Good afternoon, and welcome to the LightPath Technologies Second Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please also note today’s event is being recorded. I will now pass the call off to Donald Retreage, Chief Financial Officer of LigthPath Technologies. Please go ahead.

Good afternoon. Before we get started, I would 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 and involve various risks and uncertainties that are discussed in the periodic SEC filings. Although the company believes 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. 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 management discussions, there will be a formal Q&A session open to participants on the call. I would now like to turn the conference call over to Jim Gaynor, LightPath's President and Chief Executive Officer.

Thank you and good afternoon. Welcome to LightPath Technologies fiscal 2020 second quarter financial results conference call. Our financial results press release was issued after the market closed today and posted to our corporate website. Following my remarks, our CFO, Don Retreage will further review our financial results and provide more perspective on some key areas. We will then conduct the Q&A session. We are very pleased with our fiscal 2020 second quarter results. Our performance reflects a rebound from the last several quarters during which time we implemented several transitional strategies. At the end of last quarter’s call I remarked at that time that we had made significant progress on the major steps taken to restructure our business last year and in the first quarter our true performance was masked by two issues; the customer requested shipment delay and yields on our new BD6 products. Both of these areas have been addressed which now enables more visibility into the progress as reported with our 2Q results. I further noted last quarter that our outlook would be favorably impact by a few factors. These were one, our IR business growth will increase with the addition of our new family of lens assemblies using our proprietary BD6 material system. Two, our precision molded optics business will benefit from demand relating to the 5G network build-out. Three, that we have right-sized our operating expenses, reduced debt and invested to improve and expand our production capacity and four, that we have sufficient cash to execute our growth strategies. All of these factors contributed to our record quarterly revenues record bookings and record backlog. For full transparency our record quarterly revenue of 9.6 million included about 500,000 of orders that had been delayed from the previous periods but excluding this amount from our 2Q…

Thank You Jim. First I would like to mention that much of the information we are discussing during the call is also included in a press release issued earlier today in our 10-Q filed with the SEC. I encourage you to visit our website at lightpath.com and specifically the section titled Investor Relations. Now on to my remarks pertaining to the second quarter of fiscal 2020. Jim's remarks covered a lot of our financial performance. So I will be specifically discussing key performance areas. Gross margin in the second quarter of fiscal 2020 it was approximately $3.9 million, an increase of 11% as compared to the approximately $3.5 million in same quarter of prior fiscal year and 63% higher than the $2.4 million in the first quarter of 2020. Gross margin for the percentage of revenue was 41%, the second quarter of fiscal 2020 consistent with the second quarter of fiscal 2019 but increased from the first quarter 2020 when gross margin as a percentage of revenue was 32%. Improvement in gross margin was due to increased volumes, yield improvement and mitigation of the impact of the tariff increases. Yield issue relating to BD6 products which we experienced in the first quarter of 2020 was substantially medicated during the second quarter. We identified the root cause of the yield issue early in the second quarter and have implemented corrective action. We continue to make process improvements that we believe will further improve our BD6 yields and margins going forward. Total cost of sales was approximately $5.7 million for the second quarter of fiscal 2020 compared to $5.2 million in the first quarter of 2020. While revenues of $9.66 million in the second quarter of 2020 increased [only 6%] from $7.6 million in the first quarter of 2020 cost of sales…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question will come from Marc Weissenberg of B Riley FBR. Please go ahead.

Thank you. Good afternoon. Can you talk about the increase in the BD6 lenses and is the increase coming from new customers, new applications or existing customers that are really seeing the benefits and are substituting materials?

I think the answer to that question is yes all three parts Marc. I mean we're seeing increased volume on some of the products that we had developed to customers and they're repeating those orders and increasing them. A lot of this material is going into new projects as we develop those lens designs. I think so I think all of those things are contributing to that growth and we are substituting and we're working on and I think we'll see the substitution of the product into for some germanium products increase although we haven't seen a tremendous amount of that to date but there are some of our customers are working on that type of substitution.

I think you put out a release recently talking about the diamond like coating. Talk about how that's going to impact the application and potential maybe acceleration of the substituting of the BD6 lenses.

I mean in our opinion the chalcogenide glass which is BD6, BD6 is our name for that is actually in many ways technically superior to the germanium in that it has a wider thermal operating temperature range. It's lighter in weight but one knock on the on the product was that it is softer and it didn't have good wear characteristics if it was used for front element in an assembly. So with the diamond like carbon coatings now we can put a wear surface on that and correct that deficiency. So then I think overall it's a better material choice and not to mention the fact that is somewhat less expensive.

