LIGHTPATH TECHNOLOGIES INC 10-Q

Item 1. Financial Statements LIGHTPATH TECHNOLOGIES, INC. Condensed Consolidated Balance Sheets (unaudited) March 31, June 30, Assets 2025 2024 Current assets: Cash and cash equivalents $ 6,478,885 $ 3,480,268 Trade accounts receivable, net of allowance of $ 23,514 and $ 25,676 7,651,086 4,928,931 Inventories, net 12,687,225 6,551,059 Prepaid expenses and deposits 1,206,115 445,900 Other current assets 57,815 131,177 Total current assets 28,081,126 15,537,335 Property and equipment, net 15,461,601 15,210,612 Operating lease right-of-use assets 6,457,530 6,741,549 Intangible assets, net 21,476,226 3,650,739 Goodwill 9,741,473 6,764,127 Deferred tax assets, net 123,000 123,000 Other assets 79,860 59,602 Total assets $ 81,420,816 $ 48,086,964 Liabilities and Stockholders Equity Current liabilities: Accounts payable $ 5,737,240 $ 3,231,713 Accrued liabilities 3,079,036 1,911,867 Accrued payroll and benefits 1,752,940 1,446,452 Operating lease liabilities, current 1,271,740 1,059,998 Loans payable, current portion 185,631 209,170 Finance lease obligation, current portion 203,954 177,148 Total current liabilities 12,230,541 8,036,348 Deferred tax liabilities, net 1,498,479 326,197 Accrued liabilities, noncurrent 937,000 611,619 Finance lease obligation, less current portion 457,441 528,753 Operating lease liabilities, noncurrent 7,518,766 8,058,502 Loans payable, less current portion 4,693,544 325,880 Warrant liability 3,961,023 Total liabilities 31,296,794 17,887,299 Commitments and Contingencies Series G Convertible Preferred Stock; $ 0.01 par value; 44,000 shares authorized; 24,956 issued and outstanding $ 34,399,622 - Stockholders equity: Preferred stock: Series D, $ 0.01 par value, voting; 500,000 shares authorized; none issued and outstanding Common stock: Class A, $ 0.01 par value, voting; 94,500,000 shares authorized; 42,893,563 and 39,254,643 shares issued and outstanding 428,936 392,546 Additional paid-in capital 238,505,174 245,140,758 Accumulated other comprehensive income 451,067 509,936 Accumulated deficit ( 223,660,777 ) ( 215,843,575 ) Total stockholders equity 15,724,400 30,199,665 Total liabilities, convertible preferred stock and stockholders equity $ 81,420,816 $ 48,086,964 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 4 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) Three Months Ended Nine Months Ended March 31, March 31, 2025 2024 2025 2024 Revenue, net $ 9,167,627 $ 7,699,175 $ 24,992,837 $ 23,092,060 Cost of sales 6,503,526 6,092,988 17,553,476 16,985,846 Gross profit 2,664,101 1,606,187 7,439,361 6,106,214 Operating expenses: Selling, general and administrative 4,448,359 3,171,770 11,075,005 8,691,395 New product development 757,938 569,962 1,998,775 1,817,598 Amortization of intangible assets 779,025 434,403 1,469,512 1,201,120 Loss on disposal of property and equipment 2,068 13,248 80,505 13,248 Total operating expenses 5,987,390 4,189,383 14,623,797 11,723,361 Operating loss ( 3,323,289 ) ( 2,583,196 ) ( 7,184,436 ) ( 5,617,147 ) Other income (expense): Interest expense, net ( 486,833 ) ( 37,649 ) ( 805,246 ) ( 149,048 ) Loss on extinguishment of debt ( 418,502 ) - ( 418,502 ) - Change in fair value of warrant liability 870,554 - 870,554 - Other income (expense), net ( 124,359 ) 29,109 ( 119,380 ) 234,024 Total other income (expense), net ( 159,140 ) ( 8,540 ) ( 472,574 ) 84,976 Loss before income taxes ( 3,482,429 ) ( 2,591,736 ) ( 7,657,010 ) ( 5,532,171 ) Income tax provision 100,031 5,798 160,192 121,402 Net loss $ ( 3,582,460 ) $ ( 2,597,534 ) $ ( 7,817,202 ) $ ( 5,653,573 ) Foreign currency translation adjustment 120,572 ( 112,356 ) ( 58,869 ) 22,409 Comprehensive loss $ ( 3,461,888 ) $ ( 2,709,890 ) $ ( 7,876,071 ) $ ( 5,631,164 ) Loss per common share (basic) $ ( 0.09 ) $ ( 0.07 ) $ ( 0.19 ) $ ( 0.15 ) Number of shares used in per share calculation (basic) 41,363,643 37,988,770 40,209,657 37,639,464 Loss per common share (diluted) $ ( 0.09 ) $ ( 0.07 ) $ ( 0.19 ) $ ( 0.15 ) Number of shares used in per share calculation (diluted) 41,363,643 37,988,770 40,209,657 37,639,464 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited) Temporary Equity Accumulated Series G Convertible Class A Additional Other Total Preferred Stock Common Stock Paid-in Comphrehensive Accumulated Stockholders Shares Amount Shares Amount Capital Income Deficit Equity Balances at June 30, 2024 - - 39,254,643 $ 392,546 $ 245,140,758 $ 509,936 $ ( 215,843,575 ) $ 30,199,665 Issuance of common stock for: Employee Stock Purchase Plan - - 8,232 82 10,290 - - 10,372 Exercise of Stock Options, RSUs & RSAs, net - - 70,309 703 ( 703 ) - - Issuance of common stock for acquisition of Visimid - - 279,553 2,796 318,562 - - 321,358 Stock-based compensation on stock options, RSUs & RSAs - - - - 264,475 - - 264,475 Foreign currency translation adjustment - - - - - 271,594 - 271,594 Net loss - - - - - - ( 1,622,745 ) ( 1,622,745 ) Balances at September 30, 2024 - - 39,612,737 $ 396,127 $ 245,733,382 $ 781,530 $ ( 217,466,320 ) $ 29,444,719 Issuance of common stock for: Exercise of Stock Options, RSUs & RSAs, net - - 229,097 2,291 ( 2,291 ) - - Shares issued as compensation - - 49,000 490 89,180 - - 89,670 Stock-based compensation on stock options, RSUs & RSAs - - - - 231,581 - - 231,581 Foreign currency translation adjustment - - - - - ( 451,035 ) - ( 451,035 ) Net loss - - - - - - ( 2,611,997 ) ( 2,611,997 ) Balances at December 31, 2024 39,890,834 $ 398,908 $ 246,051,852 $ 330,495 $ ( 220,078,317 ) $ 26,702,938 Issuance of preferred stock under private equity placement, net of fees 255 19,648,488 - - Issuance of common stock for: Employee Stock Purchase Plan - - 1,137 11 4,002 - - 4,013 Exercise of Stock Options, RSUs & RSAs, net - - 238,641 2,387 788 - - 3,175 Issuance of common stock for acquisition of Visimid - - 102,700 1,027 391,561 - - 392,588 Issuance of common stock for acquisition of G5 - - 1,972,501 19,725 4,852,343 - - 4,872,068 Issuance of common stock under private equity placement, net of fees - - 687,750 6,878 1,584,014 - - 1,590,892 Issuance of warrants under private placement, net of fees - - - - 177,445 - - 177,445 Preferred cumulative dividends plus accretion - 14,751,134 - - ( 14,751,134 ) - - ( 14,751,134 ) Stock-based compensation on stock options, RSUs & RSAs - - - - 194,303 - - 194,303 Foreign currency translation adjustment - - - - - 120,572 - 120,572 Net loss - - - - - - ( 3,582,460 ) ( 3,582,460 ) Balances at March 31, 2025 255 $ 34,399,622 42,893,563 $ 428,936 $ 238,505,174 $ 451,067 $ ( 223,660,777 ) $ 15,724,400 Balances at June 30, 2023 37,344,739 $ 373,447 $ 242,808,771 $ 606,536 $ ( 207,836,229 ) $ 35,952,525 Issuance of common stock for: Employee Stock Purchase Plan 14,607 146 19,573 - - 19,719 Exercise of Stock Options, RSUs & RSAs, net 14,482 145 ( 145 ) - - Issuance of common stock for acquisition of Visimid 81,610 816 149,184 - - 150,000 Stock-based compensation on stock options, RSUs & RSAs - - 240,075 - - 240,075 Foreign currency translation adjustment - - - ( 125,208 ) - ( 125,208 ) Net loss - - - ( 1,342,376 ) ( 1,342,376 ) Balances at September 30, 2023 37,455,438 $ 374,554 $ 243,217,458 $ 481,328 $ ( 209,178,605 ) $ 34,894,735 Issuance of common stock for: Exercise of Stock Options, RSUs & RSAs, net 93,940 940 ( 940 ) - - Stock-based compensation on stock options, RSUs & RSAs - - 258,691 - - 258,691 Foreign currency translation adjustment - - - 259,973 - 259,973 Net loss - - - - ( 1,713,663 ) ( 1,713,663 ) Balances at December 31, 2023 37,549,378 $ 375,494 $ 243,475,209 $ 741,301 $ ( 210,892,268 ) $ 33,699,736 Issuance of common stock for: Employee Stock Purchase Plan 15,840 158 19,800 - - 19,958 Exercise of Stock Options, RSUs & RSAs, net 225,814 2,258 ( 2,258 ) - - Issuance of common stock for acquisition of Visimid 267,176 2,672 333,382 - - 336,054 Issuance of common stock under public equity placement 68,041 680 97,528 - - 98,208 Stock-based compensation on stock options, RSUs & RSAs - - 264,492 - - 264,492 Foreign currency translation adjustment - - - ( 112,356 ) - ( 112,356 ) Net loss - - - ( 2,597,534 ) ( 2,597,534 ) Balances at March 31, 2024 38,126,249 $ 381,262 $ 244,188,153 $ 628,945 $ ( 213,489,802 ) $ 31,708,558 The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 6 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 7,817,202 ) $ ( 5,653,573 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 3,356,752 2,985,850 Interest from amortization of loan issuance costs 161,905 - Loss on extinguishment of debt 418,502 - Change in fair value of warrant liability ( 870,554 ) - Loss on disposal of property and equipment 80,505 13,248 Stock-based compensation on stock options, RSUs & RSAs, net 745,155 763,258 Provision for credit losses ( 3,014 ) ( 4,422 ) Change in operating lease assets and liabilities ( 91,582 ) 47,693 Inventory write-offs to allowance 135,625 95,539 Deferred taxes ( 2,368 ) 8,573 Changes in operating assets and liabilities, net of acquisitions: Trade accounts receivable ( 822,043 ) 1,766,594 Other current assets 73,362 ( 419,797 ) Inventories ( 1,206,340 ) 725,460 Prepaid expenses and deposits ( 360,439 ) 95,900 Accounts payable and accrued liabilities 520,289 32,020 Net cash (used in) provided by operating activities ( 5,681,447 ) 456,343 Cash flows from investing activities: Purchase of property and equipment ( 580,726 ) ( 1,892,660 ) Proceeds from sale of equipment 10,648 - Proceeds from sale-leaseback of equipment - 364,710 Acquisition of G5 ( 20,250,011 ) - Acquisition of Visimid, net of cash acquired - ( 847,141 ) Net cash used in investing activities ( 20,820,089 ) ( 2,375,091 ) Cash flows from financing activities: Proceeds from exercise of stock options 3,175 - Proceeds from sale of common stock