities of 90 days or less when purchased.
F-7
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Allowance for accounts receivable, is calculated by taking 100% of the total of invoices that are over 90 days past due from the due date and 10% of the total
of invoices that are over 60 days past due from the due date. Accounts receivable are customer obligations due under normal trade terms. The Company
performs continuing credit evaluations of its customers' financial condition. Recovery of bad debt amounts previously written off is recorded as a reduction of bad
debt expense in the period the payment is collected. If the Company's actual collection experience changes, revisions to its allowance may be required. After all
attempts to collect a receivable have failed, the receivable is written off against the allowance.
Inventories, which consist principally of raw materials, work-in-process and finished lenses, collimators and assemblies are stated at the lower of cost or market,
on a first-in, first-out basis. Inventory costs include materials, labor and manufacturing overhead. Acquisition of goods from our vendors has a purchase burden
added to cover customs, shipping and handling costs. Fixed costs related to excess manufacturing capacity have been expensed. We look at the following
criteria for parts to consider for the inventory reserve: items that have not been sold in two years or that have not been purchased in two years or of which we
have more than a two-year supply. These items as identified are reserved at 100%, as well as reserving 50% for other items deemed to be slow moving within
the last twelve months and reserving 25% for items deemed to have low material usage within the last six months. The parts identified are adjusted for recent
order and quote activity to determine the final inventory reserve. In the third quarter of fiscal 2013 we placed a 100% reserve on our isolator inventories due to
our current sales forecast for this product line.
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets ranging from
one to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets using the straight-
line method.
Long-lived assets, such as property, plant, and equipment, tooling and purchased intangibles subject to amortization, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the
asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying
amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be
presented separately in the appropriate asset and liability sections of the balance sheet.
Deferred rent relates to certain of the Company's operating leases containing predetermined fixed increases of the base rental rate during the lease term being
recognized as rental expense on a straight-line basis over the lease term. The Company has recorded the difference between the amounts charged to
operations and amounts payable under the leases as deferred rent in the accompanying consolidated balance sheets.
Deferred revenue relates to a $1.1 million purchase order from Raytheon for which revenue is recognized on a percentage of completion basis. The Company is
using the "cost-to-cost method" to allow it to measure progress toward completion based on the ratio of costs incurred to date to total estimated costs. The
Company recorded in deferred revenue, or other receivables, in the accompanying consolidated balance sheet, based on the difference between the amounts
invoiced on the project and the amount recognized into revenue or expenses incurred. As of June 30, 2013, the Company invoiced $743,500 and recognized
$1,097,030 as revenue with the difference of $353,530 recorded as other receivables. At June 30, 2013, we had no billed accounts receivable outstanding with
respect to this purchase order. The project is expected to be completed by December 2013.
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are computed on the basis of differences
between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based upon enacted tax laws
and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances have been established to reduce
deferred tax assets to the amount expected to be realized.
The Company has not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or
penalties has not been provided since there has been no unrecognized benefit or penalty. If there were an unrecognized tax benefit or penalty, the Company
would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
The Company files U.S. Federal income tax returns, and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal, state, or
local, or non-U.S. income tax examinations by tax authorities for years before 2010.
Revenue is recognized from product sales when products are shipped to the customer, provided that the Company has received a valid purchase order, the
price is fixed, title has transferred, collection of the associated receivable is reasonably assured, and there are no remaining significant obligations. Revenues
from product development agreements are recognized as milestones and are completed in accordance with the terms of the agreements and upon shipment of
products, reports or designs to the customer. Invoiced amounts for sales or value-added taxes (VAT) are posted to the balance sheet and not included in
revenue.
F-8
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
New product development costs are expensed as incurred.
Stock-based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite
service period. We estimate the fair value of each restricted stock unit or stock option as of the date of grant using the Black-Scholes-Merton pricing model. Most
awards granted under our Amended and Restated Omnibus Incentive Plan vest ratably over two to four years and generally have four to ten-year contract lives.
The volatility rate is based on historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of
previously outstanding awards. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants
that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable then the compensation expense will be amortized
over the remaining vesting period.
Management estimates. Management makes estimates and assumptions during the preparation of the Company's consolidated financial statements that affect
amounts reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information
becomes available, which in turn could impact the amounts reported and disclosed herein.
Financial instruments. The Company accounts for financial instruments in accordance with ASC 820, which provides a framework for measuring fair value and
expands required disclosure about fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable.
Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the
assumptions that market participants would use in pricing.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2013. The
Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities, which include cash equivalents of $728,000 at June 30,
2013. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments which include cash,
trade receivables, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they
are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
The Company values its warrant liabilities based on open-form option pricing models which, based on the relevant inputs, render the fair value measurement at
Level 3. The Company bases its estimates of fair value for warrant liabilities on the amount it would pay a third-party market participant to transfer the liability
and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable
companies maximizing the use of observable inputs when available. See further discussion at Note 18.
The Company does not have any other financial or non-financial assets or liabilities that would be characterized as Level 2 or Level 3 instruments.
Derivative financial instruments. The Company accounts for derivative instruments in accordance with ASC 815, which requires additional disclosures about
the Company's objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how
the derivative instruments and related hedging items affect the financial statements.
