LPTH 10-K & 10-Q changes, risk factors and insider trading

We may be affected by political and other risks as a result of our sales to international customers and/or our sourcing of materials from international suppliers. In fiscal year 2025,2026, 38%48% of our net revenue was derived from sales outside of the U.S., compared to 38% in fiscal 2025, with customers in Europe and Asia accounting for 97% and 91% of our foreign sales derivedin fromfiscal 2026 and 2025, respectively. However, those percentages are based on ship-to location, and one of our largest customers integrates products in Europe and Asia.ships Into fiscaltheir yearcustomers 2024, 39% of our net revenue was derived from sales outside ofin the U.S., with 94% ofso our foreigninternational sales derivedis fromactually customersless inthan Europethis and Asia.indicates. Our international sales will be limited, and may even decline, if we cannot establish relationships with new international distributors, maintain relationships with our existing international distributions, maintain and expand our foreign operations, expand international sales, and develop relationships with international service providers. For example, following the sale of LPOIZ and the Zhenjiang Facility, which is expected to close in September 2026, we expect to become more dependent on third-party suppliers, including LPOIZ’s new owners, for the manufacture and supply of certain materials and products. While the transaction documents contemplate an ongoing supply relationship, any disruption in the new owners' operations, changes in their business priorities, financial condition, or ability to perform under our agreements could adversely affect our supply chain, operations, and financial results. Additionally, our international sales may be adversely affected if international economies weaken. We are subject to the following risks, among others:

Russia’s ongoing conflict with Ukraine may continue to disrupt our supply chain. Our business, financial condition, and results of operations could be adversely affected by continued disruption and global consequences stemming from the conflict. Although we have no direct operations in Russia or Ukraine, the broader consequences of this conflict have negatively affected, and are expected to continue to negatively affect, the global economy, including the imposition of sanctions, cyber incidents or information technology failures, supply disruptions, increases in inflation rates, increase in energy costs, changes to foreign currency exchange rates, constraints, volatility, or disruption in financial markets, the availability of raw materials, supplies, freight, and labor, and uncertainty about economic and global stability. Historically, we have sourced Germanium from suppliers located in Russia and China. At the start of the Russia\Ukraine conflict we had ceased all purchases of Germanium from vendors in Russia and instead have been purchasing Germanium from vendors in China. OnIn July 4, 2023 China announced its intentions to impose some export restrictions on Germanium, requiring all international customers to provide an end user statement for approval before receiving an export license. Since that announcement, supply of Germanium has been disrupted, though not completely stopped. OnIn December 3, 20242024, China further announced an immediate export ban on Germanium, Gallium and antimony to the United States and for any dual use or military use applications. We have taken proactive steps to minimize the orders we accept for Germanium products and therefore minimize our exposure to this risk. We cannot provide any assurances that we will be able to obtain adequate supplies in the future or, if adequate supplies are available, that the timing or costs of obtaining such raw materials will be acceptable to us. Further, some of our major customers in Europe may be directly impacted by the Russian-Ukraine conflict, which could impact the amount and frequency of orders they place with us, as well as impact the timing and ability to pay for products ordered from us. Any material impacts to our customers could have a material adverse effect on our business and operating results.

We depend on single or limited source suppliers for some of the key materials or process steps in our products, making us susceptible to supply shortages, poor performance, or price fluctuations. We currently purchase several key materials (including Germanium and sensors) or have outside vendors perform process steps, such as lens coatings, used in or during the manufacture of our products from single or limited source suppliers. We may fail to obtain required materials or services in a timely manner in the future, or we could experience delays as a result of evaluating and testing the products or services of potential alternative suppliers. The economic decline in China may have adversely impacted the financial condition of certain of our suppliers, some of whom have limited financial resources. We have in the past, and may in the future, be required to provide advance payments in order to secure key materials from financially limited suppliers. Financial or other difficulties faced by these suppliers could limit the availability of key components or materials. The economic decline in China has also increased the risk of bankruptcy for suppliers with operations in China and has led to higher manufacturing costs for us and the need to identify alternate suppliers. Additionally, financial difficulties could impair our ability to recover advances made to these suppliers. Any interruption or delay in the supply of any of these materials or services, or the inability to obtain these materials or services from alternate sources at acceptable prices and within a reasonable amount of time, would impair our ability to meet scheduled product deliveries to our customers and could cause customers to cancel orders, thereby negatively affecting our business, financial condition, and results of operation.operations.

International tariffs, including tariffs applied to goods traded between the U.S. and China, could materially and adversely affect our business and results of operations. The United States has recently enacted and proposed to enact significant new tariffs affecting certain products exported by a number of U.S. trading partners, including China. While certain tariffs have subsequently been suspended, modified or temporarily reduced, we cannot predict the results of the U.S. government’s trade negotiations or the outcome of ongoing legal challenges to specific tariff policies. The unpredictable nature of these trade policies and the potential for further escalation may increase uncertainty and volatility in our industry, which could negatively impact our financial performance The institution of trade tariffs both globally and between the U.S. and China specifically carries the risk of negatively impacting China’s overall economic condition, which could have negative repercussions for us. Furthermore, imposition of tariffs could cause a decrease in the sales of our products to customers located in China or other customers selling to Chinese end users, which would directly impact our business. In light of these events, there continues to exist significant uncertainty about the future relationship between the U.S. and other countries with respect to such trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us. We have operations, customers and suppliers in the U.S., China and other countries and regularly import and export goods and services to and from those countries. An increase in tariffs could have a material impact on our costs and on the demand for our products and services.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows. We execute all foreign sales from our U.S.-based facilities and inter-company transactions in U.S. dollars in order to partially mitigate the impact of foreign currency fluctuations. However, a portion of our international revenues and expenses are denominated in foreign currencies. Accordingly, we experience the risks of fluctuating currencies and corresponding exchange rates. In each of fiscal years 20252026 and 2024,2025, we recognized net losses of approximately $0.1 million and gains of approximately $0.1 million on foreign currency transactions, respectively.transactions. Any such fluctuations that result in a less favorable exchange rate could adversely affect a portion of our revenues and expenses, which could negatively impact our results of operations and financial condition.

