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Item 2. Management’s Discussion and Analysis

2025-05-20 compared with 2025-02-13 · 191 added, 144 removed, 202 unchanged (62% of the section changed)

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Our actual results could differ materially from those discussed in the forward-looking statements.

Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

Please also see the cautionary language at the beginning of this Quarterly Report on Form 10-Q regarding forward-looking statements.

We were incorporated in Delaware in 1992 as the successor to LightPath Technologies Limited Partnership, a New Mexico limited partnership, formed in 1989, and its predecessor, Integrated Solar Technologies Corporation, a New Mexico corporation, formed in 1985.

Today, LightPath is a global company with major facilities in the United States, the People’s Republic of China, and the Republic of Latvia.

Today, LightPath is a global company with major facilities in the U.S., the People’s Republic of China, and the Republic of Latvia.

In November 2005, we formed LPOI, a wholly-owned subsidiary, located in Jiading, People’s Republic of China.

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ISP Latvia’s facility in Riga, Latvia (the “Riga Facility”) functions as its manufacturing facility.

In July 2023, we acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”).

In July 2023, we acquired Visimid.

Visimid is an engineering and design firm specializing in thermal imaging, night vision and IOT applications.

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We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.

Visimid’s facility is located in Plano, TX.

Visimid’s facility is located in Plano, Texas.

For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2024.

In February 2025, we acquired G5 Infrared LLC, a New Hampshire limited liability company.

G5 Infrared is a leading vertically-integrated manufacturer of high- performance infrared camera systems and imaging solutions, specializing in advanced thermal imaging technology and long-range mission-critical detection solutions.

G5 Infrared’s existing revenue and future growth pipeline are driven by established multi-year contracts and multiple defense programs of record in shipboard long-range surveillance, border security, and counter unmanned aerial systems (“C-UAS”) systems, as well as recurring federal, naval, and law enforcement programs.

Additionally, G5 Infrared is an industry-leading provider of cutting-edge advanced infrared coatings, including for materials such as LightPath’s BlackDiamond (“BlackDiamond”) glass.

G5 Infrared operates from a state-of-the-art manufacturing facility in Hudson, New Hampshire.

We believe that this acquisition strengthens LightPath’s position as a leader in infrared imaging by expanding the Company’s portfolio to include cooled infrared cameras.

The combination of LightPath and G5 Infrared creates a more robust, vertically-integrated solutions provider.

Product Groups

We categorize our products into four product groups:

infrared components, visible components, assemblies and modules, and engineering services.

G5 Infrared’s revenue is generally derived from infrared components (including coating services) and assemblies and modules.

Our infrared components product group is comprised of both molded and turned infrared lenses and assemblies using a variety of infrared glass materials.

This product group also includes both conventional and computer numerical control (“CNC”) ground and polished lenses.

This product group also includes any revenue from sale of our BlackDiamond glass materials, and G5’s optical component and coating business.

This product group includes both conventional and computer numerical control (“CNC”) ground and polished lenses.

Advances in chalcogenide materials have enabled compression molding for mid-wave (“MWIR”) and long-wave (“LWIR”) optics in a process similar to precision molded lenses.

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In addition, both product groups offer both catalog and custom designed optics.

Our assemblies and modules product group is comprised of other value-added products, including both infrared and visible components, such as mounted lenses, optical assemblies, collimator assemblies, and other custom specialty optics.

Collimator assemblies are utilized in applications involving light detection and ranging (“LIDAR”) technology for advanced driver assistance systems and autonomous vehicles, such as forklifts and other automated warehouse equipment.

This continues to be an emerging market with long-term growth potential for us.

We also expect growth from medical programs and commercial optical sub-assemblies.

We design, build, and sell optical assemblies in markets for test and measurement, medical devices, military, industrial, and communications based on our proprietary technologies.

Most of our optical assemblies are based on our BlackDiamond glass.

In recent years and with the growing adoption of our BlackDiamond glass, our optical assemblies business has grown considerably, and we expect to see it continue to grow.

Our unique positioning in the market with our BlackDiamond glass allows us to capture a bigger portion of the customers’ Bill of Materials (BOM), which translates to more sales of assemblies, instead of only components.

Since the acquisitions of Visimid Technologies and G5 Infrared, this product group is predominantly driven by sales of cameras, both Visimid’s uncooled cameras, and G5 Infrared’s cooled cameras.

This product group also includes revenue from camera repair services, primarily from G5 Infrared.

Our engineering services product group represents services we provide pursuant to product development agreements that we enter into with customers.

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Since our Chief Executive Officer, Mr.

Sam Rubin, joined the Company in 2020, we have been developing a new strategy that will transition the Company from a pure component manufacturer to a supplier of imaging subsystems and systems.

Our new strategic direction, which is based on our core technological differentiators such as our BlackDiamond glass (“BlackDiamond”) and proprietary molding technologies, significantly increases our value add to customers.

