LIGHTPATH TECHNOLOGIES INC

Previous wording

Revenue from engineering services increased by $1.2 million for fiscal 2025, as compared to the same period of the prior fiscal year. This increase was driven by Visimid’s contract with Lockheed Martin, as well as revenue from one of our space-related funded research contracts. The timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period.

Current wording

Revenue from engineering services was nearly flat for fiscal 2026, as compared to the same period of the prior fiscal year. This includes Visimid’s contract with Lockheed Martin, as well as several other non-recurring engineering projects, the largest of which was for another defense customer. The timing and dollar value of deliverables is not always consistent, which causes revenue for the programs within this product group to fluctuate from period to period.

Previous wording

Cost of Sales and Gross Margin.

Current wording

Cost of Sales and Gross Profit.

Previous wording

Gross margin for fiscal year 2025 was approximately $10.1 million, an increase of 17%, as compared to approximately $8.6 million in fiscal year 2024. Total cost of sales was approximately $27.1 million for fiscal year 2025, compared to $23.1 million for fiscal year 2024, an increase of 17%. Gross margin as a percentage of revenue was 27% for fiscal year 2025 as compared to 27% for fiscal year 2024. Gross margin for fiscal year 2025 was favorably impacted by the addition of G5 Infrared revenue and gross margin since acquisition, particularly in the assemblies and modules product group. The assemblies and modules product group increased from 14% of revenue in fiscal year 2024, to 21% of revenue in fiscal year 2025, and these products typically have higher gross margins than the component product groups. Gross margin for fiscal year 2025 was unfavorably impacted by an approximately $0.5 million increase in inventory reserve charges primarily related to visible components where revenue has declined for the past several years.

Current wording

Gross profit for fiscal year 2026 was approximately $25.8 million, an increase of 155%, as compared to approximately $10.1 million in fiscal year 2025. Total cost of sales was approximately $45.9 million for fiscal year 2026, compared to $27.1 million for fiscal year 2025, an increase of 70%. Gross margin as a percentage of revenue was 36% for fiscal year 2026 as compared to 27% for fiscal year 2025. The increase in gross margin for fiscal year 2026 was driven by the increase in sales across nearly all product groups, as well as improved gross margins across each of the product groups. Fiscal year 2026 also includes a full year of G5 Infrared revenue and gross profit, particularly in the assemblies and modules product group. The assemblies and modules product group increased from 23% of revenue in fiscal year 2025, to 44% of revenue in fiscal year 2026, and these products typically have higher gross margins than the component product groups. Gross profit for fiscal year 2025 was also unusually low, partially due to the unfavorable impact of an approximately $0.5 million increase in inventory reserve charges primarily related to visible components where revenue had declined for the past several years.

Previous wording

New product development costs were approximately $3.1 million in fiscal year 2025, an increase of approximately $0.7 million, or 28%, as compared to the prior fiscal year. These increases are due to the addition of engineering personnel, as well as an increase in materials and outside services utilized for development projects, primarily for infrared cores and camera systems.

Current wording

New product development costs were approximately $3.8 million in fiscal year 2026, an increase of approximately $0.7 million, or 24%, as compared to the prior fiscal year. New product development costs increased with the addition of G5 Infrared product development costs, and other additional engineering personnel. These increases were partially offset by a decrease in outside services and materials utilized for development projects, due to timing of such projects. Management views the investment in new product development as an important part of execution of our strategy, and plans to continue to grow our investment in new product development.

Previous wording

Amortization of intangibles decreased by $0.2 million for fiscal year 2025, as compared to the prior fiscal year, as certain of the intangible assets related to the acquisition of ISP were fully amortized as of December 31, 2024. This decrease was largely offset by the addition of amortization of intangible assets associated with the G5 Infrared acquisition. See Note 3,Acquisitions, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for further information.

Current wording

Amortization of intangible assets increased by $0.4 million for fiscal year 2026, as compared to the prior fiscal year due to the addition of amortization of intangible assets associated with the G5 Infrared and AML acquisitions. See Note 3,Acquisitions, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for further information.

