LightPath Technologies, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Lightpower Technologies' second quarter fiscal 2025 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This conference is being recorded today, February 13, 2025. And the earnings press release accompanying these conference call was issued before the market opened today. I'd just like to remind you that during the course of this conference call, the company will be making a number of forward-looking statements that are based on current expectation, involve various risks and uncertainties as discussed in its periodic SEC filing. Although the company believes that the assumptions underlying these statements are reasonable, any of them can be proven to be inaccurate and there could be no assurance that the projected results would be realized. In addition, references made by, maybe made to certain financial measures that are not in accordance with generally accepted accounting principles or GAAP, we refer to these as non-GAAP financial measures. Please refer to our SEC reports in certain of our press releases, which include reconciliations of non-GAAP financial measures and associated disclaimers. CEO Sam Rubin will begin today's call with an overview of today's acquisition of G5 Infrared, a strategic overview of the business and recent developments for the company, while CFO Al Miranda will then review financial results for the quarter. Following the prepared remarks, there will be a formal question and answer session. I would now like to turn the conference over to CEO Sam Rubin. Sam, the floor is all yours.

Thank

you,

operator. Good afternoon to everyone and welcome to Lightpath Technologies second quarter physical 2025 financial results conference call. Given the important news we announced this morning regarding the acquisition of G5 Infrared, I will be dedicating most of my remarks today to this topic. The acquisition of G5 Infrared is a key and transformative event for Lightpath and is a natural continuum of the strategic transition the company has been undertaking for the last few years. As a reminder, up until about four years ago, Lightpath was a pure play optical component manufacturer. The core technology for Lightpath up until that point, precision glass molding was a innovative technology in the early 2000s, which gradually became commercialized and constantly commoditized over the last 20 years. What was a leading differentiator for the company years ago has become by 2020, a widely deployed technology with aggressive and ample competition, pushing Lightpath out of the market. In late 2020, shortly after I joined and consequently built a new leadership team, we outlined a new strategy that leverages our differentiators into a more value-added position with the goal to eventually become a solution and subsystem provider, all of which is still in the opting space where we have strong domain expertise with the ultimate goal of becoming a system supplier. We started the journey by first offering optical assemblies based on our optical components, then began to offer compact thermal cameras, such as our Mantis multispectral camera. And later on, through the acquisition of Vizimid technologies in the summer of 2023, we added advanced capabilities in video engine and camera cores for uncooled infrared cameras. The acquisition of Vizimid also came at a critical pivotal point for the Vizimid team. But shortly after the acquisition, Vizimid and Lightpath were awarded a large development contract with Lockheed Martin for a new missile program, a contract that has the potential to translate to between 50 to $100 million a year in revenue from that one program alone. Similarly, though not as large, Vizimid and Lightpath have several other large programs in various stages, many of which have the potential of bringing more than $10 million a year in new revenue from each one of those programs. The addition of G5 infrared, as you will see, fits in naturally into what we have been building and is a logical next step in our journey. Not only do G5's products complement Lightpath's products perfectly, but G5 is also at a pivoting point, about to be awarded some large lucrative defense programs that will be moving into LRIP, LRIP is Low Rate Initial Production. We'll be moving into LRIP very soon, and from there shortly into full-scale production. So with this background now framing where we have come from and where we are, let's dive into the acquisition itself. G5 was established in 2011 by a seasoned team that this was the second or even third time around. The first time around, DIOP, -O-P, was a household name in our industry, establishing a big part of what was axes back in the mid-2000s, and later sold to General Dynamics for $643 million in 2009. This highly accomplished team led by Lou Fantosi are well known in the industry as the ones that always deliver the highest quality, effectively gold standard cameras in long range imaging. These infrared cold cameras systems are used in places where extreme sensitivity of detection is needed, such as detecting people from miles away, or vehicles, or drones from tens of miles away. And I will talk more about that later. And as is often the case in optics, just like Lightbath leverages its black diamond glass to make best in class optical systems and uncooled cameras, G5 also has its own optical coating services group, another element in the secret source of these high-end camera systems. These coatings are part of what makes their cameras perform the way they do. And this coating service offered to external customers also accounts for a highly profitable service revenue that makes up to 20% of G5's revenue. These coating capabilities also fit very well with Lightbath's infrared component business, and will be a critical capacity to that, of the Lightbath business. So clearly G5 is a successful and well-aligned business to Lightbath in and by itself. This is also evident from their growth rates, winning businesses, and solid financial performance, delivering strong margins and EBITDAs of around or higher than 20% consistently. And while the financial profile is important, growth is too. So I'd like to dive in a bit into the product and technology and how this translates to revenue. Lightbath's transition to move from a pure play component to a subsystem or solution provider, and from there to a system supplier can be characterized in many ways. But probably one of the best indicators to where a company fits in the food chain are ASPs, or average sales price of its product. When I joined Lightbath in 2020, the company was, as we mentioned, a component company, and its product individual lenses had ASPs ranging from $1 for the really commoditized telecom lenses, to up to say $100 for the more complex diamond turned lenses. In 2021 to 2022, we gradually transitioned into offering assemblies, a more complex engineered optical product. That resulted in ASPs going from $100 to $500, already a more complex by itself. But while ASPs in and by themselves are not the goal per se, they're a good leading indicator to the complexity of the product and the offering, and hence to the value created by that product. And as many strategy books will tell you, creating value followed by capturing value is how one creates a strategy that leads to sustainable profits and growth. And so we went from single digit ASPs to three digit ASPs. Next came our uncooled cameras, such as our Mantis, innovative multi-spectral uncooled camera, which was our ticket into the world of cameras. Those products of cameras had ASPs of $10,000 to begin with. And through more complex cameras for oil and gas industries, we're now