Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Consolidated Financial Statements and notes thereto and our Annual Report on Form 10-K for the year ended June 30, 2025, including the audited Consolidated Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report on Form 10-Q regarding forward-looking statements.

Introduction

We were incorporated in Delaware in 1992 as the successor to LightPath Technologies Limited Partnership, a New Mexico limited partnership, formed in 1989, and its predecessor, Integrated Solar Technologies Corporation, a New Mexico corporation, formed in 1985. Today, LightPath is a global company with major facilities in the U.S., the People's Republic of China, and the Republic of Latvia.

Historically, we operated with a focus on optical component manufacturing, and specifically on our leadership position as a precision molded lens manufacturer for visual light applications. We expanded our addressable market with the acquisition of ISP, a manufacturer of infrared optical components, in December 2016. Since 2020, our strategy has been to move up the value chain by producing optical assemblies, modules and simple cameras. The acquisition of Visimid in 2023 and the acquisition of G5 Infrared in 2025 were completed to enhance our abilities on cameras and sensors and speed our movement up the value chain in line with our strategy of value-add infrared systems.

Subsidiaries

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").

In July 2023, we acquired Visimid. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things applications. Visimid provides design and consulting services for U.S. Department of Defense contractors, commercial and industrial customers, and original equipment manufacturers for original new products. Visimid's core competency is developing and producing custom thermal and night vision cores. Visimid's facility is located in Plano, Texas.

In February 2025, we acquired G5 Infrared. G5 Infrared is a leading vertically-integrated manufacturer of high-performance infrared camera systems and imaging solutions, specializing in advanced thermal imaging technology and long-range mission-critical detection solutions. G5 Infrared's existing revenue and future growth pipeline are driven by established multi-year contracts and multiple defense programs of record in shipboard long-range surveillance, border security, and counter unmanned aerial systems ("C-UAS") systems, as well as recurring federal, naval, and law enforcement programs. Additionally, G5 Infrared is an industry-leading provider of cutting-edge advanced infrared coatings, including for materials such as LightPath's BlackDiamond ("BlackDiamond") glass. G5 Infrared operates from a state-of-the-art manufacturing facility in Hudson, New Hampshire. We believe that this acquisition strengthens LightPath's position as a leader in infrared imaging by expanding the Company's portfolio to include cooled infrared cameras. The combination of LightPath and G5 Infrared creates a more robust, vertically-integrated solutions provider.

For additional information, please refer to our Annual Report on Form 10-K for the year ended June 30, 2025.

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Product Groups

We categorize our products into four product groups: (i) infrared components, (ii) visible components, (iii) assemblies and modules, and (iv) engineering services. G5 Infrared's revenue is generally derived from infrared components (including coating services) and assemblies and modules.

Our infrared product group is comprised of both molded and turned infrared lenses using a variety of infrared glass materials. This product group also includes revenue from sales of our BlackDiamond glass materials, 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.

Our visible components product group consists of visible precision molded optics with varying applications. Aspheric lenses are known for their optimal performance. Aspheric lenses simplify and shrink optical systems by replacing several conventional lenses. However, aspheric lenses can be difficult and costly to machine. Our glass molding technology enables the production of both low and high volumes of aspheric optics, while still maintaining the highest quality at an affordable price. Molding is the most consistent and economical way to produce aspheres and we have perfected this method to offer the most precise molded aspheric lenses available.

Between these two component product groups, we have the capability to manufacture lenses from very small (with diameters of a sub-millimeter) to over 300 millimeters, and with focal lengths from approximately 0.4 millimeters to over 2,000 millimeters. In addition, both product groups offer both catalog and custom designed optics.

Our assemblies and modules product group is comprised of both optical assemblies such as lens systems, and cameras, both in the form of camera modules and complete camera systems. Historically this product group also included optical fiber collimators and some visible lens assemblies, however those are now a very small part of our activity, making infrared cameras and assemblies the most dominant part of this group. Today, the majority of the revenue of this group is derived from cameras made in our Texas facility (uncooled camera systems and modules), cameras made in our New Hampshire facility (cooled cameras for long range surveillance and detection), and optical assemblies such as standard off the shelf lens assemblies, and custom lens assemblies, the latter of which are produced mainly in Orlando. This product group also includes revenue from camera repair services, primarily from G5 Infrared.