Previous wording

Interest expense, net, was approximately $1.1 million for fiscal year 2025, compared to approximately $0.2 million in the prior fiscal year. Interest expense for fiscal year 2025 include financing costs associated with the warrant liability of approximately $0.3 million. The remaining increase in interest expense is due to the interest and amortization of loan issuance costs associated with the Bridge Note, executed in August 2024, which was subsequently replaced by the Acquisition Notes executed in February 2025. See Note 14,Loans Payable, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for definitions and further information.

Current wording

Interest income, net, was approximately $0.01 million for fiscal year 2026, compared to interest expense, net, of approximately $1.1 million in the prior fiscal year. For fiscal 2026, we earned interest on our cash balance following the December Offering (as defined below) and the June Offering (as defined below), partially offset by interest expense on finance leases and interest and amortization of loan issuance costs on the Acquisition Notes (as defined below) until they were redeemed in December 2025. Interest expense for fiscal year 2025 includes financing costs associated with the warrant liability of approximately $0.3 million, and the interest and amortization of loan issuance costs associated with the Bridge Note (as defined below), executed in August 2024, which was subsequently replaced by the Acquisition Notes executed in February 2025. See Note 14,Loans Payable, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for definitions and further information.

Previous wording

We recorded a loss in extinguishment of debt of $0.4 million during fiscal year 2025, related to the exchange of the Bridge Note for an Acquisition Note in connection with the financing of the acquisition of G5 Infrared. The loss is based on the difference between the carrying value of the debt being extinguished and the fair value of the new debt, plus any other payments exchanged (e.g. the aforementioned Class A Common Stock, Series G Convertible Preferred Stock and warrants).

Current wording

We recorded a loss in extinguishment of debt of $0.5 million during fiscal year 2026, upon redemption of the Acquisition Notes, based on the difference between the carrying value of the debt being extinguished and the redemption amount. During fiscal year 2025, we recorded a loss on extinguishment of debt of $0.4 million related to the exchange of the Bridge Note for an Acquisition Note in connection with the financing of the acquisition of G5 Infrared. The loss is based on the difference between the carrying value of the debt being extinguished and the fair value of the new debt, plus any other payments exchanged (e.g. the aforementioned Class A Common Stock, Series G Convertible Preferred Stock and warrants).

Previous wording

We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. During fiscal year 2025, we incurred net foreign currency transaction losses of approximately $0.1 million, compared to net foreign currency transaction gains of $0.1 million for fiscal year 2024.

Current wording

Other expense, net, was approximately $0.1 million for fiscal year 2026, compared to $0.1 million for fiscal year 2025. Other expense, net, for fiscal years 2026 and 2025 primarily consists of net foreign exchange losses. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year.

Previous wording

During fiscal year 2025, we recorded income tax expense of approximately $0.1 million, compared to $0.1 million in fiscal year 2024, primarily related to our operations in China. Income taxes for fiscal years 2025 and 2024 include Chinese withholding tax expenses of $0.2 million and $0.2 million, respectively, the majority of which are associated with intercompany dividends declared by LPOIZ, payable to us as the parent company. While these repatriation transactions result in some additional Chinese withholding taxes, LPOIZ currently qualifies for a reduced Chinese income tax rate; therefore, the total tax on those earnings was still below the normal income tax rate. Income tax expense for fiscal years 2025 and 2024 are also offset by deferred income tax benefits from the turnaround of temporary differences, and increased by deferred income tax expense related to certain indefinite lived temporary differences. Please refer to Note 9,Income Taxes, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to each of our tax jurisdictions.

Current wording

During fiscal year 2026, we recorded income tax expense of approximately $0.3 million, compared to $0.04 million in fiscal year 2025, primarily related to our operations in China. Income taxes for fiscal years 2026 and 2025 include Chinese withholding tax expenses of $0.1 million and $0.2 million, respectively, the majority of which are associated with intercompany dividends declared by LPOIZ, payable to us as the parent company. While these repatriation transactions result in some additional Chinese withholding taxes, LPOIZ currently qualifies for a reduced Chinese income tax rate; therefore, the total tax on those earnings was still below the normal income tax rate. Income tax expense for fiscal years 2026 and 2025 are also offset by deferred income tax benefits from the turnaround of temporary differences, and increased by deferred income tax expense related to certain indefinite lived temporary differences. Please refer to Note 9,Income Taxes, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information related to each of our tax jurisdictions.