We are dependent on a few key customers, and the loss of any key customer could cause a significant decline in our revenues. In fiscal year 2026, we had sales to three customers that comprised an aggregate of approximately 37% of our annual revenue, with one customer at 24% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales. In fiscal year 2025, we had sales to three customers that comprised an aggregate of approximately 23% of our annual revenue, with one customer at 9% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales. InHowever, two of the three largest customers for fiscal year 2024,2025 wewas hadnot among the three largest for fiscal year 2026, which demonstrates that our customer concentration is not static. We continue to diversify our business in order to minimize our sales toconcentration three customers that comprised an aggregate of approximately 25% of our annual revenue, with one customer at 12% of our sales, another customer at 7% of our sales, and the third customer at 6% of our sales.risk. Our current strategy of providing the domain expertise and the extensive “know how” in optical design, fabrication, production and testing technologies will allow our customers to focus on their own development efforts, without needing to develop subject matter expertise in optics. By providing the bridge into the optical solution world, we partner with our customers on a long-term basis, create value to our customers, and capture that value through the long-term supply relationships we develop. However, the loss of any of these customers, or a significant reduction in sales to any such customer, would adversely affect our revenues.

Our stock price may fluctuate widely. Many factors, including, but not limited to, future announcements concerning the Company, its competitors or customers, as well as quarterly variations in operating results, announcements of technological innovations, seasonal or other variations in anticipated or actual results of operations, changes in earnings estimates by analysts or reports regarding the Company’s industries in the financial press or investment advisory publications, could cause the market price of the Company’s stock to fluctuate substantially. In addition, the Company’s stock price may fluctuate widely for reasons which may be unrelated to operating results. Also, any information concerning the Company, including projections of future operating results could in the future contribute to volatility in the market price of the Company’s commonClass stock.A Common Stock.

Because of our limited product offerings, our ability to generate additional revenues may be limited without additional growth. With our strategic transition into more value-added solutions, and the addition of Visimid in July 2023, we reorganized our products into four product groups: infrared components, visible components, assemblies and modules, and engineering services. The addition of G5 Infrared in February 2025 and AML in January 2026 further expands our product offerings.offerings and proprietary infrared materials. In fiscal year 2025,2026, sales of infrared components represented approximately 38%30% of our net revenues, sales of visible components represented approximately 32%22% of our net revenues, sales of assemblies and modules represented 21%44% of our revenues, and engineering services represented 9%4% of our revenues. In the future, we expect growth primarily from our assemblies and modules and engineering services product groups,group, the vertical integration of which will be supported by the infrared components product group. Continued and expanding market acceptance of these products, particularly infrared products based on our proprietary chalcogenide materials (Germanium alternatives), is critical to our future success. There can be no assurance that our current or new products will achieve market acceptance at the rate at which we expect, or at all, which could adversely affect our results of operations and financial condition.

Business interruptions could adversely affect our business. We manufacture our products at manufacturing facilities located in Orlando, Florida; Hudson, New Hampshire; Riga,Plano, LatviaTexas; and Riga, Latvia. Up until completing the sale of LPOIZ, we also manufactured our products in a manufacturing facility in Zhenjiang, China. Our revenues are dependent upon the continued operation of these facilities. The Orlando Facility is subject to a lease that expires March 31, 2034. The Hudson, New Hampshire facility lease expires in NovemberDecember 2026.2031. The Plano, Texas lease expires in August 2030. The Riga Facility is subject to two leases which expire in December 2030, and the Zhenjiang Facility is subject to one lease that expires in December 2027.2030. Our operations are vulnerable to interruption by fire, hurricane winds and rain, earthquakes, electric power loss, telecommunications failure, and other events beyond our control. We do have a business continuity and recovery plan for our facilities however, we do not have a backup facility, other than our other facilities, or contractual arrangements with any other manufacturers in the event of a casualty to or destruction of any facility or if any facility ceases to be available to us for any other reason. If we are required to rebuild or relocate either of our manufacturing facilities, a substantial investment in improvements and equipment would be necessary. We carry only a limited amount of business interruption insurance, which may not sufficiently compensate us for losses that may occur.

If we are unable to protect and enforce our intellectual property rights, we may be unable to compete effectively. We believe that our intellectual property rights are important to our success and our competitive position, and we rely on a combination of patent, copyright, trademark, and trade secret laws and restrictions on disclosure to protect our intellectual property rights in the United States and internationally. Although we have devoted substantial resources to the establishment and protection of our intellectual property rights, the actions taken by us may be inadequate to prevent imitation or improper use of our products by others or to prevent others from claiming violations of their intellectual property rights by us. In addition, we cannot assure that, in the future, our patent applications will be approved, that any patents that may be issued will protect our intellectual property, or that third parties will not challenge any issued patents. Other parties may independently develop similar or competing technology or design around any patents that may be issued to us. We also rely on confidentiality procedures and contractual provisions with our employees, consultants, and corporate partners to protect our proprietary rights, but we cannot assure the compliance by such parties with their confidentiality obligations, which could be very time consuming, expensive, and difficult to enforce.

Revenue generated by the visible components product group was approximately $11.7$15.5 million for fiscal year 2025,2026, an increase of 4%,$3.8 million, or 32%, as compared to the prior fiscal year. The increase in revenue iswas primarily due to sales to defense customers, partially offsetdriven by decreases in sales through catalog and distribution channels in the U.S., as well as decreasesincreases in sales to commercialindustrial customers the U.S., Asia and medicalEurope, customers.including several new programs.

Revenue from the assemblies and modules product group was approximately $8.0$31.9 million in fiscal year 2025,2026, an increase of 79%$23.5 million, or 281%, as compared to fiscal year 2024.2025. FiscalOf yearthis 2025increase, includesapproximately $4.0$23.1 million ofis due to an increase in G5 Infrared sales of cameras and modules.modules, Theincluding remainingpreviously decreaseannounced islarge duedefense toand ansecurity 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 an infrared lens assembly to an industrial customer which started shipping at volume in the third quarter of fiscal 2025.programs.

Revenue from engineering services increasedwas bynearly $1.2 millionflat for fiscal 2025,2026, as compared to the same period of the prior fiscal year. This increase was driven byincludes Visimid’s contract with Lockheed Martin, as well as revenueseveral fromother onenon-recurring engineering projects, the largest of ourwhich space-relatedwas fundedfor researchanother contracts.defense customer. The timing and dollar value of deliverables is not always consistent, which causes revenue for the programs within this product group to fluctuate from period to period.