The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible debt instruments are
reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 to be accounted for separately from the
host contract, and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with
corresponding changes in fair value recorded in current period operating results.
F-9
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative
instruments. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required to
be classified as equity or as a derivative liability.
Comprehensive income (loss) of the Company is defined as the change in equity (net assets) of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners
and distributions to owners. Comprehensive income (loss) has two components, net income (loss) and other comprehensive income (loss), and is included on
the statement of operations and comprehensive income. Our other comprehensive income (loss) consists of the foreign currency translation adjustment.
Business segments are required to be reported by the Company. As the Company only operates in principally one business segment, no additional reporting is
required.
Recent accounting pronouncements. The Company has implemented all new accounting pronouncements issued by FASB and the SEC that are in effect and
that may impact its financial statements, and does not believe that there are any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
In July 2013 the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a
Tax Credit Carryforward Exists," which amends ASC 740, "Income Taxes." This new guidance requires that a liability related to an unrecognized tax benefit be
offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if certain criteria are met. The provisions of
this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The
amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The
Company will adopt this guidance during fiscal 2015 and does not expect the adoption to have a material effect on our financial position, results of operations or
cash flows.
3. Inventories – net
The components of inventories include the following:
Raw materials
Work in process
Finished goods
Reserve for obsolescence
June 30, 2013 June 30, 2012
$
$
628,956 $
493,536
874,311
(226,122)
1,770,681 $
578,089
485,429
522,281
(72,415)
1,513,384
During fiscal years 2013 and 2012 the Company evaluated all reserved items and disposed of $9,174 and $33,800, respectively, of parts and wrote them
off against the reserve.
F-10
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
4. Property and Equipment – net
Property and equipment consist of the following:
Manufacturing equipment
Computer equipment and software
Furniture and fixtures
Leasehold improvements
Construction in progress
Tooling
Total property and equipment
Less accumulated depreciation and amortization
Total property and equipment, net
Estimated
Life (Years)
June 30,
2013
June 30,
2012
5 - 10
3 - 5
5
5 - 7
1 - 5
$
$
$
3,859,620
255,100
75,762
826,307
279,869
852,143
6,148,801
3,913,020
2,235,781
$
3,400,004
249,478
86,358
797,219
237,800
880,261
5,651,120
3,730,170
1,920,950
During fiscal years 2013 and 2012, fully depreciated manufacturing equipment and computer equipment in the amount of $4,800 and $123,700,
respectivley, was written off as abandoned assets. Tooling once fully amortized is disposed. Disposals for tooling were $553,300 and $579,700 for fiscal 2013
and 2012, respectively.
5. Intangible Assets – net
Intangible assets consist of the following:
Gross carrying amount
Accumulated amortization
Net carrying amount
June 30, 2013
June 30, 2012
$
$
621,302
(585,905)
35,397
$
$
621,302
(553,037)
68,265
Amortization expense related to intangible assets totaled approximately $33,000 during the fiscal years ended June 30, 2013 and 2012.
The amount of the June 30, 2013, net intangible asset value is expected to be fully amortized by the end of fiscal 2015, with annual amortization estimated
as follows:
2014
32,868
2015
2,529
Total
35,397
6. Accounts Payable
The accounts payable balance includes $51,300 of related party transactions for board of directors' fees for both June 30, 2013 and June 30, 2012.
7. Stockholders' Equity
Preferred stock—The Company's preferred stock consists of the following:
Authorized 5,000,000 shares of Series D preferred stock, $.01 par value. The stockholders of Series D preferred stock are entitled to one vote for each
share held.
Common stock—The Company's common stock consists of the following:
Authorized 40,000,000 shares of Class A common stock, $.01 par value. The stockholders of Class A common stock are entitled to one vote for each
share held.
F-11
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
In June 2012, the Company executed a Securities Purchase Agreement with nineteen institutional and private investors with respect to a private
placement of an aggregate of 1,943,852 shares of our Class A common stock, at $1.02 per share and warrants to purchase 1,457,892 shares of our Common
Stock at an initial exercise price of $1.32 per share (subsequently adjusted to $1.26). The warrants are exercisable for a period of five years beginning on
December 11, 2012. We received aggregate gross cash proceeds from the issuance of the Common Stock (exclusive of proceeds from any future exercise of
the warrants) in the amount $1,982,727.