selling cameras with ASPs of $30,000, which is really a leap into five digit ASPs of yours. Again, not the goal by itself, but an indicator. Now comes G5 with cooled mid-infrared cameras. ASPs of their product start from $50,000 for their entry level cameras, short range detection cameras, up to $500,000 for the high end long range detection cameras. And when we say long range, we're talking about cameras that can detect the presence of a vehicle from as far as 68 kilometers away, 42 miles, that is. So very, very impressive products. So in the span of four years, we've gone from selling lenses at single dollar lenses and declining, unfortunately, to assemblies at hundreds of dollars, to uncooled cameras at thousands of dollars, and now to adding cooled cameras at tens or hundreds of thousands of dollars per day. G5 is also a fast growing business with a significant pipeline of new business opportunities with multiple programs of records expected to begin production in the next two years, driving strong growth far beyond their existing revenue base. Their long range cameras are used for detecting objects at long ranges, if you would. The two main applications are around detection of drones, also known as counter UAS, or CUAS, and detection of people and vehicle. The former, counter UAS, is a fast growing application in which G5's cameras, with their proprietary image stabilization software, Atcom, are considered the best performer in terms of detection range. One of the programs of record G5 is designed into includes placing those cameras on hundreds of naval vessels for passive detection of incoming threats, such as drones, missiles, and war. The word passive is actually pretty important in this. As we've all seen in the Ukraine conflict battlefield, if one uses an active system, such as a radar, to detect incoming drones and missiles, the radar's emission immediately turns you into a target. And so, passive detection of incoming threats is one of the fastest growing technologies today. And one that G5 systems are by far the leader in. In this application, G5 sells cameras to integrators that place them into larger systems with pan tilt and motion control, and build a complete system for detection and tracking of such threats. A second leading application is perimeter and border security. Here the same camera technology is used on towers along the border, and for perimeter security and critical infrastructure, like stadiums, power plants, and more. G5 has a long history with cameras for border security, and has already hundreds of cameras installed along the border. With the limited lifetime of cryogenic coolers in such systems, G5 also provides an ongoing service for repair of those hundreds of cameras, which is a great revenue stream that we expect to grow significantly more in the incoming years. More specifically, G5 provides now cameras that are used in the Customs and Border Patrol CTSE towers. And just last month, received their first award and order for the new surveillance towers of Custom and Border Patrol. That's part of Homeland Security Department. We expect to be able to announce soon more detail about those programs, both the Naval and the Border Patrol one. So a highly accretive acquisition brings over $15 million in preliminary, unaudited revenue in 2024, and brings us to a point where we expect our combined revenue in the next 12 months to exceed $55 million, making us a completely new place altogether. And while we don't provide guidance for future quarters specifically, I would encourage everyone to study the future earn-outs that are part of this acquisition, as it gives a very clear picture of what G5 management expects the business to look like in the next 24 months. I will give you a hint that the earn-out for the first year includes projections of revenue between $21 to $27 million from G5 alone, compared to $15 million last year. And that gives a pretty good taste into the kind of growth rates we're looking at. I'd like now with the time left to switch gears a minute and to talk about the previous quarter. The previous quarter was impacted in two ways by one major event. That event was on December 5th, China announced further restrictions on germanium exports, now completely banning sale of any germanium to any US company and to the US, and to any dual-use applications. And while we have prepared for this moment by significantly reducing our germanium business, and by preparing our black diamond substitutes, we did not escape completely unharmed out of that. Once China announced those restrictions, practically all shipments out of China suffered one way or another. This means materials that are not related even to this ban, like zinc selenide and zinc sulfide, were also completely stopped for a while. To us, this means that more than three quarters of a million dollars of revenue from last quarter could not ship in the last few weeks of the quarter and had to move into this quarter we're in now. I will emphasize that we haven't lost a single dollar of revenue. There wasn't any cancellation and we don't expect to lose any of that. It is simply a matter of timing. When all orders, when all shipments out of China came to a halt, that impacted also non-Germanium business of ours for a short period of time. We expect this to be covered very soon, although what we're seeing is that Chinese companies like Vital are completely stopping shipping any optics altogether, not only germanium. But we have many other suppliers and we're building into that and are recovering from that small hiccup. It's unfortunate because we report our numbers, of course, on quarterly basis. And something that happens in the last two or three weeks in a quarter is really just for us, a matter of timing of revenue and not a business issue. But when reporting on quarterly numbers, it appears that way. At the same time, we also saw the new restrictions of finally leading our customers to make the move to our alternative materials. We're seeing an influx of interest in those materials and are extremely encouraged by this. As a reminder, systems need to be redesigned to replace germanium with our materials. And so what we're seeing now is a very significant effort to start the redesign process by pretty much all customers related to this. With some systems, such as our customer for FPV drone optics that we announced last quarter, the redesign is fairly straightforward and allows us to get it done within weeks. But in other more complex systems, this takes months. And we're seeing quite a bit of this happening now. We're not only working with customers to help those redesigns, we're also taking a look at our manufacturing capacity to prepare the needed capacity to make the glass needed for these programs once the redesign and qualification is done. As a reminder, we spent nearly $6 million in our Orlando facility over the last few years preparing the infrastructure needed for growth. We do not expect to need to outlay any significant additional capital for this increase in capacity. We expect to be increasing our glass capacity significantly in coming months, but with fairly modest investments in that. Okay, since we're running out of time and I can't really cover everything that happened last quarter, I will encourage everyone to review some of the recent press releases on new products, such as gas detection camera, on new contracts, such as our FPV drone optics and many other things that we reported over the last few months. And I will be also available as always to answer questions and notes. But now I'd like to turn the call over to our CFO, Al Narenda, to talk about our second quarter fiscal 2025 financial results.

