Capital Markets Day Transcript - LPTH 2026-02-25

Speaker 4

Good afternoon. Welcome, everyone, present physically and virtually via the webcast. Hopefully, I can be heard nice and clear and you can see my presentation.

Speaker 6

Excited to have everyone here.

Speaker 4

Second time, we do an investor day. The next round has rolled quite a bit since the first one.

Speaker 3

As the company, I will review and I will backlog it, and we'll talk about all of that today.

Speaker 4

So I'll be speaking as well as Al Miranda, our CFO, and we also have with us here Dr. Steve Milkey, our VP of Engineering, Israel Pierre-Giovanni, our VP of Manufacturing, and Natalie King, VP Finance, which will take part in mostly the Q&A. For those that were here present physically, we did a facility tour at lunch, and now we'll go ahead with this and have Q&A at the end presentation. Okay, I think it's good. So I'm assuming they can see a poll. So, you know, a bit of a history of Lightbath and where we've come from. So Lightbath has been around for a while. We're a 40-year-old company, maybe 41-year-old company. For many, many years, 35 out of the 40 really, we were an optical component company. I mean, to give a perspective to this, these tiny lenses that we see here on the left, were most what Lightbar did and it's claimed to fame for many, many years. Now, the company really was a pioneer in the technology of molded optics and developed that. And as we've seen here, developed even the technology to do that, including the machines and instrumentation needed. And the hope for the plan was that this technology, these molded lenses, will get adopted in very high volumes. And to put it into perspective, you know, back in 2000s or so, the volume of synthetic lenses was minuscule compared to what we did today, and the price was much higher. And the plan of the company was the expectation that adoption in volume will drive significant revenue. What was missing in that part was that that also drives the cost down and the price down. And so lenses maybe 25 years ago were selling for $100 per lens, now sell for single digit dollars. And so the strategy behind that wasn't working out that well. Companies started pivoting towards infrared optics a bit in 2016, 2017, whose acquisition of ISP Optics, a company that produces individual lenses by grind and polish, pretty conventional technologies. And the thought there was that we could adopt the same multi-technology used to make lenses in high volume into infrared optics called coordinate glass. Back then, it was very, very new, and people were only starting to adopt it. The company back then had two types of black diamond glass, BD6 and BD2, which are really generic forms of a glass made by other companies like Schott, that calls it IRG26, or Vitamins, that calls it IG6. You know, pretty generic. Fast forward to the year 2020, except for COVID, which was a big event, there was also a change in management here. And with that, we started changing direction of the company. Strategically, we understood that we cannot live in the component area. We want to do far more than that. That's not new. So many, many companies that go through that and many companies try to do that. But we had two other things that were playing in our favor. One was the market, the adoption of optics or photonics in the wider market. that was going on over the last 10 years or so changed a bit the dynamics of the supply chain or started to change the dynamics of the supply chain. And so while we were making components

Speaker 6

sort of a vertical supply chain where we would send the components, someone that would build

