Good afternoon, everyone. And welcome to the LightPath Technologies Fiscal Third Quarter 2023 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. At this time, I'd like to turn the conference over to Albert Miranda, Chief Financial Officer. Please go ahead, Alb.

Thank you. Good afternoon, everyone. Before we get started, I'd like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectations, involve various risks and uncertainties, as discussed in our periodic SEC filings. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be prove to be inaccurate and there could 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. We refer to these as non-GAAP financial measures. Please refer to our SEC reports and certain press release which include reconciliations of non-GAAP financial measures and associated disclaimers. Sam will begin today's call with an overview of the business and recent developments for the company. I will then review financial results for the fiscal year. Following our prepared remarks, there will be a formal question-and-answer session. I would now like to turn the conference over to Sam Rubin, LightPath's President and Chief Executive Officer.

Thank you, Al. Good afternoon to everyone and welcome to LightPath Technologies fiscal 2023 third quarter financial results conference call. Our financial results press release was issued after the market closed today and posted to our corporate website. As expected -- we as we expected would happen to some degree shipments in the third fiscal quarter of 2023 were impacted by the ongoing construction and expansion of our Florida facility. And while we planned and expected for some disruptions from the move and expansion, this resulted in between a million to 1.5 million of products that was not shipped in the quarter. Those orders however, are not lost, and their shipment moved into Q4 the current quarter we're in. Completing such construction will position the company for larger, more sophisticated orders, a growth that is backed by a strong backlog and continued bookings and customer commitment. In prior quarterly calls we discussed LightPath's strategic shift from a components manufacturer to a value added solutions provider. To discuss this further, I'd like to use a framework of talking about three pillars of growth as I started communicating in recent months. Some of those points we've discussed previously, the complete understanding is important. The three pillars of growth we look at the shift to the solutions business, the increase in defense business driven mostly by our new materials, and the new high volume markets primarily automotive. While the latter two growth fellows are market and application-driven, the first the solution approach is they strategic in nature, and in many ways ties into and enables the two strongest growth segments. Our solution business defines the first part of our growth strategy. The solutions business is built on leveraging unique capabilities we have and continue to develop and provide customers with solutions engineered to…

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. I will discuss some of the primary financial performance metrics and provide additional color on them to better assist investors in analyzing the company. On a consolidated basis revenues for the first quarter -- excuse me, third quarter were $7.4 million, compared to $8.3 million in the year ago period. Sales of infrared products were $3.6 million or 49% of the company's consolidated revenue of fiscal third quarter. Revenue from Precision-molded optics or PMO products was $3.1 million or 42% of consolidated revenue. Revenue from specialty products were $0.7 million or 9% of total company revenue. The decrease in infrared product sales is due largely to timing issues related to a renewed large annual contract, which was partially offset by the sale of the majority of the company's infrared catalog inventory to Edmund Optics. Decrease in PMO revenue was primarily attributed to a decrease in sales to customers in the telecom and commercial markets, partially offset by increases in defense and industrial customers. PMO sales in China continue to be soft across all industries. The increase in specialty optics during the quarter was a result of increased demand for collimated assemblies and custom visible lens assemblies to the medical industry. Gross margin in the third quarter of fiscal 2023 was approximately $2.5 million, a decrease of 16% as compared to approximately $3 million in the same period of the prior fiscal year. Total costs of sales were approximately $4.9 million for the third quarter of fiscal 2023, compared to approximately $5.3 million for the same…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Brian Kinstlinger with Alliance Global Partners. Please go ahead.

Hi, guys, thanks so much for taking my questions. I got a bunch. We'll start with some around the numbers. The large renewal order that started to shift but hurt your year-over-year sales for infrared. How much was that a year ago versus this quarter? Or what was the headwind from that?

Well the biggest impact of the move here in Orlando has been the coating chambers for the infrared. So all right, we're not only that, most of the impact from the downtime that we had, would show up as impact in sales of infrared.

I thought you -- in addition to that, I thought you said that the timing of that order for year-over-year comps. So I was just wondering what that was. Sorry, go over there afterwards. That's okay. When I looked at the Q, with a little surprised, even with the Orlando facility down what unit volumes were, then I was even more surprised to see that the average selling price I know it in swing was almost twice what it almost ever is, or both your main category. So can you help me understand these dynamics?

So twice being higher, right.

Almost $100 a unit, whereas normally it's $50 to $70?

