LIGHTPATH TECHNOLOGIES INC

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:

Despite these challenges to winning more “annuity” business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the market to our current and potential customers looking for specific solutions to their needs. Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of critical component(s) from foreign sources. For information regarding revenue recognition related to our various revenue streams, refer toCritical Accounting Policies and Estimates in our Annual Report on Form 10-K dated June 30, 2026.

Our Key Performance Indicators:

Usually on a weekly basis, management reviews several performance indicators. Some of these indicators are qualitative and others are quantitative. These indicators change from time to time as the opportunities and challenges in the business change. They are mostly non-financial indicators, such as units of shippable output by product line, production yield rates by major product line, and the output and yield data from significant intermediary manufacturing processes that support the production of the finished shippable product. These indicators can be used to calculate such other related indicators as fully yielded unit production per-shift, which varies by the product and our state of automation in production of that product at any given time. Higher unit production per shift means lower unit cost, and, therefore, improved margins or improved ability to compete, where desirable, for price sensitive customer applications. The data from these reports is used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted, are proprietary information.

Financial indicators that are considered key and reviewed regularly are as follows:

These indicators are similarly used to determine tactical operating actions and changes and are discussed in more detail below. Management will evaluate these key indicators as we transition to our strategic plan to determine whether any changes or updates to our key indicators are warranted.

Sales Backlog

We believe sales growth has been and continues to be a key indicator of success. Our best view into the efficacy of our sales efforts is in our “order book.” Our order book equates to sales “backlog.” It has a quantitative and a qualitative aspect: quantitatively, our backlog’s prospective dollar value and qualitatively, what percent of the backlog is scheduled by the customer for date-certain delivery. We monitor and evaluate our total backlog, which includes all firm orders requested by a customer that are reasonably believed to remain in the backlog and be converted into revenues. This includes customer purchase orders and may include amounts under supply contracts if they meet the aforementioned criteria.

Our total backlog at September 30, 2026 was approximately $132.9 million, an increase of 20%, as compared to $110.9 million as of June 30, 2026. Backlog change rates for the last five fiscal quarters are:

Of the total backlog of $132.9 million as of September 30, 2026, approximately $110.8 million is requested by the customer for delivery within one year, which is expected to be converted into revenues during the next four fiscal quarters.

The increase in total backlog during the first quarter of fiscal 2027 includes approximately $11 million in follow-on orders from a leading global technology customer for advanced infrared camera systems, as well as $13 million in follow-on orders for optical assemblies from a leading C-UAS and defense systems supplier and several other multi-million dollar orders from other customers. 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.

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.

Revenue by Product Group

The following table sets forth revenue for our four product groups for the three-month periods ended September 30, 2026 and 2025:

Three months ended September 30, 2026

Our revenue increased by approximately $5.7 million, or 38%, in the first quarter of fiscal 2027 compared to the same quarter of the prior fiscal year, primarily driven by increases in assemblies and modules, and to a lesser extent, increases in infrared components and visible components. AML was included in our revenue for the first quarter of fiscal 2027, but was not included for the first quarter of fiscal 2026, as the acquisition closed in the third quarter of fiscal 2026.

Revenue generated by the infrared components product group for the first quarter of fiscal year 2027 was $4.7 million, an increase of $0.6 million or 15%, as compared to the same quarter of the prior fiscal year. AML contributed approximately $1.1 million to the increase in sales of infrared components. This increase was partially offset by a decrease in sales to defense customers in Europe due to timing of orders.

Revenue from the visible components product group for the first quarter of fiscal year 2027 was $4.6 million, an increase of $0.7 million, or 19%, as compared to the same quarter of the prior fiscal year. The increase was primarily driven by increases in sales to industrial customers in Europe, as well as U.S. defense customers and distributors. Although we do not expect significant growth in visible components revenue over the long term, demand has trended up since fiscal 2026.

Revenue from assemblies and modules for the first quarter of fiscal year 2027 was $10.5 million, an increase of $4.5 million, or 76%, as compared to the same quarter of the prior fiscal year. This increase is primarily due to an increase in G5 Infrared sales of cameras and modules, including the previously announced programs with global technology and defense customers for use in surveillance and C-UAS applications.

Revenue from engineering services decreased by $0.2 million for the first quarter of fiscal 2027, as compared to the same quarter of the prior fiscal year. 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 first quarter of fiscal 2027, the revenue recognized against Visimid's contract with Lockheed Martin was more than in the first quarter of fiscal 2026, however this increase was offset by a decrease in revenue from another development project with a defense customer, where the revenue was less in the first quarter of fiscal 2027 than in the first quarter of fiscal 2026.

Other Key Indicators

Other key indicators include various qualitative and quantitative operating metrics. These indicators change from time to time as the opportunities and challenges in the business change. They are mostly non-financial indicators, such as evaluating the pipeline of sales opportunities, on time delivery trends, production yield rates by major product line, and the output and yield data from significant intermediary manufacturing processes that support the production of the finished shippable product. The data from these reports is used to determine tactical operating actions and changes. Management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP measures. These non-GAAP measures are described in more detail below under the heading “Non-GAAP Financial Measures.”