Our engineering services product group represents services we provide pursuant to product development agreements that we enter into with customers. Typically, customers approach us and request that we develop new products or applications utilizing our existing products to fit their particular needs or specifications. The purpose of those engineering services that we offer is not only to provide purely engineering services for a customer, but also to engineer new products which we later manufacture for the customer. The timing and extent of any such product development requests are unpredictable and outside of our control.

Growth Strategy

Since our Chief Executive Officer, Mr. Sam Rubin, joined the Company in 2020, we have been developing a new strategy that will transition the Company from a pure component manufacturer to a supplier of imaging subsystems and systems. Our 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 and the February 2025 acquisition of G5 Infrared, is positioning the Company for significant growth and higher profitability in coming years. These acquisitions have also added to our technological differentiators.

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Understanding the shifts that are happening in the marketplace and the changes that come when a technology, like photonics, moves from being a specialty to being integrated into mainstream industries and applications, we redefined our strategic direction to provide our wide customer base with domain expertise in optics, and became their partner for the optical engine of their systems. In our view, as the use of photonics evolves, so do customer needs. The industry is transforming from a fragmented industry with a component oriented supply chain, into a solution-focused industry with the potential for partnerships for solution development and production. Over the last couple of years we have worked to align our organization to this strategy, and leverage our in-house domain expertise in photonics, knowledge and experience in advanced optical technologies, and the necessary manufacturing techniques and capabilities. We have been developing these partnerships by working closely with our customers throughout their design process, designing optical solutions that are tailored to their needs, often times using unique technologies that we own, and supplying the customer with a complete optical subsystem to be integrated into their product. Such an approach builds on our unique, value-added technologies that we currently own, such as infrared materials, optical molding, fabrication, system design, and proprietary manufacturing technologies, along with technologies that we acquired through the Visimid acquisition, such as video processing, and technologies from the G5 Infrared acquisition, such as long range imaging using cooled midwave cameras. Continually adding differentiating technologies is key to our strategy and we expect to continue to do so both organically and through acquisitions.

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. Most recent 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.

The shift in strategy and product offerings also shifts the price range of our product portfolio and indirectly drives growth in and of itself. Historically, as a pure component Company, the average selling prices ("ASPs") of those products were measured in single dollars or tens of dollars, whereas with the development of our assemblies product line (i.e. LightPath 2.0), ASPs for those products are measured in hundreds of dollars. When we added cameras, subsystems and systems (LightPath 3.0), ASPs for those products are measured in tens of thousands, and sometimes hundreds of thousands of dollars. We expect this shift to start favorably impacting our financial results in future periods.

Further information about our strategic direction can be found in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.

Results of Operations

Revenue

Revenue for the first quarter of fiscal 2026 was approximately $15.1 million, an increase of approximately $6.7 million, or 79%, as compared to approximately $8.4 million in 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.

Revenue from infrared components was approximately $4.3 million in the first quarter of fiscal 2026, an increase of $1.6 million, or 63%, as compared to the same quarter of the prior fiscal year. The first quarter of fiscal 2026 includes $0.7 million of G5 Infrared sales of coating services and components. The remaining $0.9 million increase in revenue is primarily due to an increase in sales to defense and industrial customers.

Revenue from the visible components product group for the first quarter of fiscal 2026 was $3.8 million, an increase of approximately $0.5 million, or 16%, as compared to the same quarter of the prior fiscal year. The increase was primarily driven by increases in sales to industrial customers in Asia.

Revenue from assemblies and modules was approximately $5.9 million in the first quarter of fiscal 2026, an increase of approximately $4.8 million, or 436%, as compared to the same quarter of the prior fiscal year. The first quarter of fiscal 2026 includes $4.7 million of G5 Infrared sales of cameras and modules.

Revenue from engineering services decreased by approximately $0.3 million, or 21%, for the first quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year. This decrease was primarily driven by Visimid's development 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 first quarter of fiscal 2026, the revenue recognized against this contract was less than in the first quarter of fiscal 2025.

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Gross Profit

In the first quarter of fiscal 2026, gross profit was approximately $4.5 million, an increase of $1.6 million, or 58%, as compared to the same quarter of the prior fiscal year. Total cost of sales was approximately $10.6 million for the first quarter of fiscal 2026, compared to approximately $5.6 million for the same quarter of the prior fiscal year. Gross margin as a percentage of revenue was 30% for the first quarter of fiscal 2026, compared to 34% for the same quarter of the prior fiscal year. Although the product group mix was generally more favorable in the first quarter of 2026, the first quarter of fiscal 2025 included certain non-recurring or end of life orders that had higher margins.