This transition, which is occurring both organically and through acquisitions, such as the July 2023 acquisition of Visimid Technologies, is positioning the Company for significant growth and higher profitability in coming years.

Sam Rubin, joined the Company in 2020, we have been developing a new strategy that we believe is transitioning the Company from a pure component manufacturer to a supplier of imaging subsystems and systems.

Our new strategic direction, which is based on our core technological differentiators such as our BlackDiamond glass and proprietary molding technologies, significantly increases our value add to customers.

This transition, which is occurring both organically and through acquisitions, such as the July 2023 acquisition of Visimid Technologies, and the recent acquisition of G5 Infrared are expected to position the Company for significant growth and higher profitability in coming years.

Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems.

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We have been developing these partnerships by working closely with our customers throughout their design process, designing optical solutions that are tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product.

Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with technologies that we acquired through the Visimid acquisition such as video processing, infrared camera integration and more.

Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with technologies that we acquired through the acquisitions of Visimid and G5 Infrared such as video processing, infrared camera integration and more.

Continually adding differentiating technologies is key to our strategy and we expect to continue to do so both organically and through acquisitions.

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Results of Operations

Three months ended December 31, 2024, compared to three months ended December 31, 2023

Revenue for the second quarter of fiscal 2025 was approximately $7.4 million, an increase of approximately $0.1 million, or 1%, as compared to approximately $7.3 million in the same quarter of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.

Revenue from infrared components was approximately $3.1 million in the second quarter of fiscal 2025, a decrease of approximately $0.5 million, or 13%, as compared to the same quarter of the prior fiscal year.

The decrease in revenue is primarily due to a decrease in sales against a large annual contract for Germanium-based products, which was not renewed in the second quarter of fiscal 2024, as we have decided to reduce the amount of optics we produce from Germanium, both to reduce our 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.

Three months ended March 31, 2025, compared to three months ended March 31, 2024

Revenue for the third quarter of fiscal 2025 was approximately $9.2 million, an increase of approximately $1.5 million, or 19%, as compared to approximately $7.7 million in the same quarter of the prior fiscal year, primarily driven by an increase in engineering services and assemblies and modules along with slight increases in visible components and infrared components.

Revenue from infrared components was approximately $3.6 million in the third quarter of fiscal 2025, nearly flat as compared to the same quarter of the prior fiscal year.

The third quarter of fiscal 2025 includes the addition of $0.5 million of G5 Infrared coating services and components.

This increase was offset by a decrease in sales against a large annual contract for Germanium-based products, which was not renewed in the second quarter of fiscal 2024, as we have decided to reduce the amount of optics we produce from Germanium, both to reduce our 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.

The availability of Germanium is becoming increasingly limited due to new trade restrictions and additional tariffs on goods imposed by China.

See the section entitled “Potential Impact of Economic Conditions and Policies in China” within Item 2, for additional information and a discussion of economic conditions and policies in China.

Revenue from the visible components product group for the second quarter of fiscal 2025 was $2.8 million, an increase of approximately $0.1 million, or 3%, 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 medical customers.

Revenue from assemblies and modules was approximately $0.9 million in the second quarter of fiscal 2025, a decrease of approximately $0.1 million, or 13%, as compared to the same quarter of the prior fiscal year.

The majority of the decrease is due to a decrease in sales of a custom visible lens assembly to a medical customer, for which we had an end-of-life order 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 $0.6 million, or 797%, for the second 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 revenue is generally recognized based on the achievement of milestones.

Six months ended December 31, 2024, compared to six months ended December 31, 2023

Revenue for the first half of fiscal 2025 was approximately $15.8 million, an increase of approximately $0.4 million, or 3%, as compared to approximately $15.4 million in the same period of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.

Revenue from infrared components was approximately $5.7 million in the first half of fiscal 2025, a decrease of approximately $1.7 million, or 23%, as compared to the same period of the prior fiscal year.

Revenue from the visible components product group for the third quarter of fiscal 2025 was $2.8 million, an increase of approximately $0.1 million, or 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 approximately $1.9 million in the third quarter of fiscal 2025, an increase of approximately $1.0 million, or 123%, as compared to the same quarter of the prior fiscal year.

The third quarter of fiscal 2025 includes the addition of $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 one of our space-related funded research contracts where revenue is generally recognized based on the achievement of milestones and, therefore, is not always consistent between periods.

Nine months ended March 31, 2025 compared to nine months ended March 31, 2024

Revenue for the first nine months of fiscal 2025 was approximately $25.0 million, an increase of approximately $1.9 million, or 8%, as compared to approximately $23.0 million in 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 a decrease in infrared components.

Revenue from infrared components was approximately $9.4 million in the first nine months of fiscal 2025, a decrease of approximately $1.7 million, or 15%, as compared to the same period of the prior fiscal year.

The decrease in revenue is primarily due to a decrease in sales against the aforementioned annual contract for Germanium-based products.

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and in Europe.