Al,

please go ahead.

Thank you, Sam. I'll keep my review to a succinct highlight of the financials this quarter. As a reminder, much of the information we're discussing during this call was also included in our press release issued earlier today and will be included in a 10-Q for the period. I encourage you to visit our investor relations webpage to access these documents. Revenue for the second quarter of fiscal 2025 increased .5% to 7.4 million as compared to 7.3 million in the same year ago quarter. Sales of infrared components were 3.1 million or 42%. Revenue from visible components was 2.8 million or 37%. Revenue from assembly modules were 0.9 million or 12%. Revenue from engineering services was 0.7 million or 9%. Gross profit decreased 11% to 1.9 million or 26% of total revenues in the second quarter of 2025 as compared to 2.2 million or 30% of total revenues in the same year ago quarter. The decrease in gross margin as a percentage of revenue was primarily driven by differences in the product mix coupled with minor and typical manufacturing yield issues exasperated by a slowdown in supply chain which Sam discussed, mostly attributable to China exports and impacting visible and infrared components. Operating expenses increased 12% to 4.4 million for the second quarter of fiscal 2025 as compared to 4 million in the same quarter of the prior fiscal year. The increase was primarily due to higher legal and consulting fees related to business development initiatives including 174,000 in expenses associated with G5 acquisition announced today. Product development cost of about 200,000 higher than the comparative quarter as well as increased sales and marketing spend to promote new products. Net loss in the second quarter of fiscal 2025 totaled 2.6 million or 7 cents per basic and diluted share as compared to 1.7 million or 5 cents per basic and diluted share in the same quarter of the prior fiscal year. The increase in net loss was primarily attributed to lower gross profit coupled with the increased SG&A and new product development costs as well as higher interest expense. EBITDA loss for the second quarter of fiscal 2025 was 1.5 million compared to a loss of 0.5 million for the same period of the prior fiscal year. The decrease in EBITDA in the second quarter of fiscal 2025 was primarily attributable to lower gross profit coupled with increased SG&A including legal and consulting expenses related to business development initiatives including acquisition costs and higher new product development costs. Cash and cash equivalents as of December 31st, 2024 totaled 3.2 million as compared to 3.5 million as of June 30th, 2024. As of December 31st, 2024 total debt stood at 3.9 million and backlog totaled 19.8 million. As Sam noted, today we announced the acquisition of G5 which had preliminary unaudited revenue of 15 million in calendar year 2024. The expectation is for the combined companies to generate 55 million in revenue in the 12 months following today's acquisition. Subsequent to quarter end and to finance the G5 acquisition for 27 million of total consideration we issued 25.5 million of .5% fixed convertible preferred equity as well as private placements totaling 1.5 million and two senior secured promissory notes totaling 5.4 million. Following the close of the transaction, the August 2024 bridge promissory note of 3 million will be fully converted and no longer outstanding. The 25.5 million in preferred is mostly held by a fundamental investor that takes a concentrated position with a long-term perspective in a few investments. Terms and conditions are not toxic and are clean as possible. The investor will also become a board member for a five-year term to assist in our growth plans. We consider this new investor as a partner to our business. In closing, I view the acquisition of G5 as a robust tool to supercharge the near-term potential of White Path particularly in the defense space with the introduction of high margin, high ASP and incremental products. We see this as providing an expedited path to achieving our long-term goal of 15% EBITDA margins. Defining White Path is a platform company focused on disappointing strategy and delivering value to our shareholders as we scale and grow.