Cost of Sales and Gross Margin.Profit.

Gross marginprofit for fiscal year 20252026 was approximately $10.1$25.8 million, an increase of 17%,155%, as compared to approximately $8.6$10.1 million in fiscal year 2024.2025. Total cost of sales was approximately $45.9 million for fiscal year 2026, compared to $27.1 million for fiscal year 2025, compared to $23.1 million for fiscal year 2024, an increase of 17%.70%. Gross margin as a percentage of revenue was 27%36% for fiscal year 20252026 as compared to 27% for fiscal year 2024.2025. GrossThe increase in gross margin for fiscal year 20252026 was favorably impacteddriven by the additionincrease in sales across nearly all product groups, as well as improved gross margins across each of the product groups. Fiscal year 2026 also includes a full year of G5 Infrared revenue and gross margin since acquisition,profit, particularly in the assemblies and modules product group. The assemblies and modules product group increased from 14% of revenue in fiscal year 2024, to 21%23% of revenue in fiscal year 2025, to 44% of revenue in fiscal year 2026, and these products typically have higher gross margins than the component product groups. Gross marginprofit for fiscal year 2025 was unfavorablyalso impactedunusually bylow, partially due to the unfavorable impact of an approximately $0.5 million increase in inventory reserve charges primarily related to visible components where revenue hashad declined for the past several years.

For fiscal year 2025,2026, Selling, General and Administrative (“SG&A”) costs were approximately $15.8$24.7 million, an increase of approximately $3.5$8.8 million, or 29%,56%, as compared to the prior fiscal year. The increase in SG&A costs was partially attributable to including a full year of G5 Infrared SG&A costs for 2026, an increase of $2.3 million, as compared to fiscal year 2025 is primarily relateddue to the acquisitiontiming of G5 Infrared, including: (i) the additionacquisition. ofThe approximatelyAML $1.1transaction also added $1.0 million in SG&A costs related to G5 Infrared; and (ii) non-recurring costs of $1.5 million related to the acquisition, an increase of $1.0 million as compared to priorfor fiscal year,2026, asincluding acquisition-related costs. In addition, we began incurring costs related to this acquisition in the second half of fiscal year 2024. The remaining increase of approximately $1.5 million was driven by: (i)have increased our sales and marketing spend,spend to promote new products, including additionalpersonnel headcount,costs, consultants, advertisingtravel and tradeshows;tradeshows. andWe (ii)have analso increaseincreased inour spend on information technology spend to upgrade our infrastructure to meet customerheightened requirements,security particularly,standards Cybersecurity,as required by our customers, and for theacquisition defenseintegration industry.projects. Our SG&A personnel costs have also increased due to filling certain vacant executive roles and accruing for incentive compensation plans for employees.

New product development costs were approximately $3.1$3.8 million in fiscal year 2025,2026, an increase of approximately $0.7 million, or 28%,24%, as compared to the prior fiscal year. TheseNew increasesproduct aredevelopment duecosts toincreased with the addition of G5 Infrared product development costs, and other additional engineering personnel,personnel. asThese wellincreases aswere anpartially increaseoffset by a decrease in materials and outside services and materials utilized for development projects, primarilydue forto infraredtiming coresof such projects. Management views the investment in new product development as an important part of execution of our strategy, and cameraplans systems.to continue to grow our investment in new product development.

Amortization of Intangibles.Intangible Assets.

Amortization of intangiblesintangible decreasedassets increased by $0.2$0.4 million for fiscal year 2025,2026, as compared to the prior fiscal year,year as certain of the intangible assets relateddue to the acquisition of ISP were fully amortized as of December 31, 2024. This decrease was largely offset by the addition of amortization of intangible assets associated with the G5 Infrared acquisition.and AML acquisitions. See Note 3, Acquisitions, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for further information.

Interest expense,income, net, was approximately $1.1$0.01 million for fiscal year 2025,2026, compared to interest expense, net, of approximately $0.2$1.1 million in the prior fiscal year. For fiscal 2026, we earned interest on our cash balance following the December Offering (as defined below) and the June Offering (as defined below), partially offset by interest expense on finance leases and interest and amortization of loan issuance costs on the Acquisition Notes (as defined below) until they were redeemed in December 2025. Interest expense for fiscal year 2025 includeincludes financing costs associated with the warrant liability of approximately $0.3 million.million, The remaining increase in interest expense is due toand the interest and amortization of loan issuance costs associated with the Bridge Note,Note (as defined below), executed in August 2024, which was subsequently replaced by the Acquisition Notes executed in February 2025. See Note 14, Loans Payable, in the Consolidated Financial Statements included in this Annual Report on Form 10-K, for definitions and further information.

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

Other expense, net, was approximately $0.1 million for fiscal year 2026, compared to $0.1 million for fiscal year 2025. Other expense, net, for fiscal years 2026 and 2025 primarily consists of net foreign exchange losses. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-United States currencies, primarily the Chinese Yuan and Euro, are translated at rates of exchange prevailing on the balance sheet date, and revenues and expenses are translated at average rates of exchange for the year. During fiscal year 2025, we incurred net foreign currency transaction losses of approximately $0.1 million, compared to net foreign currency transaction gains of $0.1 million for fiscal year 2024.

Net loss for fiscal year 20252026 was approximately $20.5 million, or $0.38 basic and diluted loss per share, compared to approximately $14.9 million, or $0.36 basic and diluted loss per share, compared to approximately $8.0 million, or $0.21 basic and diluted loss per share, for fiscal year 2024.2025. The increase in net loss for fiscal year 2025,2026, as compared to fiscal year 2024,2025, is partiallyprimarily attributable to the approximately $3.5$14.1 million increase in operatingthe losschange duein tofair highervalue of acquisition liabilities, which is included in operating expenses, partiallyas well as the increase in SG&A and new product development costs, which were largely offset by the increase in gross margin. In addition, fiscal year 2025 net income reflects a number of non-operating items driven by the acquisition financing, including the increased interest expense of $1.0 million, loss on extinguishment of debt of $0.4 million, and change in fair value of warrant liability of $1.4 million.profit.