Revenue from the visible components product group for the first half of fiscal 2025 was $6.1 million, an increase of approximately $0.7 million, or 13%, as compared to the same period 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 medical customers.

Revenue from assemblies and modules was approximately $2.1 million in the first half of fiscal 2025, a decrease of approximately $0.3 million, or 13%, as compared to the same period of the prior fiscal year.

The majority of the decrease is due to a decrease in sales of a custom visible lens assembly to a medical customer, for which we had an end of life order which shipped complete in the first quarter of fiscal 2025.

Revenue from engineering services increased by $1.7 million, or 465%, for the first half 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, where revenue is generally recognized based on the achievement of milestones.

In the second quarter of fiscal 2025, gross profit was approximately $1.9 million, a decrease of $0.3 million, or 11%, as compared to the same quarter of the prior fiscal year.

Total cost of sales was approximately $5.5 million for the second quarter of fiscal 2025, compared to approximately $5.1 million for the same quarter of the prior fiscal year.

Gross margin as a percentage of revenue was 26% for the second quarter of fiscal 2025, compared to 30% for the same quarter of the prior fiscal year.

The decrease in gross margin as a percentage of revenue is primarily due to differences in the product mix, coupled with some manufacturing yield issues in infrared components, which were resolved late in the second quarter.

Revenue from the visible components product group for the first nine months of fiscal 2025 was $8.9 million, an increase of approximately $0.9 million, or 10%, as compared to the same period of the prior fiscal year.

The increase in revenue is primarily due to an increase in sales to customers in the defense industry.

Revenue from assemblies and modules was approximately $3.8 million for the first nine months of fiscal 2025, an increase of approximately $0.7 million, or 24%, 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.

In the third quarter of fiscal 2025, gross profit was approximately $2.6 million, an increase of $1.1 million, or 66%, as compared to the same quarter of the prior fiscal year.

Total cost of sales was approximately $6.5 million for the third quarter of fiscal 2025, compared to approximately $6.1 million for the same quarter of the prior fiscal year.

Gross margin as a percentage of revenue was 29% for the third quarter of fiscal 2025, compared to 21% for the same quarter of the prior fiscal year.

The increase in gross margin as a percentage of revenue is primarily due to a more favorable product mix, with more revenue from assemblies and modules and engineering services, which typically have higher margins than infrared components.

We continue to focus our strategic direction on higher margin products.

For the first half of fiscal 2025, gross profit was approximately $4.8 million, an increase of $0.3 million, or 6%, as compared to the same period of the prior fiscal year.

Total cost of sales was approximately $11.0 million for the first half of fiscal 2025, compared to approximately $10.9 million for the same period of the prior fiscal year.

Gross margin as a percentage of revenue was 30% for the first half of fiscal 2025, compared to 29% for the same period of the prior fiscal year.

The increase in gross margin as a percentage of revenue is primarily due to a more favorable product mix, with increases in both visible components sales and engineering services, which typically have higher margins than infrared components.

For the first nine months of fiscal 2025, gross profit was approximately $7.4 million, an increase of $1.3 million, or 22%, as compared to the same period of the prior fiscal year.

Total cost of sales was approximately $17.6 million for the first nine months of fiscal 2025, compared to approximately $17.0 million for the same period of the prior fiscal year.

Gross margin as a percentage of revenue was 30% for the first nine months of fiscal 2025, compared to 26% for the same period of the prior fiscal year.

Selling, General and Administrative

In the second quarter of fiscal 2025, SG&A costs were approximately $3.4 million, an increase of approximately $0.5 million, or 17%, as compared to approximately $2.9 million in the same quarter of the prior fiscal year.

For the first half of fiscal 2025, SG&A costs were approximately $6.6 million, an increase of approximately $1.1 million, or 20%, as compared to approximately $5.5 million in the same period of the prior fiscal year.

In the third quarter of fiscal 2025, SG&A costs were approximately $4.4 million, an increase of approximately $1.3 million, or 40%, as compared to approximately $3.2 million in the same quarter of the prior fiscal year.

For the first nine months of fiscal 2025, SG&A costs were approximately $11.1 million, an increase of approximately $2.4 million, or 27%, as compared to approximately $8.7 million in the same period of the prior fiscal year.

The increase in SG&A costs is primarily due to an increase in legal and consulting fees related to business development initiatives.

Due diligence and other costs incurred leading up to the acquisition of G5 were approximately $175,000 for the second quarter of fiscal 2025, and $585,000 for the first half of 2025.

Due diligence and other costs incurred related to the acquisition of G5 Infrared were approximately $0.7 million for the third quarter of fiscal 2025, and $1.3 million for the first nine months of 2025.

We have also increased our sales and marketing spend to promote new products, including personnel costs, travel, advertising and tradeshows.

The third quarter and first nine months of 2025 also reflect the addition of G5 Infrared’s SG&A costs since the G5 Acquisition Date.

