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Note 3 - Acquisition of Amorphous Materials
 9 Months Ended
Mar. 31, 2026
Amorphous Materials, LLC (“AML”) [Member]  
Notes to Financial Statements  
Business Combination [Text Block]

3. Acquisition of Amorphous Materials

 

On January 20, 2026, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), by and among the Company, Amorphous Materials, LLC (“AML”), a Delaware limited liability company and wholly-owned subsidiary of the Company (“Buyer”), Amorphous Materials, Inc., a Texas corporation (“Seller”) and other parties thereto, pursuant to which, subject to the terms and conditions set forth in the Asset Purchase Agreement, Buyer agreed to acquire substantially all of the assets (collectively, the “Assets”) and assume and acquire certain of the rights and liabilities of Seller (collectively, the “Liabilities” and such acquisition of Assets and assumption of the Liabilities together, the “Transaction”) relating to Seller’s business of compounding and melting a broad range of Chalcogenide glasses for third-party manufacturers. The Transaction closed on January 21, 2026 (the "AML Acquisition Date").

 

Aggregate consideration payable by the Company to Seller under the Asset Purchase Agreement in connection with the Transaction will not exceed $10.0 million and consists of (i) a cash payment of $7.0 million that was paid at closing (the “Cash Consideration”) and (ii) contingent consideration that will not exceed $3.0 million (the “Contingent Consideration”). The Contingent Consideration, if earned, is payable in shares of the Company's Class A common stock, $0.01 par value, ("Common Stock"), to be issued in up to six tranches of $500,000 each divided by the LPTH Stock Price (as calculated pursuant to the Asset Purchase Agreement) upon the achievement of certain milestones set forth in the Asset Purchase Agreement (each, a "Contingent Consideration  Payment").

 

We accounted for the acquisition of AML 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 AML Acquisition Date, with the excess of the consideration transferred over those fair values recorded as goodwill. We are in the process of obtaining third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets, goodwill and deferred income tax assets are subject to change.

 

As of January 20, 2026, Seller satisfied the first milestone contemplated by the Contingent Consideration Payments and received an aggregate of 39,897 shares of Common Stock (or approximately $544,000 at fair value, determined by multiplying the number of shares issued by the fair value of the Common Stock on the AML Acquisition Date). On March 10, 2026, following the achievement of the second milestone, an additional 43,621 shares of Common Stock were issued (or approximately $482,000 at fair value as of the issuance date). The remaining estimated potential earnout has been accrued based on a preliminary third-party valuation and is included in Accrued liabilities the accompanying unaudited Condensed Consolidated Balance Sheet as of March 31, 2026.


As of the AML Acquisition Date, the preliminary fair value of the aggregate consideration was approximately $9.2 million which consisted of (i) the Cash Consideration, (ii) 39,897 shares of Common Stock (or approximately $544,000 at fair value, determined by multiplying the number of shares issued by $13.64 per share, which was the closing price on the AML Acquisition Date), and (iii) potential earnout consideration subject to achievement of five additional technical milestones, as defined in the Asset Purchase Agreement. As of the AML Acquisition Date, the fair value of consideration transferred consisted of the following:

 

  

January 21,

 

Description

 

2026

 

Cash consideration

 $7,000,111 

Net working capital adjustment

  (157,394)

Equity portion of consideration

  544,195 

Earnout portion of consideration

  1,780,000 

Selling expense at closing

  2,000 

Fair value of consideration transferred

 $9,168,912 

 

The following table summarizes the preliminary allocation of the fair value of consideration transferred to assets acquired and liabilities assumed as of the AML Acquisition Date:

 

  

Preliminary as of

 
  

March 31,

 

Description

 

2026

 

Assets:

    

Accounts receivable

 $155,324 

Inventory

  455,399 

Property and equipment

  182,050 

Goodwill

  5,561,256 

Other intangible assets

  2,980,000 

Total assets acquired

 $9,334,029 

Liabilities:

    

Accounts payable

  27,994 

Accrued liabilities

  97,134 

Operating lease liabilities, current

  39,989 

Total liabilities assumed

 $165,117 

Net assets acquired

 $9,168,912 

 

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

 

      

Useful Lives

 

Intangible Asset

 

Total

  

(Years)

 

Backlog

 $90,000   1 

Know-how

  930,000   10 

Tradename

  390,000   10 

Customer relationships

  1,570,000   10 

Total

 $2,980,000     

 

Goodwill – The $5.6 million of goodwill recognized is attributable to AML’s assembled workforce and expected synergies related to the expansion of our infrared glass portfolio and manufacturing capabilities. The acquired goodwill is expected to be deductible for Federal income tax purposes. See Note 9, Goodwill and Intangible Assets, in these Notes to these unaudited Condensed Consolidated Financial Statements for further information.

 

The Company’s unaudited Condensed Consolidated Financial Statements reflect the financial results of AML beginning on the AML Acquisition Date. Revenue generated by AML from the AML Acquisition date through March 31, 2026 is approximately $1.0 million and is included in our infrared components product group, with net income of approximately $0.3 million.

 

For the three and nine months ended March 31, 2026, we incurred approximately $0.1 million and $0.2 million in acquisition costs which are included in the unaudited Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.”

 

See Note 4, Acquisition of G5 Infrared, in these Notes to these unaudited Condensed Consolidated Financial Statements for unaudited consolidated pro forma information.