Previous wording

Net loss for fiscal year 2025 was approximately $14.9 million, or $0.36 basic and diluted loss per share, compared to approximately $8.0 million, or $0.21 basic and diluted loss per share, for fiscal year 2024. The increase in net loss for fiscal year 2025, as compared to fiscal year 2024, is partially attributable to the approximately $3.5 million increase in operating loss due to higher operating expenses, partially offset by the increase in gross margin. In addition, fiscal year 2025 net income reflects a number of non-operating items driven by the acquisition financing, including the increased interest expense of $1.0 million, loss on extinguishment of debt of $0.4 million, and change in fair value of warrant liability of $1.4 million.

Current wording

Net loss for fiscal year 2026 was approximately $20.5 million, or $0.38 basic and diluted loss per share, compared to approximately $14.9 million, or $0.36 basic and diluted loss per share, for fiscal year 2025. The increase in net loss for fiscal year 2026, as compared to fiscal year 2025, is primarily attributable to the approximately $14.1 million increase in the change in fair value of acquisition liabilities, which is included in operating expenses, as well as the increase in SG&A and new product development costs, which were largely offset by the increase in gross profit.

Previous wording

Weighted-average common stock shares outstanding were 40,874,068 for both basic and diluted in fiscal year 2025, compared to 37,944,935 for both basic and diluted in fiscal year 2024. The increase in weighted-average basic common shares was primarily due to the Class A Common Stock issued in conjunction with the financing of the acquisition of G5 Infrared (refer to Note 8,Stockholders’ Equity, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information). The increase is also attributable to: (i) the 585,483 shares of Class A Common Stock issued during the second half of fiscal year 2024 pursuant to the at-the-market equity program; (ii) the shares of Class A Common Stock issued in conjunction with the acquisition of Visimid; and (iii) the issuance of shares of Class A Common Stock under the 2014 ESPP and underlying vested RSUs and RSAs. Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for all periods presented, as their effects would have been anti-dilutive due to net losses in those periods.

Current wording

Weighted-average common stock shares outstanding were 53,374,275 for both basic and diluted in fiscal year 2026, compared to 40,874,068 for both basic and diluted in fiscal year 2025. The increase in weighted-average basic common shares was primarily due to the December Offering and the June Offering. The increase is also attributable to: (i) the 3,468,698 shares of Class A Common Stock issued upon the exercise of warrants; (ii) the 8,692,097 shares of Class A Common Stock issued upon conversion of Series G Convertible Preferred Stock; (iii) the 524,124 shares of Class A Common Stock issued in conjunction with the acquisitions of Visimid, G5 Infrared and AML, including earnouts; and (iv) the issuance of shares of Class A Common Stock under the 2015 ESPP and underlying vested RSUs and RSAs. Potential dilutive common stock equivalents were excluded from the calculation of diluted shares for all periods presented, as their effects would have been anti-dilutive due to net losses in those periods.

Previous wording

At June 30, 2025, we had working capital of approximately $11.3 million and total cash and cash equivalents of approximately $4.9 million. Approximately 25% of our total cash, cash equivalents and restricted cash was held by our foreign subsidiaries in China and Latvia. Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested. However, during fiscal year 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a portion of earnings generated by our foreign subsidiaries, however we also plan to repatriate a portion of their earnings.

Current wording

At June 30, 2026, we had working capital of approximately $103.7 million and total cash and cash equivalents of approximately $93.2 million. Approximately 4% of our total cash and cash equivalents was held by our foreign subsidiaries in China and Latvia. Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested. However, during fiscal year 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a portion of earnings generated by our foreign subsidiaries, however we also plan to repatriate a portion of their earnings.