New Product Development

In the second quarter of fiscal 2025, new product development costs were approximately $0.8 million, an increase of approximately $0.2 million, or 26%, as compared to the same quarter of the prior fiscal year.

For the first half of fiscal 2025, new product development costs were approximately $1.2 million, approximately the same as the first half of fiscal 2024.

The increase for the second quarter was primarily driven by materials consumed for continued development of infrared assembly products.

For the first half, the increase in material spend was offset by a decrease in personnel costs as engineering personnel have shifted toward externally funded, rather than internally funded, development projects.

In the third quarter of fiscal 2025, new product development costs were approximately $0.8 million, an increase of approximately $0.2 million, or 33%, as compared to the same quarter of the prior fiscal year.

For the first nine months of fiscal 2025, new product development costs were approximately $2.0 million, an increase of approximately $0.2 million, or 10%, as compared to the same period of the prior fiscal year.

The increase for the third quarter was primarily driven by materials consumed for continued development of infrared assembly products.

For the first nine months, the increase in material spend was offset by a decrease in personnel costs as engineering personnel have shifted toward externally funded, rather than internally-funded, development projects.

Amortization of Intangibles

Amortization of intangibles decreased by $0.2 million for the second quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, and decreased by $0.1 million for the first half of fiscal 2025, as compared to the same period of the prior fiscal year.

These decreases are driven by the amortization of identifiable intangible assets associated with the Visimid acquisition, for which the backlog intangible reached full amortization during the first quarter of fiscal 2025.

See Note 3, Acquisition of Visimid , in the unaudited Condensed Consolidated Financial Statements, for further information.

Amortization of intangibles increased by $0.3 million for the third quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, and increased by $0.3 million for the first nine months of fiscal 2025, as compared to the same period of the prior fiscal year.

The increases are driven by the amortization of identifiable intangible assets associated with the acquisition of G5 Infrared, partially offset by decreases in amortization of intangible assets associated with the acquisition of Visimid, for which the backlog intangible reached full amortization during the first quarter of fiscal 2025.

See Note 3, Acquisition of G5 Infrared , and Note 4, Acquisition of Visimid , in the unaudited Condensed Consolidated Financial Statements, for further information.

Other Income (Expense)

Interest expense, net, was approximately $169,000 for the second quarter of fiscal 2025, as compared to $54,000 for the same quarter of the prior fiscal year.

For the first half of fiscal 2025, interest expense, net was approximately $318,000, as compared to $111,000 for the same period of the prior fiscal year.

The increase in interest expense is due to the interest and amortization of loan issuance costs associated with the Bridge Note which was executed in August 2024.

Other income, net, was approximately $86,000 for the second quarter of fiscal 2025, as compared to other income, net of $200,000 for the same quarter of the prior fiscal year.

For the first half of fiscal 2025, other income, net was approximately $5,000, as compared to $205,000 for the same period of the prior fiscal year.

Other income for the second quarter and first half of fiscal 2024 includes a gain of $190,000 for the return of funds previously misappropriated by our former Chinese management team, as a result of the ongoing legal proceedings described in Note 14, Contingencies, in the unaudited Condensed Consolidated Financial Statements.

Interest expense, net, was approximately $487,000 for the third quarter of fiscal 2025, as compared to $38,000 for the same quarter of the prior fiscal year.

For the first nine months of fiscal 2025, interest expense, net was approximately $805,000, as compared to $149,000 for the same period of the prior fiscal year.

Interest expense for both the three and nine months ended March 31, 2025 include financing costs associated with the warrant liability of approximately $319,000.

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.

We recorded a loss in extinguishment of debt of $0.4 million during the three and nine months ended March 31, 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).

Other expense, net, was approximately $124,000 for the third quarter of fiscal 2025, as compared to other income, net, of $29,000 for the same quarter of the prior fiscal year.

For the first nine months of fiscal 2025, other expense, net was approximately $119,000, as compared to other income, net, of $234,000 for the same period of the prior fiscal year.

Other expense, net, for the third quarter and first nine months of fiscal 2025 includes a non-cash valuation adjustment of $130,000 related to the Visimid acquisition payments that were settled in Class A Common Stock.

Other income for the first nine months of fiscal 2024 includes a gain of $190,000 for the return of funds previously misappropriated by our former Chinese management team, as a result of the ongoing legal proceedings described in Note 15, Contingencies, in the unaudited Condensed Consolidated Financial Statements.

Other income, net also includes net gains and losses on foreign exchange transactions.

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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.

We recognized foreign currency transaction gains of $40,000 and $4,000 for the second quarter of fiscal 2025 and 2024, respectively.

For the first half of fiscal 2025 and 2024, we recognized foreign currency gains of $4,000 and $29,000, respectively.

Assets and liabilities denominated in non-U.S.

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.

We recognized foreign currency transaction gains of $8,000 and $12,000 for the third quarter of fiscal 2025 and 2024, respectively.

