LIGHTPATH TECHNOLOGIES INC

We have continuing sales of two basic types: sales via ad-hoc purchase orders of mostly standard product configurations (our “turns” business) and the more challenging and potentially more rewarding business of customer product development. In this latter type of business, we work with customers to help them determine optical specifications and even create certain optical designs for them, including complex, multi-component, optical system or sub-system designs that we call “engineered solutions.” These engineered solutions are often based on existing reference designs we have demonstrated, that then get further customized to the customer’s specific needs. 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, 2024.

Our Key Performance Indicators:

Typically, on a weekly basis, management reviews a number of performance indicators, both qualitative and quantitative. These indicators change from time to time as the opportunities and challenges in the business change. These indicators are 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 also used to determine tactical operating actions and changes and are discussed in more detail below. Management continues to evaluate these key indicators as we refine our strategic plan to determine whether any changes or updates to our key indicators are warranted.

Sales Backlog

We believe our sales activity 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 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 also include amounts under supply contracts for which purchase orders have not yet been received, if those contracts meet the aforementioned criteria. Generally, a higher total backlog is better for us.

Our total backlog at March 31, 2025 was approximately $27.4 million, an increase of 25%, as compared to $22.0 million as of March 31, 2024. Compared to the end of fiscal 2024, our total backlog increased by 39% during the first nine months of fiscal 2025. Backlog change rates for the last five fiscal quarters are:

The acquisition of G5 Infrared added $5.6 million of backlog, as of the Acquisition Date. As of March 31, 2025, backlog for G5 Infrared products was $9.9 million. The remaining decrease in backlog during the third quarter of fiscal 2025 is primarily due to the timing of shipments against prior period backlog under other annual and multi-year contracts. During the first quarter of fiscal 2025, we received a significant contract renewal for advanced infrared optics for a critical international military program, with a small increase over the previous renewal in the same period of the prior fiscal year, as well as a $0.5 million low-rate initial production order for thermal imaging assemblies with a new tier-1 defense customer. 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 industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our proprietary BD6 and our new BDNL-4 materials. With the global supply of Germanium currently concentrated in Russia and China, global events which have significantly restricted the Germanium supply, particularly to the U.S., 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. Several of our customers are actively working to convert their designs to use optics made of our BlackDiamond materials. Additionally, the proliferation in use of drones, both by state players and by non state players and civilians, is driving demand for C-UAS passive detection systems, such as G5’s long range cameras. Passive detection of unmanned aerial systems (“UASs”) is preferred over the use of active systems such as Radar, as the later provides the enemy information on one’s own location. We expect sales of cameras for C-UAS applications to grow substantially in the next few years.

As we have outlined in our strategic direction, we do not expect to see significant growth in our visible components product group in the near future. Competition in that product line has grown substantially over the last few years, and some of our new molding capabilities and technologies such as free-form molded optics, might take longer than anticipated to reach full commercialization, depending on economic conditions and technology trends in the area of AR\VR.

In addition, order bookings for both visible and infrared components and assemblies continue to be slow in China. Domestic sales in China have also been adversely impacted by the economic downturn in China, which continues to negatively impact revenue and bookings in that region.

Revenue by Product Group

The following table sets forth revenue for our four product groups for the three and nine-month periods ended March 31, 2025 and 2024:

Three months ended March 31, 2025

Our revenue increased by 19% in the third quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, primarily driven by an increase in assemblies and modules and engineering services, along with slight increases in visible components and infrared components.

Revenue generated by the infrared components product group for the third quarter of fiscal 2025 was $3.6 million, nearly flat, as compared to same quarter of the prior fiscal year. The third quarter of fiscal 2025 includes $0.5 million of G5 Infrared coating services and components. The remaining decrease in revenue is primarily due to a decrease in sales to a single customer against a large annual contract for Germanium-based products, which was not renewed in the second quarter of fiscal 2024. Due to the uncertainty surrounding the global Germanium supply, we decided to reduce the amount of optics we produce from Germanium, both to reduce our exposure to the risk of supply chain disruption, and more importantly, to work with customers to convert their systems to use optics made of our own BlackDiamond materials. We continue to work with this single customer, as well as other customers to convert their systems to use BlackDiamond optics. Over the last few quarters we have worked closely with several customers to replace their Germanium optics with solutions made from our BlackDiamond materials. We continue to see growth in the number of customers making that transition, as well as the volume of demand for solutions made using our BlackDiamond materials to replace legacy Germanium systems. As a result, we continue to also add more manufacturing capacity for our BlackDiamond glass, to address the growing number of customers adopting the material. Disruptions in the Germanium supply continue to cause delays in fulfilling orders, and we are accepting fewer orders for Germanium-based products.

Revenue from the visible components product group for the third quarter of fiscal 2025 was $2.8 million, an increase of 6%, as compared to the same quarter of the prior fiscal year. The increase in revenue is primarily due to an increase in sales to customers in the defense industry, partially offset by decreases in sales to industrial and commercial customers.

Revenue from assemblies and modules was $1.9 million, an increase of 123% for the third quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year. The third quarter of fiscal 2025 includes $0.9 million of G5 Infrared cameras and modules. The remaining increase is primarily due to sales of infrared cores and cameras, partially offset by the absence of revenue from an end of life order for a custom visible lens assembly which shipped complete in the first quarter of fiscal 2025.

Revenue from engineering services increased by $0.3 million, or 54%, for the third 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, as well as revenue from one of our space-related funded research contracts, where revenue is generally recognized based on the achievement of milestones. During the first quarter of fiscal 2025, we received qualification of our advanced thermal camera system by Lockheed Martin as part of its bid to produce the design of a major missile program for the U.S. Army. Due to the end customer’s requirement for confidentiality, and the competition between Lockheed Martin and other companies vying for the contract to be awarded for this project, we are unable to provide a more comprehensive update on this project, other than the project is currently continuing on schedule.

Nine months ended March 31, 2025

Our revenue increased by 8% in the first nine months of fiscal 2025, as compared to the same period of the prior fiscal year, driven by increases in sales of engineering services, assemblies and modules and visible components, partially offset by decreases in infrared components.

Revenue generated by the infrared components product group for the first nine months of fiscal 2025 was $9.4 million, a decrease of 15%, as compared to same period of the prior fiscal year. The third quarter of fiscal 2025 includes $0.5 million of G5 infrared coating services and components. The decrease in revenue is primarily due to a decrease in sales against the aforementioned annual contract for Germanium-based products. The decrease in sales to this customer was partially offset by increases in sales to several defense customers in the U.S. and in Europe.

Revenue from the visible components product group for the second quarter of fiscal 2025 was $8.9 million, an increase of 10%, as compared to the same period of the prior fiscal year. The increase was primarily driven by customers in the defense industry. The year-over-year increase was largely due to timing; we generally do not expect growth in our visible components product group.

Revenue from assemblies and modules increased by $0.7 million, or 24%, for the first nine months of fiscal 2025, as compared to the same period of the prior fiscal year. The third quarter of fiscal 2025 includes $0.9 million of G5 Infrared cameras and modules. The remaining decrease is due to an end of life order for a custom visible lens assembly which shipped complete in the first quarter of fiscal 2025. This decrease in visible lens assembly sales was partially offset by increased sales of infrared cores and cameras.

Revenue from engineering services increased by $2.0 million, or 221%, for the first nine months of fiscal 2025, as compared to the same period of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, as well as revenue from one of our space-related funded research contracts, where revenue is generally recognized based on the achievement of milestones.

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.”