Warrants
Warrants shares outstanding at June 30, 2013 equal 3,756,771 and include:
•
•
•
•
•
•
•
a warrant to purchase up to 100,000 shares of Class A common stock at $3.20 per share at any time through September 29, 2013 issued
to Robert Ripp on September 29, 2003 issued in connection with his providing a line of credit to the Company;
warrants to purchase up to 605,771 shares of Class A common stock at $1.68 per share and warrants to purchase up to 332,843 shares of
Class A common stock at $1.89 at any time through August 1, 2013 issued in connection with the sale of convertible debentures in fiscal
2009;
warrants to purchase up to 332,102 shares of Class A common stock at $0.87 per share at any time through December 31, 2013 issued in
connection with the conversion of 25% of the convertible debentures in fiscal 2009;
warrants to purchase up to 582,229 shares of Class A common stock at $1.73 per share at any time through February 19, 2015 issued in
connection with a private placement financing in fiscal 2010;
warrants to purchase up to 101,549 shares of Class A common stock at $2.48 per share at any time through October 8, 2015 issued in
connection with a private placement financing in fiscal 2010;
warrants to purchase up to 1,652,277 shares of Class A common stock at $1.26 per share at any time through December 11, 2017 issued
in connection with a private placement financing in fiscal 2012; and
warrants to purchase up to 25,000 shares of Class A common stock at $1.03 per share at any time through December 29, 2015 and
warrants to purchase up to 25,000 shares of Class A common stock at $0.95 per share at any time through April 30, 2016 issued in
connection with an investor relations contract in fiscal 2012.
During July and August 2013 the Company received $1,304,678 in proceeds from the exercise of warrants. The Company issued 829,178 shares of
common stock in connection with these exercises. The exercise prices ranged from $0.87 to $1.89 per share of common stock.
8. Income Taxes
Due to the Company's taxable losses from operations prior to fiscal 2013, there was no provision for income taxes and no taxes were paid during the
years ended June 30, 2013 and 2012. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax
liabilities are as follows at June 30:
Deferred tax assets:
Net operating loss and credit carryforwards
Intangible assets
Capital loss and R&D credits
Research development expenses
Inventory
Accrued expenses and other
Gross deferred tax assets
Valuation allowance for deferred tax assets
Total deferred tax assets
Deferred tax liabilities:
Depreciation and other
Net deferred tax liability
2013
2012
$
35,210,000
148,000
1,442,000
652,000
100,000
56,000
37,608,000
(37,246,000)
362,000
(362,000)
—
$
36,606,000
248,000
1,496,000
694,000
57,000
110,000
39,211,000
(38,800,000)
411,000
(411,000)
—
$
$
The reconciliation of income tax attributable to operations computed at the United States federal statutory tax rates and the actual tax provision of zero
results primarily from the change in the valuation allowance.
F-12
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of
approximately $93.5 million prior to the expiration of net operating loss carry-forwards from 2014 through 2033. Based on the level of historical taxable income,
management has provided for a valuation adjustment against the deferred tax assets of $37,234,000 at June 30, 2013, a decrease of approximately $1,566,000
over June 30, 2012.
At June 30, 2013, in addition to net operating loss carry forwards, the Company also has research and development credit carry forwards of approximately
$1,442,000. A portion of the net operating loss carry forwards may be subject to certain limitations of the Internal Revenue Code Section 382 which would
restrict the annual utilization in future periods due principally to changes in ownership in prior periods.
9. Compensatory Equity Incentive Plan and Other Equity Incentives
Share-based payment arrangements — The Company's Amended and Restated Omnibus Incentive Plan (the "Plan") included several available forms
of stock compensation of which incentive stock options, non-qualified stock options and restricted stock units have been granted to date.
These plans are summarized below:
Equity Compensation Arrangement
Amended and Restated Omnibus Incentive Plan
Employee Stock Purchase Plan
Award Shares
Authorized
Award Shares
Outstanding
at June 30,
2013
Available for
Issuance
at June 30,
2013
2,715,625
200,000
1,419,709
—
2,915,625
1,419,709
848,012
109,457
957,469
The 2004 Employee Stock Purchase Plan ("ESPP") permits employees to purchase common stock through payroll deductions, which may not exceed
15% of an employee's compensation, at a price not less than 85% of the market value of the stock on specified dates (June 30 and December 31). In no event
may any participant purchase more than $25,000 worth of shares in any calendar year and an employee may purchase no more than 4,000 shares on any
purchase date. This discount of $898 and $1,433 for fiscal 2013 and 2012, respectively, is included in selling, general and administrative expense in the
accompanying financial statements.
Grant Date Fair Values and Underlying Assumptions; Contractual Terms— The Company estimates the fair value of each stock option as of the date
of grant. The Company uses the Black-Scholes pricing model. The ESPP fair value is the amount of the discount the employee obtains at the date of the
purchase transaction.
For stock options and restricted stock units ("RSUs") granted in the years ended June 30, 2013 and 2012, the Company estimated the fair value of each
stock award as of the date of grant using the following assumptions:
Expected volatility
Weighted average expected volatility
Dividend yields
Risk-free interest rate
Expected term, in years
Year ended
June 30, 2013
Year ended
June 30, 2012
110% - 120 %
110% - 120 %
0%
0.67% - 1.72%
3 - 7
119% - 122 %
119% - 122 %
0%
0.9% - 2.01%
3 - 7
Most awards granted under the Company's Plan vest ratably over two to four years and generally have three-year to ten-year contract lives. The initial
assumed forfeiture rate used in calculating the fair value of option grants with both performance and service conditions was 20% for 2013 and 2012. The
forfeiture rate for RSUs was 0% for both 2013 and 2012. The volatility rate is based on historical trends in common stock closing prices and the expected term
was determined based primarily on historical experience of previously outstanding awards. The interest rate used is the treasury interest rate for constant
maturities. The forfeiture rate for RSUs for directors is 0% because upon termination of service as a director, all outstanding RSUs immediately vest.