Selling, General and Administrative

In the first quarter of fiscal 2026, SG&A costs were approximately $4.4 million, an increase of approximately $1.1 million, or 34%, as compared to approximately $3.3 million in the same quarter of the prior fiscal year. The increase in SG&A costs is primarily due to the addition of G5 Infrared SG&A costs of $0.8 million, as well as an increase in sales and marketing spend to promote new products, including personnel costs, travel, advertising and tradeshows.

New Product Development

In the first quarter of fiscal 2026, new product development costs were approximately $0.9 million, an increase of approximately $0.4 million, or 82%, as compared to the same quarter of the prior fiscal year. This increase includes the addition of G5 Infrared product development costs, and additional engineering personnel, as well as an increase in materials and outside services utilized for development projects, primarily for infrared cores and camera systems.

Amortization of Intangibles

Amortization of intangibles increased by $0.1 million for the first quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year. The increases are driven by the amortization of identifiable intangible assets associated with the acquisition of G5 Infrared, partially offset by decreases in amortization of intangible assets associated with prior acquisitions.

Other Income (Expense)

Interest expense, net, was approximately $0.3 million for the first quarter of fiscal 2026, as compared to $0.1 million for the same quarter of the prior fiscal year. The increase in interest expense is due to the 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.

Other expense, net, was approximately $0.04 million for the first quarter of fiscal 2026, as compared to $0.1 million for the same quarter of the prior fiscal year, which 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. We recognized foreign currency transaction losses of $0.04 million for both the first quarters of fiscal 2026 and 2025.

Income Taxes

Income tax expense was approximately $0.1 million for the first quarter of fiscal 2026, as compared to $0.01 million for the same quarter of the prior fiscal year. 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

Net loss for the first quarter of fiscal 2026 was approximately $2.9 million, or $0.07 basic and diluted loss per share, compared to $1.6 million, or $0.04 basic and diluted loss per share, for the same quarter of the prior fiscal year.The increase in net loss of approximately $1.3 million for the first quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year, was primarily attributable to the change in fair value of acquisition liabilities for the earnout related to the acquisition of G5 Infrared.

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Weighted-average common shares outstanding for the first quarter of fiscal 2026 were 43,287,933, basic and diluted, compared to 39,561,480, basic and diluted, in the same quarter of fiscal 2025. The increase in weighted-average basic common shares was primarily due to the Class A Common Stock issued in conjunction with the financing of the acquisition of G5 Infrared (refer to Note 3, 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). The increase is also attributable to the Private Placement (as defined below) of 1,600,000 shares of Class A Common Stock which closed in September 2025, the shares of Class A Common Stock issued in conjunction with the acquisition of Visimid, and 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.

Liquidity and Capital Resources

As of September 30, 2025, we had working capital of approximately $17.4 million and total cash and cash equivalents of approximately $11.5 million, of which, approximately 15% of our cash and cash equivalents was held by our foreign subsidiaries.

Cash and cash equivalents held by our foreign subsidiaries in China and Latvia were generated in-country as a result of foreign earnings. We routinely declare intercompany dividends to remit a portion of the earnings of our foreign subsidiaries to LightPath, as the U.S. parent company. It is still our intent to reinvest a significant portion of earnings generated by our foreign subsidiaries, however, we may also repatriate a portion of their earnings, and we accrue for these taxes on the portion of earnings that we intend to repatriate. We currently do not intend for our Latvian subsidiary to declare intercompany dividends.

In China, before any funds can be repatriated, the retained earnings of the legal entity must equal at least 50% of the registered capital. As of September 30, 2025, LPOIZ had approximately $0.4 million available for repatriation, based on earnings accumulated through December 31, 2024, the end of the most recent statutory tax year, that remained undistributed as of September 30, 2025.

As of September 30, 2025, loans payable consists of two third-party equipment loans and the Acquisition Notes. See Note 13, Loans Payable, in the unaudited Condensed Consolidated Financial Statements, for further information.

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, Acquisition of G5 Infrared, in the accompanying unaudited Condensed Consolidated Financial Statements.

On September 15, 2025, the Company 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.

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.