from Employee Stock Purchase Plan 14,385 39,677 Proceeds from issuance of common stock under public equity placement, net of fees - 98,208 Proceeds from issuance of common stock under private equity placement, net of fees 437,725 - Proceeds from issuance of preferred stock under private equity placement, net of fees 18,842,138 - Proceeds from issuance of warrants under private equity placement 4,620,561 - Deferred payment for acquisition of Visimid ( 125,000 ) - Borrowings on loans payable 6,659,596 142,853 Loan issuance costs ( 597,465 ) - Payments on loans payable ( 149,118 ) ( 2,262,798 ) Repayment of finance lease obligations ( 133,711 ) ( 87,610 ) Net cash provided by (used in) financing activities 29,572,286 ( 2,069,670 ) Effect of exchange rate on cash and cash equivalents ( 72,133 ) 2,880 Change in cash, cash equivalents and restricted cash 2,998,617 ( 3,985,538 ) Cash, cash equivalents and restricted cash, beginning of period 3,480,268 7,144,490 Cash, cash equivalents and restricted cash, end of period $ 6,478,885 $ 3,158,952 Supplemental disclosure of cash flow information: Interest paid in cash $ 66,136 $ 161,676 Income taxes paid $ 118,016 $ 120,787 Supplemental disclosure of non-cash investing & financing activities: Purchase of equipment through finance lease arrangements $ 93,048 $ 391,107 Issuance of common stock for acquisition of Visimid $ 713,946 $ 486,054 Issuance of common stock for acquisition of G5 $ 4,872,068 $ - Accrual of earnout consideration for acquisition of G5 $ 2,501,000 $ - Extinguishment of debt in exchange for common stock, preferred stock warrants and a note $ 3,057,110 $ - The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements. 7 Table of Contents LIGHTPATH TECHNOLOGIES, INC. Notes to Unaudited Condensed Consolidated Financial Statements 1. Basis of Presentation References in this document to the “Company,” “LightPath,” “we,” “us,” or “our” are intended to mean LightPath Technologies, Inc., individually, or as the context requires, collectively with its subsidiaries on a consolidated basis. These unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the requirements of Article 8 of Regulation S-X promulgated under the Exchange Act and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended June 30 and the associated quarters of those fiscal years. These Condensed Consolidated Financial Statements are unaudited, but include all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly our financial position, results of operations and cash flows for the interim periods presented. The Condensed Consolidated Balance Sheet as of June 30, 2024 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. Results of operations for interim periods are not necessarily indicative of the results that may be expected for the year as a whole. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. 2. Significant Accounting Policies Our significant accounting policies are provided in Note 2, Summary of Significant Accounting Policies , in the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. There have been no material changes to our significant accounting policies during the nine months ended March 31, 2025, from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Use of Estimates Management makes estimates and assumptions during the preparation of our unaudited Condensed Consolidated Financial Statements that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes available, which, in turn, could impact the amounts reported and disclosed herein. Warrants The Company accounts for warrants as equity or liability classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. If a warrant does not meet the conditions for equity classification, it is carried on the consolidated balance sheet as a warrant liability measured at fair value, with subsequent changes in the fair value of the warrant recorded in the condensed consolidated statement of comprehensive income (loss). If a warrant meets both conditions for equity classification, the warrant is initially recorded in additional paid-in capital on the condensed consolidated balance sheets, and the amount initially recorded is not subsequently remeasured at fair value. Fair Value of Financial Instruments We account for financial instruments in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification Topic 820, “ Fair Value Measurements and Disclosures ” (“ASC 820”), which provides a framework for measuring fair value and disclosure requirements for fair value measurements of assets and liabilities. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. Level 3 - Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. 8 Table of Contents Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of financial instruments recorded on the Condensed Consolidated Balance Sheets approximated their fair values. These financial instruments include accounts receivable, accounts payable and accrued liabilities. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the finance lease obligations and loans payable approximate their carrying values, based upon current rates available to us. See Note 12, Leases and Note 13, Loans Payable , to these unaudited Condensed Consolidated Financial Statements for additional information. Management considers these fair value estimates to be Level 2 fair value measurements. The fair value of the warrants currently classified as a liability is considered a Level 3 fair value measurement. We do not have any other financial or non-financial assets or liabilities that would be characterized as Level 1, Level 2 or Level 3 instruments. 3. Acquisition of G5 Infrared In February 2025, the Company acquired G5 Infrared LLC (“G5 Infrared”), pursuant to a Membership Interest Purchase Agreement (the “MIPA”) by and among the Company, G5 Infrared, the members of G5 Infrared (collectively, the “Sellers”), and Kenneth R. Greenslade, solely in his capacity as Sellers’ Representative. The Company has acquired from the Sellers all of the issued and outstanding membership interests of G5 Infrared, which transaction closed on February 18, 2025 (the “G5 Acquisition Date”). G5 Infrared is a vertically-integrated manufacturer of infrared camera systems and imaging solutions, and also provides infrared coatings. G5 Infrared operates from a manufacturing facility in Hudson, New Hampshire. The Company acquired G5 Infrared to expand the Company’s portfolio to include cooled infrared cameras. Net assets and results of operations of G5 Infrared are reflected in our financial results commencing on the G5 Acquisition Date. Revenue generated by G5 Infrared is included in our infrared and assemblies and modules product groups. We are in the process of further refining our product groups and evaluating our operating segments following the acquisition. We accounted for the acquisition of G5 Infrared using the acquisition method of accounting, which required us to measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the G5 Acquisition Date, with the excess of the consideration transferred over those fair values recorded as goodwill. The fair value of the aggregate consideration was approximately $ 27.6 million which consisted of (i) $ 20.25 million in cash, (ii) 1,972,501 shares of the Company’s Class A common stock, $ 0.01 par value (“Class A Common Stock”) (at a value of $ 2.47 per share, which was the closing price on the G5 Acquisition Date), and (iii) potential earnout consideration paid annually in fiscal years 2026 and 2027 subject to achievement of certain revenue and EBITDA targets set forth in the MIPA. As of the G5 Acquisition Date, the preliminary estimate of fair value of consideration transferred consisted of the following: Description February 18, 2025 Cash consideration $ 20,250,000 Equity portion of consideration 4,872,077 Earnout portion of consideration 2,501,000 Fair value of consideration transferred $ 27,623,077 9 Table of Contents The fair value of the equity portion of the consideration was determined by multiplying the number of shares issued, 1,972,501 , by the fair value of the Class A Common Stock on the G5 Acquisition Date, which was $ 2.47 . Earnout payments of an aggregate of up to $ 23 million of additional consideration may be paid annually in fiscal years 2026 and 2027 subject to achievement of certain minimum EBITDA and revenue targets for the one and two-year periods beginning on the first full calendar month commencing after the G5 Acquisition Date, as set forth in the MIPA. If the targets are achieved during the respective periods, LightPath will (i) issue an aggregate number of shares of Class A Common Stock equal to 30% of the earnout payment divided by the average close price for the ten trading days immediately prior to the first anniversary of the earnout commencement date, as defined in the MIPA, and (ii) pay additional cash consideration in an amount equal to 70% of the earnout payment. The earnout is considered contingent consideration and is accounted for as a liability initially measured at fair value, with changes during each reporting period recognized in earnings. The portion of the earnout that will be settled in stock will also be accounted for as a liability since the achievement of targets adjusts the number of shares to be issued at settlement based on a variable other than the Company’s Class A Common Stock, and therefore it does not meet the criteria in ASC 480, Distinguishing Liabilities from Equity . The fair value of the earnout in the accompanying unaudited Condensed Consolidated Balance Sheet is calculated using a Monte Carlo simulation to determine the probability of achieving the earnout and its fair value. The following table summarizes the preliminary allocation of the fair value of consideration