F-13
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Information Regarding Current Share-based Payment Awards— A summary of the activity for share-based payment awards in the years ended
June 30, 2013 and 2012 is presented below:
June 30, 2011
Granted
Exercised
Cancelled
June 30, 2012
Granted
Exercised
Cancelled
June 30, 2013
Awards exercisable/
vested as of
June 30, 2013
Awards unexercisable/
unvested as of
June 30, 2013
Stock Options
Weighted
Average
Exercise
Price
(per share)
Weighted
Average
Remaining
Contract
Life (YRS)
Shares
500,233
$
90,000
—
(13,840)
576,393
$
98,500
(2,511)
(87,373)
3.01
1.39
—
9.14
2.61
0.96
1.05
2.37
585,009
$
2.38
Restricted
Stock Units (RSUs)
Weighted
Average
Remaining
Contract
Life (YRS)
0.9
1.0
—
—
1.0
2.6
—
—
1.1
Shares
434,700
160,000
—
—
594,700
240,000
—
—
834,700
6.9
9.3
—
3.0
6.4
9.4
5.5
7.0
5.9
401,759
$
2.76
4.8
463,030
—
183,250
585,009
$
1.53
8.5
371,670
834,700
1.1
Weighted average fair value
of share awards granted for the year ended
June 30, 2013
Stock
Options
RSU
All Awards
$
0.80
$
0.87
$
0.85
The total intrinsic value of share options exercised for years ended June 30, 2013 and 2012 was $452 and $0, respectively.
The total intrinsic value of shares options outstanding and exercisable at both June 30, 2013 and 2012 was $9,000 and $0 respectively.
The total fair value of shares options vested during the years ended June 30, 2013 and 2012 was $123,000 and $177,000, respectively.
The total intrinsic value of RSUs exercised during the years ended June 30, 2013 and 2012 was $0 and $0, respectively.
The total intrinsic value of RSUs outstanding and exercisable at June 30, 2013 and 2012 was $508,000 and $371,000, respectively.
The total fair value of RSUs vested during the years ended June 30, 2013 and 2012 was $94,000 and $275,000, respectively.
F-14
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
As of June 30, 2013 there was $386,656 of total unrecognized compensation cost related to non-vested share-based compensation arrangements
(including share options and restricted stock units) granted under the Plan. The cost expected to be recognized as follows:
Year ended June 30, 2014
Year ended June 30, 2015
Year ended June 30, 2016
Year ended June 30, 2017
$
$
Stock
Options
Restricted
Stock
Share/
Units
Total
57,371
$
163,769
$
221,140
27,092
12,749
88,056
115,148
34,597
3,022
100,234
$
—
286,422
$
47,346
3,022
386,656
The table above does not include shares under the Company's ESPP, which has purchase settlement dates in the second and fourth fiscal quarters. The
Company's ESPP is not administered with a look back option provision and, as a result, there is not a population of outstanding option grants during the
employee contribution period.
RSU awards vest immediately or from two to four years from the grant date.
The Company issues new shares of common stock upon the exercise of stock options. The following table is a summary of the number and weighted
average grant date fair values regarding our unexercisable/unvested awards as of June 30, 2013 and 2012 and changes during the two years then ended:
Weighted-Average
Grant Date Fair Values
2.53
$
1.30
2.27
2.42
0.85
1.91
1.64
1.57
$
$
Unexercisable/unvested awards
June 30, 2011
Granted
Vested
June 30, 2012
Granted
Vested
Cancelled/Forfeited
June 30, 2013
Stock Options
Shares
182,500
90,000
(74,375)
198,125
98,500
(59,875)
(53,500)
183,250
RSU Shares
200,000
160,000
(125,000)
235,000
240,000
(103,330)
—
371,670
Total Shares
382,500
250,000
(199,375)
433,125
338,500
(163,205)
(53,500)
554,920
Acceleration of Vesting— The Company has not accelerated the vesting of any stock options or RSUs.