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Cash Flows - Operating:

Cash used in operations was approximately $1.1 million for the first quarter of fiscal 2026, compared to approximately $1.7 million for the same period of the prior fiscal year.Cash used in operations for the first quarter of fiscal 2026 was primarily due to the decrease in accounts payable and accrued liabilities, while accounts receivable and inventory remained relatively flat. Cash used in operations for the first quarter of fiscal 2025 was largely driven by a decrease in accounts payable and accrued liabilities, coupled with increases in accounts payable and inventory.

Cash Flows - Investing:

During the first quarter of fiscal 2026, we expended approximately $0.1 million in investments in capital equipment, compared to approximately $0.1 million in the same period of the prior fiscal year.

Cash Flows - Financings:

Net cash provided by financing activities was approximately $7.8 million for the first quarter of fiscal 2026, compared to approximately $2.5 million in the same period of the prior fiscal year. Cash provided by financing activities for the first quarter of fiscal 2025 primarily reflects the proceeds of $7.9 million from the Private Placement, offset by approximately $0.1 million in principal payments on our loans and finance leases. Cash provided by financing activities for the first quarter of fiscal 2025 primarily reflects the $2.7 million in net proceeds from the Bridge Note, plus approximately $10,000 in proceeds from the sale of Class A common stock under the 2014 ESPP, offset by approximately $94,000 in principal payments on our loans and finance leases.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates during the three months ended September 30, 2025 from those disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended June 30, 2025.

How We Operate

We have continuing sales of two basic types: sales of standard product configurations and 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:

	·	Maintaining an optical design and new product sampling capability, including a high-quality and responsive optical design engineering staff, opto-mechanical engineering, and all related disciplines;
	·	The fact that as our customers take products of this nature into higher volume, commercial production they begin to work seriously to reduce costs - which may lead them to turn to larger producers, domestic or overseas, even if sacrificing quality; and
	·	Our small business mass means that we can only offer a moderate amount of total productive capacity before we reach financial constraints imposed by the need to make additional capital expenditures - in other words, because of our limited cash resources and cash flow, we may not be able to service every opportunity that presents itself in our markets without arranging for such additional capital expenditures.

Despite these challenges to winning more "annuity" business, we nevertheless believe we can be successful in procuring this business because of our unique capabilities in optical design engineering that we make available on the market to our current and potential customers looking for specific solutions to their needs. Additionally, we believe that we offer value to some customers as a source of supply in the U.S. should they be unwilling to commit to purchase their supply of critical component(s) from foreign sources. For information regarding revenue recognition related to our various revenue streams, refer to Critical Accounting Policies and Estimates in our Annual Report on Form 10-K dated June 30, 2025.

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Our Key Performance Indicators:

Typically, on a weekly basis, management reviews a number of performance indicators, both qualitative and quantitative. These indicators change from time to time as the opportunities and challenges in the business change. These indicators are used to determine tactical operating actions and changes. We believe that our non-financial production indicators, such as those noted, are proprietary information.

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

	·	Sales backlog;
	·	Revenue by product group;
	·	EBITDA and Adjusted EBITDA; and
	·	Other key indicators.

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

Sales Backlog

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

Our total backlog at September 30, 2025 was approximately $86.0 million, an increase of 130%, as compared to $37.4 million as of June 30, 2025. Backlog change rates for the last five fiscal quarters are:

Quarter		Total Backlog ($ 000)				Change From Prior Year End				Change From Prior Quarter End
Q1 2025		$	20,542				7	%			7	%
Q2 2025		$	19,767				3	%			-4	%
Q3 2025		$	27,423				42	%			39	%
Q4 2025		$	37,390				94	%			36	%
Q1 2026		$	86,043				130	%			130	%

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 September 30, 2025, backlog for G5 Infrared products was $64 million, compared to $16.6 million as of June 30, 2025. Included in the increase from June 30, 2025 to September 30, 2025 are approximately $40 million in orders from a leading global technology customer for advanced infrared camera systems expected to ship in calendar year 2026 and 2027 and approximately $7 million in orders from other customers. In addition to these G5 Infrared orders, LightPath orders contributed approximately $1.2 million to the increase in backlog during the first quarter of fiscal 2026. During the first quarter 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.

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Markets continue to experience growing demand for infrared products used in the industrial, defense and first responder sectors. Demand for infrared products continues to be fueled by interest in lenses made with our 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.