Yeah, so the biggest impact, the biggest driver to that is really the decrease in sales in China, where we've spoken in the past about the big drop in revenue, nearly two thirds of our sales in China 20% of our global consolidated sales have gone away, basically, because of the different events in China geopolitical primarily, but not only. And those are all tend to be on the lower end of the spectrum of products, meaning really down to the components, single dollar lenses around, $1, even sometimes. So less of that is really driving water of the unit prices up, the ASPs as well as, of course their assemblies and quarter the shift into some more engineered solutions, which is taking us to hundreds of dollars and thousands of dollars per unit. And Brian, that's the telecom industry, particularly out of China. Where --

And what about infrared? That was like $128 per unit, as opposed $80 for the last few quarters? I mean --

The second customer in China with the infrared, it was for consumer level product, that we're using infrared lenses.

Okay. So a couple of big picture questions. Maybe an update on I mean, you gave us a lot of information this quarter on Mantis. In the last conference call, I think you said you were probably six months away from its initial sales. So maybe update us on where discussions are with OEMs and partnering with you. And does that timeline still hold?

Yeah, absolutely. I think we have very extensive tests. And don't feel the lab with different groups in the DoD, which naturally, we cannot talk too much about the application there. But I would say that the different groups there have been evaluating our cameras or taking deliveries of samples such for a while now for a couple of months. And things look very, very positive and some elements, the results they were showing us that they got even better than we thought could could be. But those are more of the technology development groups within DoD, different not research labs, but different application labs or technology developments. So that move into actual product for the most part exception of two groups, the most part, it takes longer. In the commercial side, we've had a lot of very interesting conversations, leaving some field tests as well, in firefighting, and some industrial applications of high temperature process monitoring, in plastic recycling, and more. I believe in the next few weeks, we'll already start shipping some small volume of units to some of those customers for them to test integrating them into their applications. But we're still a few months away from for many substantial, I'd say commitment around it.

Right. Okay. And then you talked about the auto breaks opportunity, which is great to hear more about it. Last quarter, you talked about it here when I thought it was just supplier, but you're talking about a car manufacturer, not a supplier.

I meant the supplier. So we're just, it's that level of products, we tend to get involved in more than one level. So we're supplying to the integrator that we know very well who said car company is and have some interaction with them.

So your primary customer with the tier one, whose primary customer will be a Detroit car manufacturer.

Correct, yep.

And then and so again, back to timeline. I don't want to hold you exactly to it. But I mean, you sort of five to six months away, maybe from a supply agreement. Is that still feel right, I guess, I don't care about margins, [multiple speakers] major changes to that timeline.

Yeah, nothing, nothing changed to the worth in that timeline. But we're not there yet. So anything can happen. But there's been no negative changes in any way. On the contrary, even some discussion of increasing the scope of work, so we will do more assembly than initially, but I'd say that's going well right now.

Okay. And then my last question is, you've got three major government agencies in the U.S. and Europe that have -- you talked about approved and completed testing on BD Six. So when could this become a catalyst to revenue? And what do you think has to happen in order for that to actually take off?

Yeah, we expect from the different projects or programs with different government agencies, which funded those for over $1 billion to this point. We expect in the next two months to be compiling all of that data into some commercial form that would then help our customers start to take delivery of BD Six in a more standard fashion, meaning they can still have the proper book cover specification and also technical data they need. And at that point will start selling I think more of it, sometimes even in the more war format, where would it be selling it uncoated for example, the search to customers that wanted to do some additional processing guide. So we expect in the next couple of months to start seeing a bit more of a drive on that.

Great. Thanks so much.

The next question -- excuse me. The next question is from Gene Inger with ingerletter.com. Please go ahead.

Hi, Sam, an Al.

Hi, Gene.

Hi. It's sort of an interesting time. Obviously, the preceding quarter is, I'm sure I'd say use an old Irish word a little bit, nebbish. But I don't think that's what we're all holding shares in LightPath for we're looking to the future as are you. Because it's pretty obvious to me at this point, that this company is primarily about the new directions and new solutions, and so on. Although I do want to ask you one question about BD Six, which the other gentleman was just asking about. Because you have talked, you've said before, I think that you could make as much as 10 metric tons a year of that. And the assumption has been that it's sort of a secret sauce that you don't want to license or sell the materials. And that you wanted to promote them specifically for your own thoughts, is that the case or is this now something you would like?

Yeah, I separate it into two parts. We sort of created a bit of a confusion over the years by talking about BD Six, BD Six, BD Six. Where now, BD Six and number Six is one of 12 material, where 10 of the other materials are licensed from Edmund are exclusive to us. So BD Six, as the general material has equivalent materials made by companies like [Indiscernible] for example. And so that one is not a secret sauce alone, it's not proprietary completely. The BDML [ph], the Naval Research Lab materials, those are the ones that are completely exclusive. And where we do not plan to sell of material. But the BD Six itself, we see no reason down the road to sell it to the material even given that there are others that exist similar to that and it can help there were economies of scale in the manufacturing of the globe.

