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Acquisition of G5 Infrared

3 Months Ended

Sep. 30, 2025

3. Acquisition of G5 Infrared

In February 2025, the Company acquired G5 Infrared LLC, a New Hampshire limited liability company (“G5 Infrared”), pursuant to a Membership Interest Purchase Agreement (the “G5 MIPA”) by and among the Company, G5 Infrared, the members of G5 Infrared (collectively, the “Sellers”), and Kenneth R. Greenslade, solely in his capacity as Sellers’ Representative. The Company has acquired from the Sellers all of the issued and outstanding membership interests of G5 Infrared, which transaction closed on February 18, 2025 (the “G5 Acquisition Date”).

Net assets and results of operations of G5 Infrared are reflected in our financial results commencing on the G5 Acquisition Date. Revenue generated by G5 Infrared is included in our infrared and assemblies and modules product groups.

We accounted for the acquisition of G5 Infrared using the acquisition method of accounting, which required us to measure identifiable assets acquired and liabilities assumed in the acquiree at their fair values as of the G5 Acquisition Date, with the excess of the consideration transferred over those fair values recorded as goodwill.

The fair value of the aggregate consideration was approximately $27.1 million which consisted of (i) $20.3 million in cash, (ii) 1,972,501 shares of the Company’s Class A common stock, $0.01 par value (“Class A Common Stock”) (at a value of $2.47 per share, which was the closing price on the G5 Acquisition Date), and (iii) potential earnout consideration paid annually in fiscal years 2026 and 2027 subject to achievement of certain revenue and EBITDA targets set forth in the G5 MIPA. As of the G5 Acquisition Date, the fair value of consideration transferred consisted of the following:

Description	February 18, 2025
Cash consideration	$	20,250,000
Net working capital adjustment		(423,871	)
Equity portion of consideration		4,872,066
Earnout portion of consideration		3,536,471
Revenue clawback		(1,104,471	)
Fair value of consideration transferred	$	27,130,195

The fair value of the equity portion of the consideration was determined by multiplying the number of shares issued, 1,972,501, by the fair value of the Class A Common Stock on the G5 Acquisition Date, which was $2.47. The initial cash consideration at closing was subject to a net working capital adjustment, which was settled in June 2025. The G5 MIPA also included a provision for a clawback amount if G5 Infrared’s actual revenue for the 2024 calendar year was less than $17.3 million. This clawback amount was settled in June 2025 and is reflected in the determination of the purchase price.

Earnout payments of an aggregate of up to $23.0 million of additional consideration may be paid annually in fiscal years 2026 and 2027 subject to achievement of certain minimum EBITDA and revenue targets for the one and two-year periods beginning on the first full calendar month commencing after the G5 Acquisition Date, as set forth in the G5 MIPA. If the targets are achieved during the respective periods, LightPath will (i) issue an aggregate number of shares of Class A Common Stock equal to 30% of the earnout payment divided by the average close price for the ten trading days immediately prior to the first anniversary of the earnout commencement date, as defined in the G5 MIPA, and (ii) pay additional cash consideration in an amount equal to 70% of the earnout payment, in each case to the former G5 Infrared members. The earnout is considered contingent consideration and is accounted for as a liability initially measured at fair value, with changes during each reporting period recognized in earnings. The portion of the earnout that will be settled in stock will also be accounted for as a liability since the achievement of targets adjusts the number of shares to be issued at settlement based on a variable other than the Company’s Class A Common Stock, and therefore it does not meet the criteria in ASC 480, Distinguishing Liabilities from Equity. The fair value of the earnout in the accompanying Consolidated Balance Sheet is calculated using a Monte Carlo valuation method, which involves assumptions of revenue and EBITDA forecasts, discount rates and revenue volatility. Significant increases or decreases in any of those assumptions in isolation could result in a significantly higher or lower fair value measurement. The earnout liability is subject to fair value measurement each reporting period. As of September 30, 2025, the earnout liability was adjusted to $6.2 million, an increase of $1.3 million from June 30, 2025, which is included in the “Change in fair value of acquisition liabilities” in the accompanying Condensed Consolidated Statement of Comprehensive Income (Loss).