Previous wording

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. During fiscal years 2025 and 2024, we repatriated approximately $1.2 million and $1.4 million, respectively, from LPOIZ. As of June 30, 2025, LPOIZ had approximately $0.4 million in retained earnings available for repatriation, based on earnings accumulated through December 31, 2024, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2025.

Current wording

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. During fiscal years 2026 and 2025, we repatriated approximately $0.2 million and $1.2 million, respectively, from LPOIZ. As of June 30, 2026, LPOIZ had approximately $0.7 million in retained earnings available for repatriation, based on earnings accumulated through December 31, 2025, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2026. In July 2026, we repatriated $0.4 million, ahead of the closing of the divestiture of LPOIZ which is expected to occur in September 2026.

Previous wording

Loans payable as of June 30, 2025 consisted of the Acquisition Notes (as defined below) and two third-party equipment loans (as defined below). Details of the loans are as follows:

Current wording

Loans payable as of June 30, 2026 consisted of the 2023 Equipment Loan (as defined below).

Previous wording

In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advances under the 2023 Equipment Loan totaled 260,258 EUR (or approximately USD $0.3 million), the proceeds of which were used to make prepayments to a vendor for equipment to be delivered at a future date. The final advance for the final payment to the equipment vendor was 132,674 EUR (or approximately USD $0.1 million). The 2023 Equipment Loan is payable over 48 months, with monthly installments beginning January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (4.89% as of June 30, 2025). As of June 30, 2025, the outstanding balance on the 2023 Equipment Loan was approximately 263,000 EUR (or USD $0.3 million).

Current wording

In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advances under the 2023 Equipment Loan totaled 260,258 EUR (or approximately USD $0.3 million), the proceeds of which were used to make prepayments to a vendor for equipment to be delivered at a future date. The final advance for the final payment to the equipment vendor was 132,674 EUR (or approximately USD $0.1 million). The 2023 Equipment Loan is payable over 48 months, with monthly installments beginning January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (5.20% as of June 30, 2026). As of June 30, 2026, the outstanding balance on the 2023 Equipment Loan was approximately 164,000 EUR (or USD $0.2 million). For additional information regarding the 2023 Equipment Loan, see Note 14,Loans Payable, to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.

Previous wording

On February 18, 2025, we announced the closing of the acquisition of G5 Infrared and the related financing, including the issuance of shares of Series G Convertible Preferred Stock. For additional information, refer to Note 3,Acquisitions, to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.

Current wording

On February 18, 2025, we announced the closing of the acquisition of G5 Infrared and the related financing, including the issuance of shares of Series G Convertible Preferred Stock. For additional information, refer to Note 3,Acquisitions and Note 8,Stockholders' Equity, to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.

Previous wording

There are a number of factors that could result in the need to raise additional funds in the longer term, including a decline in revenue or a lack of anticipated sales growth, increased material costs, increased labor costs, planned production efficiency improvements not being realized, increases in property, casualty, benefit and liability insurance premiums, and increases in other costs. In addition, approximately 25% of our cash and cash equivalents was held by our foreign subsidiaries as of June 30, 2025 and, although we regularly repatriate cash, it may not be readily available to repay our liabilities in the U.S. should our cash assets in the U.S. not be sufficient. We may also identify opportunities for additional acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.

Current wording

In the short term, we have sufficient capital to fund the continued expansion of our operations. In the longer term, we may identify opportunities for additional acquisitions and other strategic transactions to expand and further enhance our business that may require that we raise additional capital should we elect to pursue any of such transactions.

Previous wording

Cash used in operations was $8.3 million, compared to cash provided by operations was approximately $0.5 million for fiscal year 2024. The cash used in operations for fiscal 2025 was driven by the net loss, after considering non-cash items, which was partially driven by significant legal and consulting expenses related to the acquisition of G5 Infrared. In addition, inventory increased $1.4 million (net of inventory included in the acquisition of G5 Infrared), while the increase in accounts payable was largely offset by increases in accounts payable and accrued liabilities. The cash provided by operations during fiscal year 2024 was primarily due decreases in accounts receivable and inventory, due to lower sales in fiscal year 2024, as compared to fiscal year 2023.