With

that, I'll turn the call back

to Sam for some closing remarks. Thank you, everyone, for taking the time today

to attend our call. Looking ahead, we will continue to drive the future of imaging as seen through our proprietary Black Diamond optics, leveraging our clear advantage in our capabilities and supply chain security as compared to legacy Germanium-based solutions. With defined catalysts in industrial, defense and camera solution market, taken in tandem with our acquisition of G5, providing an entrance into the cooled infrared camera space, we believe calendar 2025 will build additional momentum towards our Light Path 3.0 vision of becoming a leading next generation optics and imaging solutions provider. With that, I will now turn the call over to the operator to begin the questions and answers session.

Operator. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Jason Schmidt from Lake Street Capital Markets. Please go ahead.

Hey, guys. Thanks for taking my questions. Just want to start on the gross margin in December. You noted some kind of manufacturing yield issues. Just curious if those have been

fully resolved. Sorry, Jason. Jim and I are sitting

together, so we usually need eye contact. Yeah. That'll

be one of the things.

So, our yield issues in this quarter, we're not particularly bad. I would say it was normal. You know, you don't get 100 percent yield, particularly with coatings. They were minor. The problem was sort of exasperated by the fact that we usually have more material. We can get extra materials. We plan for it. We have it. So, when we have yield issues and not a fast and quick source to some of the materials coming out of China, it sort of delays our ability to deliver. So, a normal yield issue becomes a not normal yield issue, if you will.

Okay. That makes sense. And then, obviously, it sounds like you guys are pretty familiar with G5. Just curious, sort of the customer overlap between the two companies and relatedly, the cross-selling opportunities you guys are envisioning. And if there are cross-selling opportunities, are those sort of baked into the growth expectations reflected in the earnouts?

Yeah. I'll take that one. There's definitely some great opportunities there and we're seeing a lot of excitement from the customers. So, to begin with, just on the optics part, which is easiest to answer, since G5 has a very good and robust optical coating services, they naturally service many of our customers already in that aspect. So, that part is sort of an easy, very natural part. When it comes to the camera part, which is really where a lot of our growth expectations will come from, most times when you see today a system that has those cold infrared cameras, it will very, very often have an uncooled camera that goes with it. If you look at some of the companies like Silent Sentinel, which is today part of Motorola, and you look at their product offering, those same pan-tilt systems of gimbal will have a short-range camera, uncooled camera, like our uncooled cameras, and a long-range camera from G5 next to it. So, the selling opportunities there is tremendous. The same is also in optical gas imaging. Oftentimes in a gas field, there will be many small uncooled cameras, like our gas camera, and then one large cold camera, which obviously naturally is much more expensive and over $100,000, but that one is able to actually quantify exactly how much gas is leaking. So it gets pointed at the places where the smaller cameras identify the leak to begin with, and so on. So, there's some great opportunities there, we feel. And as of now, those are not baked into the numbers. The revenue numbers for G5 and their earn-out is based on their projections and their own expectations of revenue without any synergies

in that. Okay, that's helpful. And then just the last one for me, and I'll jump back into Q. How should we think about the gross margin profile through the G5 business? Al,

do you wanna

take

that? So, the camera business has

higher margins than the light path visible or infrared component business. So, in terms of expectations, the margin will blend upwards with the portfolio being

added. Perfect, thanks a lot, guys. Thank you. Thank you.

