Good afternoon and welcome to the LightPath Technologies Fiscal 2015 First 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 Dorothy Cipolla, Chief Financial Officer. Please go ahead.

Thank you and good afternoon. Welcome to LightPath Technologies' fiscal 2016 first quarter financial results conference call. The call today will be hosted by Mr. Jim Gaynor, President and Chief Executive Officer. Following management’s discussion, there will be a formal Q&A session open to participants on the call. Before we get started, I would like to remind you that during the course of this conference call, we will be making a number of forward-looking statements that are based on our current expectations and involve various risks and uncertainties that are discussed in our periodic SEC filings. Although we believe that the assumptions underlying these statements are reasonable, any of them can prove to be inaccurate and there can be no assurance that the results will be realized. With that out of the way, it's now my pleasure to introduce Mr. Jim Gaynor, President and CEO of LightPath.

Thank you, Dorothy and welcome to everyone who has joined us on the call today. We appreciate your interest in LightPath. I will open with an overview of the operational results, highlights and recent developments and then we will turn the call over to Dorothy for a more in-depth review of our financials. After some closing remarks, we will then open the call to your questions. So we really had a great quarter to start fiscal year 2016, this marks our fourth consecutive quarter of strong fundamental performance since we implemented the series of new growth initiatives in early 2015. Here of the highlights from the first quarter of fiscal 2016. Revenue for the first quarter increase 61% to approximately $4.2 million compared to approximately $2.6 million for the first quarter of fiscal 2015. Revenues from sales of infra-red products increased by more than 146% in the first quarter of fiscal 2016, compared to the first quarter of fiscal 2015. Gross margin was 54% in the first quarter of fiscal 2016 compared to 38% in the first quarter of fiscal 2015. And for the first quarter of fiscal 2016 operating income was approximately $663,000 compared to an operating loss of $511,000 for the first quarter of fiscal 2015. Our reported net income for the first quarter adjusted for the effect of non-cash change in the value of our warrant liability which Dorothy will review further in her remarks and would have been $475,000 and is compared to a loss of $525,000 in the same period of fiscal 2015. EBITDA was $1,040,000 for the first quarter of fiscal 2016 compared to a negative EBITDA of $434,000 in the first quarter of the previous year. And quarterly cash flow from operating activities reached a record and nearly $1 million, a reversal from…

Thank you, Jim. First I’d like to mention that much of the information we’re discussing during this call is also included in the press release issued earlier today and on Form 10-Q, which was filed today. I encourage you to visit our website at lightpath.com and specifically the section entitled Investor Relations. I’ll now review financial performance and operational details on our fiscal 2016 first quarter which ended September 30. Revenue for the first quarter was $4.2 million, an increase of 61%, as compared to the same period last year. The growth is attributable to 103% increase in sales of our specialty products and a 146% increase in sales of infrared products and an increase of 39% in sales of precision molded optics. This marks the fourth consecutive quarter where we have experienced year-over-year increases in sales of both of our infrared and precision molded optics lines. In addition to these three product groups, we had non-recurring engineering revenues which increased 250% from the prior year to 140,000. In terms of geographic revenue mix 42% was from the U.S., 30% was from Asia, 23% was from Europe and 5% was from rest of world. The gross margin as a percentage of revenue in the first quarter was 54%, this compares to 38% last year. The improvement in gross margin as a percentage of sales was driven by the favorable product mix with higher selling prices. Leverage to the sales volumes against our manufacturing over net costs and the realization of the full benefit of our Zhenjiang facility and the implementation of modest amounts of cost sophisticated with the transition into our new manufacturing facility in China which have been a drag on the prior period. As previously disclosed with the lower cost sales in Zhenjiang as compared with Shanghai we…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Brett Moyer, Private Investor. Please go ahead.

Yes, Jim it was as a good quarter, congratulations.

Thank you, Brett, appreciate that.

That’s all, carry on.

All right thank you.

Our next question is from John Noble of Taglich Brothers. Please go ahead.

Hi, good afternoon Jim and Dorothy. I just wanted to run through a couple of questions here started the infra-red sales I noticed that the infra-red sales have been growing very nicely and I'm just curious what market in particular do you see driving infra-red sales going forward?