Current wording

Cash used in operations was $10.2 million for fiscal 2026, compared to approximately $8.3 million for fiscal year 2025. The cash used in operations for fiscal 2026 was primarily due to the following: (i) payment of the first earnout payment for the acquisition of G5 Infrared, of which $3.8 million was classified in operating activities, representing the amount in excess of the contingent consideration liability recognized as of the acquisition date; and (ii) investments in working capital of $9.6 million, largely driven by accounts receivable and inventory due to the growth in revenue, as well as supplier prepayments for critical materials with long lead times. The cash used in operations during fiscal year 2025 was driven by the net loss, after considering non-cash items, which was partially driven by significant legal and consulting expenses related to the acquisition of G5 Infrared. In addition, inventory increased $1.4 million (net of inventory included in the acquisition of G5 Infrared), while the increase in accounts receivable was largely offset by increases in accounts payable and accrued liabilities.

Previous wording

During fiscal years 2025 and 2024, we expended approximately $18.5 million and $0.8 million, net, to acquire G5 Infrared and Visimid, respectively, as disclosed in Note 3,Acquisitions, in the Consolidated Financial Statements in this Annual Report on Form 10-K. During fiscal 2025, we expended approximately $1.3 million for capital equipment, as compared to approximately $2.2 million during fiscal year 2024. During fiscal year 2025, our capital expenditures were primarily related to expansion of our glass fabrication capacity, as well as metrology and infrared coating equipment, whereas our capital expenditures in fiscal year 2024 were primarily related to the expansion of our Orlando Facility. In August 2023, we completed the construction of certain tenant improvements subject to our continuing lease for our Orlando Facility, of which the landlord provided $2.4 million in tenant improvement allowances. We funded the balance of the tenant improvement costs of approximately $3.7 million over fiscal years 2023 and 2024.

Current wording

During fiscal years 2026 and 2025, we expended approximately $7.0 million and $18.5 million, net, to acquire AML and G5 Infrared respectively, as disclosed in Note 3,Acquisitions, in the Consolidated Financial Statements in this Annual Report on Form 10-K. During fiscal 2026, we expended approximately $6.3 million for capital equipment, as compared to approximately $1.3 million during fiscal year 2025. During fiscal years 2026 and 2025 our capital expenditures were primarily related to expansion of our glass fabrication capacity, as well as metrology and infrared coating equipment.

Previous wording

We anticipate a moderate level of capital expenditures during fiscal year 2026; however, the total amount expended will depend on sales growth opportunities and other circumstances.

Current wording

We anticipate a higher level of capital expenditures during fiscal year 2027, to support the demand currently in backlog and to enhance our capacity and capabilities; however, the total amount expended will depend on sales growth opportunities and other circumstances.

Previous wording

Net cash provided by financing activities was approximately $29.3 million, whereas cash used in financing activities was approximately $1.5 million in fiscal year 2024. Cash provided by financing activities for fiscal year 2025 reflects approximately $29.8 million from financing related to the acquisition of G5 Infrared, offset by $0.4 million in principal payments on loans and finance leases. Cash used in financing activities for fiscal year 2024 reflects approximately $2.6 million in principal payments on our loans and finance leases, offset by $0.3 million in proceeds from the 2023 Equipment Loan, $0.8 million in proceeds from the sale of Class A common stock pursuant to the at-the-market equity program.

Current wording

Net cash provided by financing activities was approximately $111.0 million for fiscal year 2026, compared to approximately $29.3 million in fiscal year 2025. Cash provided by financing activities for fiscal year 2026 reflects approximately $120.2 million in net proceeds from public and private equity placements, offset by $5.7 million in principal payments on loans and finance leases. Cash provided by financing activities for fiscal year 2025 reflects approximately $29.8 million from financing related to the acquisition of G5 Infrared, offset by $0.4 million in principal payments on loans and finance leases.