Speaker 4

the system and so on, now our customers are changing. And we started seeing customers that are less experts in optics and more solution integrators all together. And so they wanted a complete solution and that created an opportunity for us to move away from the pure component into more of a solution company. We were able to do that not only because the opportunity existed but because of the capabilities we had already in here. So to begin with we were an optics company but we had a lot of internal disciplines of engineering related to building our own instrumentation and technology that was needed. So we have here, or have here already, electronic engineering, mechanical engineering, things you typically don't find a company like that. We also had some unique technologies that we understood could be real differentiators when going upstream into subassemblies, subsystems, and so on. Primarily, and chief among them was the Black Diamond technology. There were a handful of companies that were making glass of that type, But they were all sort of making the same generic license, and the adoption of them was very, very limited. We came across the portfolio of materials that Naval Research Laboratory developed under the mandate to develop new technologies for the Navy, and we're looking to license it. We were lucky to be able to secure an exclusive license for those, and understanding that those technologies, those materials, could drastically change the landscape of infrared images. And so with that, we decided to leverage that to no longer just be a supplier of components of glass, but actually go upstream. And so two things in our favor. One, the market wanted it. They wanted more companies making complete subsystems and so on. And secondly, we could offer subsystems that were better than others out there because of these unique materials that we licensed, because we were leveraging our molding technology to reduce the cost of making send-lease and systems. it. Then they will subjure politics, which in the past used to hurt us every time. In fact, the US and China would go into law. And it used to hurt Lightbark badly because Lightbark was very, very dependent on China. When five years ago, 60 years ago, when I joined the company, 55% of our business was in China, manufacturing and sales. Now it's nothing more, less than 5%. But back then, every time tariffs or anything like that would happen, it would take a very negative impact to the company. This time, because of the way we were positioned, all of geopolitics actually plays in our favor. And obviously, everyone is very, very familiar now with the story around Germanium and Germanium alternative, and our Black Diamond being the Germanium alternative. I would love to say that I saw that coming exactly the way it is. There's some element of luck here as well. Sometimes we get lucky. Okay, are we still going or? So we decided to go on that path. We started, you know, it's easier said than done sometimes. We had to take baby steps. And so we started from just doing assembly. So going from the individual lenses into assemblies, selling them pretty much to the same customer base, sometimes a bit more, but saying to the customer, instead of buying lenses and designing an assembly, let us design the assembly. Assembly can be something really simple, like two lenses in a barrel like this, or a complex eight lens telescope, or a much larger one. But it's got our feet wet, it's got people used to it, and so down the road, this was for a couple of years, we were doing just that, people were starting to get used to the idea of light bulb doing more than that, started to get used to the idea of the Black Diamond materials, and we're seeing we can actually make assemblies for them that are very cost-effective, very high volume, and so on. And then we started dabbling into the more higher value-added, which is where we were targeting all along, really, and that is the cameras. Before any acquisitions, we started already with our own first camera, the Mantis, which was a broadband or dual band, if anyone wants to call it, a multispectral many terms to it. One camera that can see in more than one spectral band didn't really exist before that. It's still making its way into being adopted and so on, but it was more of a statement that it was a massive best self. It was more of a statement of like, hey, we're now making cameras also, and these cameras can be way better than anything else there or very different than anything else there because with our unique black diamond materials you could make this camera multi-spectral without black diamond it would be you'd have to sacrifice quite a bit of specifications or performance and would not be able to do it that was our first statement of hey this is what black Diamond can do. And if you pay close attention, we are planning to leverage that to go way up and become a system company. From that, we started supplementing with acquisitions, Visamid being the first one, I think. Oh, okay. So let me not figure out this timeline, but that's fine. Visamid being the first one, and that added capabilities in making those cameras. In fact, that first camera, the Mantis, was developed together with Visamid before we acquired them. And the reason for that is actually besides the fact that we wanted to develop a camera, we also wanted to work with business. Acquisitions are an important tool for us. We've said that before. We'll talk about it some more. We strongly