transferred to assets acquired and liabilities assumed as of the G5 Acquisition Date: Description Preliminary fair value of estimated purchase consideration $ 27,623,077 Assets : Cash - Accounts receivable 1,897,098 Inventory 5,065,451 Prepaid expenses and other current assets 363,413 Property and equipment 1,542,707 Operating right-of-use asset 463,985 Intangible assets 19,295,000 Other assets 21,748 Total Assets 28,649,402 Liabilities : Accounts payable 1,981,164 Accrued liabilities 336,263 Operating lease liabilities, current 268,972 Deferred tax liabilities, noncurrent 1,174,650 Operating lease liabilities, noncurrent 242,620 Total Liabilities Assumed 4,003,669 Net Assets 24,645,733 Goodwill $ 2,977,344 Due to the timing of the acquisition of G5 Infrared, our accounting for the acquisition remains preliminary. Amounts recorded associated with these assets and liabilities are based on preliminary calculations and estimates. Our preliminary estimates and assumptions are subject to change as we obtain additional information during the measurement period (up to one year from the G5 Acquisition Date). The allocation of the purchase price is determined by management and utilizes certain third-party valuations and other analyses that have not been completed as of the date of this Quarterly Report on Form 10-Q, including but not limited to working capital, certain tax matters, property and equipment, and intangible assets. The final allocation could be materially different from the preliminary allocation used herein and may include (i) changes in fair values of property and equipment; (ii) changes in allocations to intangibles assets as well as goodwill; and (iii) other changes to certain assets and liabilities, including deferred taxes. Any potential adjustments made could be material in relation to the preliminary values presented above. 10 Table of Contents Intangible assets – All intangible assets acquired in the acquisition of G5 Infrared are subject to amortization. The preliminary fair value of identifiable intangible assets acquired as of the G5 Acquisition Date is as follows: Intangible Asset Total Useful Lives (Years) Backlog $ 4,265,000 1 Know-how 5,656,000 10 Tradename 3,564,000 15 Customer relationships 5,810,000 15 Total $ 19,295,000 The fair value of intangible assets is estimated using the multi-period excess earnings approach for acquired customer relationships and the relief from royalty method for the acquired trade names and know-how. All of these level 3 fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, royalty rates related to the trade names intangible assets, revenue growth attributable to the intangible assets and remaining useful lives. The acquired intangible assets are not expected to be deductible for New Hampshire state income taxpurposes, which resulted in a deferred tax liability of $ 1.1 million. Goodwill – The $ 3.0 million of goodwill recognized is attributable to G5 Infrared’s market presence, the assembled workforce and established operating infrastructure. The acquired goodwill is expected to be deductible for Federal income tax purposes. See Note 8, Goodwill and Intangible Assets, in these Notes to these unaudited Condensed Consolidated Financial Statements for further information. Financial Results Revenue and loss before income taxes of G5 Infrared included in our Condensed Consolidated Statement of Operations for the G5 Acquisition Date through March 31, 2025 was $ 1.4 million and $ 0.6 million, respectively. The following table presents unaudited pro forma financial results of the operations acquired with G5 Infrared. The pro forma results for the three quarters ended March 31, 2025 were prepared as if the acquisition was completed on the first day of our fiscal 2025, July 1, 2024, and include adjustments to remove costs directly attributable to the acquisition, such as transaction-related costs and the loss on extinguishment of debt (as described below). The pro forma results for the three quarters ended March 31, 2024 were prepared as if the acquisition was completed on the first day of our fiscal 2024, July 1, 2023, and include adjustments to remove transaction-related costs directly attributable to the acquisition. The pro forma results do not include any integration synergies and are not necessarily indicative of our results of operations that actually would have been obtained had the acquisition of G5 Infrared been completed for the period presented, or which may be realized in the future. Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Revenue $ 10,373,802 $ 9,828,325 $ 37,108,202 $ 37,331,752 Income before taxes $ ( 3,340,705 ) $ ( 3,043,300 ) $ ( 6,258,058 ) $ ( 2,888,463 ) Acquisition-related costs have been expensed as incurred. In connection with the acquisition of G5 Infrared, we recorded transaction and integration costs of $ 0.4 million and $ 1.3 million for the three and nine months ended March 31, 2025, respectively, which were included in the “Selling, general and administrative expenses” line item in our unaudited Condensed Consolidated Statement of Operations. 11 Table of Contents Acquisition Financing Concurrent with the entry into the MIPA on February 13, 2025, we entered into a Securities Purchase Agreement, a Class A Common Securities Purchase Agreement and two promissory notes for total proceeds of approximately $ 32.2 million, inclusive of the conversion of the Bridge Promissory Note (see Note 13, Loans Payable ), and before deducting estimated offering expenses of $2.0 million incurred by the Company, which was used to fund, in part, the cash consideration payable in connection with the acquisition of G5 Infrared. Pursuant to the Securities Purchase Agreement (the “Securities Purchase Agreement”) with North Run Capital, AIGH Investment Partners, LP, WVP Emerging Manager Offshore Fund LLC, the Lytton-Kambara Foundation and Alice W. Lytton Family LLC (collectively, the “Purchasers”), the Purchasers purchased from the Company (i) an aggregate of approximately 24,956 shares of Series G Convertible Preferred Stock (the Series G Convertible Preferred Stock is convertible into shares of Class A Common Stock), (ii) warrants to purchase an aggregate of 4,352,774 shares of Class A Common Stock, with an exercise price of $2.58 per share (the “Purchasers Warrants”), and (iii) two senior secured promissory notes in an aggregate principal amount of $5.2 million (the “Acquisition Notes”) , which are convertible into shares of Series G Convertible Preferred Stock upon the occurrence of certain events (see Note 13, Loans Payable). The Securities Purchase Agreement closed on February 18, 2025. At the closing of the Securities Purchase Agreement, the Company and the Purchasers entered into a registration rights agreement, pursuant to which the Company agreed to register the Class A Common Stock Issuable upon the conversion of the Series G Convertible Preferred Stock (including those shares of Series G Convertible Preferred Stock that are issuable upon the conversion of the Acquisition Notes) and the Purchasers Warrants (collectively, the “Registrable Securities”) under the Securities Act. The Company filed a registration statement covering the resale of such Registrable Securities on May 2, 2025, which became effective on May 12, 2025. The Company may not issue Class A Common Stock upon the conversion of the Series G Convertible Preferred Stock or the Purchasers Warrants to the extent such issuances would result in an aggregate number of shares of Class A Common Stock exceeding 19.99 % of the total shares of Class A Common Stock issued and outstanding as of the G5 Acquisition Date, in accordance with the rules and regulations of the Nasdaq Stock Market, LLC (“Nasdaq”) unless the Company first obtains stockholder approval (the “Stockholder Approval”). Pursuant to the Securities Purchase Agreement and as required by Nasdaq, the Company agreed to file a proxy statement to obtain the Stockholder Approval and hold a special meeting of stockholders of the Company not later than 120 days after the G5 Acquisition Date. On February 13, 2025, the Company also entered into a Securities Purchase Agreement (the “Class A Common Securities Purchase Agreement”) with Lytton-Kambara Foundation (the “Buyer”), pursuant to which Buyer purchased from the Company: (i) 455,192 shares of Class A Common Stock at a purchase price of approximately $2.15 per share, and warrants to purchase 37.5% of the number of shares, or 170,697 shares of Class A Common Stock, with an exercise price of $2.58 per share (the “Buyer's Warrants”); and (ii) 232,258 shares of Class A Common Stock at a purchase price of approximately $2.15 per share (the “Common Offering”). The Buyer and its affiliate, Alice W. Lytton Family LLC, (collectively, the “Lytton Buyers”) were also among the Purchasers in the Securities Purchase Agreement, and the Buyer was also the Lender of our Bridge Promissory Note (see Note 13, Loans Payable ). In connection with the closing of Securities Purchase Agreement and the Class A Securities Purchase Agreement, the Company received $1.5 million in cash from the Lytton Buyers , and the remaining consideration was exchanged for the outstanding principal and accrued interest of the Bridge Promissory note as of February 18, 2025 (see Note 13, Loans Payable). The Class A Common Securities Purchase Agreement closed on February 18, 2025. The proceeds were allocated to the instruments as follows: (i) to the Class A Common Stock, Buyer's Warrants, Purchaser Warrants, Series G Convertible Preferred Stock, and Acquisition Note issued to the Lytton Buyers at fair value, as the instruments were issued in exchange for the Bridge Promissory Note outstanding, which was accounted for as an extinguishment as further detailed in Note 13, Loans Payable , (ii) to the remaining Purchasers Warrants at fair value as the Purchasers Warrants are liabilities, and (iii) the remaining proceeds, to the remaining Series G Convertible Preferred Stock, and Acquisition Notes issued on a relative fair value basis, by investor. 