Previous wording

We have continuing sales of two basic types: sales of standard product configurations and sales of customized products or products developed specifically for a certain customer. In this latter type of business, we work with customers to help them determine optical specifications and then create certain optical designs for them, including complex multi-component, optical system or sub-system designs that we call “engineered solutions.” This is followed by “sampling” or prototyping small numbers of the product for the customers’ test and evaluation. Thereafter, should a customer conclude that our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket purchase order” type or a supply agreement. The strategy is to create an annuity revenue stream that makes the best use of our production capacity and longer-term revenue planning, as compared to the turns business, which is unpredictable and uneven. A key business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:

Current wording

We have continuing sales of two basic types: (i) sales of standard product configurations and (ii) sales of customized products or products developed specifically for a certain customer. In this latter type of business, we work with customers to help them determine optical specifications and then create certain optical designs for them, including complex multi-component, optical system or sub-system designs that we call “engineered solutions.” This is followed by “sampling” or prototyping small numbers of the product for the customers’ test and evaluation. Thereafter, should a customer conclude that our specification or design is the best solution to their product need; we negotiate and “win” a contract (sometimes called a “design win”) – whether of a “blanket purchase order” type or a supply agreement. The strategy is to create an annuity revenue stream that makes the best use of our production capacity and longer-term revenue planning, as compared to the turns business, which is unpredictable and uneven. A key business objective is to convert as much of our business to the design win and annuity model as is possible. We face several challenges in doing so:

Previous wording

The acquisition of G5 Infrared added $5.6 million of backlog as of the Acquisition Date. As of June 30, 2025, backlog for G5 Infrared products was $16.6 million. The remaining backlog of $20.8 million as of June 30, 2025 represents an increase of 8% as compared to the end of the prior fiscal year, primarily due to an increase in orders from an industrial customer, which are scheduled into fiscal year 2027. The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders. We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.

Current wording

The increase in total backlog from June 30, 2025 to June 30, 2026 of $73.6 million includes approximately $58.0 million in orders from a leading global technology customer for advanced infrared camera systems expected to ship in calendar year 2026 and 2027, as well as several other multi-million dollar orders from other customers. During fiscal 2026, we received a significant contract renewal for advanced infrared optics for a critical international military program. The acquisition of AML also added backlog of $1.1 million as of March 31, 2026. The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders. We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.

Previous wording

Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our BD6 glass and our new BDNL materials. With the global supply of germanium concentrated in Russia and China, recent global events and increases in restrictions on the sourcing of these materials are generating renewed interest in germanium alternatives such as our proprietary BlackDiamond materials, and other materials we are currently developing under an exclusive license with the Naval Research Lab.

Current wording

Markets continue to experience growing demand for infrared products used in the defense, security, industrial and first responder sectors. Demand for infrared products, including assemblies and cameras, continues to be fueled by interest in lenses made with our BD6 glass and our new BDNL materials. With the global supply of germanium concentrated in Russia and China, recent global events and increases in restrictions on the sourcing of these materials are generating high levels of interest in germanium alternatives such as our proprietary BlackDiamond materials, AML's AMTIR materials and other materials we are currently developing under an exclusive license with the Naval Research Lab.

Previous wording

The following table sets forth revenue dollars by our three product groups for the three months and year ended June 30, 2025 and 2024:

Current wording

The following table sets forth revenue dollars by our four product groups for the three months and year ended June 30, 2026 and 2025, with certain fiscal year 2025 amounts reclassified from infrared components to assemblies and modules to conform to current classification:

Previous wording

Our revenue increased by 41% in the fourth quarter of fiscal year 2025, as compared to the same quarter of the prior fiscal year, primarily driven by increases in infrared components and assemblies and modules resulting from the addition of G5 Infrared revenue since acquisition.

Current wording

Our revenue increased by $9.0 million in the fourth quarter of fiscal year 2026, as compared to the same quarter of the prior fiscal year, primarily driven by increases in infrared components and assemblies and modules.

Previous wording

Revenue from engineering services decreased $0.8 million, for the fourth quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, where the timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. For the fourth quarter of fiscal 2025, the revenue recognized against this contract was less than in the fourth quarter of fiscal 2024.