The next question comes from the line of Glenn Madsen from Leidenberg Talman. Please go ahead.

Hi, guys, and congrats on the acquisition. I couldn't help but notice your comment on the... We're talking about G5 a little bit about... You mentioned something about about to be awarded several large programs and that you should be moving into LRIP. That's just trying to understand that language because normally I guess you wouldn't say about to be awarded unless you had the business pretty secure or is it... Can you just

give us a color on that? One of them is a matter of days, literally. I mean, it's in very final negotiations. And when I say LRIP, I mean, just to put it into perspective, the naval program, for example, or the prototypes that we expect to order any day now, it could be several millions, let's say two to three million dollars for the prototypes. When it goes into production, so LRIP is just the beginning of low-weight initial productions and scaling, we're expecting this could be 10 to 20 million dollars a year.

Okay, and you said the timeframe on that remind me that you mentioned moving into LRIP.

So prototypes now in the next six to eight months and then we expect LRIP towards the end of this calendar year. Okay, thanks.

That's helpful. Yeah,

just on the synergies, I missed part of your answer on the last question, but one thing that struck me was in the press release, you talked about multiple programs of record for G5. Is there an opportunity to use those as a funding vehicle whereby you could cross-sell better your uncooled cameras and things into those funding? Yeah,

exactly that, exactly that. So when you look at many of those systems that are deployed, they would very often have a mix of both uncooled and cold cameras together. So the uncooled cameras of course cannot detect the range of those cameras, so you use them for a short-range detection, but because they're so much cheaper than the long-range ones and the cold ones, you would sometimes deploy a few of them and have them look in different angles. And then you will use sort of the big, cold, long-range camera on a pan tilt where you would point it to where one of the uncooled cameras saw something maybe. So oftentimes a combination of both, and I know our sales team is extremely excited and can't wait to start cross-selling on both sides.

Right, right, I guess that really makes it sound like a strategic fit like you mentioned. And just lastly, the exposure to some of the issues with the Chinese, can you remind us how much of your business is still exposed to that, as you move towards that? Yeah,

Al, do you have a number on that and how much do we still have? So we have two million of

sales in Germany and two million of sales in Europe. So we have a lot of Germanium in the US that I would say is at risk because of the restrictions, right, to bring Germanium in. So we're sourcing that locally, switching to local sourcing, which is a project that's been going on for several weeks. We have also a couple of million of Germanium sales in Europe, but at much less risk because Latvia and the end users for those products are not on the Chinese no-sell list. But nonetheless, we'd like to move all of that product out of Germanium as well in Europe. But, and we have similar plans to migrate, but the urgency isn't there yet like it is now in the United States.

Right. And just to add on the two million in the US, Al, so first of all, we're gonna supply those by sourcing locally, but the local sources of Germanium, as everyone knows, are very, very limited. So it's not really a long-term strategy. So once we supply those two million of Germanium orders in the US, we will no longer be doing any Germanium business in the US. Okay.

Okay, great. That's it for me. Thanks, guys, and congrats again.

Thank you.

Thanks.

Thank you. The next question comes from the line of Olin Hirschman from AIGH Investment. Please go ahead.

Hi, congratulations on the acquisition. Just going back to some of the earlier comments. So you mentioned on the acquisition, these are just random questions, you mentioned Motorola is an example. Is that a current customer? Were you using that as an actual customer example?

Yes. Motorola

is

a very large customer of G5, yes. Isn't the belong? To those that don't know, Motorola is one of the leading companies in perimeter security and safety equipment. So it's a very major part of the business for us. Okay.

And I'm not an expert on this space. My impression is that these very long-range infrared cameras are a newer type of security way of doing things. Is that true? Is this early on in the use of infrared, particularly long-range infrared for security where there's a big runway?