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

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

Revenue by Product Group

The following table sets forth revenue for our four product groups for the three-month periods ended September 30, 2025 and 2024:

		(unaudited)
		Three Months Ended September 30,
		2025				2024
Revenue
Infrared components		$	4,257,955			$	2,610,884
Visible components			3,838,306				3,299,878
Assemblies and modules			5,859,498				1,093,668
Engineering services			1,102,522				1,395,951
Total revenue		$	15,058,281			$	8,400,381

Three months ended September 30, 2025

Our revenue increased by 79% in the first quarter of fiscal 2026 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.

Revenue generated by the infrared components product group for the first quarter of fiscal year 2026 was $4.3 million, an increase of 63%, as compared to the same quarter of the prior fiscal year. The first quarter of fiscal 2026 includes $0.7 million of G5 Infrared sales of coating services and components. The remaining $0.9 million increase in revenue is primarily due to an increase in sales to defense and industrial customers.

Revenue from the visible components product group for the first quarter of fiscal year 2026 was $3.8 million, an increase of 16%, as compared to the same quarter of the prior fiscal year. The increase was primarily driven by increases in sales to industrial customers in Asia.

Revenue from assemblies and modules increased by $4.8 million, or 436%, for the first quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year. The first quarter of fiscal 2026 includes $4.7 million of G5 Infrared sales of cameras and modules.

Revenue from engineering services decreased $0.3 million, for the first quarter of fiscal 2026, as compared to the same quarter of the prior fiscal year. This decrease was primarily driven by Visimid's development 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 first quarter of fiscal 2026, the revenue recognized against this contract was less than in the first quarter of fiscal 2025.

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Other Key Indicators

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

Non-GAAP Financial Measures

We report our historical results in accordance with GAAP; however, our management also assesses business performance and makes business decisions regarding our operations using certain non-GAAP financial measures. We believe these non-GAAP financial measures provide useful information to management and investors that is supplementary to our financial condition and results of operations computed in accordance with GAAP; however, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other companies use.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures used by management, lenders, and certain investors as a supplemental measure in the evaluation of some aspects of a corporation's financial position and core operating performance. Investors sometimes use EBITDA, as it allows for some level of comparability of profitability trends between those businesses differing as to capital structure and capital intensity by removing the impacts of depreciation and amortization. EBITDA also does not include changes in major working capital items, such as receivables, inventory and payables, which can also indicate a significant need for, or source of, cash. Since decisions regarding capital investment and financing and changes in working capital components can have a significant impact on cash flow, EBITDA is not necessarily a good indicator of a business's cash flows. We use EBITDA for evaluating the relative underlying performance of our core operations and for planning purposes. We calculate EBITDA by adjusting net income to exclude net interest expense, income tax expense or benefit, depreciation and amortization, thus the term "Earnings Before Interest, Taxes, Depreciation and Amortization" and the acronym "EBITDA."

We also calculate an adjusted EBITDA, which excludes, as applicable: (1) stock compensation expenses; (2) the loss on extinguishment of debt; (3) the effect of the non-cash income or expense associated with the mark-to-market adjustments, related to the warrants; (4) the effect of non-cash income or expenses associated with the fair value adjustments related to the acquisition earnout liabilities; and (5) the effect of foreign exchange gains or losses. Management uses adjusted EBITDA to evaluate our underlying operating performance and for planning and forecasting future business operations.

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We believe EBITDA and Adjusted EBITDA are helpful for investors to better understand our underlying business operations. The following table adjusts net loss to EBITDA and Adjusted EBITDA for the three months ended September 30, 2025 and 2024:

		(unaudited)
		Three Months Ended September 30,
		2025				2024
Net loss		$	(2,893,002	)		$	(1,622,745	)
Depreciation and amortization			1,218,948				989,562
Income tax provision			81,270				15,636
Interest expense			268,853				149,360
EBITDA		$	(1,323,931	)		$	(468,187	)
Stock-based compensation			359,661				264,475
Change in fair value of acquisition liabilities			1,282,529				-
Foreign exchange loss (gain)			42,543				35,504
Adjusted EBITDA		$	360,802			$	(168,208	)
% of revenue			2	%			-2	%

Our adjusted EBITDA for the quarter ended September 30, 2025 was approximately $0.4 million, compared to a loss of $0.2 million for the same quarter of the prior fiscal year. The increase in adjusted EBITDA in the first quarter of fiscal 2026 was primarily attributable to the increase in gross profit, driven by higher sales, partially offset by increased SG&A and new product development costs.