12 Table of Contents Warrants – The Company issued 4,352,775 Purchasers Warrants in connection with the Securities Purchase Agreement and 170,697 Buyer's Warrants in connection with the Class A Securities Purchase Agreement (collectively, the “Warrants”). The exercise price of the Warrants is $ 2.58 (the “Exercise Price”). The Exercise Price and the number of underlying shares of Class A Common Stock is subject to proportional adjustment in the event of customary stock splits, stock dividends, combinations or similar events. The Warrants became exercisable upon the issuance date and will expire on the six-year anniversary of issuance. A holder may not exercise any portion of the Warrants, to the extent that after giving effect to such issuance exercise, either (i) the holder (together with the holder’s affiliates and any other persons acting as a group together with the holder or any of the holder’s affiliates would beneficially own in excess of 19.99%, or, if elected be such holder, a lesser percentage of the number of shares of the Class A Common Stock outstanding immediately after giving effect to the issuance of shares of Class A Common Stock issuable upon exercise of the Warrant, or (ii) the aggregate number of shares of Class A Common Stock issued upon exercise of the Warrant, the exercise of any other Warrants issued pursuant to the Securities Purchase Agreement, and upon conversion of Series G Convertible Preferred Stock, exceeds the Exchange Cap (6,055,606 shares, as adjusted to reflect any share splits, reverse share splits or similar recapitalizations that occur after the Issue Date). The Purchasers Warrants are not indexed the Company’s own stock due to the Exchange Cap, as shareholder approval is not an input for determining the fair value of a fixed-for-fixed option on the Company’s Class A Common Stock. As such, the Purchasers Warrants are classified as liabilities on the condensed consolidated balance sheets, with subsequent changes in the fair value of the warrant recorded in the change in fair value of warrant liability in other income (expense) on the condensed consolidated statements of comprehensive income (loss). The Buyer's Warrants are indexed to the Company's own stock, and meet the criteria for equity classification. The Warrants are valued using the Black-Scholes-Merton pricing model. Series G Convertible Preferred Stock – Based on an analysis of the Series G Convertible Preferred Stock, it was concluded that they are more akin to an equity-type instrument. Economic characteristics and risks of an equity-linked conversion option are clearly and closely related to an equity-type host; thus, the conversion option embedded in the Series G Convertible Preferred Stock do not require bifurcation or liability classification under ASC 815, Derivatives and Hedging . It also does not meet the definition of being mandatorily redeemable under ASC 480-10-20 because it does not embody an unconditional obligation to redeem the instrument. The Series G Convertible Preferred Stock is redeemable at the option of the holder after the 5 year Guaranteed Term, thus, it should be classified as mezzanine equity, outside of permanent equity. The Series G Convertible Preferred was valued using a Binomial Lattice Model which considers the ability of the Investor to convert the instrument into common stock at any time, and for the Company's call option and the Investor's put option which are available after 5 years. The model incorporates transaction details such as stock price, contractual conversion price, dividend yield, risk-free rate, historical volatility, market credit spread, estimated yield and investor exercise behavior. The Series G Convertible Preferred Stock bears dividends at a per annum rate of 6.5%. The Company elected to recognize any redemption value changes immediately as they occur and adjust the carrying amount to equal the redemption value at each reporting period. Promissory Notes – The Acquisition Notes were recorded at fair value based on several probability weighted Binomial Lattice Models which considered the following outcomes: (i) the Company's EBITDA for the fiscal year ended December 31, 2025 would be less than $4,921,875 the ("EBITDA target") which would cause automatic conversion of the Notes into shares of Preferred Stock at a price of $1,000 per share; (ii) the Company would chose to redeem the Notes at a premium of 102% prior to the two year maturity date, or (iii) the Notes will be repaid at maturity. The models incorporate transaction details such as stock price, contractual conversion price, dividend yield, risk-free rate, historical volatility, market credit spread, estimated yield, and the probability the Company will meet the EBITDA target which was based on a simulation technique considering the Company's historical EBITDA. Refer to Note 13, Loans Payable , for further information regarding the Acquisition Notes. Offering costs – The $ 2.0 million of estimated direct and incremental offering costs in connection with the Acquisition Financing, allocated based on the relative fair values of the warrants, Class A Common Stock, Series G Convertible Preferred Stock and the Acquisition Notes that comprise the offering. Issuance costs were allocated as follows: (i) $ 1.4 million allocated to the Series G Convertible Preferred Stock and the Class A Common Stock issued in conjunction with the Acquisition Financing were recorded as a reduction to temporary equity; (ii) $ 0.3 million allocated to the warrants were expensed, as the warrants were determined to be classified as a liability, initially; and (iii) $ 0.3 million allocated to the Acquisition Notes, which are deferred and will be expensed over the term of the Acquisition Notes using the effective interest method. 4. Acquisition of Visimid Technologies In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Visimid Acquisition Date”). The Company’s unaudited Condensed Consolidated Financial Statements reflect the financial results of Visimid beginning on the Visimid Acquisition Date. The purchase price included $ 1 million in cash, $ 1,550,000 of restricted stock, $ 150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract. Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued in four equal installments of $350,000 each, on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025 . The number of shares is based on the average closing price of the Company’s Class A Common Stock, as reported by Bloomberg, for the five trading days prior to each stock issuance. For the January 1, 2024 installment, 267,176 shares were issued; for the July 1, 2024 installment, 279,553 shares were issued; and for the January 1, 2025 installment, 102,700 shares were issued. The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $ 2.7 million, based on present values as of the Visimid Acquisition Date. Of this amount, $ 600,000 was paid at closing, cash installments of $ 150,000 , $ 125,000 and $ 125,000 were paid in October 2023, January 2024 and September 2024, respectively, per the terms of the purchase agreement, and the remaining cash and stock payments, including the balance of the estimated potential earnout, have been accrued and are included in Accrued liabilities in the unaudited Condensed Consolidated Balance Sheet as of March 31, 2024. The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Visimid Acquisition Date. As part of the valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and trademarks. The customer backlog, customer relationships, trade secrets and trademarks were determined to have estimated values of approximately $ 464,000 , $ 122,000 , $ 925,000 and $ 442,000 , respectively, and estimated useful lives of 1 year for customer backlog, and 10 years for customer relationships, trade secrets and trademarks. The estimated fair value of identifiable intangible assets is determined primarily using the “income approach,” which requires a forecast of all future cash flows. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Visimid. The goodwill is expected to be deductible for income taxpurposes. 