For the first nine months of fiscal 2025 and 2024, we recognized foreign currency gains of $12,000 and $41,000, respectively.

Income tax expense is primarily related to income taxes from our operations in China, including estimated Chinese withholding taxes associated with intercompany dividends declared by LPOIZ and payable to us as its parent company, as well as withholding taxes on payments from LPOIZ to LightPath for administrative services rendered.

Income tax expense was approximately $45,000 for the second quarter of fiscal 2025, as compared to $76,000 for the same quarter of the prior fiscal year.

For the first half of fiscal 2025, income tax expense was $60,000, as compared to $116,000 for the same period of the prior fiscal year.

The decreases are due to timing of intercompany dividends.

Net loss for the second quarter of fiscal 2025 was approximately $2.6 million, or $0.07 basic and diluted loss per share, compared to $1.7 million, or $0.05 basic and diluted loss per share, for the same quarter of the prior fiscal year.The increase in net loss of approximately $1.0 million for the second quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, was primarily attributable to lower gross profit coupled with increased SG&A and new product development costs, as well as higher interest expense.

Included in SG&A are $175,000 in non-recurring costs leading up to the acquisition of G5.

Net loss for the first half of fiscal 2025 was approximately $4.2 million, or $0.11 basic and diluted loss per share, compared to $3.1 million, or $0.08 basic and diluted loss per share, for the same period of the prior fiscal year.

The increase in net loss of approximately $1.2 million for the first half of fiscal 2025, as compared to the same period of the prior fiscal year, was primarily attributable to the increased SG&A costs, including legal and consulting expenses of $585,000 related to the acquisition of G5.

Weighted-average common shares outstanding for the second quarter of fiscal 2025 were 39,728,933, basic and diluted, compared to 37,501,683, basic and diluted, in the same quarter of fiscal 2024.

Weighted-average common shares outstanding for the first half of fiscal 2025 were 39,645,206, basic and diluted, compared to 37,446,714, basic and diluted, in the same period of fiscal 2024.

The increase in weighted-average basic common shares was due to the 585,483 shares issued during the second half of fiscal year 2024 pursuant to the at-the-market equity program, and the shares of Class A common stock issued in conjunction with the acquisition of Visimid.

The increase is also attributable to the issuance of shares of Class A common stock under the 2014 ESPP and underlying vested RSUs and RSAs.

Income tax expense was approximately $100,000 for the third quarter of fiscal 2025, as compared to $6,000 for the same quarter of the prior fiscal year.

For the first nine months of fiscal 2025, income tax expense was $160,000, as compared to $121,000 for the same period of the prior fiscal year.

The increases are primarily due to the timing of intercompany dividends.

Net loss for the third quarter of fiscal 2025 was approximately $3.6 million, or $0.09 basic and diluted loss per share, compared to $2.6 million, or $0.07 basic and diluted loss per share, for the same quarter of the prior fiscal year.

The increase in net loss of approximately $1.0 million for the third quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, was primarily attributable to increased SG&A driven by acquisition costs, interest expense and amortization of intangible assets, partially offset by a net favorable change in other income items.

Included in SG&A are $0.7 million in non-recurring costs related to the acquisition of G5 Infrared.

Net loss for the first nine months of fiscal 2025 was approximately $7.8 million, or $0.19 basic and diluted loss per share, compared to $5.7 million, or $0.15 basic and diluted loss per share, for the same period of the prior fiscal year.

The increase in net loss of approximately $2.1 million for the first nine months of fiscal 2025, as compared to the same period of the prior fiscal year, was primarily attributable to the increased SG&A costs, including non-recurring costs of $1.3 million related to the acquisition of G5 Infrared, as well as increased interest expense and amortization of intangible assets.

Weighted-average common shares outstanding for the third quarter of fiscal 2025 were 41,363,643, basic and diluted, compared to 37,988,770, basic and diluted, in the same quarter of fiscal 2024.

Weighted-average common shares outstanding for the first nine months of fiscal 2025 were 40,209,657, basic and diluted, compared to 37,639,464, basic and diluted, in the same period of fiscal 2024.

The increase in weighted-average basic common shares was primarily due to the Class A Common Stock issued in conjunction with the Acquisition Financing.

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.

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This also resulted in significant price increases in the cost of Germanium material, by as much as 60%.

Following these restrictions we had proactively canceled a number of customer orders for Germanium, to reduce our exposure in case of a supply disruption.

Then, in December 2024, China escalated trade tensions with the United States by imposing more stringent export restrictions on critical minerals, including germanium.

Following these restrictions we had proactively canceled a number of customer orders for Germanium to reduce our exposure to the supply disruption.

Then, in December 2024, China escalated trade tensions with the U.S.

by imposing more stringent export restrictions on critical minerals, including Germanium.

The Chinese Ministry of Commerce cited national security concerns as the rationale for these measures, which effectively banned shipments of these minerals to the U.S., and significantly limited shipments of those minerals for dual-use applications in many other countries.

