Good afternoon and welcome to the LightPath Technologies Fiscal 2022 Third Quarter Financial Results Conference Call. All participants’ will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Albert Miranda, Chief Financial Officer. Please go ahead.

Thank you. Good afternoon, everyone. Before we get started, I'd like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectations involve various risks and uncertainties, including the impact of COVID-19 pandemic those discussed in this periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them to be proven to be inaccurate and there can be no assurances that the results would be realized. In addition, references may be made to certain non-generally accepted accounting principles, or non-GAAP measures for which you should refer to the appropriate disclaimers and reconciliations in the company's SEC filings and press releases. Following the management's discussion, there will be a formal question-and-answer session open to participants on the call. I would now like to turn the conference over to Sam, LightPath’s President and Chief Executive Officer.

Thank you, Alan. Good afternoon to everyone, and welcome to LightPath Technologies fiscal [2021] sic [2022] third quarter financial results conference call. Our financial results press release was issued after the market closed today and posted at our corporate website. I want to start today's call by providing you a brief update on our company and the vision we have for the future of the business. The area of optics and photonics is at the truly exciting inflection points, technological advances have made solutions in optics and photonics available and applicable to products and services in a wide variety of industries. Optical solutions are now applicable to products in LIDAR, drones, augmented and virtual reality, medical field, sporting and consumer goods, to name a few. An example of one such application is LIDAR for autonomous drones for which we recently announced a collaboration with Attollo Engineering. We believe that when a technology like photonics moves from being a speciality technology to being integrated into mainstream industries and applications. Our advantages and the main expertise make us an ideal partner for providing the optical engine of our customers' systems. Owning the critical differentiating technologies such a unique materials, high volume molding technology, freeform optics and others position us to both create unique value for those customers and capture that value in the form of stronger profit margins and long-term agreements, engagement with our customers. Photonics can be embedded in products across many industries and it is estimated to represent as much as 11% of the global economy. The integration of photonics into mainstream products provides us with a built-in product and customer diversification opportunities. In the past LightPath was primarily focused on components within the manufacturing supply chain that strategy was designed around the permits that photonics is not wildly adopted,…

Thank you, Sam. I'd like to remind everyone that much of the information we're discussing during this call is also included in our press release issued earlier today and will be included in the 10-Q for the period. I encourage you to visit our website at lightPath.com. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist investors in analyzing the company. As a reminder, we had been significantly impacted by the transition of business conditions in China during the fourth quarter of fiscal 2021 and into the fiscal year. LightPath’s third quarter financial results are also negatively impacted by expenses associated with the management employee transition and our Chinese subsidiaries, although to a lesser extent than in recent quarters. On a consolidated basis revenue for the third quarter of fiscal 2022 was $8.3 million, compared to $10.7 million in the year ago period. Sales of infrared products were $3.7 million or 45% of the company's consolidated revenue in the third quarter of fiscal 2022. Revenue from the PMO products was $4 million or 48% of consolidated revenue, revenue from specialty products was 547,000 or 7% of total company revenue. The decrease in revenue from sales of infrared products is primarily due to a decrease in sales to customers -- excuse me, in the industrial market and for temperature sensing applications, which peaked in demand during the third quarter of fiscal 2021. PMO sales increased 3% in the third quarter of fiscal 2022, compared to the third quarter of fiscal 2021, since the drop off of PMO sales in the fourth quarter of 2021, sales of PMO products in China have improved sequentially each quarter of fiscal 2022, driven in part by other telecommunication customers, as well as an increased sales…

We will now begin the question-and-answer session. [Operator Instructions] And our first question will come from Gene Inger with ingerletter.com. Please go ahead.

Hi, Sam and Al, it sounds like an interesting quarter, obviously still in the turnaround mode. Excuse me, and I think the -- it looks like SG&A were actually lower, but it also looks like unit profits dropped, did they for both PMO and infrared?

Yes, so the units fluctuate all the time and is really dependent on the mix. We began to see some of the larger customers in China, especially in telecom come back to some degree as we discussed last quarter. And those tend to be lower unit prices on them. In the infrared this varied significantly. Engineered Solutions and assemblies can be in 100s of dollars sometimes where individual components can be in the 10s of dollars or less. So we tend to stay away from giving too much importance to the average sale prices, fluctuation, since the mix of product and what we do has been varying considerably more. But yes, thanks for noticing the SG&A and the effects, I think the don't think considered given $8.3 million topline results are pretty good and the continued improvement in gross margins even when topline hasn't grown really in that specific quarter is very encouraging.

Right, that causes me Sam to ask this, the market cap is so low, of course there’s hundreds of companies that are, you know, far move into almost oblivion at this point. A, it looks like you're making it through this, B you've been pointing in the right direction, but you're trading at around 1 times sales and you would think from an investor standpoint that's very cheap. And then, maybe I'm just giving an opinion, but I don't know whether you actually want to eventually shop the company for sale or some sort of a merger, but is it had essentially undervalued based on even a reasonable growth?

Yes, I think first of all, I agree with you that in my independent opinions that it's undervalued and an attractive investment. As a public company, we always open for all options and we have a rule out anything, we're not actively shopping the company around. We think that we have, as you said heading in the right direction, a lot of the indication, lot that we're doing the right thing. Sometimes it's a matter of timing and you know it happened to me that our discovery of the multi-year effect in China happens at the time where the market was valuing and so we've been enjoy it as much of that rally. And now, while recovery is happening in the time where the market is down, in a bear market. So, sometimes it's just as simple as that.