13 Table of Contents The Company incurred a total of approximately $ 238,000 , in acquisition costs, of which $ 98,000 was incurred during the nine months ended March 31, 2024. These costs are included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Selling, general and administrative.” No further Visimid acquisition costs were incurred during the nine months ended March 31, 2025. Prior to the acquisition of Visimid, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera. 5. Revenue Product Revenue We are a manufacturer of optical components and higher-level assemblies, including precision molded glass aspheric optics, molded and diamond-turned infrared optical components, and other optical materials used to produce products that manipulate light. We design, develop, manufacture, and distribute optical components and assemblies utilizing advanced optical manufacturing processes. We also provide engineering services and perform research and development for optical solutions for a wide range of optics markets. Revenue is derived primarily from the sale of optical components and assemblies. Revenue Recognition Revenue is generally recognized upon transfer of control, including the risks and rewards of ownership, of products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We generally bear all costs, risk of loss, or damage and retain title to the goods up to the point of transfer of control of products to customers. Shipping and handling costs are included in the cost of goods sold. We present revenue net of sales taxes and any similar assessments. Customary payment terms are granted to customers, based on credit evaluations. We currently do not have any contracts where revenue is recognized, but the customer payment is contingent on a future event. We record deferred revenue when cash payments are received or due in advance of revenue recognition. Deferred revenue was $ 207,000 and $ 725,000 as of March 31, 2025 and June 30, 2024, respectively, and is included in accrued liabilities in the Condensed Consolidated Balance Sheets. Nature of Products Revenue from the sale of optical components and assemblies is recognized upon transfer of control, including the risks and rewards of ownership, to the customer. The performance obligations for the sale of optical components and assemblies are satisfied at a point in time, generally upon shipment. Product development agreements for engineering services are generally short-term in nature, with revenue recognized upon satisfaction of the performance obligation, and transfer of control of the agreed-upon deliverable. Visimid has one longer-term order with a defense customer which includes both product development and hardware deliverables where similar revenue recognition criteria will be applied. We categorize our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. 14 Table of Contents Revenue by product group for the three and nine months ended March 31, 2025 and 2024 was as follows: Three Months Ended Nine Months Ended March 31, March 31, 2025 2024 2025 2024 Infrared components $ 3,640,517 $ 3,638,674 $ 9,363,477 $ 11,046,129 Visible components 2,838,346 2,688,475 8,901,076 8,055,714 Assemblies and modules 1,852,482 829,265 3,803,364 3,077,987 Engineering services 836,282 542,761 2,924,920 912,230 Total revenue $ 9,167,627 $ 7,699,175 $ 24,992,837 $ 23,092,060 6. Inventories The components of inventories include the following: March 31, 2025 June 30, 2024 Raw materials $ 2,872,025 $ 3,112,428 Work in process 4,099,547 2,333,240 Finished goods 7,046,151 2,330,287 Allowance for obsolescence ( 1,330,498 ) ( 1,224,896 ) $ 12,687,225 $ 6,551,059 The value of tooling in raw materials, net of the related allowance for obsolescence, was approximately $ 1.3 million and $ 1.4 million as of March 31, 2025 and June 30, 2024, respectively. 7. Property and Equipment Property and equipment are summarized as follows: Estimated Lives (Years) March 31, 2025 June 30, 2024 Manufacturing equipment 5 - 10 $ 23,615,600 $ 22,582,429 Computer equipment and software 3 - 5 1,405,925 970,494 Furniture and fixtures 5 381,924 349,932 Leasehold improvements 5 - 10 9,271,694 8,964,714 Construction in progress 780,783 646,217 Total property and equipment 35,455,926 33,513,786 Less accumulated depreciation and amortization ( 19,994,325 ) ( 18,303,174 ) Total property and equipment, net $ 15,461,601 $ 15,210,612 Depreciation expense was $ 1.9 million and $ 1.8 million the nine-month periods ended March 31, 2025 and 2024, respectively. 15 Table of Contents 8. Goodwill and Intangible Assets The change in the net carrying amount of goodwill during the nine months ended March 31, 2025 was as follows: Goodwill at June 30, 2024 $ 6,764,127 Acquisition of G5 2,977,346 Goodwill at March 31, 2025 $ 9,741,473 The increase in goodwill during the nine months ended March 31, 2025 was due to the acquisition of G5 Infrared. The Company is in the process of finalizing third-party valuations of certain intangible assets; thus, the provisional measurement of goodwill and intangible assets are subject to change. See Note 3, Acquisition of G5 Infrared , to these unaudited Condensed Consolidated Financial Statements, for more information. Amortizable intangible assets were comprised of: Useful Lives (Years) March 31, 2025 June 30, 2024 Customer relationships 10 - 15 $ 9,522,300 $ 3,712,300 Trade secrets 8 - 10 7,761,304 4,197,304 Trademarks 8 - 10 9,912,418 4,256,418 Backlog 1 4,728,525 463,525 Total intangible assets 31,924,547 12,629,547 Less accumulated amortization ( 10,448,321 ) ( 8,978,808 ) Total intangible assets, net $ 21,476,226 $ 3,650,739 Future amortization of intangible assets is as follows: Fiscal year ending: June 30, 2025 (three months remaining) $ 1,460,967 June 30, 2026 4,244,494 June 30, 2027 1,578,869 June 30, 2028 1,578,869 June 30, 2029 1,578,869 After June 30, 2029 11,034,158 $ 21,476,226 9. Income Taxes A summary of our total income tax expense and effective income tax rate for the three and nine months ended March 31, 2025 and 2024 is as follows: Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Loss before income taxes $ ( 3,482,429 ) $ ( 2,591,736 ) $ ( 7,657,010 ) $ ( 5,532,171 ) Income tax provision $ 100,031 $ 5,798 $ 160,192 $ 121,402 Effective income tax rate ( 3 )% 0 % ( 2 )% ( 2 )% 16 Table of Contents The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia. Effective February 28, 2023, the legal entities of LightPath Optical Instrumentation (Shanghai) Co., Ltd. (“LPOI”) and LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”) were merged, with LPOIZ as the surviving company and the operations of the two companies were merged. For the three and nine months ended March 31, 2025 and 2024, income tax expense was primarily related to income taxes from our operations in China, including accruals for withholding taxes on intercompany dividends declared by LPOIZ, and paid or payable to LightPath, its parent company, as well as withholding taxes on payments from LPOIZ to LightPath for administrative services rendered. We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of March 31, 2025 and June 30, 2024, our net deferred tax assets are related to the U.S. jurisdiction and we have provided a valuation allowance to reduce the deferred tax assets to the net amount we estimate is more-likely-than-not to be realized. Our net deferred tax assets as of March 31, 2025 and June 30, 2024 consist primarily of federal and state tax credits with indefinite carryover periods. U.S. Federal and State Income Taxes Our U.S. federal and state statutory income tax rate is estimated to be 25.5 %. Based on our current assessment of the valuation allowance position on our net deferred tax assets, no additional tax expense or benefit is expected to be recorded on pre-tax income or losses generated in the U.S. Income Tax Law of the People’s Republic of China Our Chinese subsidiary, LPOIZ, is governed by the Income Tax Law of the People’s Republic of China. As of March 31, 2025, LPOIZ was subject to a statutory income tax rate of 15 %. The net deferred tax liabilities included in these unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and June 30, 2024 are related to LPOIZ, and primarily consist of timing differences related to depreciation. The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S. parent company. The Company also intends to reinvest a portion of the earnings generated by its foreign subsidiaries. The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $ 32,000 as of both March 31, 2025 and June 30, 2024. Other than these withholding taxes, these intercompany dividends have no impact on the unaudited Condensed Consolidated Financial Statements. Law of Corporate Income Tax of Latvia Our Latvian subsidiary, ISP Optics Latvia, SIA (“ISP Latvia”), is governed by the Law of Corporate Income Tax of Latvia. Effective January 1, 2018, the Republic of Latvia enacted tax reform with the following key provisions: (i) corporations are not subject to income tax, but are instead subject to a distribution tax on distributed profits (or deemed distributions, as defined) and (ii) the rate of tax was changed to 20 %; however, distribution amounts are first divided by 0.8 to arrive at the profit before tax amount, resulting in an effective tax rate of 25 %. As a transitional measure, distributions of earnings prior to January 1, 2018 were not subject to tax if declared prior to December 31, 2019. ISP Latvia declared an intercompany dividend to be paid to ISP Optics Corporation (“ISP”), its U.S. parent company, for the full amount of earnings accumulated prior to January 1, 2018. Distributions of this dividend have been fully settled as of June 30, 2024 and we currently do not intend to distribute any earnings generated after January 1, 2018. If, in the future, we change such intention, we will accrue distribution taxes, if any, as profits are generated. 10. Stock-Based Compensation Our directors, officers, and key employees are granted stock-based compensation through our Amended and Restated Omnibus Incentive Plan, as amended (the “Omnibus Plan”), through October 2018 and after that date, through our 2018 Stock and Incentive Compensation Plan (the “SICP”). Such stock-based compensation may include, among other things, incentive stock options, non-qualified stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”). The SICP is administered by the Compensation Committee of the Board of Directors. To date, our stockholders approved an aggregate of 7,215,625 shares of our Class A Common Stock for issuance pursuant to awards granted under the Omnibus Plan or SICP. As of March 31, 2025, 614,538 shares of Class A Common Stock were authorized and available for issuance pursuant to awards granted under the SICP. The Company’s executive officers are eligible to earn incentive compensation consisting of equity-based awards, as well as cash bonuses, based on the achievement of certain individual and/or Company performance goals set by the Compensation Committee. 