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Liquidity and Capital Resources

As of December 31, 2024, we had working capital of approximately $5.4 million and total cash and cash equivalents of approximately $3.2 million, of which, approximately 60% of our cash and cash equivalents was held by our foreign subsidiaries.

As of March 31, 2025, we had working capital of approximately $15.9 million and total cash and cash equivalents of approximately $6.5 million, of which, approximately 25% of our cash and cash equivalents was held by our foreign subsidiaries.

Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings.

We routinely declare intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S.

We routinely declare intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to LightPath, as the U.S.

parent company.

It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we also plan to repatriate a portion of their earnings, and we accrue for these taxes on the portion of earnings that we intend to repatriate.

It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we may also repatriate a portion of their earnings, and we accrue for these taxes on the portion of earnings that we intend to repatriate.

We currently do not intend for our Latvian subsidiary to declare intercompany dividends.

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital.

As of December 31, 2024, LPOIZ had approximately $1.2 million 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 December 31, 2024.

As of December 31, 2024, loans payable consists of two third-party equipment loans and the Bridge Note.

As of March 31, 2025, LPOIZ had approximately $0.8 million 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 March 31, 2025.

As of March 31, 2025, loans payable consists of two third-party equipment loans and the Acquisition Notes.

See Note 13, Loans Payable , in the unaudited Condensed Consolidated Financial Statements, for further information.

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During the year ended June 30, 2024, we issued 585,483 shares of our Class A Common Stock pursuant to the at-the-market equity program.

No additional shares were issued under this program during the six months ended December 31, 2024.

No additional shares were issued under this program during fiscal year 2025 before the shelf registration expired on March 1, 2025.

On January 12, 2023, the Company entered into a securities purchase agreement (“Purchase Agreement”), pursuant to which the Company agreed to issue and sell in a public offering under the shelf registration statement an aggregate of 9,090,910 shares of the Company’s Class A Common Stock, par value $0.01 per share for a purchase price of $1.10 per share and filed a prospectus supplement with the SEC related thereto.

The sale of shares pursuant to the Purchase Agreement closed on January 17, 2023, and resulted in net proceeds of approximately $9.2 million after payment of placement agent fees, and certain other costs and expenses of the offering.

On February 13, 2025, we announced a strategic acquisition and the related financing, including the issuance of a new series of preferred stock.

For additional information, refer to Note 16, Subseqent Event , in the accompanying unaudited condensed consolidated financial statements.

On February 13, 2025, we announced a strategic acquisition and related financing, including the issuance of Series G Convertible Preferred Stock.

For additional information, refer to Note 3, Acquisition of G5 Infrared , in the accompanying unaudited Condensed Consolidated Financial Statements.

There are a number of factors that could result in the need to raise additional funds, 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.

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Cash Flows – Operating:

Cash used in operations was approximately $2.4 million for the first half of fiscal 2025, compared to cash provided by operations of approximately $0.9 million for the same period of the prior fiscal year.Cash used in operations for the first half of fiscal 2025 was primarily due to the net loss, coupled with payments against accounts payable and accrued liabilities, as well as increases in prepaid expenses and accounts receivable.

Cash provided by operations for the first half of fiscal 2024 was largely driven by a decrease in accounts receivable, driven by the timing of sales.

Sales were lower in the first and second quarters of fiscal 2024 than in the fourth quarter of fiscal 2023 resulting in higher collections in the first half of fiscal 2024 than in the first half of fiscal 2025.

Cash used in operations was approximately $5.4 million for the first nine months of fiscal 2025, compared to cash provided by operations of approximately $0.5 million for the same period of the prior fiscal year.

Cash used in operations for the first nine months of fiscal 2025 was primarily due to the net loss, coupled with increases in accounts receivable, inventories and prepaid expenses.

Cash provided by operations for the first nine months of fiscal 2024 was largely driven by decreases in accounts receivable and inventory, driven by the timing of sales.

Cash Flows – Investing:

During the first half of fiscal 2025, we expended approximately $0.2 million in investments in capital equipment, compared to approximately $1.5 million in the same period of the prior fiscal year.

The capital spending in the first half of fiscal 2024 was largely driven by the Orlando Facility expansion.

During the first nine months of fiscal 2025, we expended approximately $0.6 million in investments in capital equipment, compared to approximately $1.9 million in the same period of the prior fiscal year.

The capital spending in the first nine months of fiscal 2024 was largely driven by the Orlando Facility expansion.

As disclosed in Note 11, Leases , in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, we constructed additional tenant improvements in our Orlando Facility subject to our continuing lease, of which the landlord agreed to provide $2.4 million in tenant improvement allowances.

We funded the balance of the tenant improvement costs of $3.7 million over fiscal years 2023 and 2024.