Well, I think as we’ve indicated where we started and continues in that vein for the immediate future is in the safety equipment particularly related to firefighting safety and firefighting cameras that are geared to individual firemen that seems to be a nice market I believe going forward the obviously the sensor market I think is going to be very, very active in large in the commercial area as you talk about things about you such as controlling temperature in rooms is the number of people increase in a room control the air-conditioning accounting type things, spectrographic type applications with food inspection and the like. I also think security obviously infra-red is surveillance whether in-home systems are for policeman search and rescue type things that seem to be a very good market for these types of devices. And then I think the two others one would be automotive, night vision systems and again sensing systems only automobiles were not necessarily associated with that. Since things are control things from a safety point of view. I also think the thermo graphic type things so you get into were using the equipment for building inspection to find the moisture or electrical hotspots or long bearing. So that of stuff I think we will also be a decent market. So I think those are the types of applications and markets are going to drive it - it’s all dependent and drive as these costs come down and the volume start to increase and where we think that we have - is because of our molding process know we have a relatively lower cost and we have a process and manufacturing system that geared to higher volumes and then the current typical manufacturing methods. So I think those are things are going to drive that market job.

Okay thanks for that breakdown of the infra-red market, but besides infra-red which product line do you believe will show the most growth?

Well I mean we are seeing very good growth and what we called specialty products which are basically value-added type devices, custom design you know the mounting a lenses and mechanical holder or device whether we’re making an assembly such as an isolator, collimator type device which is making a very specialized lens. I think those things we’re seeing very good growth in that segment where we can make what we call simple arrays have 4, 5 lens with a single piece of glass of that type of thing that are used to communication systems that's where I think we’re going to see the growth and we have been seeing the growth very, very good pace here in recent quarters.

I know the sales in China have been under pressure the auto this code you - you seen an increase is that an increase sequentially or is that an increase over last year's first quarter.

I think is both certainly over last year's first quarter and sequentially over last quarter as we’ve seen some of the larger OEMs that we’ve done business with in the past are now starting to take some volume lenses that we produced that are associated with those industrial tools and then the other area that we see growing in our China market is the Telecommunications has been very strong as the optical network expansion continues to the bandwidth demand around the world. So we’re seeing that very active for us and has been for the last several months. So I think that we’re going to see good growth in those two sectors. During the downturn we developed some new application into fiber laser delivery systems and medical type instruments in that market as well and obviously we’re going to work to continue those things. Because those types of things have had the other advantage for us of being higher price point products that some of the industrial tool stuff. So I think that’s also driving some of that growth.

Okay, and if I could exclude China, I was hoping you could talk a little about how sales and other parts of Asia having been growing?

I think there it’s difficult for us to - I am not sure we break that out very well John. In most of the - we kind of look China and Asia together and I don't have right on the tip of my tongue here breakout of that.

That’s good. Asian sales how big or what percentage would you say China is contributing to total Asia sales?

I am trying to remember, I think I don’t want to misspeak. I can get you that number John; I just don’t have it off the top of my head. Sorry.

All right. Fair enough. Just one more question, last call you mentioned that margins were impacted by an increase in production orders versus prototype for the infrared product line. I think it was indicating like obviously your prototype products would help your margins to some degree, production orders were increased - that could explain why last quarter's fourth quarter margins were lower sequentially but I'm curious all the prototype orders still skewing margins or other production order level now magnitude such that they are not having as much of an impact on margins?

Yes, I think the latter is what's happening is the volume starting to build substantially. So they were covering more of those - that were leveraging those manufacturing overheads better.

But that’s not really impacting your margins but yet I know that if anything that’s only helped your margins. So even with most of that and a greater percentage of production orders you posted 53.7% margin this quarter. So I just want to have one final question, I know Dorothy before I think you said that you are looking at high 40’s or low 50% range in your gross margins going forward?

That’s correct.

Okay. So I mean at this given level this is more of a true gross margins, it’s not like it was skewed higher because of prototype products. This is really a production level so and not to say we’re going to see 54% going forward. But like you said around this range of a high 40s to low 50s should be a safe bet I just want to make sure I am clear on that?

Yes. You are clear.

Okay great. That's all I had. Thank you very much.

Our next question is from [indiscernible]. Please go ahead.

Hi, your Chinese factory at present could estimate what percent capacity is operating at? And is it capable of being incrementally expanded as you make even more and more and more and more of your goodies?

It’s roughly running around 50% of its capacity right now. And yes it’s very easy to incrementally expand that capacity as necessary.

I trust your sales team is out trying to close that gap, okay.

Absolutely. We hope we are going to be battling with that problem very shortly.

Yes, thank you very much. Very good quarter. Thank you.

Thank you.

[Operator Instructions] Our next is from Vesselin Mihaylov of Newport Coast Securities. Please go ahead. Vesselin your line is open.

Sorry about that. Hi, Jim and Dorothy congratulations on a great quarter.

Thank you.

So I am very pleased to see the tremendous leverage here in the last quarter. Just for people listening and reading the transcript I wanted to outline that you know your contribution margin was as high as 75% that is you increase revenues by approximately $1.6 million and brought about $1.2 million to the operating line and that's outstanding. So I don't expect that to continue in the future but wanted to ask you what do you have you know I'm sure you are looking at these numbers, what you have the basically the commitments going forward under normal circumstances I mean we’re growing very rapidly here but to keep that up and as much as you possibly can clearly 75% may be unsustainable. But is there a lot of leverage inheriting these increases in revenue here?

I think that’s what we’ve seen is, this quarter was kind of like where the scale tipped over and then we got the benefit of all things that we’ve been working on for the last many quarters. So I think you're seeing the leverage, EBITDA margin, return on assets and the growth that we are now at a level that we expect to operate the company and that will - with these revenue levels I would expect to see those same types of performance numbers and then we can enhance that as we continue to expand the topline.

Okay, great. Great to hear that. Number two, I just wanted to ask you about the R&D expense in the last quarter, it seems to light compared to same quarter of last year, is there any particular reason for that normally the technology company spend between 10% and 15% of revenues on the average over time. And so…

The basic reason for the change is just a flip of some of the R&D expenses went up into SG&A having to deal with the initiatives that we announced early 2015.

Okay, so in another words you are aware that the actual dollars expressed on R&D are appropriate and you are not leaving opportunities that unturned so to speak?

Well, I think as a matter of fact Vess I mean that’s one of the areas that we’ll access and it’s appropriate we’ll continue to invest. I think our technical group is probably stronger than it's ever been in the past with the team that we have in place now and they can handle a lot of things, but we will continue to support that and maintain that investment because almost I would say 90% plus of our projects require some input from engineering to get them from request to production and we run really kind of what I call semi-custom business as well as our forecast on business. I agree with you, it a very important area, we won’t slack of in that area.

Okay, great to hear. And one final kind of - it’s a little bit of a statement for very, very long-term shareholder since 1996 literally, clearly we’ve seen all the difficulties over the last 10, 15 years after the telecom crash and I hear that you are seeing some opportunities in China and elsewhere for acquisition. So I don't so I'm just calling on you Jim and management in general to carefully do these acquisitions such that they are accretive in the near-term. We have significant amount of tax loss carry forwards which are indication of the acquisitions and deposits have not exactly bend out. We remember them from the year 2000 and in addition I don't believe the market is paying the right multiple for the company for stocks, so if you are going to be using stock I think it’s completely undervalued tended to see very, very expensive currency to be spent on the acquisitions that may need additional funds raised. And so I would say let the stock appreciate a little bit opportunistically to get the market cap a little bit bigger over $2 a stock because marketable, attracts more eyes and more attention and only at that time probably look at some acquisitions, because otherwise we may cover some investor headwinds if people started thinking, my gosh, just did a little bit of - couple of quarters of profitability and cash flow positive and here we go again into acquiring businesses that may bring general losses and expenditures and so on. We have a good momentum let's not rock the boat too much if you don’t have to.

I will say this is - if we do anything, we are going to do it very carefully, we work very hard to get to this point and there are some things out there that would make sense if we could do them at the right price and they bring the right kind of return to the company. If you are looking at things of that nature, we would certainly want them to be accretive very quickly. And so I agree with you on that point so we don’t do anything that does not done properly and in the interest of our long-term strategy the builds on the gains that we've done so far. And then I would just add looking at you gets that stock up there.

Working on that every day. Thank you very much Jim, thank you Dorothy. Congratulations and here's to another quarter going forward.

Thank you.

Thanks Vess.

Bye-bye.

[Operator Instructions] It showing no additional questions and I’d like to turn the conference back over to Mr. Gaynor for any closing remarks.

Thank you. In conclusion, we appreciate the support of our shareholders and the dedication of our global team of LightPath. We remain focused on our efforts to drive diversified revenue and growth and continue to derive benefits from the leverage in our business as we improve our profitability and generation of cash flow. With the progress that has been made and our plans for continued execution, we look forward to delivering long-term profitable growth, which may deliver meaningful returns for the benefit of our shareholders. Thanks again, and we look forward to speaking with you next quarter.

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