Definitely for, yeah, definitely for counter UAS. So counter UAS and perimeter security, they have not been really used too much until now. In Border Patrol, G5 actually has quite a install base there. Now in the past systems were not as long range because the technology advanced and especially the ASCOM capabilities that G5 has now with the initial stabilization significantly improved that. But also in Border Patrol, the cameras were not as widely spread as they are now. Now they're talking about putting these towers every couple of miles. So it's a much, much larger install base going to be. In perimeter security, I mean, this is now really growing. This is every data center, when you look at it now, the data centers are like Fort Knox. They're secured with radars and with the most advanced systems. And so we expect that market to really take off considerably. The relationship G5 has with Motorola is very significant for that. And our sales team of former FLIR people are also gonna be pivotal at getting us into that. Then the whole world of counter UAS and detecting drones and as we all know from the news, that is only getting started. I mean, that's gonna be huge.

Just finally, just in terms of those shipments that pushed out being in this quarter and just in general, are we seeing that coming through and how, do you have any comments on the current quarter shaping up?

Yeah, Al, do you wanna talk about that? So we shipped

most of that already, or in the first six weeks of this quarter, the stuff that pushed out. My concern is that the supply chain is not speeding up out of China. So we did get some good indications. Product is being released, but the releases that come are still small, really too small, to be honest. So on the one hand, we could close the gap, so there's no rollover from this quarter, or we could end up at the end of Q3, coming up a bit short again, because of this same sort of roll forward problem. I mean, it really comes down to sort of like every day, checking with customs to see what comes through and what's approved and licensed. And it's a -by-day thing, really. And

how's the rest of the business doing in terms of some of the newer programs ramping?

So the new business that we're ramping, and particularly in the assemblies and chorus, I like this business. It doesn't take up as much space. It doesn't use as much capital equipment. And with the ASPs, the way they are, and the margins high, historically high, for anything else we do, I like it. So I keep encouraging Sam and the sales team to bring in more of the assemblies and core business, for sure. I

think we haven't also given any update on the Lockheed Martin project. So just shortly, it's going very well on track. We're about to start shipping flight worthy units for actual flight tests of the missiles, which are extremely exciting for us personally. And we're moving along very well with Lockheed, both from this program and the two other derivative programs in which Lockheed is already integrating our camera systems into two more programs.

Thanks so much. That's what I always wanted to hear. Thank you.

The next question comes from the line of Scott Buck from HC Wainwright. Please go ahead.

Hi, good afternoon, guys. Thanks for taking my questions and congrats on the transaction. I guess the first thing, guys, hopefully I didn't miss it, but could you give just a little bit of background on how the deal came together? Were they actively out looking for a suitor or was this more, I guess, organic in the way it came about?

So like many of the acquisitions we contemplate, G5 is a company we've had an ongoing relationship with. In this case, it goes back nearly 30 years, well before I even joined Lightpath. But ISB Optics has been a supplier and partner for G5 back when they were DIOP and later AXIS and General Dynamics and so was Lightpath. So we've known each other already pretty well. We got the feeling that they're about to go out and possibly start shopping around and we did a bit of a preemptive strike, if you would, and just essentially picked it up before they went and formally engaged a bank. And to that extent, we've always been very clear that we are on the lookout for acquisitions. I think we've been very clear that we could see acquisitions in two forms, one could be like Vizimit, a small technical group that adds specific technologies and others would be larger like G5, which would be in the 15 to 20 million dollars of revenue, profitable with strong margins. And those are the type of acquisitions. We have at any given point in time multiple acquisition opportunities or ideas that we keep in touch with or keep an eye out for. We always, always make sure that any acquisition we do are people that we know and if we don't know them, then we proactively engage in some joint projects to get to know each other. Because as anyone that has done M&A would know, the number one reason for fail of acquisitions is culture. So a culture fit and getting to know each other if we don't know yet is very important for us. In this case, we've simply known each other for a very long time, so it was very easy.

Great, that's a good help up there. So if I could add on to that, Glenn, so we mentioned that this is not the first time for this group to come together and create a company. They didn't have a good experience with the last time, sort of the last time they sold, it was General Dynamics, they basically picked it apart, used the technology, moved it around planet Earth and the current owners, sellers, didn't really like the outcome that came with that for the people that were working there and had been loyal to them. So Sam's 100% right in terms of cultural fit, but also strategic fit and our plans for them is to grow that location in the way the original founders imagined it and continue along that path. That went a long way towards them feeling warm and fuzzy about the situation with us and not going to investment bankers to try and sell it outside. And they believe they left money on the table by not doing that, we could argue that all day long, but that's their belief and yet another reason why the culture fit and everything else about Whitepath was attractive to them.