Current wording

Revenue from engineering services increased by $0.5 million for the fourth quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, where the timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. For the fourth quarter of fiscal 2026, the revenue recognized against this contract was more than in the fourth quarter of fiscal 2025. Management expects that the engineering revenue from a current Lockheed Martin program will decline, as the program transitions from development into production, yet other new programs that are starting now will generate comparable or higher engineering services revenue.

Previous wording

Revenue from engineering services increased by $1.2 million for fiscal year 2025, as compared to the prior fiscal year. This increase was driven by Visimid’s contract with Lockheed Martin, as well as revenue from one of our space-related funded research contracts, where the timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. Projects related to this product group are expected to drive sales growth in the other product groups over time, as these new products transition to from development and prototyping to production.

Current wording

Revenue from engineering services for fiscal year 2026 was nearly flat, as compared to the prior fiscal year. Revenue from Visimid’s contract with Lockheed Martin was less than in the prior fiscal year, due to timing, partially offset by a non-recurring engineering project for another defense customer. The timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. Projects related to this product group are expected to drive sales growth in the other product groups over time, as these new products transition to from development and prototyping to production.

Previous wording

Our average DCSI for fiscal year 2025 was 130, compared to 112 for fiscal year 2024. The increase in average DCSI is driven by the is acquisition of G5 Infrared during the third quarter of fiscal 2025, which increase the inventory balance disproportionately to sales for that quarter. We expect DCSI to return to an average of 110 to 120 days.

Current wording

Our average DCSI for fiscal year 2026 was 115, compared to 130 for fiscal year 2025. The decrease in average DCSI is driven by the increase in sales, while managing inventory levels to support our growing backlog. We strive to maintain DCSI of 110 to 120 days.

Previous wording

Our average DSO for fiscal year 2025 was 67, compared to 56 for fiscal year 2024. The increase in average DSO for fiscal year 2025 is due to the addition of G5 Infrared revenue, which had a higher concentration of shipments in the third month of the third and fourth fiscal quarters which drives the accounts receivable balance up disproportionately to sales. We strive to maintain a DSO of less than 60, which we did achieve during fiscal 2025, when calculated on a monthly basis.

Current wording

Our average DSO for fiscal year 2026 was 56, compared to 67 for fiscal year 2025. The decrease in average DSO for fiscal year 2026 is due to higher than normal DSO in fiscal year 2025. This was due to the addition of G5 Infrared revenue, which had a higher concentration of shipments in the third month of the third and fourth fiscal quarters of 2025 which drove the accounts receivable balance up disproportionately to sales. We strive to maintain a DSO of less than 60, which we achieved for fiscal year 2026.

Previous wording

EBITDA and Adjusted EBIDA are non-GAAP financial measures used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory, and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation, and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”

Current wording

EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation’s financial position and core operating performance. Investors sometimes use EBITDA as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory, and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not a good indicator of a business’s cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation, and amortization, thus the term “Earnings Before Interest, Taxes, Depreciation and Amortization” and the acronym “EBITDA.”

Previous wording

We also calculate an adjusted EBITDA, which excludes: (1) stock compensation expenses; (2) the loss on extinguishment of debt; (3) the effect of the non-cash income or expense associated with the mark-to-market adjustments, related to the warrants; and (4) the effect of foreign exchange gains or losses. Management uses adjusted EBITDA to evaluate our underlying operating performance and for planning and forecasting future business operations.

Current wording

We also calculate an adjusted EBITDA, which excludes: (1) stock compensation expenses; (2) the loss on extinguishment of debt; (3) the effect of the non-cash income or expense associated with the mark-to-market adjustments, related to the warrants; (4) the effect of non-cash income or expenses associated with the fair value adjustments related to the acquisition earnout liabilities; (5) acquisition costs, including legal fees and due diligence; and (6) the effect of foreign exchange gains or losses. Management uses adjusted EBITDA to evaluate our underlying operating performance and for planning and forecasting future business operations.