believe that we're able to identify, attract, and integrate acquisitions in a very suitable way to have a new business model that will be in that direction. But integration of an acquisition, sometimes everything, it can kill the best plans ever if culture doesn't work, if the integration doesn't work, if the teams don't work. And so any company we acquired and plan to acquire, we do some work to get to know each And there have been deals we walked away from because the culture picture clearly wasn't And so Vitamid was really, Mantis was really a first attempt to go into Canvas, but also get to know the Vitamid team. We got along so well that halfway through the development, it just became natural of like, okay, let's just merge two companies. And that was the first exhibition. Down the road from there, so we're T5, and most recently, Amorphous Materials. And I'll just go in a different order, but going into that clinician, since I was talking about them, very important to us, very important for them to be highly accretive. So we sort of started talking about the story, how we went from components and end up in subsystems. We haven't finished that journey yet, by the way. We're, you know, quite along there, but haven't finished it yet. But there are some technologies we could develop in-house. There were some we really needed to bring in. We needed to bring in because sometimes it's just cheaper to acquire in a portfolio or product, a group of engineers, and to develop it from scratch. It's also obviously a different transaction, balance sheet versus income statement and such. But sometimes it's a matter of time also. So we realized that we have a very unique window of opportunity because of the geopolitics and situation with Germany. There's a time frame in which we can really shine and we can grab significant market share of that system subsystem level. And so sometimes you need to use acquisitions to do that. And so what we're seeing here is really all of those acquisitions of what are some specific technologies, which is most of the time the first thing we aim at. We are a technology company after all, but every one of them, for them to be accretive, have also brought with it an existing backlog or with programs that were about to get to be won or be awarded. Sometimes, like in the case of G5, we knew most of those programs are coming. We knew we're able to come in at the right time at the right place there. But we also knew that we are really needed in order to deliver on those programs. So G5, we knew it's going to struggle with the situation with geranium, just like everyone else struggles. And we can come in and we can really enable G5 to deliver on these big programs, some of them are much bigger than what we even thought of, but, you know, definitely something we can enable them to deliver. Real, real synergies there. Sometimes, like with Vizamid, the NGSRI program, our, you know, probably flagship program in heat-seeking missiles or in that platform or that range, was really in part awarded because of the acquisition. Vizamid was a small engineering team that was developing technology, but it's always the technology that was developing was mostly handed over to the customer or sold as a customer for production. Lockheed was betting on Visumid for the NGSRI program, but Visumid was not in a place to really be able to take that into the next level. And so the acquisition came at the right time, at the right place, even though, again, we didn't plan on it because of NGSRI, but sometimes we get really lucky And this one happened to be that halfway through the acquisition, the NGSRI program popped up, and it made sense all around. And then, of course, the markets, right? Everything we do is almost everything, probably other than e-thinking missiles, but almost everything else is dual use. And so approaching other markets, security markets, industrial imaging, and so on is also important for us and something that we'll continue to do and sometimes expands through acquisitions. Going back to the order of slides we had, we talked through this, some major events just during time. I'm not going to talk too much about the first few years. It was ugly. There was a lot of cleanups. There was a lot going on. There was theft in China. There was a operation that was really extremely inefficient and not set up the right way. There were too many buildings, there were too many companies, there were too much of a lot of things. Anyway, once 2024 came about, or 2023, the Mantis cameras, the visitment acquisition, that was really starting to be the turning point. G5 acquisition, actually a year ago from today, happens to be a major one. But really, what is really coming now is the number of large programs and orders that we are winning and getting into, because over those four years, we set up the foundation for all of that. So whether it's G5 winning more business because they can supply cameras when other people cannot supply cameras, or whether it's G5 winning business because they're part of a larger company, and so some people feel more comfortable buying from them, that means small. or it's because of technologies that we put together. Visamid's uncooled cameras turned into heat seekers, that were black diamond, can actually make something really, really unique there. And amorphous materials, the company has been around forever, probably as old as I am, to be honest, that has been sort of captivated in doing one specific thing and doing