I think you called out, I am sorry, go forward.

I was just going to say I think those are the reasons that we expect it to continue to grow and why that DLC capability is so important.

And kind of following on that point I think you called out that the BD6 is making up about 10% of total revenue and about 20% of the IR revenue. What's kind of your expectations going forward as to how much of the business that could grow into?

Well, I mean, I think in general the infrared business is probably going to be 60% or greater of our total revenue. I think will kind of settle into that 60/40 split between the visible and the infrared type business and as we go through the next couple of years I think the chalcogenide material will be probably the majority of that, although I think germanium will still have its place but with the molding capability we have, we can provide those types of products in large volumes as the sensor market and the surveillance market which are emerging applications for this material continue to grow and then with our diamond turning capability we can make the light larger lenses and BD6 is turnable as well as moldable so that we can do the full range of lens fabrication with it. So I would imagine that the chalcogenide for us will be probably the majority of the material over time.

Great. What percentage of you talk about a big uptick in 5G how much of the business was that this quarter?

So we saw the PMO business grow about I think it was the revenue actually was down a little bit but the unit volumes were up about 20% and I think that's mainly being driven by the telecom sector at this point but there's still general weakness in the industrial and commercial areas particularly in Asia but telecom is still growing quite rapidly and we see that increase continuing as far into the future as we can see which is the next two to three quarters for sure.

Great. I think you talked about the large contract and the delivering on that. Was there any pull through to account for that based on the delivery timing or that's not going to impact next quarter and maybe you could talk about the dynamics of that contract and the volumes?

No I think that we shipped, we were somewhere between 800,000 and a million delayed last quarter. Of that delay we shipped on top of what we'd normally ship another $0.5 million. So there's still some of that delay that will fall into this [indiscernible] which I think I pointed out that we would take us part of the second quarter and part of the third quarter to get completely caught up with that. So it's not, it's additional type revenue if you want to think about it from if you don't count what we didn't ship and if you want but I think it's and that contract has renewed and the volumes in that contract are consistent with what we've had in the last two to three years with that contract. So it's just going to continue at that level.

Great. Thank you. Maybe I mean nice jump in the backlog maybe you could talk about the composition of the increase in the backlogs?

Yes. I think IR is certainly driving the majority of our growth and that's coming there. I think so the precision molded optics I mean overall our unit volume was up about 23% and so that's everything weighted together. As I said the infrared the molded volume was up about 215%. I think the diamond turned volume was up in the mid 30s if I remember correctly. So the mix has stayed fairly consistent but it's just continuing to grow.

That's nice to hear. You were overcoming some challenges. You've got a really solid quarter but then the coronavirus hitting and impacting operation. What kind of how is what is that going to take off growth in the quarter or and then how do we think about that impacting what you could do in the second in the third quarter.

Yes, we're still trying to assess what it means in the short-term. The interesting thing here is while we had a plant shut down for the Chinese New Year which we actually in our operation had shortened from what most companies in China do. And we had plan to start our operations pack up around the 28th of January which is a couple of days earlier than the New Year holiday was planned to be. Then the Chinese government came in and extended that shut down period to through the 9th of February. Were added another 10 days to the shutdown. However, we had already started operating and we were asked to continue to operate by some of our medical customers who also petitioned the government and lest give us as a critical component supplier. So, we've been running our plant since the 27th of January at about 50% of its capabilities. During the height of that the beginning of that crisis, we had about 50 people in there working. We now have over a 100 working out of the 130 total employees we have in Jinjang. So, we are running at increasing levels through this whole period. So, instead of losing 10 days of production, we're probably going to lose five to six effective days which we believe for the most part we can make up during the balance of the quarter. So, it's still a dynamic situation, it changes a little bit every day. I think but in the short-term there could be some slowing, in the intermediate term I think it's actually going to end up being an increase in production. During this period, our GM in China called me up the other day and told me he received several large request for quotations from some of our major companies that we service. It would tremendous increases in volume which are associated with making thermal analyzers for combating the coronavirus. So, some of that is infrared, some of it is visible product and it may end up being an increase in our production output as opposed to decreasing it over the long haul. So, I think it's for us it's kind of the silver lining in this very dark cloud but I think we're going to come out of this alright. Now what I don’t know yet is how much it'll impact in the next six or eight weeks that we have in the third quarter. Right now, I think that's going to be fairly minimal.