We also expended approximately $0.7 million during the first half of fiscal 2024, to acquire Visimid, net of cash acquired, as disclosed in Note 3, Acquisition of Visimid Technologies , in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The first half of fiscal 2024 also reflected proceeds of approximately $365,000 from sale-leasebacks of equipment.

In the third quarter of fiscal 2025, we expended $20.3 million to acquire G5 Infrared, as disclosed in Note 3, Acquisition of G5 Infrared , in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

During the first nine months of fiscal 2024, we expended approximately $0.9 million to acquire Visimid, net of cash acquired, as disclosed in Note 4, Acquisition of Visimid Technologies , in the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The first nine months of fiscal 2024 also reflected proceeds of approximately $365,000 from sale-leasebacks of equipment.

Cash Flows – Financings:

Net cash provided by financing activities was approximately $2.4 million for the first half of fiscal 2025, compared to cash used in financing activities of approximately $0.3 million in the same period of the prior fiscal year.

Cash provided by financing activities for the first half of fiscal 2025 primarily reflects the $2.7 million in net proceeds from the Bridge Note, plus approximately $10,000 in proceeds from the sale of Class A common stock under the 2014 ESPP, offset by approximately $196,000 in principal payments on our loans and finance leases and $0.1 million for the final cash payment related to the acquisition of Visimid.

Cash used in financing activities for the first half of fiscal 2024 included $466,000 in principal payments on our loans and finance leases, offset by approximately, $143,000 in proceeds from the 2023 Equipment Loan and $20,000 in proceeds from the sale of Class A common stock under the 2014 ESPP.

Contractual Obligations and Commitments

As of December 31, 2024, our principal commitments consisted of obligations under operating and finance leases, and debt agreements.

No material changes occurred during the first six months of fiscal 2025 in our contractual cash obligations to repay debt or to make payments under operating and finance leases, or in our contingent liabilities as disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024.

Off Balance Sheet Arrangements

We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.

Net cash provided by financing activities was approximately $29.3 million for the first nine months of fiscal 2025, compared to cash used in financing activities of approximately $2.1 million in the same period of the prior fiscal year.

Cash provided by financing activities for the first nine months of fiscal 2025 primarily reflects the Acquisition Financing of $27 million, net of financing costs and the Bridge Note conversion, plus $2.7 million in net proceeds from the Bridge Note, offset by approximately $0.3 million in principal payments on our loans and finance leases and $0.1 million for the final cash payment related to the acquisition of Visimid.

Cash used in financing activities for the first nine months of fiscal 2024 included $2.3 million in principal payments on our loans and finance leases, offset by approximately $143,000 in proceeds from the 2023 Equipment Loan, $98,000 in proceeds from the sale of Class A Common Stock pursuant to the at-the-market equity program and $40,000 in proceeds from the sale of Class A Common Stock under the 2014 ESPP.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates during the six months ended December 31, 2024 from those disclosed in Item 7.

There have been no material changes to our critical accounting policies and estimates during the nine months ended March 31, 2025 from those disclosed in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the year ended June 30, 2024.

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Revenue by product group;

EBITDA and Adjusted EBITDA;

Other key indicators.

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Generally, a higher total backlog is better for us.

Our total backlog at December 31, 2024 was approximately $19.8 million, a decrease of 4%, as compared to $21.2 million as of December 31, 2023.

Compared to the end of fiscal 2024, our total backlog increased by 3% during the first half of fiscal 2025.

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:

Total Backlog ($ 000)

Change From Prior Year End

Prior Year End

Change From Prior Quarter End

The increase in backlog during the first half of fiscal 2025 is primarily due to 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.

Also contributing to the increase is a $0.5 million low-rate initial production order for thermal imaging assemblies with a new tier-1 defense customer.

These significant bookings were partially offset by shipments against prior period backlog under other annual and multi-year contracts.

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.

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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.

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Revenue by Product Group

The following table sets forth revenue for our four product groups for the three and six-month periods ended December 31, 2024 and 2023:

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

Six Months Ended

Nine Months Ended

Infrared components

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Total revenue

Three months ended December 31, 2024

Our revenue increased by 1% in the second quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.

Revenue generated by the infrared components product group for the second quarter of fiscal 2025 was $3.1 million, a decrease of 13%, as compared to same quarter of the prior fiscal year.

The 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 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.

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.

During the first quarter of fiscal 2025, we announced that a current key defense customer using Germanium lenses successfully completed the qualification and evaluation of new optics made from our proprietary BlackDiamond chalcogenide-based glass.

Revenue from the visible components product group for the second quarter of fiscal 2025 was $2.8 million, an increase of 3%, 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 medical customers.

Revenue from assemblies and modules decreased by 13% for the second quarter of fiscal 2025, as compared to the same quarter of the prior fiscal year.

This decrease in visible lens assembly sales was partially offset by increased sales of infrared cores and cameras.