only that. we're able to take them, combine them with our Black Diamond technology and achieve something much bigger, so to speak. I mean, physically, bigger in terms of optics and lenses. And so that's the strategy behind us. Now, as we went along, we started talking about Pillars of Growth. It's a concept that introduced sort of maybe three years ago. We've started talking about this. It's not really a formal concept in business school or anything like that, But it's something that stuck and we found it useful to frame things, very useful to frame things externally, but also internally for the team. We're going through a transition. One day we're making components for saying, you know, hey, guys, in three years time, we're going to be a completely different company. You need to explain to people what that's going to be. To us, we chose to say, okay, you know, everything we're doing falls under those three pillars, sort of, of independent activities that have, through them, independent opportunities underneath them. So we're very diversified. We're not betting on one thing alone because sometimes things fall through not because of you. And, for example, here, of those three pillars of growth, two of them were highly successful and really got us to where we are. and the third one didn't and that's okay that's the whole idea of diversification and that's why we have multiple different things we're doing in our example we said three years ago we want to go into more assemblies and cameras well we took that from in 2020 assemblies were maybe half a million dollars a quarter to now more than seven million actually It's a bit outdated. It's probably much more like 10 million. So we said we want to go into government and defense. We identified that because of the Black Diamond, because of the alternatives to Germanium, because we realized that's a really big market, infrared optics. And you can't be an infrared company if you're doing only 8% of your revenue within defense. So we changed that. And that's part of our move away from China, back to the US and Europe, and the direction we're going. that's now government and defense being more than 70 percent per hour revenue. The third pillar that we identified was new application. At first, we thought it would be automotive. It was clear very quickly that that wasn't going to happen. We pivoted a bit to oil and gas and utilities, areas that we thought we could really have an impact there in terms of growth of thermal imaging. Some successes there, mainly in the furnace camera part, some less. But again, that is fun. All of those, when we introduced them three years ago, and we were at about $30 million in revenue, we talked about in three to five years, we want to get to $100 to $150 million. Well, that's happening. I mean, we're well on track to achieve that soon, and so that is a bit of old news, and we need a new goal, and we need a new direction on set. So not a completely new direction, we're still going up screen, systems, cameras, but to frame it as to where the growth will come from, if we look at the same way as three pillars, we're taking something a bit different now. We're saying, okay, for the next few years, if we are to, again, separate the business into sort of three blocks and say they are based on the same prevailing technologies, like diamond, imaging, assemblies, optics that we make, fabrication, coating, and so on. All of our technologies serve all three of those, but those three are somewhat independent of each other and can have underneath them independent large opportunities that could be significant to us. Significant used to be, we used to say a significant opportunity would be in the millions, now that's in the noise a bit. So we'd say, currently we'd say big opportunities because something that could be $10 million not at the more a year. We have probably eight to 10 of those right now. But with this and the direction we're going, that threshold will grow even higher. So let's talk a bit about what those are, those three pillars of growth. First one on the left is the assemblies business. We've tapped into that a little bit through those fixed focus assemblies, what we see here on the screen, and sort of a few barrels, that's a very nice market. We're taking a very good portion of that market already because we can do those with black diamonds that form great. We can deliver them. They're made here in the U.S. We actually can produce them now also in Latvia. So we serve them into the European market and into Ukraine. And we might be selling even more assemblies right now in Europe than we are here in the short term. So successful there. But there's much more than that. There are much more complex assemblies, if you would, where someone would come and say, I don't want to buy a complete camera system from you. I want to build my own camera for whatever reason. And I want to buy just the optical assembly. That business of just optical assemblies that has already players in there, like MKS Ophir in Israel and such, that's a business that we estimated, both we did a top-down and bottom-up analysis, and we got an independent market research done, right? And, yep, I'll agree to spend money on the market research. So the addressable market for us is between $5 million to $1 billion on that level. Optics as a whole or infrared imaging as a whole, to remind you, is currently, according to, again, an independent market research, it's currently at $10 to $11 billion a year.

Speaker 3

So it's a portion of that. Where do those go to?

Speaker 4

They can go to someone that wants to build his own gimbal, let's say, that goes into an aircraft and let someone buy a sensor from someone else. We use certain sensors from certain companies that we chose to use their detectors, but there are others and different preferences and different uses. This could be a camera that is in space. we don't know how to build space cameras right now. That's not something we could do with that entire panel. I'll talk about it in a minute, but we can build a telescope, so optical assembly. This could also go to some of our direct competitors. So companies that make their own detector and want to set a complete camera, like we'll talk about that we're selling complete cameras, but they want to buy the assembly from us. That's fine. I would tell anyone really that they can make money.

Speaker 3

So that's that first pillar, opportunity of $500 to $1 billion, studied in different ways.

Speaker 4

Second pillar is infrared camera systems. To put it, simply think about FLIR. They are now part of Teledyne, because the numbers were public up until a few years ago before they got acquired. You can even look them up, but again, market research and such. This is taking G5 and building on that, taking RISMIT and building on that. So, standard cameras that can go into pods, again, into gimbals, can go into like this camera we see here from G5, can be on the border tower, can be on the truck, can be on a stadium or county UAS. G5 is already probably has a really good stand in the market on those large fixed ones. But there's a whole market of the smaller compact ones, of other wavelengths. G5 does only one wavelength, but there are other wave bands to do, so multispectral cameras that we're starting to do and so on. So cameras as standard products, standard cameras, complete cameras, that has a addressable market between $1 to $1.5 billion. And then the third one is a bit harder to explain, but easier to demonstrate. Large defense programs. Think about those programs we say today we have that are 10 plus million. NGSRI is an example. Navy Spear is another one that a year ago we announced. All of those are programs where we do some development work, painful by the customer, heavy NREs to it, but the real money will be made in production. Those programs, we're not an engineering company. We don't do that for the engineering revenue, That's a nice small thing, but it's really for the production. So those are opportunities like that, like the Apache, like the NGSRI, like the Sphere, where we build on existing technologies that we have. So not developing from scratch. We're not a research organization. We're not developing a completely new technology, but taking something and modifying it. BIO, which last year in the investor meeting we talked about and now is public information because with the press release also out, is a program which we took the high-end camera of G5, so a thousand millimeter camera, upgraded it to some performance specifications that may be wanted in a nearly two-year engineering project, and now it's going to get installed on every naval surface or counter UAS and detecting low-flying cruise results. That's a program of record. It's a public program. You can go and see it. L3 talks about it. I mean, it is based on an existing technology. We didn't develop a camera from scratch. So we believe we can do more of this. What is the TAM here? I can't even tell because the TAM is really more gated by how much can we take of this. So we assume we did some internal study and we said, okay, you know, at G5, we can do X programs like that before it becomes like really a burden and distracts us from other work. In Norlanda, we can do that. So we believe this is large enough that it can be as big as those pillars in terms of revenue it would bring us. And again, you can just look at what you know. We have NGSFI, our programs that we hope and we're rooting for Lockheed to win.

Speaker 3

If they do, it could be anywhere from $50 to $100 million a year for one program.

Speaker 4

So these are kind of what we're talking about in that pillar of growth.

Speaker 3

Now talking a bit about what we have so far in product portfolio, how are we doing going

Speaker 4

OK, so what have we developed until now? Now, I'm not talking about the optical components. I'm not talking about materials. I'm talking more about the subsystems and the base technologies that enable a lot of this. So when I were meant this, we talked about that. Specific cameras for applications like gas imaging, light furnace inspection, of course, the range of G5 cold, long-range detection cameras, CSP Solo, a new camera we're coming out with, which is really a very compact, if you want, heat seeker, but it could be a heat thinking drone could use it, or because that's the way paths that some of the drones are going, or for some industrial applications. And so sometimes we make some bets, we try, and again, diversification is the key to everything. We have to have a few different things. We can't depend on one. And we try something. Like NJR was actually an attempt at some phase to integrate AI into the camera that was not that successful. And I bring it up, even though I should be hiding things that aren't successful, but just mentality-wise, from a concept, diversification in everything we do is extremely important to us. It's something we drive through as a team. Never bet on one thing. Don't bet on one program. Don't bet on one technology. Keep trying. Something will stick. And sometimes they don't stick. Okay, our black diamond glass. Obviously our pride and joy and a huge enabler to a lot of what we do. So I mentioned there used to be two materials that were more generic. One of them we discontinued. One of them we still do and quite a bit of, BD6, but there's really a whole portfolio of material. To put it into perspective, the next company after us has probably five types of glasses they make. Between light bulb and amorphous materials,

Speaker 3

we have now something that is close to 20.

Speaker 4

So we are by far the largest selection of infrared materials anywhere, period. And we're probably now by far the largest producer of infrared materials between a whole piece and light bulb. And as those of you that were here saw on the tour, we have some very grandiose plans of expansion there because we have to actually have way more orders than we can make glass for right now. But what is unique about this glass? Well, first of all, geopolitically, it's an alternative to geomagic, right? it's not a one-to-one replacement to germanium nothing ever is but in the world of optics you can design your systems now without germanium or without gallium by using flashlight optics accounts for 25 percent of the germanium the u.s it's a public market research actually done for the u.s congress some years ago and it's public information 25 percent also however many tons CUSD or for GIMRIC or for optics. We solved that problem for the optics part. We don't solve it for the other 75%. So germanium is very, very critical in solar cells, okay? If you don't have germanium for solar cells for satellites, the size of the solar cells would be three times as bigger as much as they are today. So it is much more important to direct the germanium there where you don't have an alternative than to optics where we provide an alternative. And that has always been part of our pitch to the government. That's something DLA, Defense Logistics Agency, understood very, very well and why they've been financing part of this and so on to free up germanium to places where you don't have right now an alternative. So besides alternative to germanium, it's made here in the US. germanium, gallium, those are crystals. They are grown by taking raw materials and feed out and growing it into a crystal, and you get a pure metal out of it, which then you can dope a little bit and turn it into office. Ours is a glass. A glass is not grown as a crystal. A glass is melted. That means we can scale it much better in terms of production. you've seen here, that means we can also change the properties of it. And that's why we have 20 types of them where germanium, we have just one. Germanium properties are whatever germanium is. You cannot change them. So germanium transmits mid-wave and long-wave. It cannot transmit short-wave infrared. No matter what you'll do to it, it will not transmit. Silicon can transmit short wave and mid wave, no matter what you're going to do, it's not going to transmit long wave. And so those materials that were used until now, think selenite and sulfide, germanium, silicon, all this is whatever properties they have, they're all crystalline materials.