Understood, thank you. And just two more from me. I think you guys 8-K'ed recently you've done the extension from NASDAC on the potential delisting. What are your potential strategies on dealing with that I think the deadline is some time in the summer?

Yes. I mean we were granted an extension on January 14th to the July 11th. As we continue to report proof results as we did this quarter. I think we should see the stock or would hope we'd see the stock price moved a more normal levels. If not then we'll consider other options to ensure that we maintain the listing. But that's a decision we don’t have to make at least for another month or so.

Understood and then in the final one. Jim, you're slated to depart in the summer as well. I think previously we talked about bringing external search firms. What's the status on plan on succession plans?

Well, I think the plan remains the same. I mean, the search committee and the board is continuing the interview candidates both external and internal. And that's the decision has been made out and then when they make one we'll certainly announce it.

Okay, understood. Thank you, very much.

[Operator Instructions] And our next question will come from Michael Dyett, a Private Investor. Please go ahead.

Jim and the team, great job, great report. As you know the past I've asked about some of the international and European sales strategies and you talked about some of the distributors. Maybe you could bring us up-to-date there and particularly in relation to the shift with more IR. Does that shift the distributor support and related to that those things like the Munich Fair still really play an important role in your EU sales efforts.

Well I think Michael the distribution of our revenue by geography kind of remains similar to what it was. In this last quarter up 24% of the revenue was in Asia, 34% was in Europe, and 36% was in North America, the U.S. with the balance being and the small balance being the rest of the world. So, we see all of those geographic is pretty evenly split. If you think about that, the so all of those areas are important to us. We still have 14 reps around the world that we use. We have our master distributor in Germany that we use mainly for Europe. We're supplementing what they do with our sales team out of our Riga facility and we're supplementing what we do in Asia with our sales team out of our Chinese facility. So, that strategy has not changed and all of those geographic areas are continue to be important to us. We see a growth on the infrared side in all of those areas. The Asia is that's continuing as I said, it's getting a little boost here looks like from this virus situation where the increase in Thermal analyzers is short-term need. So, that's increasing that. Europe is there is lots of opportunities for infrared there and we continue to pursue those. So, I think I don’t think we'll see that change much in terms of by product line all of those geographic regions are important to us.

That related to that and past calls you mentioned a shift to or a product or a technical sales team orientation. And I wondered if that's being paying off or if there are any changes expected?

Well, I think we're continuing to implement that strategy. We implemented the product management strategy and we put in place two product managers which are hard at work doing the market research and developing the market segments that we think are the right ones to go after. The whole strategy for example are visible business. As you know for many year's it's been driven by the laser diode growth which grows at 2% to 4% a year. We think we can grow that business faster than that by looking at particular markets within that segment that are growing faster. For example, we're looking at laser projectors that is a market that grows at about 24%, predicted to grow at 24% compound and annually. Medical instruments grows around 8%. Datacom, Telecom transceiver it looks like it's going to grow around 17% compound and annually. So, we believe we can grow faster than the diode market by focusing those efforts into those kinds of markets. So, that kind of strategy is being implemented in all the product lines. These guys are focused on the precision molded optics, invisible the infrared imaging type applications as well. So, we're implementing that and staffing the sales department for that. Now we're not fully staffed as we make this transition and that's why some of those open positions we talked about lye. And so, I think but that is the strategy that we were working and we believe it is working. Our whole idea is to get the technical people in front of the customer quicker and shorten that cycle time from what we're trying to define as the requirements for that optic. And I think that is the right strategy and I think it’s working.

Thank you, very much. It's good to have it affirmed and I appreciate the good report and the good results from all your solid work. I appreciate you taking my questions.

Thank you Michael, it's always good to hear from you.

We show no additional questions. I'd like to turn the conference back over to Mr. Gaynor for any closing remarks.

Thank you. We conclude our second quarter 2020 conference call. I'd like to leave with this final comment which was part of our earnings press release. We have demonstrated operating leverage which has been gained through topline growth and discipline cost management. Taken this time to get here but we are now in a stronger position both financially and operationally and more optimized to deliver value for our shareholders. Thanks again for participating on today's conference call. We look forward to speaking with you again next quarter. And I also like to thank all our employees and particularly our Chinese employees were working so diligently through a very difficult time. So, thank you.

The conference is no concluded. Thank you, for attending today's presentation. You may now disconnect.