Weighted-average common stock shares outstanding were 53,374,275 for both basic and diluted in fiscal year 2026, compared to 40,874,068 for both basic and diluted in fiscal year 2025, compared to 37,944,935 for both basic and diluted in fiscal year 2024.2025. The increase in weighted-average basic common shares was primarily due to the ClassDecember AOffering Common Stock issued in conjunction withand the financingJune of the acquisition of G5 Infrared (refer to Note 8, Stockholders’ Equity, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information).Offering. The increase is also attributable to: (i) the 585,4833,468,698 shares of Class A Common Stock issued duringupon the second halfexercise of fiscal year 2024 pursuant to the at-the-market equity programwarrants; (ii) the 8,692,097 shares of Class A Common Stock issued upon conversion of Series G Convertible Preferred Stock; (iii) the 524,124 shares of Class A Common Stock issued in conjunction with the acquisitionacquisitions of VisimidVisimid, G5 Infrared and AML, including earnouts; and (iiiiv) the issuance of shares of Class A Common Stock under the 20142015 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.

At June 30, 2025,2026, we had working capital of approximately $11.3$103.7 million and total cash and cash equivalents of approximately $4.9$93.2 million. Approximately 25%4% of our total cash,cash and cash equivalents and restricted cash was held by our foreign subsidiaries in China and Latvia. Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. Historically, we considered unremitted earnings held by our foreign subsidiaries to be permanently reinvested. However, during fiscal year 2020, we began declaring intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to us, as the U.S. parent company. It is still our intent to reinvest a portion of earnings generated by our foreign subsidiaries, however we also plan to repatriate a portion of their earnings.

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. During fiscal years 20252026 and 2024,2025, we repatriated approximately $1.2$0.2 million and $1.4$1.2 million, respectively, from LPOIZ. As of June 30, 2025,2026, LPOIZ had approximately $0.4$0.7 million in retained earnings available for repatriation, based on earnings accumulated through December 31, 2024,2025, the end of the most recent statutory tax year, that remained undistributed as of June 30, 2025.2026. In July 2026, we repatriated $0.4 million, ahead of the closing of the divestiture of LPOIZ which is expected to occur in September 2026.

Loans payable as of June 30, 20252026 consisted of the Acquisition2023 NotesEquipment (as defined below) and two third-party equipment loansLoan (as defined below). Details of the loans are as follows:

In May 2023, ISP Latvia entered into an equipment loan with a third party financial institution (the “2023 Equipment Loan”). The 2023 Equipment Loan is collateralized by certain equipment. The initial advances under the 2023 Equipment Loan totaled 260,258 EUR (or approximately USD $0.3 million), the proceeds of which were used to make prepayments to a vendor for equipment to be delivered at a future date. The final advance for the final payment to the equipment vendor was 132,674 EUR (or approximately USD $0.1 million). The 2023 Equipment Loan is payable over 48 months, with monthly installments beginning January 1, 2024. The 2023 Equipment Loan bears interest at the six-month EURIBOR rate, plus 2.84% (4.89%5.20% as of June 30, 20252026). As of June 30, 2025,2026, the outstanding balance on the 2023 Equipment Loan was approximately 263,000164,000 EUR (or USD $0.3$0.2 million). For additional information regarding the 2023 Equipment Loan, see Note 14, Loans Payable, to the Notes to the Consolidated Financial Statements to this Annual Report on Form 10-K.

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

Cash used in operations was $8.3$10.2 million,million for fiscal 2026, compared to cash provided by operations was approximately $0.5$8.3 million for fiscal year 2024.2025. The cash used in operations for fiscal 2026 was primarily due to the following: (i) payment of the first earnout payment for the acquisition of G5 Infrared, of which $3.8 million was classified in operating activities, representing the amount in excess of the contingent consideration liability recognized as of the acquisition date; and (ii) investments in working capital of $9.6 million, largely driven by accounts receivable and inventory due to the growth in revenue, as well as supplier prepayments for critical materials with long lead times. The cash used in operations during fiscal year 2025 was driven by the net loss, after considering non-cash items, which was partially driven by significant legal and consulting expenses related to the acquisition of G5 Infrared. In addition, inventory increased $1.4 million (net of inventory included in the acquisition of G5 Infrared), while the increase in accounts payablereceivable was largely offset by increases in accounts payable and accrued liabilities. The cash provided by operations during fiscal year 2024 was primarily due decreases in accounts receivable and inventory, due to lower sales in fiscal year 2024, as compared to fiscal year 2023.

During fiscal years 20252026 and 2024,2025, we expended approximately $18.5$7.0 million and $0.8$18.5 million, net, to acquire AML and G5 Infrared and Visimid, respectively, as disclosed in Note 3, Acquisitions, in the Consolidated Financial Statements in this Annual Report on Form 10-K. During fiscal 2025,2026, we expended approximately $1.3$6.3 million for capital equipment, as compared to approximately $2.2$1.3 million during fiscal year 2024.2025. During fiscal yearyears 2025,2026 and 2025 our capital expenditures were primarily related to expansion of our glass fabrication capacity, as well as metrology and infrared coating equipment, whereas our capital expenditures in fiscal year 2024 were primarily related to the expansion of our Orlando Facility. In August 2023, we completed the construction of certain tenant improvements subject to our continuing lease for our Orlando Facility, of which the landlord provided $2.4 million in tenant improvement allowances. We funded the balance of the tenant improvement costs of approximately $3.7 million over fiscal years 2023 and 2024.equipment.

We anticipate a moderatehigher level of capital expenditures during fiscal year 20262027, to support the demand currently in backlog and to enhance our capacity and capabilities; however, the total amount expended will depend on sales growth opportunities and other circumstances.

Net cash provided by financing activities was approximately $29.3$111.0 million,million whereasfor cashfiscal usedyear in2026, financingcompared activities wasto approximately $1.5$29.3 million in fiscal year 2024.2025. Cash provided by financing activities for fiscal year 2026 reflects approximately $120.2 million in net proceeds from public and private equity placements, offset by $5.7 million in principal payments on loans and finance leases. Cash provided by financing activities for fiscal year 2025 reflects approximately $29.8 million from financing related to the acquisition of G5 Infrared, offset by $0.4 million in principal payments on loans and finance leases. Cash used in financing activities for fiscal year 2024 reflects approximately $2.6 million in principal payments on our loans and finance leases, offset by $0.3 million in proceeds from the 2023 Equipment Loan, $0.8 million in proceeds from the sale of Class A common stock pursuant to the at-the-market equity program.