During the first quarter of fiscal 2025, we announced the global launch of a new version of the Mantis™ camera, specifically designed for monitoring high-temperature processes inside boilers and furnaces in power plants, and we also announced the first commercial order for furnace inspection for a customer in the southeastern U.S., as well as a new Optical Gas Imaging (“OGI”) camera platform to detect fugitive gas emissions for oil and gas applications.

During the second quarter of fiscal 2025, we announced a new version of our OGI platform to detect fugitive ammonia and sulfur hexafluoride (SF6) emissions for industrial and manufacturing applications.

Revenue from engineering services increased by $0.6 million, or 797%, for the second 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 revenue is generally recognized based on the achievement of milestones.

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.

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.

We expect to start delivering flightworthy hardware for implementation into Lockheed Martin's initial live test units during the third quarter of fiscal 2025.

Six months ended December 31, 2024

Our revenue increased by 3% in the first half of fiscal 2025, as compared to the same period of the prior fiscal year, driven by increases in sales of visible components and engineering services, partially offset by decreases in infrared components and assemblies and modules.

Revenue generated by the infrared components product group for the first half of fiscal 2025 was $5.7 million, a decrease of 17%, as compared to same period of the prior fiscal year The decrease in revenue is primarily due to a decrease in sales against the aforementioned annual contract for Germanium-based products.

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 $6.1 million, an increase of 13%, as compared to the same period 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 medical customers.

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 decreased by 13% for the first half of fiscal 2025, as compared to the same period of the prior fiscal year.

During the first half of fiscal 2025, we announced a new version of the Mantis™ camera, the first commercial order for furnace inspection, and a new OGI camera platform to detect fugitive gas emissions for oil and gas applications.

In December 2024 we also announced that we began deliveries of custom lens assemblies, using our BlackDiamond glass, to a European defense customer for use in first-person view drone applications.

Revenue from engineering services increased by $1.7 million, or 465%, for the first half 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, where revenue is generally recognized based on the achievement of milestones.

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.

Other Key Indicators

Other key indicators include various operating metrics, some of which are qualitative and others are quantitative.

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.

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As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

EBITDA is a non-GAAP financial measure 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.

EBITDA and Adjusted EBITDA

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.

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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.”

We believe EBITDA is helpful for investors to better understand our underlying business operations.

The following table adjusts net loss to EBITDA for the three and six months ended December 31, 2024 and 2023:

Three Months Ended

Six Months Ended

$ (2,611,997 )

$ (1,713,663 )

We also calculate an adjusted EBITDA, which excludes:

(1) the effect of the non-cash income or expense associated with the mark-to-market adjustments, related to the warrants;

and (2) the loss on extinguishment of debt.

The fair value of the warrants is re-measured each reporting period until the warrants are either exercised or expired (which expiration occurs on February 18, 2031).

Each reporting period, the change in the fair value of the warrants is either recognized as a non-cash expense or non-cash income.

The change in the fair value of the warrants is not impacted by our actual operations but was instead strongly tied to the change in the market value of our Class A Common Stock.

Management uses adjusted EBITDA to evaluate our underlying operating performance and for planning and forecasting future business operations.

We believe EBITDA and Adjusted EBITDA are helpful for investors to better understand our underlying business operations.

The following table adjusts net loss to EBITDA and Adjusted EBITDA for the three and nine months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Nine Months Ended March 31,

$ (2,597,534 )

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$ (2,397,273 )

Our EBITDA for the quarter ended December 31, 2024 was a loss of approximately $1.5 million, compared to $0.5 million for the same quarter of the prior fiscal year.

The decrease in EBITDA in the second quarter of fiscal 2025 was primarily attributable to lower gross profit coupled with increased SG&A, including $175,000 of non-recurring expenses related to the acquisition of G5, and new product development costs.

Our EBITDA for the six months ended December 31, 2024 was a loss of approximately $2.0 million, compared to $0.9 million for the same period of the prior fiscal year.

The decrease in EBITDA in the first half of fiscal 2025 was primarily attributable to the increased SG&A costs, including $585,000 of non-recurring expenses related to the acquisition of G5.

Loss on extinguishment of debt

Change in fair value of warrant liability

Adjusted EBITDA

$ (1,984,498 )

$ (1,511,237 )

$ (3,947,064 )

$ (2,397,273 )

Our adjusted EBITDA for the quarter ended March 31, 2025 was a loss of approximately $2.0 million, compared to $1.5 million for the same quarter of the prior fiscal year.

The decrease in adjusted EBITDA in the third quarter of fiscal 2025 was primarily attributable to increased SG&A, including $0.7 million of non-recurring expenses related to the acquisition of G5 Infrared, and new product development costs.

Our adjusted EBITDA for the nine months ended March 31, 2025 was a loss of approximately $3.9 million, compared to $2.4 million for the same period of the prior fiscal year.

The decrease in adjusted EBITDA in the first nine months of fiscal 2025 was primarily attributable to the increased SG&A costs, including $1.3 million of non-recurring expenses related to the acquisition of G5 Infrared.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis