3. Acquisitions

Vismid Technologies

In July 2023, the Company acquired Visimid, pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Visimid Acquisition Date”).

Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and IOT applications. Visimid provides design and consulting services for DoD contractors, commercial and industrial customers, and OEMs for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.

The Company’s consolidated financial statements reflect the financial results of Visimid beginning on the Visimid Acquisition Date. The purchase price included $1 million in cash, $1,550,000 of restricted stock, $150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract. Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued in four equal installments of $350,000 each, on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025. The number of shares is based on the average closing price of the Company’s Class A common stock, $0.01 par value (“Class A Common Stock”), as reported by Bloomberg, for the five trading days prior to each stock issuance. For the January 1, 2024 installment, 267,176 shares were issued; for the July 1, 2024 installment, 279,553 shares were issued; for the January 1, 2025 installment, 102,700 shares were issued; and for the July 1, 2025 installment, which was the final installment, 112,323 shares were issued.

The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $2.7 million, based on present values as of the Visimid Acquisition Date. Of this amount, $0.6 million was paid at closing, cash installments of $0.2 million and $0.1 million were paid in October 2023 and January 2024, respectively, per the terms of the purchase agreement, and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities in the accompanying Consolidated Balance Sheet as of June 30, 2025. Certain of these acquisition liabilities are subject to fair value adjustments, for which $0.1 million of expense was recorded during the fiscal year ended June 30, 2025, and is included the “Change in fair value of acquisition liabilities” in the accompanying Consolidated Statement of Comprehensive Income (Loss).

The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Visimid Acquisition Date. As part of the valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and tradenames. The customer backlog, customer relationships, trade secrets and tradenames were determined to have estimated values of approximately $0.5 million, $0.1 million, $0.9 million and $0.4 million, respectively, and estimated useful lives of 1 year for customer backlog, and 10 years for customer relationships, trade secrets and tradenames. The estimated fair value of identifiable intangible assets is determined primarily using the “income approach”, which requires a forecast of all future cash flows. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Visimid. The goodwill is not expected to be deductible for income tax purposes.

For the fiscal year ended June 30, 2024, the Company incurred approximately $98,000, in acquisition costs. These costs are included in the consolidated statements of comprehensive income (loss) in the line item entitled “Selling, general and administrative.” For the fiscal year ended June 30, 2025, the Company did not incur any additional acquisition costs.

Prior to the acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera.

G5 Infrared

On February 18, 2025 (the “G5 Acquisition Date”), the Company acquired G5 Infrared pursuant to a Membership Interest Purchase Agreement (the “G5 MIPA”) by and among the Company, G5 Infrared, the G5 Infrared members through the purchase from the members thereof of all of the issued and outstanding membership interests of G5 Infrared (collectively, the “Sellers”), and Kenneth R. Greenslade, solely in his capacity as Sellers’ Representative.

G5 Infrared is a vertically-integrated manufacturer of infrared camera systems and imaging solutions, and also provides infrared coatings. G5 Infrared operates from a manufacturing facility in Hudson, New Hampshire. The Company acquired G5 Infrared to expand the Company’s portfolio to include cooled infrared cameras.

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

We 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 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 preliminary estimate of fair value of consideration transferred consisted of the following:

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. The earnout liability is subject to fair value measurement each reporting period. As of June 30, 2025, the earnout liability was adjusted to $5.0 million, an increase of $1.4 million, which is included in the “Change in fair value of acquisition liabilities” in the accompanying Consolidated Statement of Comprehensive Income (Loss).

We determined the fair value of assets acquired and liabilities assumed by using available market information and various valuation methods that require judgement related to estimates. Our preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed were subject to change as we obtained additional information during the measurement period. We completed our accounting for the acquisition during the fiscal quarter ended June 30, 2025. The following table summarizes the 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:

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.

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:

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 tradenames 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 $1.1 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 7, Goodwill and Intangible Assets, in these Notes to these Consolidated Financial Statements for further information.

Acquisition costs have been expensed as incurred. In connection with the acquisition of G5 Infrared, we recorded acquisition costs of $1.1 million and $0.6 million for the years ended June 30, 2025 and 2024, respectively, which were included in the “Selling, general and administrative expenses” line item in our Consolidated Statements of Operations.

Financial Results

Revenue and loss before income taxes of G5 Infrared included in our Consolidated Statement of Income (Loss) for the G5 Acquisition Date through June 30, 2025 was $5.6 million and $0.4 million, respectively.

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 for the include adjustments to remove costs directly attributable to the acquisition, such as transaction-related costs and the loss on extinguishment of debt (as described in Note 14, Loans Payable, to these Consolidated Financial Statements). The pro forma results were prepared as if the acquisition was completed on the first day of our fiscal 2024, July 1, 2023. 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.