The following table summarizes the preliminary allocation of the fair value of consideration transferred to assets acquired and liabilities assumed as of the G5 Acquisition Date and the adjustments recognized during the measurement period:

Description	Preliminary as of March 31, 2025		Measurement Period Adjustments, Net			Final as of June 30, 2025
Assets:
Accounts receivable	$	1,897,098	$	-		$	1,897,098
Inventory		5,065,451		-			5,065,451
Prepaid expenses and other current assets		363,413		-			363,413
Property and equipment		1,542,707		-			1,542,707
Operating lease right-of-use asset		463,985		-			463,985
Goodwill		2,977,344		4,012,450			6,989,794
Other intangible assets		19,295,000		(5,543,000	)		13,752,000
Other assets		21,748		-			21,748
Total assets acquired	$	31,626,746	$	(1,530,550	)	$	30,096,196
Liabilities:
Accounts payable		1,981,164		-			1,981,164
Accrued liabilities		336,263		-			336,263
Operating lease liabilities, current		268,972		-			268,972
Deferred tax liabilities, noncurrent		1,174,650		(1,037,668	)		136,982
Operating lease liabilities, noncurrent		242,620		-			242,620
Total liabilities assumed	$	4,003,669	$	(1,037,668	)	$	2,966,001
Net assets acquired	$	27,623,077	$	(492,882	)	$	27,130,195

Measurement period adjustments include fair value adjustments during the fiscal quarter ended June 30, 2025, primarily related to refined assumptions in the valuation of the earnout consideration, and intangible assets such as backlog, customer relationships and know-how intangible assets. Deferred tax liabilities were adjusted for the revised intangible asset values, and for the refined tax rate apportionment calculation. The net impact of the aforementioned adjustments resulted in an increase to goodwill. There were no further adjustments during the fiscal quarter ended September 30, 2025.

Intangible assets – All intangible assets acquired in the acquisition of G5 Infrared are subject to amortization. The fair value of identifiable intangible assets acquired as of the G5 Acquisition Date is as follows:

Intangible Asset	Total		Useful Lives (Years)
Backlog	$	361,000		1
Know-how		4,801,000		10
Tradename		3,450,000		15
Customer relationships		5,140,000		15
Total	$	13,752,000

The fair value of intangible assets is estimated using the multi-period excess earnings approach for acquired customer relationships and the relief from royalty method for the acquired trade names and know-how. All of these level 3 fair value methods are income-based valuation approaches, which require judgment to estimate appropriate discount rates, revenue forecasts, useful lives, royalty rates related to the trade names and know-how intangible assets, and profitability assumptions related to customer relationships. The acquired intangible assets are not expected to be deductible for New Hampshire state income tax purposes, which resulted in a deferred tax liability of $0.1 million.

Goodwill – The $7.0 million of goodwill recognized is attributable to G5 Infrared’s market presence, the assembled workforce and established operating infrastructure. The acquired goodwill is expected to be deductible for Federal income tax purposes. See Note 8, Goodwill and Intangible Assets, in these Notes to these unaudited Condensed Consolidated Financial Statements for further information.

Unaudited supplemental pro forma information

The following table presents unaudited pro forma financial results of the operations acquired with G5 Infrared. The pro forma results include adjustments to remove costs directly attributable to the acquisition, such as transaction-related costs. The pro forma results were prepared as if the acquisition was completed on the first day of our fiscal 2025, July 1, 2024. The pro forma results do not include any integration synergies and are not necessarily indicative of our results of operations that actually would have been obtained had the acquisition of G5 Infrared been completed for the period presented, or which may be realized in the future.

	Three Months Ended September 30, 2024
Revenue	$	14,491,485

Income before taxes	$	(909,606	)

Acquisition Financing

In conjunction with the financing of the acquisition of G5 Infrared, the Company designated a new series of preferred stock, “Series G Convertible Preferred Stock”, which is convertible into shares of Class A Common Stock. Concurrent with the entry into the G5 MIPA on February 13, 2025, we entered into (i) a Securities Purchase Agreement (the “Securities Purchase Agreement”) by and among the Company and North Run Capital, AIGH Investment Partners, LP, WVP Emerging Manager Offshore Fund LLC, the Lytton-Kambara Foundation and Alice W. Lytton Family LLC (collectively, the “Series G Purchasers”), (ii) a Class A Common Securities Purchase Agreement by and between the Company and Lytton-Kambara Foundation (the “Class A Purchaser”), and (iii) two senior secured promissory notes in an aggregate principal amount of $5.2 million (the “Acquisition Notes”) for total proceeds of approximately $32.2 million, inclusive of the conversion of the bridge promissory note (the “Bridge Note”) (see Note 13, Loans Payable), and before deducting offering expenses of $2.2 million incurred by the Company, which was used to fund, in part, the cash consideration payable in connection with the acquisition of G5 Infrared. Pursuant to the Securities Purchase Agreement, the Series G Purchasers purchased from the Company (i) an aggregate of approximately 24,956 shares of Series G Convertible Preferred Stock, (ii) warrants to purchase an aggregate of 4,352,774 shares of Class A Common Stock, with an exercise price of $2.58 per share (the “Series G Purchasers Warrants”), and (iii) the Acquisition Notes, which are convertible into shares of Series G Convertible Preferred Stock limited to failure to achieve a certain EBITDA threshold (see Note 13, Loans Payable). The Securities Purchase Agreement closed on February 18, 2025.