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

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

The following table sets forth revenue dollars by our threefour product groups for the three months and year ended June 30, 20252026 and 20242025, with certain fiscal year 2025 amounts reclassified from infrared components to assemblies and modules to conform to current classification:

Our revenue increased by 41%$9.0 million in the fourth quarter of fiscal year 2025,2026, as compared to the same quarter of the prior fiscal year, primarily driven by increases in infrared components and assemblies and modules resulting from the addition of G5 Infrared revenue since acquisition.modules.

Revenue generated by the infrared components product group for the fourth quarter of fiscal year 20252026 was $5.0$7.1 million, an increase of 63%,56%, as compared to the same quarter of the prior fiscal year. TheAML, which was acquired during the quarter of fiscal 2026, contributed $1.1 million in sales of infrared materials during the fourth quarter of fiscal 2025 includes $1.1 million of G5 Infrared sales of coating services and components.2026. The remaining $0.8$1.5 million increase in revenue is primarily due to an increaseincreases in sales to defense customers.and industrial customers in the U.S. and Europe.

Revenue from the visible components product group for the fourth quarter of fiscal year 20252026 was $2.8$4.2 million, oran flatincrease inof comparison49% as compared to the same quarter of the prior fiscal year. The decreaseincrease was primarily driven by asales decreaseto industrial customers in salesAsia throughand Europe, as well as U.S. catalogdefense customers and distributiondistributors. channels,In dueJuly to2026, awe specialannounced orderthe divestiture of LPOIZ, our Chinese subsidiary, which increasedwill reduce our revenue infrom visible components following the fourth quarterclosing of the priortransaction, fiscalwhich year.is expected to occur in September 2026.

Revenue from assemblies and modules increasedwas by $2.8$9.1 million, oran 203%, for the fourth quarterincrease of fiscal 2025,98%, as compared to the same quarter of the prior fiscal year. TheThis fourthincrease quarteris ofprimarily fiscaldriven 2025by includes $3.1 millionsales of G5 Infrared sales of cameras and modules.modules, The remaining decrease is partially due toincluding the absencepreviously ofannounced revenueprogram fromwith ana endlarge ofglobal lifetechnology ordercustomer and other defense and security customers, primarily for aborder custom visible lens assembly which shipped complete in the first quarter of fiscal 2025,patrol and aC-UAS decrease in sales of infrared camera cores due to timing of an order in the prior year.systems.

Revenue from engineering services decreasedincreased $0.8by million,$0.5 million for the fourth quarter of fiscal 2025,2026, as compared to the same quarter of the prior fiscal year. This increase was primarily driven by Visimid’s contract with Lockheed Martin, where the timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. For the fourth quarter of fiscal 2025,2026, the revenue recognized against this contract was lessmore than in the fourth quarter of fiscal 2024.2025. Management expects that the engineering revenue from a current Lockheed Martin program will decline, as the program transitions from development into production, yet other new programs that are starting now will generate comparable or higher engineering services revenue.

Our business, operations, and financial condition are subject to various risks and uncertainties. The risk factors described in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2025, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with the SEC in connection with evaluating us, our business, and the forward-looking statements contained in this Quarterly Report on Form 10-Q. During the sixnine months ended DecemberMarch 31, 2025,2026, there have been no material changes from the risk factors previously disclosed under Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K, for the year ended June 30, 2025.

In November 2005, we formed LPOI, a wholly-owned subsidiary, located in Jiading, People’s Republic of China, which was primarily engaged in sales and support functions. In December 2013, we formed LPOIZ, a wholly-owned subsidiary located in the New City district, of the Jiangsu province, of the People’s Republic of China. LPOIZ’s manufacturing facility (the “Zhenjiang Facility”) serves as our primary manufacturing facility in China and provides a lower cost structure for production of larger volumes of optical components and assemblies. Effective February 28, 2023, the legal entities of LPOI and LPOIZ were merged, with LPOIZ as the surviving company.

In December 2016, we acquired ISP, and its wholly-owned subsidiary, ISP Latvia. ISP is a vertically-integrated manufacturer offering a full range of infrared products from custom infrared optical elements to catalog and high-performance lens assemblies. ISP’s manufacturing operation is located at our corporate headquarters facility in Orlando, Florida (the “Orlando Facility”). ISP Latvia is a manufacturer of high precision optics and offers a full range of infrared products, including catalog and custom infrared optics. ISP Latvia’s manufacturing facility is located in Riga, Latvia (the “Riga Facility”).Latvia.

Our infrared product group is comprised of both molded and turned infrared lenses using a variety of infrared glass materials. This product group includes both conventional and CNC ground and polished lenses. This product group also includes revenue from sales of our BlackDiamond glass materials, the infrared materials offered by AML, and G5 Infrared’s optical component and coating business. This product group includes both conventional and 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. Our molded infrared optics technology enables high performance, cost-effective infrared aspheric lenses that do not rely on traditional diamond turning or lengthy polishing methods. Utilizing precision molded aspheric optics significantly reduces the number of lenses required for typical thermal imaging systems and the cost to manufacture these lenses. Molding is an excellent alternative to traditional lens processing methods particularly where volume and repeatability is required.

Since our Chief Executive Officer, Mr. Sam Rubin, joined the Company in 2020, we have been developing a new strategy that willis transitiontransitioning the Company from a pure component manufacturer to a supplier of imaging subsystems and systems. Our 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 andVisimid, the February 2025 acquisition of G5 Infrared, and the January 2026 acquisition of the assets of Amorphous Materials, Inc., is positioning the Company for significant growth and higher profitability in coming years. TheseEach of these acquisitions havehas also added to our technological differentiators.

Examples of this strategic approach can be found in many of our recent new product lines. We refer to these as LightPath 2.0 and 3.0, as that symbolizes the evolution of the Company. LightPath 2.0 refers to our assemblies and LightPath 3.0 refers to our cameras and related subsystems and systems. Like any company, a successful implementation of a strategy depends heavily on differentiators. In our case, those differentiators mostly tend to be technologies and capabilities. Over the last few years we have worked to, and will continue to work to, add and evolve our differentiators. Some of our differentiators currently include our unique BlackDiamond materials, optical system design capabilities, glass molding technology, processing of thermal images, and long range imaging technologies. Examples of how those differentiators translate into revenue include our multispectral Mantis camera, our missile program with Lockheed Martin, our long range cameras for border patrol and C-UAS applications, and a number of other system and subsystem level products and programs that are enabled by these technologies. MostA recent example was our announcement of two G5 Infrared cameras that have been re-designed to eliminate Germanium from the bill of materials, leveraging the advantages of our BlackDiamond materials as alternative to Germanium.