Great, I appreciate that, Sam and Al, that was helpful. And then second one, just a quick modeling question, is there any seasonality in their business that we should be thinking about as we model the outquarters here?

Yeah, there is seasonality. I'm not 100% confident yet in how it looks, but typically using our fiscal year, their Q3 and Q4 is white on revenue and then Q1 and Q2 is heavy on revenue. I don't have the exact mix, it's really something I wanna confirm with the management team next week when we start going through the more detailed forecast versus the ones we used currently and get a better handle on it. And I'll help you guys try to understand what that looks like.

Great,

I appreciate it guys, that's all I

had, thank you.

Thanks.

Thank you.

The next question comes from the line of Brian Kingslinger from Alliance Global Partners, please go ahead.

Great, thanks so much. With the $55 million revenue target, it implies significant growth from G5, from the 15 million. I joined late, so hopefully I'm not repeating, I just joined when Glenn was asking questions. Have the few programs that you expect to drive this growth with G5, are those awarded? Have you started shipping against these contracts or subcontracts and at what point do you expect these shipments to meaning play ramp in order to achieve this growth?

Yeah, so one of the programs, the Border Patrol, they received the first order last month and already began shipping towards that. So that one is already, I'd say, in the pocket and confirmed. The second one, the Naval shipments, we expect any day now to purchase order for that and those would be for the initial seven units, I'm not sure, something like that, something around that, where towards the end of the year, that will scale into low rate initial production. Other than that, the rest, there are many other programs all in different security and defense. Some of them confirmed and some of them fairly confident. But I'd say that in this case, the founders and the owners of G5 literally put their money where the mouth is by putting a significant bet onto their earn out, that is for the next 12 months, designed around them hitting revenues of between 21 to 27 million.

Yep, and then given the commentary on seasonality, at least the modest, knowing that the marks in the June quarter are their weakest, will Light Path as a combined company be profitable, assuming you close as expected and you have a full June quarter, will that be a profitable quarter from an EBITDA perspective? Al?

From

an EBITDA perspective, we should be positive. Great, and then again, sorry, I missed the prepared remarks. Can you comment on whether you're beginning to see a ramp in the mantis orders? I know last quarter you commented, you expected several customers would begin ordering in the second half, and here we are. So I'm curious, has that ramped as you expected?

Yes, we've already been taking orders and shipping more and more of the furnace camera orders. The gas detection ones are not ramping as fast as we thought they would. I think for the gas detection, we still need to go through some quantification test of measuring or giving a actual performance number of how much gas it can detect in parts per million, and that's something that we didn't realize we really can't begin significant sales before we have that. That's ongoing right now at the customer site in Salt Lake City, so I'm hoping that the gas, the optical gas imaging cameras are gonna start scaling up very soon.

Great, the last question I have, I don't know if you addressed this, is there anything that keeps you up at night about tariffs, whether it's for your customers, whether it's for your suppliers, anything that you're carefully watching?

So

we started almost immediately,

yeah, we started almost immediately line-lining tariffs to our customers and we're passing it through. It's transparent, the customers see it, they know it, this includes purchase orders already in-house. For the US market, our customer base seems to have accepted the fact that this is happening. Yeah,

I would add that, Al, I don't stay up at night because of the tariffs, I don't think that will be that impactful to us. I do worry about supply chain of materials. I mean, this side effect of when China announced the ban on germanium and suddenly companies like Vital Materials stopped exporting any materials, period. That took us completely by surprise and isn't over yet. So companies like Vital still aren't selling materials altogether, not only germanium. So I worry a bit more about that part, but there are many people, Lightbuff is one of them, but many players working day and night to recreate the industrial base in the US, thankfully. I'm very confident about that longer term, but I think we do still have a few months of transitory effects related to material supply.

Then I have one follow-up. I mean, you clearly have been preparing for this for many years, there's no doubt about it, but my question would be what percentage of your business relies on imports from

China? Well, Al, what's

the, I mean, when we say imports from China, it could be also like our regular glass lenses made in our final operation. From an overall perspective.