So I guess my last question for the moment, so others can come on -- would might be, if you have a lot of experience in China you turned around and built a big company there in -- an earlier life, and I wonder whether you envision growing China or eventually with this new focus with the Navy and so on and on free form optics and I enjoyed your discussion, which is on YouTube in Washington. I wonder whether you would eventually drop off China, spent it off somehow and concentrate on the domestic scene, which seems to be doing better for the company?

Yes, definitely our investment approach has changed considerably in the last two years since I joined. We stopped investing in China even before all of those events. We rerouted really all of our investments, due to the Latvia operation, which serves the U.S. by being an vital facility and now to Orlando where we're essentially doubling our manufacturing space and bringing manufacturing back. That said the operation we have in China is still very important, it’s a good cash generator for us, it's our core technology, which we wouldn't spin-off, that would essentially include giving away that technology. But we still see it as a valuable piece of the company just not our strategic long-term focus as much.

Do you have a timeline and I’ll let to go, do you have a timeline on when you envision the new licenses with the Navy and so on. AI and VR actually and you talked about some of that give a timeline when you think this will crystallize in the bookable business?

Yes, so two separate things, right. The Navy -- the licensing of the Navy materials as I mentioned, they really one thing we've seen from the discussions I've had in Washington and with different government officials and such, is that we are really at a perfect timing from that since, the U.S. through the Defense Production Act and through the executive order of the Biden administration on resilient supply chain is heavily investing in developing a manufacturing base in the U.S. and accelerating readiness of new technologies, increasing local capacity and such. So, the U.S. currently imports, as I mentioned 90% of its germanium, that is $2.7 billion roughly of germanium a year, quarter of that goes into optics around $600 million, $700 million of germanium goes into optics in the U.S. Chalcogenide is, I think perfect spot to substitute that. Now, we cannot -- it’s not a one-to-one substitution and you will not completely eliminate germanium. But we are definitely the best option at this point for the U.S. in terms of reducing the dependence on China and Russia for that material. So, I think accelerating that is a key element of many stakeholders, including some of our time customers, who are seeking to be involved in helping us accelerate that and bring those materials to market. We are anticipating that in the next few months, the first material might be already released. We're currently already working on copper pipes and we're working with some of the primes, also on designing the material in seeing the encouraging results that we have. But it's really a key element here, I think in much of what the U.S. is looking at. In terms of the free form optics, that's a bit of a different play in the sense that this is a technology that we've already developed and matured enough now is the time for the customers to take that in and to utilize it, we've mentioned in the last months that Attollo Engineering, for example, have already adopted free form optics into their LIDAR products and it looks very promising and successful, they have some very unique products in the sense of being able to very quickly monitor the location of drones of fully autonomous drones making sure they don't collide with other and so on and the free form optics are really a key elements there. In other places, we've shipped prototypes already to AL countries, for example, have already -- our free form optics in prototypes, others are at different stages of it, LIDAR is becoming a bigger piece there, but that will take longer, because most of those -- the free form optics is enabling a cutting-edge application to such a degree that set application needs to first be adopted and when its owned commercial success, before the free form can scale up with. And it looks very encouraging.

I don't want to – well to say, if you have time for one quick, you didn't give any color on two areas that I would be interested in, in the past. One was low orbiting satellites such as SpaceX system, what would -- there is even talk about the China wanting to intercept that and so on. And I'm wondering, speaking of intercepting whether you're involved in that and whether you're involved with the new laser interception systems in Israel, which is infrared and laser to try to intercept enemy rockets?

Yes, yes. Obviously and someone who grew up in Israel, I'm very proud of that system of seeing it. I can't comment on specific systems and technologies of course, I can say our business with Israel has grown exponentially in the last half-year or so. And I feel very good about that it in a great part, it is because of the investments we made in the Latvia operation, enabling them to really service customers from there far, far better than we could before. And we have involved in multiple lowest orbiting and space project all the way from optical communication projects to thermal cameras and for detection cameras, definitely mid-wave cameras are playing a major role today in detecting supersonic missiles through lower of orbiting. The government and the Pentagon has decided to re-vault money just recently it was in the news, to deploy a whole satellite network related to that. And that’s a very exciting applications that we see for mid-wave another place where chalcogenide glass plays a major role. It's really being a thermal and very low weight, compared to alternatives makes it a great, great material for any space applications, especially lower for orbiting camera systems.

Thank you. I appreciate the enlightenment, I haven't heard anything lately from you about that.

Absolutely, yes. And we also just closed the loop on that we have announced previously that we have grants from space Florida from European space agency's and a couple of other projects and such all related to accelerating, our technologies for use in space, especially all the chalcogenide materials to replace germanium and to be used in very specifically lower for orbiting satellite.

As opposed to that footnote to that you could mentioned whether ISP optics, your Latvia operation is involved with the drones that are going to Ukraine now or coming from Turkey and whether or not you see a surge in business in Europe as a result of this.

I’d say that we don't know where our product end up always, I can definitely say that we proudly deliver products to multiple UAV and drone companies that hopefully make good use of it. I can say that our expansion in Latvia, adding the optical coating they’re making it vertically integrated and independent of U.S. manufacturing for that sense, aligns perfectly in timing to all the increases in defense budgets in Europe now and to an increase in demand that we are seeing already in terms of designing our products into defense applications. The Latvia operation decides being in night of operation can also serve European defense companies now by being completely vertically integrated having coating and the assembly capability there, which is something that we are confident is going to deliver significant growth in Europe for us in the infrared imaging.

Thank you, sir.

Absolutely. Good to hear from you Gene.

[Operator Instructions] This concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.