17 Table of Contents Stock-based compensation expense is based primarily on the fair value of the award as of the grant date and is recognized as an expense over the requisite service period. The following table shows total stock-based compensation expense for the three and nine months ended March 31, 2025 and 2024, the majority of which is included in selling, general and administrative (“SG&A”) expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss): Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Stock options $ 10,574 $ 19,942 $ 32,192 $ 81,457 RSAs 138,781 61,781 304,999 193,090 RSUs 89,779 129,681 407,964 488,711 Total $ 239,134 $ 211,404 $ 745,155 $ 763,258 We also adopted the LightPath Technologies, Inc. Employee Stock Purchase Plan (the “2014 ESPP”). The 2014 ESPP permits employees to purchase Class A Common Stock through payroll deductions, subject to certain limitations. A discount of approximately $ 1,500 and $ 4,000 for the nine months ended March 31, 2025 and 2024, respectively, is included in SG&A expenses in these unaudited Condensed Consolidated Statements of Comprehensive Income (Loss), which represents the value of the 10% discount given to the employees purchasing stock under the 2014 ESPP. The 2014 ESPP expired in January 2025. Grant Date Fair Values and Underlying Assumptions; Contractual Terms We estimate the fair value of each stock option as of the date of grant, using the Black-Scholes-Merton pricing model. The fair value of 2014 ESPP shares is the amount of the discount the employee obtains at the date of the purchase transaction. Most stock options granted vest ratably over two to four years and are generally exercisable for ten years. The assumed forfeiture rates used in calculating the fair value of RSA and RSU grants was 0%, and the assumed forfeiture rates used in calculating the fair value of options for performance and service conditions were 20% for each of the nine months ended March 31, 2025 and 2024. The volatility rate and expected term are based on seven-year historical trends in Class A Common Stock closing prices and actual forfeitures . The interest rate used is the U.S. Treasury interest rate for constant maturities. No stock options were granted during the nine months ended March 31, 2025. Restricted Stock Awards RSAs are granted primarily to our executive officers, employees and consultants, and typically vest over a one to three year period from the date of grant, although some may vest immediately upon grant. The stock underlying RSAs is issued upon vesting. Restricted Stock Units RSUs are granted primarily to our directors, although RSU awards may also be made to executive officers, employees and consultants. RSUs typically vest over a one to four year period from the date of grant, although some may vest immediately upon grant. 18 Table of Contents Information Regarding Current Share-Based Compensation Awards A summary of the activity for share-based compensation awards in the nine months ended March 31, 2025 is presented below: Stock Options Restricted Stock Units (RSUs) Restricted Stock Awards (RSAs) Weighted- Weighted- Weighted- Weighted- Average Average Average Average Exercise Remaining Remaining Remaining Shares Price Contract Shares Contract Shares Contract June 30, 2024 553,689 $ 2.02 5.4 1,250,132 0.8 161,540 1.5 Granted — — 125,499 155,121 Exercised ( 133,078 ) $ 1.97 ( 339,745 ) ( 191,205 ) Cancelled/Forfeited ( 28,794 ) $ 2.96 — — March 31, 2025 391,817 $ 1.97 5.4 1,035,886 0.6 125,456 1.4 Awards exercisable/ vested as of March 31, 2025 353,910 $ 1.93 5.2 718,739 — — — Awards unexercisable/ unvested as of March 31, 2025 37,907 $ 2.37 7.5 317,147 0.6 125,456 1.4 391,817 1,035,886 125,456 As of March 31, 2025, there was approximately $ 1.7 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements (including stock options, RSAs and RSUs) granted. We expect to recognize the compensation cost as follows: Fiscal Year Ending: Stock Options RSAs RSUs Total June 30, 2025 (remaining three months) $ 25,628 $ 82,738 $ 284,671 $ 393,037 June 30, 2026 42,064 230,546 566,495 839,105 June 30, 2027 26,551 82,893 363,814 473,258 June 30, 2028 1,761 - 35,161 36,922 $ 96,004 $ 396,177 $ 1,250,141 $ 1,742,322 11. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income or loss by the weighted-average number of shares of Class A Common Stock outstanding, during each period presented. The computation of diluted earnings (loss) per share further assumes the potential dilutive effect of potential Class A Common Stock using the treasury-stock method and if-converted method, as applicable. During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Company's convertible notes, the impact of conversion would be dilutive and such dilutive effect is reflected in diluted EPS. As a result, in periods where the average market price of the Company's common stock is above the conversion price, under the if-converted method, the Company calculates the number of shares issuable under the terms of the convertible notes based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period. The Warrants and the Series G Convertible Preferred Stock are participating securities as the holders of such instruments participate in the event a dividend is paid on common stock, however the holders do not have a contractual obligation to share in the Company’s losses. As such, losses are attributed entirely to common stockholders. The computations for basic and diluted earnings (loss) per share of Class A Common Stock are described in the following table: Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Net loss $ ( 3,582,460 ) $ ( 2,597,534 ) $ ( 7,817,202 ) $ ( 5,653,573 ) Accretion of dividends on Series G preferred ( 14,751,134 ) — ( 14,751,134 ) — Net loss attributable to stockholders $ ( 18,333,594 ) $ ( 2,597,534 ) $ ( 22,568,336 ) $ ( 5,653,573 ) Weighted-average common shares outstanding: Basic number of shares 41,363,643 37,988,770 40,209,657 37,639,464 Diluted number of shares 41,363,643 37,988,770 40,209,657 37,639,464 Loss per common share: Basic $ ( 0.44 ) $ ( 0.07 ) $ ( 0.56 ) $ ( 0.15 ) Diluted $ ( 0.44 ) $ ( 0.07 ) $ ( 0.56 ) $ ( 0.15 ) 19 Table of Contents The following potential dilutive shares were not included in the computation of diluted earnings (loss) per share of Class A Common Stock, as their effects would be anti-dilutive. Potential dilutive shares for the Series G convertible preferred, warrants and convertible notes were calculated based on the Exchange Cap in effect for the respective periods: Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Options to purchase common stock 394,527 540,123 486,965 536,335 RSUs and RSAs 1,131,004 1,981,071 1,285,881 1,790,148 Series G convertible preferred, warrants & convertible notes 2,890,176 — 935,057 — 4,415,707 2,521,194 2,707,903 2,326,483 12. Leases Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Plano, Texas; Hudson, New Hampshire; Riga, Latvia; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms at various times through 2034. We typically include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise such options. We currently have fourteen finance lease agreements entered into during fiscal years 2023, 2024 and 2025 with terms ranging from three to five years. The finance leases are for computer and manufacturing equipment. Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. One of our operating leases includes renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. The lease on the premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”) was amended in April 2021, and again in September 2021, to expand the space from approximately 26,000 square feet to approximately 58,500 square feet. The lease term was extended from April 30, 2022, to that certain date that is one hundred twenty-seven (127) months after the date the landlord completes certain work to be done at the leased premises. The landlord’s work was completed in August 2023, and accordingly the lease expires on March 31, 2034. Effective in January 2022, the terms of our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively. It is our intention to renew the lease on the reduced space in Zhenjiang for at least a one-year term . The operating lease for G5 Infrared’s facility in New Hampshire expires in December 2026. We received tenant improvement allowances for the lease of our Orlando Facility. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balance is being amortized over the corresponding lease term. In August 2023, we completed the construction of additional tenant improvements within the premises 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. The components of lease expense for the three and nine months ended March 31, 2025 and 2024 were as follows: Three Months Ended March 31, Nine Months Ended March 31, 2025 2024 2025 2024 Operating lease cost $ 265,245 $ 238,051 $ 803,725 $ 681,726 Finance lease cost: Depreciation of lease assets 45,466 23,971 126,198 57,868 Interest on lease liabilities 18,105 9,712 49,194 25,104 Total finance lease cost 63,571 33,683 175,392 82,972 Total lease cost $ 328,816 $ 271,734 $ 979,117 $ 764,698 20 Table of Contents Supplemental balance sheet information related to the leases as of March 31, 2025 and June 30, 2024 was as follows: Classification March 31, 2025 June 30, 2024 Assets: Operating lease assets Operating lease assets $ 6,457,530 $ 6,741,549 Finance lease assets Property and equipment, net (1) 928,661 1,063,768 Total lease assets $ 7,386,191 $ 7,805,317 Liabilities: Current: Operating leases Operating lease liabilities, current $ 1,271,740 $ 1,059,998 Finance leases Finance lease liabilities, current 203,954 177,148 Noncurrent: Operating leases Operating lease liabilities, less current portion 7,518,766 8,058,502 Finance leases Finance lease liabilities, less current portion 457,441 528,753 Total lease liabilities $ 9,451,901 $ 9,824,401 (1) Finance lease assets were recorded net of accumulated depreciation of approximately $ 236,000 and $ 109,000 as of March 31, 2025 and June 30, 2024, respectively. Lease term and discount rate information related to leases was as follows: Lease Term and Discount Rate March 31, 2025 Weighted Average Remaining Lease Term (in years) Operating leases 8.4 Finance leases 2.9 Weighted Average Discount Rate Operating leases 2.8 % Finance leases 7.1 % Supplemental cash flow information was as follows for the nine months ended March 31, 2025 and 2024: Nine Months Ended March 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: Operating cash used for operating leases $ 887,180 $ 634,033 Operating cash used for finance leases $ 49,194 $ 25,105 Financing cash used for finance leases $ 142,523 $ 87,610 21 Table of Contents Future maturities of lease liabilities were as follows as of March 31, 2025: Fiscal year ending: Finance Leases Operating Leases June 30, 2025 (remaining three months) $ 82,061 $ 344,553 June 30, 2026 243,229 1,409,059 June 30, 2027 216,580 1,281,635 June 30, 2028 173,283 1,157,748 June 30, 2029 57,642 1,187,989 Thereafter — 5,571,134 Total future minimum payments 772,795 10,952,118 Less imputed interest ( 111,400 ) ( 2,161,612 ) Present value of lease liabilities $ 661,395 $ 8,790,506 13. Loans Payable Acquisition Notes On February 18, 2025 we entered into the Securities Purchase Agreement (see Note 3, Acquisition of G5 Infrared ), and in connection with the closing of the Securities Purchase Agreement, we issued senior secured promissory notes in an aggregate principal amount of $5.2 million (the “Acquisition Notes”). The Acquisition Notes accrue interest at the rate between 10 - 12 % per annum (12% as of March 31, 2025), based on the ratio of indebtedness to EBIDTA of the Company, unless an event of default (as defined in the Acquisition Notes) occurs, at which time the Acquisition Notes would accrue interest at 15% per annum. The Company determined the embedded features related to the payment of variable interest and upon an event of default are clearly and closely related to the Acquisition Notes, and are therefore not bifurcated from the Acquisition Notes. At March 31, 2025, the net carrying value of the convertible promissory notes is $ 4.5 million, including unamortized debt discount and issuance costs of $ 0.7 million, and had an effective interest rate of 5.7 %. The estimated fair value (level 3) of the convertible promissory notes approximates its book value as of March 31, 2025. The Acquisition Notes will mature on February 18, 2027, the second anniversary of the issuance date. The Acquisition Notes will convert into shares of Series G Convertible Preferred Stock if the EBIDTA reported by the Company for the calendar year ending December 31, 2025 is less than $ 4,921,875 , which are in turn convertible into Conversion Shares (the “Conversion Option”). The Series G Convertible Preferred Stock is convertible into Class A Common Stock. The Company determined that the Conversion Option did not require bifurcation from the Acquisition Notes as the Conversion Option (i) is indexed to the Company’s own stock, (ii) is settled in shares, not cash, and (iii) is only exercisable into a fixed number of shares at a fixed exercise price of $1,000 per share once it is triggered to convert and the conversion price can only be adjusted for standard antidilution provisions. All or part of the Acquisition Notes may be redeemed by the Company prior to the maturity date at a redemption price equal to the portion of principal so redeemed plus all accrued and unpaid interest thereon, provided that if the funds used for redemption were not generated internally by Company operations, the redemption amount will be multiplied by 102%. In addition, following an event of default or upon a change of control, the Purchaser may require the Company to redeem all or any portion of the Acquisition Notes. Notwithstanding anything to contrary, upon any bankruptcy event of default, the Company will immediately pay the holder an amount in cash representing all outstanding principal and accrued and unpaid interest. The Company determined that these redemption features did not require bifurcation from the Acquisition Notes as these are clearly and closely related to the Acquisition Notes. The Acquisition Notes include customary affirmative and negative covenants and events of default. Additionally, the Acquisition Notes include financial covenants requiring the Company to maintain a Total Leverage Ratio (as defined in the Acquisition Notes) of not greater than 4.00:1:00 and a Fixed Charge Covered Ratio (as defined in the Acquisition Notes) of greater than 1.20:1.00 for each fiscal quarter beginning with the fiscal quarter ending December 31, 2025. Bridge Promissory Note On August 6, 2024, we entered into a bridge promissory note (the “Bridge Note”) with Lytton-Kambara Foundation (the “Lender”, previously defined as the “Buyer”) pursuant to which the Lender extended a loan to the Company in the principal amount of $ 3,000,000 (the “Loan”). The Loan is subject to an original issue discount of 7 %. After deducting the original issue discount, fees paid to our placement agent, and certain expenses, the Company received net proceeds of $ 2,700,000 . The Bridge Note was unsecured, bore interest at the rate of 12.5 % per annum and had a 1 -year term, maturing on August 6, 2025 (the “Maturity Date”), at which time the entire principal amount of the Bridge Note and all accrued but unpaid interest would have been due and payable in full. The Bridge Note and related accrued interest were settled on February 18, 2025, in conjunction with financing for the acquisition of G5 Infrared and the closing of the Securities Purchase Agreement and Class A Common Securities Purchase Agreement (see Note 3, Acquisition of G5 Infrared ) with the Lytton Buyers. The Bridge Note and $1.5 million of cash was exchanged for: (i) 687,750 shares of Class A Common Stock at a purchase price of approximately $2.15 per share issued in connection with the Class A Common Securities Purchase Agreement; (ii) approximately 1,957 shares of Series G Convertible Preferred Stock issued in connection with the Securities Purchase Agreement; (iii) warrants to purchase 512,091 shares of Class A Common Stock, with an exercise price of $2.58 per share, of which 170,697 were issued in connection with the Class A Common Securities Purchase Agreement and 341,394 were issued in connection with the Securities Purchase Agreement and (iii) an Acquisition Note in an aggregate principal amount of approximately $1.2 million issued in connection with the Securities Purchase Agreement . The exchange of the Bridge Note was accounted for as a debt extinguishment as the Conversion Option on the Acquisition Notes is substantive, the warrants, preferred stock, and common stock are equity classified and an exchange of debt for equity other than through an existing conversion feature is accounted for as an extinguishment. The loss on extinguishment of $0.4 million was computed as the difference between (i) the carrying value of the new instruments issued, including the Acquisition Note, the Series G Convertible Preferred Stock, Class A Common Stock, and Warrants. Prior to closing of the Securities Purchase Agreement and Class A Securities Purchase Agreement, the Lytton Buyers owned a de minimis amount the Company’s equity and therefore the loss was not an in-substance capital transaction and was recognized in the loss on extinguishment of debt on the condensed consolidated statements of comprehensive income (loss). Third-party costs totaling $0.3 million were recorded as issuance costs and are being amortized using the effective interest method over the term of the Acquisition Note. 22 Table of Contents Equipment Loans In December 2020, ISP Latvia received an equipment loan from a third party (the “2020 Equipment Loan”), which party is also a significant customer. The 2020 Equipment Loan was collateralized by certain equipment. The initial advance under the 2020 Equipment Loan was 225,000 EUR (or USD $ 275,000 ), payable in equal installments over 60 months, the proceeds of which were used to make a prepayment to a vendor for equipment to be delivered at a future date. An additional 225,000 EUR (or USD $ 267,000 ) was drawn in September 2021, which proceeds were paid to the vendor for the equipment, payable in equal installments over 52 months. The 2020 Equipment Loan bears interest at a fixed rate of 3.3 %. 