Okay, at the recent Photonic Show, I chatted with a number of major military contractors, defense contractors. And they all seem to know LightPath, they all seem to acknowledge they do some business with you guys. And I tend to have a focus on something that you may not want to touch upon, but seems obvious to me. I think I've mentioned this to you, Sam. And that is the smaller multispectral cameras have a use in a particular product, which doesn't come back to its base, and that is a drone. And I'm thinking what -- that I'm talking not about a drone in general that you want to come back, but what are termed kamikaze or suicide drums? Could you expand on that a little bit more? Or are we going beyond an area that can be discussed?

Well, I'd say obviously, we can't discuss the exact programs within the DpD. But I would say that loitering munition, what do you call the kamikaze drone for different missiles that are based on heat seeking are products that we are already embedded in, as well as multiple way more than one programs under development of next generation of some of those? So I'm not surprised. I'm happy to hear that. Everyone you spoke to a new lover. I don't think that they need defense company out there that we don't work with [indiscernible] at this point. Although we're not the only infrared optics supplier for now, at least, that we're working on that stuff.

Okay. I really don't have questions about previous performance. Because I think we all know what the situation is. And I actually think you and Al has balanced the monies and held things together pretty well, considering that what you're really doing is taking care of things until you arrive at the point of these new product relationships, I presume. I would like to ask you, though, you did think that it would be this quarter, the next quarter, I realized things got delayed. So you're still anticipating whether it's the military, probably maybe before the automotive, there'll be something you can announce and quantify by the end of this summer?

I very much hope so. I'd say we're juggling multiple balls in the air that have the opportunities that that would potentially be over $10 million each in the longer run. And I look at those are sort of in a way options to some degree. And as you know, we don't need all of them to happen concurrently with all of that will happen, but some of them will for sure. And the timing of it, I'm hoping that by the end of this summer, we might have some good progress to talk about. But I'm not anticipating necessarily a large announcement or a short term revenue from this.

Well, I would say all you have to do is since you've talked about integrating the thermal products into technology, it's almost like being embedded on a board. Maybe you should change the name of the company the LightPath AI.

AI does seem to flavor. But then, we might need to change it to something else when people lose some of the passion for AI.

I don't think they will because I suspect it changes the world considerably. But in any event, I will leave that with the fact that LightPath have a stack. It's almost like an option that doesn't expire. But it just goes in a neutral sort of zone. I'm wondering where you stand on a topic that you've mentioned, exploring in the past, such as acquisitions or partnerships, as opposed to simply selling these products, even when they do get to fruition?

Yeah, I think that the more we-- the further along, we're getting with stabilizing the business automation to financial performance, as you pointed out, the more we can start looking at some strategic investments or partnerships, that would bring us to the next level of some of those. And naturally, as we're starting to do things like a sophisticated camera with electronics, their PGA [ph], some processing on it on board, and so on, naturally, we would want to add capabilities there.

And I will leave you with this last question, because I have to jump off. But the last question is going to be you have a really good backlog at the current time. Do you feel that the problems you've had, because you haven't ramped up Orlando fast enough with the new equipment? Do you feel that you'll be able to meet and fulfill that backlog, because you don't want to make customers unhappy?

Yes, our production team and Peter Greif, our VP of -- have worked very hard at developing alternatives in places where we have some weak spots. And we're not ashamed to outsource even to competitors or to other companies in the industry, some parts or fabrication process or even coating when we need to, in order to deliver on time. So I'd say that the team has its pulling gold stuff, and in no means is letting any of those, I'd say events, such as the move of such prevents us from delivering. So we will deliver much better, margins will continue to improve as we add the capacity and capabilities. But for now, we're certain we can deliver on everything we have in the backlog.

I'm going to leave you but I have to bring up one word space. You have not mentioned space. And I have a feeling because we've talked about low orbiting satellite communications and so on. Can you color or provide any indication of what if anything you guys are doing in that realm?

Sure, I'm pleased that we've had a number of projects in space over the last few years that I'm here. Most of them have been around optical communication. And definitely recently, we started seeing signs that some of them could potentially grow at a higher rate than we were expecting. I'm hoping to even be able to talk about this publicly in the next few quarters, but also the various optical communication, activities in space are things where they involved in different levels of different customers.

Okay, thanks a lot guys. Good luck and fingers crossed that some of this happens sooner rather than later.

Thank you, Gene.

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

Thank you everyone for taking the time today to follow LightPath Technologies. We appreciate your the trust you place with us by our stakeholders and look forward for future calls where we will further discuss the fruits of our efforts to return to business and move the company forward. Thank you and goodbye.

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