F-15
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Financial Statement Effects and Presentation—The following table shows total stock-based compensation expense for the years ended June 30, 2013 and
2012 included in the Consolidated Statement of Operations and Comprehensive Income:
Stock options
RSU
Total
The amounts above were included in:
General & administrative
Cost of sales
New product development
10. Earnings Per Share
Year ended
June 30,
2013
Year ended
June 30,
2012
65,286
203,021
268,307
263,247
(4,350)
9,410
268,307
86,096
185,948
272,044
254,337
8,328
9,379
272,044
Basic earnings per share is computed by dividing the weighted-average number of shares of Class A common stock outstanding, during each period
presented. Diluted earnings per share is computed similarly to basic earnings per share except that it reflects the potential dilution that could occur if dilutive
securities or other obligations to issue shares of Class A common stock were exercised or converted into shares of Class A common stock. The computations for
basic and diluted earnings per share are described in the following table:
Net income (loss)
$
215,322
$
(864,867)
Year ended
June 30,
2013
2012
Weighted average common shares outstanding:
Basic
Effect of dilutive securities:
Options to purchase common stock
Restricted stock units
Common stock warrants
Diluted
Earnings (Loss) per common share:
Basic
Diluted
Excluded from computation:
Options to purchase common stock
Restricted stock units
Common stock warrants
Convertible debentures
12,102,124
9,861,596
1,438
834,700
20,956
12,959,218
—
—
—
9,861,596
$
$
0.02
0.02
$
$
(0.09)
(0.09)
583,571
—
3,424,669
—
4,008,240
576,393
594,700
4,041,771
706,169
5,919,033
F-16
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
11. Defined Contribution Plan
The Company discontinued its profit sharing plan that permitted participants to make contributions by salary reduction pursuant to Section 401(k) of the
Internal Revenue Code of 1986, as amended, in January 2009. Effective January 1, 2009, the Company transferred all plan assets to the ADP Total Source
401(k) plan. The ADP plan is a defined 401(k) contribution plan which all employees, over the age of 21, are eligible to participate in after three months of
employment. The Company matched 25% of the first 6% of employee contributions until February 27, 2009 when the match was eliminated. Currently there are
17 employees who are enrolled in this program. The 401(k) contribution plan is administered by a third party. Annual discretionary contributions, if any, are made
by the Company to match a portion of the funds employees contribute. The Company made no matching contributions during the fiscal years ended June 30,
2012 and 2013.
12. Lease Commitments
The Company has operating leases for office space. At June 30, 2013, the Company has a lease agreement for a manufacturing and office facility in
Orlando, Florida (the "Orlando Lease"). The Orlando Lease, which is for a six-year original term with renewal options, expires April 2015.
As of June 30, 2013, the Company, through its wholly-owned subsidiary, has a lease agreement for a manufacturing and office facility in Shanghai, China
(the "China Lease"). The China Lease, which is for a five-year original term with renewal options, expires April 2014.
During June 2012, the company entered into three-year capital lease agreements for computer equipment and is included as part of Property and
Equipment. Assets under capital lease are included in computer equipment and software for $10,500, with accumulated amortization as of June 30, 2013 of
$3,343. Amortization related to capital leases will be included in depreciation expense.
Rent expense totaled $434,930 and $436,192 during the years ended June 30, 2013 and 2012, respectively.
The approximate future minimum lease payments under capital and operating leases at June 30, 2013 were as follows:
Fiscal year ending June 30,
Capital Lease
Operating Lease
2014
2015
Total minimum payments
Less imputed interest
Present value of minimum lease payments
Less short term portion
Long term portion
13. Contingencies
456,556
339,631
796,187
$
$
4,300
3,942
8,242
(1,338)
6,904
3,602
3,302
The Company from time to time is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal
counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company's financial
position or results of operations.
14. Foreign Operations
Assets and liabilities denominated in non-U.S. currencies are translated at rates of exchange prevailing on the balance sheet date, and revenues and
expenses are translated at average rates of exchange for the period. Gains or losses on the translation of the financial statements of a non-U.S. operation,
where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity which was a gain of $52,736 and $88,258 at June 30,
2013 and 2012, respectively. The Company as of June 30, 2013 had approximately $5,403,000 in assets and $4,327,000 in net assets located in China. The
Company as of June 30, 2012 had approximately $4,304,000 in assets and $3,362,000 in net assets located in China.
F-17
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
15. Significant Suppliers and Customers
We utilize a number of glass compositions for the manufacture of our molded glass aspheres and lens array products. We purchase glass from Hikari,
Ohara, CDGM and other suppliers.
Base optical materials, used in both GRADIUM and collimator products, are manufactured and supplied by a number of major optical and glass
manufacturers. Optical fiber and collimator housings are manufactured and supplied by a number of major manufacturers.
In fiscal 2013 sales to five customers individually comprised at least 5% of our annual sales, with sales to Crimson Trace at 7%, sales to AMS
Technologies AG at 10%, sales to Thorlabs at 9%, sales to Red Digital at 6% and sales to IPG Photonics at 6%. The loss of any of these customers, or a
significant reduction in sales to any such customer, would adversely affect our revenues.
In fiscal 2012 sales to four customers individually comprised at least 5% of our annual sales, with sales to Crimson Trace at 10%, sales to AMS
Technologies AG at 9%, sales to Thorlabs at 9% and sales to Raytheon Missile Systems at 5%. The loss of any of these customers, or a significant reduction in
sales to any such customer, would adversely affect our revenues.
16. Convertible Debentures
On August 1, 2008, we executed a Securities Purchase Agreement with respect to the private placement of the Debentures. Among the investors were
Steven Brueck, J. James Gaynor, Louis Leeburg, Robert Ripp, Gary Silverman and James Magos, all of whom were directors or officers of LightPath as of
August 1, 2008. Mr. Magos resigned effective September 2, 2008.
Interest accruing on the Debentures was paid by issuing Class A common stock. Interest due for August 1, 2008 to August 1, 2011 was paid by issuing
27,893 shares of Class A common stock in October 2008 and 665,692 shares in December 2008. Interest accruing from August 1, 2011 to August 1, 2013, the
maturity date, was paid by issuing 41,832 shares in August 2011 and 76,078 shares in August 2012.