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 advance under the 2023 Equipment Loan was 128,815 EUR (or USD $ 141,245 ), the proceeds of which were used to make a prepayment 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 USD $ 141,815 ). The 2023 Equipment Loan is payable over 48 months, with monthly installments that began on January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% ( 4.85 % as of March 31, 2025). Future maturities of loans payable are as follows: Acquisition Notes Equipment Loans Total Fiscal year ending: June 30, 2025 (remaining three months) $ - $ 61,829 $ 61,829 June 30, 2026 150,382 150,382 June 30, 2027 5,195,205 106,320 5,301,525 June 30, 2028 70,880 70,880 Total payments $ 5,195,205 $ 389,411 $ 5,584,616 Unamortized discount to fair value ( 407,976 ) Unamortized loan issuance costs ( 297,465 ) Loans payable 4,879,175 Less current portion ( 185,631 ) Non-current portion $ 4,693,544 14. Foreign Operations Assets and liabilities denominated in non-U.S. currencies 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 period. Gains or losses on the translation of the financial statements of a non-U.S. operation, where the functional currency is other than the U.S. dollar, are reflected as a separate component of equity, which was a cumulative gain of approximately $ 451,000 and $ 510,000 as of March 31, 2025 and June 30, 2024, respectively. We also recognized net foreign currency transaction gains of $ 8,000 and $ 12,000 during the three months ended March 31, 2025 and 2024, respectively. During the nine months ended March 31, 2025 and 2024, we recognized net foreign currency transaction gains of $ 12,000 and $ 41,000 , respectively, included in the unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) in the line item entitled “Other income (expense), net.” Our cash, cash equivalents and restricted cash totaled approximately $ 6.5 million at March 31, 2025. Of this amount, approximately 25% was held by our foreign subsidiaries in China and Latvia. These foreign funds were generated in China and Latvia as a result of foreign earnings. With respect to the funds generated by our foreign subsidiaries in China, the retained earnings of the respective subsidiary must equal at least 50% of its registered capital before any funds can be repatriated through dividends. As of March 31, 2025, LPOIZ had approximately $ 0.8 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 March 31, 2025. 23 Table of Contents Revenues from foreign countries for the nine months ended March 31, 2025 and 2024 are as follows: Nine Months Ended March 31, 2025 2024 Revenues: United States $ 16,374,544 $ 13,523,888 Europe 4,857,768 6,317,636 China 2,036,124 1,177,093 Other Asian countries 742,950 1,458,543 Rest of world 981,451 614,900 $ 24,992,837 $ 23,092,060 Long-lived assets located in foreign countries as of March 31, 2025 and June 30, 2024 are as follows: March 31, 2025 June 30, 2024 Long-lived assets: United States $ 46,459,691 $ 24,989,477 Latvia 4,686,527 4,961,741 China 2,193,472 2,615,410 $ 53,339,690 $ 32,566,628 15. Contingencies Legal The Company, from time to time, is involved in various legal actions arising in the normal course of business. Management, after reviewing with legal counsel all of these actions and proceedings, believes that the aggregate losses, if any, will not have a material adverse effect on the Company’s financial position or results of operations. In April 2021, we terminated several employees of our China subsidiaries, LPOIZ and LPOI, including the General Manager, the Sales Manager, and the Engineering Manager, after determining that they had engaged in malfeasance and conduct adverse to our interests, including efforts to misappropriate certain of our proprietary technology, diverting sales to entities owned or controlled by these former employees and other suspected acts of fraud, theft and embezzlement. In connection with such terminations, our China subsidiaries have engaged in certain legal proceedings with the terminated employees. We incurred various expenses associated with the investigation into these matters prior and subsequent to the termination of the employees and the associated legal proceedings. In December 2023, we recovered approximately $ 190,000 in funds that had been recovered by the Chinese authorities, which is included in Other Income for the nine months ended March 31, 2024. We expect to incur minimal additional legal fees and consulting expenses in future periods as we have exhausted nearly all of our legal options and remedies. Potential Impact of Economic Conditions in and Trade Relations with China Due to our operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China. China’s economy differs from the economies of other countries in many respects, including with respect to the level of development, growth rate, amount of government involvement, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past several decades, its growth rate has declined in recent years and may continue to decline. Deteriorating economic conditions in China, as well as geo-political drivers such as sanctions on Chinese companies, generally have led to lower demand for our products in China and thus lower revenues and net income for our subsidiaries in China and the Company overall. A continuation of China’s current economic conditions or a further slowdown in the economic growth, an economic downturn, a recession, or other adverse economic conditions in China is likely to have a further adverse effect on our business and results of operations in future quarters. 24 Table of Contents In addition, China’s export limitations on Germanium and Gallium, two materials that are commonly used in infrared optical components, are becoming increasingly disruptive to our business with adverse impacts. The initial restrictions imposed in July 2023 required all international customers to provide an end user statement for approval before receiving an export license. Following that announcement, supply of Germanium was disrupted, though not completely stopped. This also resulted in significant price increases in the cost of Germanium material. 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 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. As a purchaser of Germanium, we cannot provide any assurance that we will be able to obtain adequate supplies of Germanium, or that the timing or costs of obtaining such raw materials will be acceptable to us. As a precaution against disruptions in the Germanium supply chain and in anticipation of increased demand for optics produced from other materials, particularly our proprietary BlackDiamond materials, we have, in agreement with a key customer, canceled sales orders for optics made of Germanium and are actively working with our customers to redesign their systems to use our BlackDiamond materials instead of Germanium-based materials. Additionally, we are actively collaborating with our customers to ensure those redesigned systems are tested and qualified as replacements for legacy Germanium-based systems. In some cases, such as complex defense and airborne systems, the re-qualification of such redesigned systems is a lengthy process that can take up to two years. In other systems such as commercial systems and also some specific defense systems, this is a faster process, that takes several months. In February 2025 , the U.S. announced additional tariffs on goods imported from China, effective immediately, and China announced its intent to follow suit and implement additional tariffs on goods imported to China from the U.S. We have in place a number of strategies to mitigate the impact of tariffs, which we will adjust in response to these additional tariffs. However, given the uncertainty regarding the potential for additional trade actions by the U.S. or other countries, any future impact on our operations and financial results is uncertain and these impacts could be more significant than in the past. Further, we can provide no assurance that the strategies we implemented to mitigate the impact of such tariffs or other trade actions will continue to be successful. To the extent that our supply chain, costs, sales, or profitability are negatively affected by the tariffs or other trade actions, our business, financial condition, and results of operations may be adversely affected. Impact of Recent Wars In February 2022, Russian military forces invaded Ukraine. This war has led to ongoing sanctions on Russia, which have had continuing impacts on our supply chain of raw materials, particularly Germanium. Separately, Israel declared war on Hamas in October 2023. Initially, this resulted in a temporary increase in our sales, as Israel worked to replace electro-optical systems that in some cases use our materials. Our sales to customers in this region have since stabilized, however, it is still possible that this war could have a negative impact on our business as a result of the overall economic impact in Israel. In addition to the significant defense related market in Israel, we also serve many commercial related applications and work with commercial companies in Israel, and the business of those customers may be negatively impacted by the war over time. Given the dynamic nature of this situation, we cannot reasonably estimate the impact of either the Russian-Ukraine conflict or the Israel-Hamas war on our financial condition, results of operations or cash flows into the foreseeable future.[NK2] 16. Liquidity We generally rely on cash from operations and equity and debt offerings, to the extent available, to satisfy our liquidity needs and to maintain our ability to repay our debt. 25 Table of Contents On February 16, 2022, we filed a shelf registration statement to facilitate the issuance of our Class A Common Stock, warrants exercisable for shares of our Class A Common Stock, and/or units up to an aggregate offering price of $ 75.8 million from time to time. In connection with the filing of the shelf registration statement, we also included a prospectus supplement relating to an at-the-market equity program under which we may issue and sell shares of our Class A Common Stock up to an aggregate offering price of $ 25.2 million from time to time, decreasing the aggregate offering price available under the shelf registration statement to $ 50.6 million. The shelf registration statement was declared effective by the SEC on March 1, 2022. As of June 30, 2024, we issued 585,483 shares of our Class A Common Stock pursuant to the at-the-market equity program. No 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 shares of Series G Convertible Preferred Stock. For additional information, refer to Note 3, Acquisition of G5 Infrared . 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. In addition, 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.