ORLANDO, FL / ACCESSWIRE / March 16, 2022 / LightPath Technologies, Inc. (NASDAQ:LPTH) (“LightPath,” the “Company,” or “we”), a leading vertically integrated global manufacturer and integrator of proprietary optical and infrared technologies and high-level assemblies, today provided an update on operations relating to the recent COVID-19 (or “coronavirus”) outbreaks in China and the Russia invasion of Ukraine.
The Company operates in China through two wholly-owned subsidiaries, including LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LOIZ”), a manufacturing operation located in Zhenjiang, which is in the Jiangsu province, and LightPath Optical Instrumentation (Shanghai) Co., Ltd., an administration and sales operation located in the city of Shanghai, which is in the Shanghai province. LightPath’s operations in eastern Europe include a wholly-owned subsidiary based in Riga, Latvia, a European Union country and NATO-member.
According to published reports, outbreaks of the Omicron variant of Covid-19 in China led to a record-breaking level of new local COVID-19 cases so far this year that exceeded the cases recorded in 2021. Mainland China reported 1,337 new domestically transmitted Covid infections with confirmed symptoms on March 13th, the National Health Commission (NHC) said on Monday. That brought the registered total this year to more than 9,000, compared with 8,378 in 2021, according to Reuters calculations. In the recent weeks, new Covid cases have been reported in Beijing and Shanghai, as well as in the provinces of Guangdong, Jiangsu, Shandong and Zhejiang.
Commenting on recent global developments, Sam Rubin, President and Chief Executive Officer of LightPath Technologies, said, “We are providing a business update following the war between Russia and Ukraine and a brief period of meaningful Covid-19 outbreaks in several cities in China. The viral outbreaks prompted authorities to institute immediate actions relating to travel bans and work from home restrictions. To the extent possible, LightPath is doing its part to contribute toward recovery and well-being, including efforts to ensure safety to our team members, customers and business partners, as well as moving forward for the benefit of our shareholders.
“LightPath’s operations in China have remained open since the onset of the Covid-19 pandemic approximately 2 years ago. We maintain remote working procedures for non-manufacturing and non-factory floor personnel in China. This does not, however, remove our responsibilities from operating safe workplaces, protecting our team members and communities, and abiding by local regulations. As such, certain of our team members have been unable to report to work due to quarantine and travel restrictions. Furthermore, some key customers and supply chain partners are experiencing similar workplace challenges and are unable to deliver raw materials to us or accept our products that have been manufactured. The primary issue we are presently encountering in China is the quarantining and temporary closure or lockdowns of certain technology areas where our customers are located. These limitations will result in some customers being unable to accept shipments until April at the earliest. This will in turn impact our revenue recognition, inventory and other financial performance measures. We have not received any requests to cancel orders to date and expect to deliver finished goods as soon as the limitations are lifted.
“Due to the invasion of Ukraine, economic and trade restrictions have been imposed against Russia. To date, this has not directly impacted our manufacturing order flow in Riga or global customer demand for the infrared (IR) optics that are made at our facility in that city. In a precautionary move, earlier this month we began advance ordering of germanium, the principal raw material used in manufacturing many of our diamond-turned IR lenses. The largest deposits of germanium are primarily in China and Russia, with our procurement typically spanning both markets depending on price and availability, along with the use of various distributors. We took these steps to ensure the resiliency of our supply chain and because we maintain the financial ability to support our customers. Our inventory of germanium is expected to increase in value above our traditional levels and is expected to alleviate potential raw material shortages or price increases due to the war in Ukraine and disruptions in China amid the increase in Covid-19 cases. We now believe we have ample supply of germanium to last an estimated 6 months of our planned manufacturing capacity. We are in compliance with internationally imposed trade restrictions against Russia.
“For the most part, we have not seen material disruption to traditional ordering patterns, bookings or fulfillment anywhere in the world except in China during the past 7-14 days. We anticipate the impact to our revenue derived from our manufacturing operations in China in the fiscal third quarter ended March 31, 2022 will be a reduction of between $1.0 million to $1.25 million. Overall, our business remains stable with no order cancellations. We are grateful to our worldwide staff for their continued perseverance and operational excellence, and wish good health and peace to all global citizens.”
LightPath’s management notes that production capabilities and actual components delivered may vary depending on workflow, product type, customer requirements and availability of raw materials. As a diversified manufacturer of infrared and visible optical lenses, LightPath maintains production facilities in three countries, each in separate continents, all manufacturing multiple product families. As a result, the Company has developed raw materials sources with multiple global partners around the world, including a portion of its proprietary BD6 lens materials being developed internally at its facilities in the US. At present, and for the foreseeable future, the Company does not anticipate any supply issues that will affect its ability to provide products required to service current demand. This situation remains fluid and is subject to change. LightPath has seen some extended delivery dates and some raw materials price increases, from some vendors, but its strategy to multi-source raw materials has, so far, allowed the Company to mitigate the impact of these issues. Shipping and delivery issues present both challenges and opportunities. Rates and availability for ocean shipping and air freight are subject to change. The aforementioned and other factors not discussed herein may alter anticipated production, deliveries and financial results.
Financial results for the fiscal third quarter ended March 31, 2022 is scheduled to be reported on May 12, 2022, with a conference call to be conducted on that day. Conference call details will be announced on or about April 28, 2022.