Investors also received warrants to purchase up to 950,974 shares of our common stock (the "Warrants"). The Warrants were exercisable for a period of
five years beginning on August 1, 2008 with 65% of the Warrants, exercisable for 618,133 shares, priced at $1.68 per share and the remaining 35% of the
Warrants, exercisable for 332,841 shares, priced at $1.89 per share. We received gross proceeds of $970,315 from the exercise of these warrants.
We paid a commission to the exclusive placement agent for the offering, First Montauk Securities Corp. ("First Montauk"). We also issued to First
Montauk and its designees warrants to purchase an aggregate of 190,195 shares of our Class A common stock at an exercise price equal to $1.68 per share.
The warrants were exercisable for a period of five years beginning on August 1, 2008.
On December 31, 2008, the Debentures were amended to allow debenture holders to convert 25% of their Debentures into shares of Class A common
stock. As a result, $732,250 of the Debentures were converted into 475,496 shares of Class A common stock. As an inducement to partially convert the
Debentures, we issued additional warrants.
On March 25, 2013, the Company and the remaining Debenture holders holding approximately 93.10% of the outstanding principal amount of the
Debentures executed the Conversion Agreement in connection with the early conversion of the Debentures. The Debenture holders party to the Conversion
Agreement were Steven Brueck, J. James Gaynor, Louis Leeburg, Robert Ripp and Gary Silverman, all of whom are directors or officers of the Company, and
BBE, a greater than 5% beneficial stockholder of the Company. In consideration of converting the Debentures prior to the maturity date, the Company issued to
each Debenture holder additional shares of Class A common stock to compensate the converting Debenture holders for the difference between the conversion
price per share, or $1.54, and the closing bid price per share of common stock as reported on the Nasdaq Capital Market on March 22, 2013, or $0.79 (the
"Conversion Incentive Shares"). In connection with the conversion of the Debentures, the Company issued a total of 1,148,738 shares of common stock,
559,448 of which we issued as Conversion Incentive Shares.
In order to ensure BBE did not exceed its 19.9% beneficial ownership limitation, set forth in the Conversion Agreement, BBE partially converted its
Debenture and the Company prepaid the outstanding principal amount due under BBE's Debenture following the partial conversion.
The remaining Debenture holder not party to the Conversion Agreement consented to the Company prepaying the outstanding principal amount due
under its Debenture. The Company paid this amount, which totaled $75,000, on March 28, 2013.
F-18
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
The summary of the Debenture conversion activity by fiscal year is as follows:
Fiscal Year
2009
2010
2011
2012
2013
Outstanding
Principal
Amount
Converted
$
$
$
$
$
732,250
262,500
832,500
14,250
1,087,500
Repayment of
Outstanding
Principal
Amounts
0
0
0
14,250
180,000
Shares Issued
475,487
170,455
540,592
0
589,590
$
$
$
$
$
The issuance of the Conversion Incentive Shares also resulted in an adjustment to the exercise price of the warrants issued to certain investors on June
11, 2012 in connection with the Company's private placement. The exercise price of the warrants was adjusted from $1.32 to $1.26 per share. Since the
Conversion Incentive Shares were issued to related party debt holders, the value of such shares was considered a capital contribution and was included as an
offset to additional paid-in capital with no effect on the statement of operations and comprehensive income (loss).
Total principal outstanding on the Debentures and the principal amount outstanding specifically to directors, officers and stockholders owning at least
10% of the Company's securities under the Debentures was $0 and $0, respectively at June 30, 2013 and $1,087,500 and $1,012,500, respectively at June 30,
2012.
17. Private Common Stock Placements
On June 11, 2012, we executed a Securities Purchase Agreement with respect to a private placement of an aggregate of 1,943,852 shares of our Class
A common stock at $1.02 per share and warrants to purchase 1,457,892 shares of our common stock at an exercise price of $1.32 per share ("June 2012
Warrants"). The June 2012 Warrants are exercisable for a period of five years beginning on December 11, 2012. We received aggregate gross cash proceeds
from the issuance of the Class A common stock (exclusive of proceeds from any future exercise of the June 2012 Warrants) in the amount $1,982,727. We used
the funds to provide working capital to support the continued growth of our business, primarily the expansion of our infrared molding capacity and enhancement
of our glass preparation processes and test and measurement capability. The funding also supported new product development and the acquisition of new
equipment, critical to the Company's growth plans.
The Company paid a commission to the exclusive placement agent for the offering, Meyer Associates, LP ("Meyer"), in an amount equal to $198,300
plus costs and expenses. The Company also issued to Meyer and its designees warrants to purchase an aggregate of 194,385 shares of our Class A common
stock at exercise price equal to $1.32 per share, for a five-year term beginning December 11, 2012. Legal and other expenses to register the Class A common
stock were approximately $187,641, reducing the proceeds of the offering.