Sorry, maybe I'm just thinking about the material. I mean, you're talking about guessing germanium that's having trouble. I'm guessing you're talking about germanium on the exports that were having trouble on the supply chain. No, no, not at

all. But that's the funny thing. So material called zinc selenide and zinc sulfide that's available from other countries as well, that we were just buying it from a Chinese vendor, even supply of that material out of China. Yeah,

so about- With the gold government, yeah. From a revenue perspective, Brian, it's eight million, let's call it eight million into Europe and the US coming out of China. The germanium risks are the ones that I mentioned earlier, two million in the US and two million in Europe. Obviously the US is high risk. Europe is, I would say, moderate risk at this point. So that's kind of rough numbers, rough high level numbers. And Sam's right. So we knew what the germanium was and we knew what the risk was and have known for a while. We've been trying to get out of it for a while, right? Switch customers. The surprise that came in the quarter back in December is companies like Vital who just shut everything down. Nobody could have predicted that. We know nobody could have predicted it because our competitors and our customers are all in the same place as we are. Great,

okay, thanks for taking all my questions. Congrats. Thank you, Brian.

Thank you. The next question comes from the line of Richard Shannon from Craig Hallam Capital Group. Please go ahead.

Well, hi Sam and all, thanks for taking my questions and congratulations, that looks like a really nice deal. Let me ask you a quick high level question following Sam your comments and your prepared remarks about G5. You said they had a really big pipeline. Can you quantify or characterize that in any way by itself or relative to the pipeline that Lightpath has itself?

Yes, I think the programs of record that we're seeing, the Border Patrol, the Naval, those vary in what we expect them to be in full production from typically those programs are anywhere from five to $20 million a year in what the potential during production will be. And since those are all military or defense related programs of record and program of record means it's a line item in the defense budget and Congress budget. So you can actually go and look it up in the formal congressional budget. Those programs are typically eight years of rollout followed by many years afterwards of spare parts and repairs which are very, very lucrative. So we're looking at the business that could easily, easily be alone in the 50 to $60 million in a matter of two, three years.

Okay, perfect, that's a helpful way to think about it. You mentioned a number of applications for the products from G5 here and all of them sound interesting, Border Control, obviously a key thing for an current US administration. Data centers obviously resonate with everybody, tracking AI, but the one that's really stood out to me, I'm really interested in this is in drones or I think you see you AS or some acronym I don't really understand. Maybe you talk about what's going on there. It sounds like a particularly useful and extremely important near term application for the defense community. Maybe you can talk about what's going on there and how big of the pipeline are you expecting from that?

Yeah, yeah, definitely. So that's the largest program to begin with, the Naval program and that's also the largest customer in Motorola, I think a lot of their systems go into that. And essentially, this is how do you detect drones or other small objects like that in movement in the best way without active measures necessarily. So of course, a lot of those could be detected with radar or active systems, but those oftentimes give out too much information about your location and where those systems are as we've all seen in Ukraine. So you end up needing to have a passive system to be able to detect drones and objects like that. And so a few technologies being looked at is acoustic technologies of trying to detect the noise of the drone. There is different microwave trying to detect the transmission of the drone if it is transmitting and so on, but by far the best technology known there right now is those infrared cameras. And it has to be an infrared camera and not a visible camera because of course, you need to be able to see it at night without the lights flashing and all of that. You need to be able to see it in many different conditions. And so right now, those are mainly mid-wave cameras and that's what G5 is offering, but they'll also be expanding into short-wave cameras or even multi-spectral, both short-wave and mid-wave together because short-wave cameras can see through clouds, for example, or could see through different adverse environmental conditions. And this is where our Black Diamond materials really designed for multi-spectral imaging will play a major role together with the G5 technology. So what we're seeing is these cameras getting installed now, multiple of them in important locations that are very sensitive on pan-tilt systems that are rotating and looking around. You're talking about cameras that can zoom 20 times as much so they can start from a very wide field of view and zoom into small objects. Again, they can do, I mean, the performance is just insane to be able to detect a tiny drone from 10 miles away is optically is just very, very impressive technology.

Okay, some great detail there, Sam. I think in the interest of time, I'll get back in the queue, but thank you very much.

Thank you, Richard. Thank you. As there are no further questions, I will now hand the conference over to Sam Rubin for his closing comments.

Okay, thank you all for attending. Very, very exciting times for us. If it wasn't apparent from our remarks, we're extremely excited and happy to be able to be here at this point with this deal. I look forward to meeting some of you in person in our Investor Day at February 25th. And I would also like to end the call by welcoming the G5 team to the LightBAR family. We very much look forward to working together and seeing what great things we can be doing together soon. Thank you, everyone, and good night.

Thank you. Ladies and gentlemen, the Conference of LightBAR Technologies has now concluded. Thank you for your participation. You may now disconnect your line.