Three Months ended DecemberMarch 31, 2025,2026, compared to three months ended DecemberMarch 31, 20242025

Revenue for the secondthird quarter of fiscal 2026 was approximately $16.4$19.1 million, an increase of approximately $8.9$10.0 million, or 120%,109%, as compared to approximately $7.4$9.2 million in the same quarter of the prior fiscal year, primarily driven by increases in infrared components and assemblies and modulesmodules. resulting fromWhile the addition of G5 Infrared revenue sincewas acquisition.a significant contributor to the increase in revenue of infrared components and assemblies and modules for the third quarter of fiscal 2026, other revenue from infrared components and assemblies and modules also grew, as well as revenue from visible components. G5 Infrared revenue was included for approximately half of the third quarter of the prior fiscal year.

Revenue from infrared components was approximately $5.0$6.1 million in the secondthird quarter of fiscal 2026, an increase of $1.9$2.5 million, or 61%,69%, as compared to the same quarter of the prior fiscal year. TheOf secondthis quarterincrease, ofapproximately fiscal 2026 includes $1.2$0.9 million ofis due to an increase in G5 Infrared sales of coating services and components. The AML transaction, which closed during the third quarter of fiscal 2026, contributed approximately $1 million to the increase in sales of infrared components. The remaining $0.7$0.6 million increase in revenue is primarily due to an increase in sales to defense and industrial customers.customers in Europe.

Revenue from the visible components product group for the secondthird quarter of fiscal 2026 was $3.4$4.0 million, an increase of approximately $0.7$1.1 million, or 25%,40%, as compared to the same quarter of the prior fiscal year. The increase was primarily driven by an increase in sales to industrial customers in the U.S.U.S., Europe and Asia.

Revenue from assemblies and modules was approximately $7.2$8.4 million in the secondthird quarter of fiscal 2026, an increase of approximately $6.4$6.6 million, or 741%,355%, as compared to the same quarter of the prior fiscal year. TheOf increasethis wasincrease, primarily driven by the inclusion ofapproximately $6.4 million ofis due to an increase in G5 Infrared sales of cameras and modules.modules, including the previously announced program with a large global technology customer.

Revenue from engineering services decreased by approximately $0.3$0.2 million, or 15%,29%, for the firstthird halfquarter of fiscal 2026, as compared to the same periodquarter of the prior fiscal year. ThisThe decreasethird wasquarter primarilyof drivenfiscal by2025 included non-recurring revenue from a space-related funded research contracts. Visimid’s development contract with Lockheed Martin,Martin also contributed to the decrease, where the timing and dollar value of deliverables is not always consistent, which causes revenue for this product group to fluctuate from period to period. For the firstthird halfquarter of fiscal 2026, the revenue recognized against this contract was less than in the samethird periodquarter of fiscal 2025.

In the secondthird quarter of fiscal 2026, gross profit was approximately $6.0$7.0 million, an increase of $4.1$5.7 million, or 212%,161%, as compared to the same quarter of the prior fiscal year. Total cost of sales was approximately $10.3$12.2 million for the secondthird quarter of fiscal 2026, compared to approximately $5.5$6.5 million for the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 37%36% for the secondthird quarter of fiscal 2026, compared to 26%29% for the same quarter of the prior fiscal year. In the first nine months of fiscal 2026, gross profit was approximately $17.5 million, an increase of $10.0 million, or 135%, as compared to the same period of the prior fiscal year. Total cost of sales was approximately $33.1 million for the first nine months of fiscal 2026, compared to approximately $17.6 million for the same period of the prior fiscal year. Gross margin as a percentage of revenue was 35% for the first nine months of fiscal 2026, compared to 30% for the same period of the prior fiscal year. The increase in gross margin as a percentage of revenue is primarily driven by the increase in revenue from assemblies and modules, which generally have higher margins. Gross margin on engineering services was also more favorable in the second quarter of fiscal 2026 due to a non-recurring engineering project for a defense customer. In addition, gross margins for infrared componentsproducts have improved due to a more favorable mix,mix of customers and the resolution of certain manufacturing yield issues that negatively impacted theprior second quarter of fiscal 2025.periods.

In the secondthird quarter of fiscal 2026, SG&A costs were approximately $5.9$6.3 million, an increase of approximately $2.5$1.8 million, or 75%,42%, as compared to approximately $3.4$4.4 million in the same quarter of the prior fiscal year. In the first halfnine months of fiscal 2026, SG&A costs were approximately $10.2$16.5 million, an increase of approximately $3.6$5.5 million, or 55%,49%, as compared to approximately $6.6$11.1 million in the same period of the prior fiscal year. The increase in SG&A costs is primarilypartially due to the addition of G5 Infrared SG&A costs of $0.8$0.4 million and $1.6$2.4 million for the secondthird quarter and first halfnine months of fiscal 2026, respectively. The AML transaction also added $0.3 million and $0.4 million in SG&A for the third quarter and first nine months of fiscal 2026, respectively, including acquisition costs. In addition, we have increased our sales and marketing spend to promote new products, including personnel costs, travel, advertising and tradeshows. We have also increased our spend on information technology to meet heightened security standards as required by our customers, and for acquisition integration projects. Our SG&A personnel costs have also increased due to filling certain vacant executive roles and accruing for incentive compensation plans for employees.

In the secondthird quarter of fiscal 2026, new product development costs were approximately $0.7$1.0 million, an increase of $0.3 million, or nearly flat,38%, as compared to the same quarter of the prior fiscal year. New product development costs increased with the addition of G5 Infrared,Infrared product development costs, and other additional engineering personnel;personnel. however, theseThese increases were partially offset by a decrease in materials and outside services utilized for development projects, due to timing of such projects.

In the first halfnine months of fiscal 2026, new product development costs were approximately $1.6$2.7 million, an increase of approximately $0.4$0.7 million, or 30%,33%, as compared to the same period of the prior fiscal year. This increase includes the addition of G5 Infrared product development costs, and other additional engineering personnel, as well as an increase in materials utilized for development projects, primarily for infrared cores and camera systems. These increases were partially offset by a decrease in outside services utilized for development projects, due to timing of such projects.