As discussed in Note 16, the issuance of the Conversion Incentive Shares resulted in an adjustment to the exercise price of the June 2012 Warrants,
including the warrants issued to Meyer and its designees. The exercise price of the June 2012 Warrants were adjusted from $1.32 to $1.26 per share. This
reduced exercise price lowered potential proceeds on the exercise of the June 2012 Warrants by $87,474 to $1,836,944. After June 30, 2013, we have received
gross proceeds from exercises of the June 2012 Warrants in the amount of $326,120.
The June 2012 Warrants issued in this placement were determined to be a derivative liability, see Note 18 to the Consolidated Financial Statements.
18. Derivative Financial Instruments (Warrant Liability)
The Company accounted for the June 2012 Warrants issued to investors under the June 11, 2012 Securities Purchase Agreement (see Note 17 above)
in accordance with ASC 815-10, Derivatives and Hedging ("ASC 815-10"). ASC 815-10 provides guidance for determining whether an equity-linked financial
instrument (or embedded feature) is indexed to an entity's own stock. This applies to any freestanding financial instrument or embedded feature that has all the
characteristics of a derivative under ASC 815-10, including any freestanding financial instrument that is potentially settled in an entity's own stock.
Due to certain adjustments that may be made to the exercise price of the June 2012 Warrants if the Company issues or sell shares of its Class A
common stock at a price which is less than the then current warrant exercise price, the June 2012 Warrants have been classified as a liability as opposed to
equity in accordance with ASC 815-10 as it was determined that the June 2012 Warrants were not indexed to the Company's Class A common stock. As a
result, the fair value of the June 2012 Warrants were remeasured on June 30, 2013 to reflect their fair market value at the end of the current reporting period.
The June 2012 Warrants will be remeasured at each subsequent financial reporting period. The change in fair value of the June 2012 Warrants is recorded in the
statement of operations and comprehensive income and is estimated using the Lattice option-pricing model using the following assumptions:
F-19
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Inputs into Lattice model for warrants:
Equivalent volatility
Equivalent interest rate
Estimated stock price
Floor
Greater of estimated stock price or floor
Probability price < Strike
Fair value of put
Probability of Fundamental Transaction occuring
6/30/2013
81.03%
0.44%
1.0866
1.1500
1.1500
75.95%
0.8457
5%
$
$
$
$
All warrants issued by the Company other than the above noted June 2012 Warrants are classified as equity.
The warrant liabilities are considered a recurring Level 3 fair value measurement, with a fair value of $1,102,021 at June 30, 2013.
The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the year ended June 30, 2013:
Fair value, June 30, 2012
Change in fair value of warrant liability
Fair value, June 30, 2013
19. Withdrawn Financing Plan
Warrant Liability
$
$
1,087,296
14,725
1,102,021
On September 29, 2011, the Company filed a Registration Statement on Form S-1, as subsequently amended (Registration No. 333-177079) (the
"Registration Statement") with the SEC announcing its intention to raise funds through the sale of Class A common stock in a fully-underwritten public offering.
The Company intended to sell up to 4.5 million units, with each unit consisting of one share of our Class A common stock, one Warrant A to purchase 0.25
shares of our Class A common stock and one Warrant B to purchase 0.25 shares of our Class A common stock. On January 27, 2012, the Company filed a
request for withdrawal of the Registration Statement with the SEC. The Company had determined that it was not in the best interests of the Company to proceed
with the offering due to business, economic and market conditions. Prepaid offering costs of approximately $227,000 were written off in the fiscal quarter ended
March 31, 2012 and are included in selling, general and administrative costs on the accompanying consolidated statement of operations and comprehensive
income.
20. Deferred Revenue/Costs in Excess of Billings
In January 2012, the Company received a purchase order for $1.1 million from Raytheon. The purchase order is for development of low cost
manufacturing processes for infrared optics and is in support of Raytheon's $13.4 million Defense Advanced Research Projects Agency's (DARPA) Low Cost
Thermal Imaging Manufacturing (LCTI-M) program. The goal of LCTI-M is to develop a wafer scale manufacturing process that will result in a camera on a chip,
making thermal imagers affordable, accessible, and ubiquitous to every warfighter.
The Company is using the "cost-to-cost method" to allow it to measure progress toward completion based on the ratio of costs incurred to date to total
estimated costs. The Company has recorded in costs in excess of billings on the accompanying consolidated balance sheet the difference between the amounts
invoiced on the project and the amount recognized into revenue.
As of June 30, 2013, the Company invoiced $743,500 and recognized $1,097,030 as revenue ($481,000 recognized during fiscal 2013). The balance of
$353,530 is recorded as other receivables. The project is expected to be completed by December 2013. At June 30, 2013, the Company had no billed accounts
receivable outtanding with respect to this purchase order as of June 30, 2013.
F-20
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
21. License of GRADIUM Intellectual Property
On September 19, 2012, the Company and Hubei New Hua Guang Information Materials Company, Ltd. ("NHG") entered into an exclusive Intellectual
Property License Agreement for the Company's GRADIUM® glass products. The license agreement is for an initial term of five years expiring on September 19,
2017, which extends beyond the remaining life of the patents. Pursuant to the license agreement, the Company will receive $150,000 in licensing fees along
with royalties on product sales starting in the fourth year of the agreement. The transaction is being accounted for under the guidance of ASC 605-10, Revenue
Recognition which states, in part, revenue can be recognized when collection of the fee agreement can be reasonably assured. The Company determined that
$50,000 of the $150,000 license fee under this agreement, representing the first milestone payment, was reasonably assured of being collected as of September
30, 2012. The Company recognized the $50,000 as other income for the quarter ended September 30, 2012 and collected the funds in the quarter ended
December 31, 2012. No revenue on this license agreement was recognized in the remainder of fiscal 2013.
End of Consolidated Financial Statements
F-21
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LIGHTPATH TECHNOLOGIES, INC.
Date: September 5, 2013
By:
/s/ J. James Gaynor
J. James Gaynor
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ J. JAMES GAYNOR
James Gaynor,
President & Chief Executive Officer
(Principal Executive Officer)
/s/ ROBERT RIPP
Robert Ripp
Director (Chairman of the Board)
/s/ DR. STEVEN R. J. BRUECK
Dr. Steven R. J. Brueck
Director
/s/ M. Scott Faris
M. Scott Faris
Director
September 5, 2013
September 5, 2013
September 5, 2013
September 5, 2013
/s/ DOROTHY M. CIPOLLA
Dorothy M. Cipolla,
Chief Financial Officer
(Principal Financial Officer)
/s/ SOHAIL KHAN
Sohail Khan
Director
/s/ LOUIS LEEBURG
Louis Leeburg
Director
/s/ GARY SILVERMAN
Gary Silverman
Director
September 5, 2013
September 5, 2013
September 5, 2013
September 5, 2013
S-1
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
Exhibit 21.1
Subsidiaries
Exhibit 21
GelTech Inc.
LightPath Optical Instrumentation (Shanghai) Co., Ltd
Delaware Corporation
People’s Republic of China
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
LightPath Technologies, Inc.
Orlando, Florida
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the registration statements (Nos. 333-23515, 333-23511, 333-41705, 333-92017, 333-121389, 333-
121385, 333-96083, 333-50976, 333-50974, 333-155044 and 333-188482) on Form S-8 and (Nos. 333-113814, 333-37443, 333-39641, 333-47905, 333-
86185, 333-93179, 333-94303, 333-31014, 333-37622, 333-47992, 333-51474, 333-75528, 333-127053, 333-133772, 333-146550, 333-153743, 333-159603,
333-162342, 333-163416, 333-166633 and 333-182240) on Form S-3 of LightPath Technologies, Inc. of our report dated September 5, 2013, relating to the
consolidated financial statements,, which appears in this Form 10-K.
/s/ Cross, Fernandez & Riley, LLP
Cross, Fernandez & Riley, LLP
Certified Public Accountants
Orlando, Florida
September 5, 2013
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 8-K
POWER OF ATTORNEY
Exhibit 24
KNOW ALL BY THESE PRESENTS, that the undersigned constitutes and appoints J. James Gaynor and Dorothy Cipolla, and each of them, his true and lawful
attorneys’-in-fact and agents, with full power of substitution and resubstitution, for and in his name, place and stead, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended June 30, 2013, and any and all amendments thereto and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises as fully to all intents and purposes as
might or could be done in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their substitute or substitutes
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, this Power of Attorney has been signed on this 23rd day of August 2013 by the following persons.
/s/ Robert Ripp
Robert Ripp
/s/ Sohail Khan
Sohail Khan
/s/ Steven Brueck
Steve Brueck
/s/ Gary Silverman
Gary Silverman
/s/ M. Scott Faris
M. Scott Faris
/s/ J. James Gaynor
J. James Gaynor
/s/ Louis Leeburg
Louis Leeburg
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, J. James Gaynor, certify that:
1. I have reviewed this annual report on Form 10-K of LightPath Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 5, 2013
/s/ J. James Gaynor
J. James Gaynor
President and Chief Executive Officer
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934
I, Dorothy M. Cipolla, certify that:
1. I have reviewed this annual report on Form 10-K of LightPath Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: September 5, 2013
/s/ Dorothy M. Cipolla
Dorothy M. Cipolla
Chief Financial Officer
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
Exhibit 32.1
Certifications of Chief Executive Officer
Pursuant to 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of LightPath
Technologies, Inc. (the "Company") does hereby certify, to the best of such officer's knowledge, that:
1. The Annual Report on Form 10-K of the Company for the year ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a)
or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: September 5, 2013
/s/ J. James Gaynor
J. James Gaynor,
President and Chief Executive Officer
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature
that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LightPath Technologies, Inc. and
will be retained by LightPath Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.
LightPath Technologies 10-K
Exhibit 32.2
Certifications of Chief Financial Officer
Pursuant to 1350 of Chapter 63 of Title 18 of the United States Code
Pursuant to U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of LightPath
Technologies, Inc. (the "Company") does hereby certify, to the best of such officer's knowledge, that:
1. The Annual Report on Form 10-K of the Company for the year ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a)
or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: September 5, 2013
/s/ Dorothy M. Cipolla
Dorothy M. Cipolla,
Chief Financial Officer
The certifications set forth above are being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended.
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging or otherwise adopting the signature
that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to LightPath Technologies, Inc. and
will be retained by LightPath Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.