Previous wording

Our adjusted EBITDA for the quarter ended June 30, 2025 was a loss of approximately $2.0 million, compared to a loss of $1.1 million for the same period of the prior fiscal year. The decrease in adjusted EBITDA in the fourth quarter of fiscal year 2025 is primarily attributable to higher SG&A, including non-recurring costs related to the acquisition of G5 Infrared, and new product development expenses, partially offset by the increase in gross margin.

Current wording

Our adjusted EBITDA for the quarter ended June 30, 2026 was approximately $2.1 million, compared to a loss of $2.0 million for the same period of the prior fiscal year. The increase in adjusted EBITDA in the fourth quarter of fiscal year 2026 is primarily attributable to higher sales and gross margin, partially offset by higher SG&A costs.

Previous wording

Our adjusted EBITDA for fiscal year 2025 was a loss of approximately $5.1 million, compared to a loss of $2.8 million for fiscal year 2024. The decrease in adjusted EBITDA for fiscal year 2025 is primarily attributable to higher SG&A, including non-recurring costs of approximately $1.5 million related to the acquisition of G5 Infrared, an increase of $1.0 million as compared to prior fiscal year, as we began incurring costs related to this acquisition in the second half of fiscal year 2024, and higher new product development expenses, partially offset by the increase in gross margin.

Current wording

Our adjusted EBITDA for fiscal year 2026 was approximately $4.2 million, compared to a loss of $5.1 million for fiscal year 2025. The increase in adjusted EBITDA for fiscal year 2026 is primarily attributable to higher sales and gross margin, partially offset by higher SG&A and new product development costs.

Previous wording

Stock-based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. Our directors, officers, and key employees were granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, the 2018 Stock and Incentive Compensation Plan (the “SICP”). Most options granted under the Omnibus Plan and the SICP vest ratably over two to four years and generally have ten-year contract lives. The volatility rate is based on four-year historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding options. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable, then the compensation expense will be amortized over the remaining vesting period. As of June 30, 2025, there are no outstanding option grants with performance-based vesting criteria.

Current wording

Stock-based compensation is measured at grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period. We estimate the fair value of each stock option as of the date of grant using the Black-Scholes-Merton pricing model. Our directors, officers, and key employees were granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, the 2018 Stock and Incentive Compensation Plan (the “SICP”). Most options granted under the Omnibus Plan and the SICP vest ratably over two to four years and generally have ten-year contract lives. The volatility rate is based on four-year historical trends in common stock closing prices and the expected term was determined based primarily on historical experience of previously outstanding options. The interest rate used is the U.S. Treasury interest rate for constant maturities. The likelihood of meeting targets for option grants that are performance based are evaluated each quarter. If it is determined that meeting the targets is probable, then the compensation expense will be amortized over the remaining vesting period.

Previous wording

**Goodwill and amortizable intangible assets **acquired in a business combination are recognized at fair value using generally accepted valuation methods. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to fifteen years. We periodically reassess the useful lives of intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate. Amortizable intangible assets consist primarily of customer relationships, know-how/trade secrets and tradenames. They are generally valued as the present value of estimated cash flows expected to be generated from the asset using a risk-adjusted discount rate. When determining the fair value of our intangible assets, estimates and assumptions about future expected revenue and remaining useful lives are used. Goodwill and intangible assets are tested for impairment on an annual basis and during the period between annual tests if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

Current wording

Goodwill and amortizable intangible assets** **acquired in a business combination are recognized at fair value using generally accepted valuation methods. Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to fifteen years. We periodically reassess the useful lives of intangible assets when events or circumstances indicate that useful lives have significantly changed from the previous estimate. Amortizable intangible assets consist primarily of customer relationships, developed technology and tradenames. They are generally valued as the present value of estimated cash flows expected to be generated from the asset using a risk-adjusted discount rate. When determining the fair value of our intangible assets, estimates and assumptions about future expected revenue and remaining useful lives are used. Goodwill and intangible assets are tested for impairment on an annual basis and during the period between annual tests if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.