Amortization of intangibles increaseddecreased by $0.2$0.3 million for the secondthird quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year, and increased by $0.2$0.1 million for the first halfnine months of fiscal 2026, as compared to the same period of the prior fiscal year. The increasesdecreases are driven by the reduction in amortization of intangible assets associated with prior acquisitions, partially offset by amortization of identifiable intangible assets associated with the acquisitionacquisitions of G5 Infrared,Infrared partiallyand offset by decreases in amortization of intangible assets associated with prior acquisitions.AML.

Interest expense,income, net, was approximately $0.3 million for the secondthird quarter of fiscal 2026, as compared to $0.2interest expense, net, of $0.5 million for the same quarter of the prior fiscal year. For the first halfnine months of fiscal 2026, interest expense, net, was $0.6$0.3 million, as compared to $0.3$0.8 million for the same period of the prior fiscal year. The increaseprior inperiods interest expense is due to theincluded interest and amortization of loan issuance costs associated with the Acquisition Notes, executed in February 2025, which replaced the Bridge Note, executed in August 2024. The Acquisition Notes were paid in full on December 31, 2025.2025, following the Offering (as defined below) which generated net proceeds of $65.2 million. Much of our cash balance is now generating interest income, which is partially offset by the interest expense on equipment loans and finance leases.

Other expense, net, was approximately $0.01$0.03 million for the secondthird quarter of fiscal 2026, as compared to $0.1other income, net, of $0.01 million for the same quarter of the prior fiscal year. Other expense, net was approximately $0.02$0.1 million for the first halfnine months of fiscal 2026, as compared to other income, net of $0.01 million for the same period of the prior fiscal year. Other expense or income, net, includes net gains and losses on foreign exchange transactions. We execute all foreign sales from our U.S. facilities and inter-company transactions in U.S. dollars, partially mitigating the impact of foreign currency fluctuations. Assets and liabilities denominated in non-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.

Income tax expense was approximately $0.03 million for the second quarter of fiscal 2026, as compared to $0.04 million for the same quarter of the prior fiscal year, and $0.1 million for both the third quarter of fiscal 2026 and 2025, and $0.2 million for both the first halfnine months of fiscal 2026 and 2025. Income tax expense for these periods is primarily related to income taxes from our operations in China, including withholding taxes on payments from LPOIZ to LightPath for administrative services rendered.

Net loss for the secondthird quarter of fiscal 2026 was approximately $9.4$4.1 million, or $0.20$0.07 basic and diluted loss per share, compared to $2.6$3.6 million, or $0.07$0.09 basic and diluted loss per share, for the same quarter of the prior fiscal year. The increase in net loss of approximately $6.8$0.5 million for the secondthird quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year, was primarily attributable to the increased operating loss, which was largely driven by the change in fair value of acquisition liabilities for the earnout related to the acquisition of G5 Infrared.

Net loss for the first halfnine months of fiscal 2026 was approximately $12.3$16.4 million, or $0.27$0.33 basic and diluted loss per share, compared to $4.2$7.8 million, or $0.11$0.19 basic and diluted loss per share, for the same quarter of the prior fiscal year. The increase in net loss of approximately $8.1$8.6 million for the first halfnine months of fiscal 2026, as compared to the same period of the prior fiscal year, was primarily attributable to the lossincreased inoperating extinguishmentloss, ofwhich debtwas coupledlargely withdriven by the change in fair value of acquisition liabilities for the earnout related to the acquisition of G5 Infrared.

Weighted-average common shares outstanding for the secondthird quarter of fiscal 2026 were 46,998,804,58,628,741, basic and diluted, compared to 39,728,933,41,363,643, basic and diluted, in the same quarter of fiscal 2025. Weighted-average common shares outstanding for the first halfnine months of fiscal 2026 were 45,143,367,49,572,872, basic and diluted, compared to 39,645,206,40,209,657, basic and diluted, in the first halfnine months of fiscal 2025. The increase in weighted-average basic common shares was due to: (i) the Class A Common Stock issued in conjunction with the financing of the acquisition of G5 Infrared (refer to Note 3,4, Acquisition of G5 Infrared, in the Notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information); (ii) the Private Placement (as defined below) of 1,600,000 shares of Class A Common Stock which closed in September 2025; (iii) the Offering (as defined below) of 8,912,500 million shares of Class A Common Stock which closed in December 2025; (iv) the shares of Class A Common Stock issued in conjunction with the acquisitionacquisitions of Visimid and AML; and (v) the issuance of shares of Class A Common Stock 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.

As of DecemberMarch 31, 2025,2026, we had working capital of approximately $72.6$61.5 million and total cash and cash equivalents of approximately $73.6$55.2 million, of which, approximately 4%6% of our cash and cash equivalents was held by our foreign subsidiaries.

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 DecemberMarch 31, 2025,2026, LPOIZ had approximately $0.5 million available for repatriation, based on earnings accumulated through December 31, 2025, the end of the most recent statutory tax year, that remained undistributed as of DecemberMarch 31, 2025.2026.

As of DecemberMarch 31, 2025,2026, loans payable consists of one third-party equipment loan. The Acquisition Notes and one third-party equipment loan were paid in full during the three months ended December 31, 2025. See Note 13,14, Loans Payable, in the unaudited Condensed Consolidated Financial Statements, for further information.

On September 15, 2025, we entered into a Securities Purchase Agreement (the “Private Placement SPA”) with Unusual Machines, Inc., a Nevada corporation (“Unusual Machines”), and Ondas Holdings Inc., a Nevada corporation (“Ondas,” together with Unusual Machines, the “Private Placement Buyers”), pursuant to which the Private Placement Buyers agreed to purchase from the Company an aggregate of 1,600,000 shares of Class A Common Stock (the “Private Placement Securities”) at a purchase price of $5.00 per share (the “Private Placement”). The Private Placement closed on September 16, 2025 and the Company received aggregate proceeds from the Private Placement of $8.0 million, before deducting offering expenses of approximately $0.1 million payable by the Company. The Company intends to use the proceeds from the Private Placement to fund working capital and other general corporate purposes. The Private Placement SPA contains customary representations, warranties, covenants, conditions and indemnification obligations of the parties.

On December 12, 2025, we entered into an underwriting agreement (the “Underwriting Agreement”) with Canaccord Genuity LLC and Craig-Hallum Capital Group LLC, as representatives of the several underwriters named therein (the “Underwriters”), relating to an underwritten public offering (the “Offering”) of 7,750,000 shares (the “Firm Shares”) of Class A Common Stock, at a public offering price of $7.75 per share. Pursuant to the terms of the Underwriting Agreement, the Company granted to the Underwriters a 30-day option to purchase up to an additional 1,162,500 shares of ClassCommon A common stockStock in the Offering at the public offering price, which the Underwriters exercised in full concurrent with the closing of the Offering on December 15, 2025.

Cash providedused byin operations was approximately $1.7$5.1 million for the first halfnine months of fiscal 2026, compared to cash used in operations of approximately $2.4$5.7 million for the same period of the prior fiscal year. Cash providedused byin operations for the first halfnine months of fiscal 2026 was primarily due to athe decreasefollowing: (i) payment of the first earnout payment for the acquisition of G5 Infrared, of which $3.8 million was classified in accountsoperating receivables,activities, coupledrepresenting withthe an increaseamount in accountsexcess payableof the contingent consideration liability recognized as of the acquisition date; and accrued(ii) liabilities,investments in working capital of $2.7 million, largely driven by customersupplier prepayments.prepayments for critical materials with long lead times. The net loss for the first nine months of fiscal 2026 was more than offset by non-cash items such as the change in fair value of acquisition liabilities, and stock compensation. Cash used in operations for the first halfnine months of fiscal 2025 was largely driven by athe decreasenet inloss, accountswhich payablewas andnot accruedfully liabilities,offset by non-cash items, coupled with annet increaseinvestments in accountsworking receivable.capital of $1.9 million.

Net cash provided by financing activities was approximately $67.7$64.0 million for the first halfnine months of fiscal 2026, compared to approximately $2.4$29.6 million in the same period of the prior fiscal year. Cash provided by financing activities for the first halfnine months of fiscal 2026 reflects the proceeds of $65.3 million from the Offering and $7.9 million from the Private Placement, offset by approximately $5.5$5.6 million in principal payments on our loans and finance leases.leases, and $3.5 million for the first earnout payment for the acquisition of G5 Infrared, representing the amount of the contingent consideration liability recognized as of the acquisition date. Cash provided by financing activities for the first halfnine months of fiscal 2025 primarily reflects the Acquisition Financing of $27.0 million, net of financing costs and the Bridge Note conversion, plus $2.7 million in net proceeds from the Bridge Note, plus approximately $0.01 million in proceeds from the sale of Class A Common Stock under the 2014 ESPP, offset by approximately $0.2$0.3 million in principal payments on our loans and finance leases and a $0.1 million deferredfor the final cash payment forrelated to the acquisition of Visimid.

There have been no material changes to our critical accounting policies and estimates during the sixnine months ended DecemberMarch 31, 20252026 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, 2025.

Our total backlog at DecemberMarch 31, 20252026 was approximately $97.8$110.6 million, an increase of 162%,196%, as compared to $37.4 million as of June 30, 2025. Backlog change rates for the last five fiscal quarters are:

The acquisition of G5 Infrared added $5.6 million of backlog, as of the Acquisition Date, during the third quarter of fiscal 2025. As of DecemberMarch 31, 2025,2026, backlog for G5 Infrared products was $70.8$80.6 million, compared to $16.6 million as of June 30, 2025. Included in the increase from June 30, 2025 to DecemberMarch 31, 20252026 are approximately $40$58.0 million in orders from a leading global technology customer for advanced infrared camera systems expected to ship in calendar year 2026 and 2027, as well as several other multi-million dollar orders from other customers. In addition to these G5 Infrared orders, LightPath orders contributed approximately $6.2$8.1 million to the increase in backlog during the first halfnine months of fiscal 2026, primarily for infrared components. The acquisition of AML also added backlog of $1.1 million as of March 31, 2026. During the first halfnine months of fiscal 2026, we received a significant contract renewal for advanced infrared optics for a critical international military program. The timing of multi-year contract renewals are not always consistent and, thus, backlog levels may increase substantially when annual and multi-year orders are received, and decrease as shipments are made against these orders. We anticipate that our existing annual and multi-year contracts will be renewed in future quarters.

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

The following table sets forth revenue for our four product groups for the three and six-monthnine-month periods ended DecemberMarch 31, 20252026 and 20242025:

Three months ended DecemberMarch 31, 20252026

Our revenue increased by 120%109% in the secondthird quarter of fiscal 2026 compared to the same quarter of the prior fiscal year, primarily driven by increases in infrared components and assemblies and modulesmodules. resulting fromWhile the addition of G5 Infrared revenue since acquisition.acquisition was a significant contributor to these product groups, other revenue from these product groups also grew, as well as revenue from visible components. Note that G5 Infrared revenue was included for approximately half of the third quarter of the prior fiscal year.

Revenue generated by the infrared components product group for the secondthird quarter of fiscal year 2026 was $5.0$6.1 million, an increase of 61%,69%, as compared to the same quarter of the prior fiscal year. TheOf secondthis quarterincrease, ofapproximately fiscal 2026 includes $1.2$0.9 million ofis due to an increase in G5 Infrared sales of coating services and components. AML, which was acquired during the third quarter of fiscal 2026, contributed approximately $1.0 million to the increase in sales of infrared components. The remaining $0.7$0.6 million increase in revenue is primarily due to an increase in sales to defense and industrial customers.customers in Europe.

Revenue from the visible components product group for the secondthird quarter of fiscal year 2026 was $3.4$4.0 million, an increase of 25%,40%, as compared to the same quarter of the prior fiscal year. The increase was primarily driven by increases in sales to industrial customers in the U.S.U.S., Europe and Asia. Although we do not expect significant growth in visible components revenue over the long term, demand has trended up in fiscal 2026 to date.

Revenue from assemblies and modules increased by $6.4$6.6 million, or 741%,355%, for the secondthird quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year,year. drivenOf bythis increase, approximately $6.4 million is due to an increase in G5 Infrared sales of cameras and modules.modules, including the previously announced program with a large global technology customer. Based on our backlog, we expect continued revenue growth for this product group.