Speaker 2

Glass, on the other hand, or synthetic glass, if you would, they're like chemistry,

Speaker 4

but you can change it. I can add a little bit of that, a bit more selenium, a bit less gallium, or whatever materials are in there. They actually don't use gallium. And I can get a different composition. I can fine-tune it. That is what label research and laboratories did for years. That's what the guys in Texas, amorphous materials, also know how to do very, very well. So amorphous, other than label research laboratories, amorphous materials was probably the only group in the U.S. that can come up with new compositions of glass or has been coming up with new compositions of glass. So the acquisition of Amorphous was also a bit different that way. It's like, okay, we have an exclusive within our end. Let's also get whoever else, you know, might be playing in this or could do something. And so, you know, lots of properties, lots of things we can play with. And so with them, we can get to some really unique advantages, which I'll explain in a second or give some demonstration. But just to summarize those, you know, we reduce supply chain risk. We have a lot of advantages on properties because they are chemistry and not crystal. They're manufactured in-house. You've seen them here. We acquired amorphous materials for a number of reasons. But one of the reasons we acquired amorphous materials was because we like to jokingly say, or I joke about it, I'm not sure everyone else finds it funny. We were one hurricane away from losing capacity. I mean, we're in Orlando. we make anything we do in the company, pretty much, we do in more than one location except glass. Glass was done only here in Orlando. And so it actually, the company did have a time where it shut down because of a hurricane and the flooding and that impacted the glass manufacturing. We couldn't do that. So having another location now in Texas that makes glass

Speaker 3

is a backup as well as many, many other things. Okay. And then other advantages that it has,

Speaker 4

Glass can be molded. You can melt it and reshape it. Crystal cannot be. Crystal, once it's grown the way it is, the only way to make a lens from it is to remove material until you polish it into the shape you want. Glass can be molded. You've seen here on the tour, Lightbar is known for molding. We keep extending the technology more and more. For the very large cameras, it makes It's less of a difference there, but for the small ones, if you're talking about the lens assemblies that go, the small ones, like we see here in the image, all of those lenses in this picture are mold, which means we can make 4 million a year of them with the molding machines that we have. If we needed to make 4 million geranium lenses a year, we would need to have this entire building filled with diamond turning and polishing machines. So it's a scalable technology, and you can do that. And then, you know, there's coatings we developed to it, a lot of qualification. We talked about that and so on. Advantages, since I'm a technologist or a failed engineer, as I say sometimes, I like to talk about the technology. What are the advantages of Black Diamond? Replacing germanium, everyone gets clear. There's much, much more to it than that. You look at the gimbal, like you see here, a payload, and you see multiple windows in different colors. Well, one of them is a laser and that needs its own window. But all of the three, the three large ones, are the cameras. But why do you need multiple cameras? You need them because they're looking at different wavelengths. One is a visible camera, maybe a black and white, maybe a color camera. Another one is probably a shortwave infrared camera because that can see you fall through haze, sometimes through clouds very well. And the third one is a thermal camera because it can see in very long distance and probably a mid-wave camera. But what if you could combine them into one camera for those all three? You would save tremendous space and weight, not to mention the cost, but also power consumption. right? All these drones, the power is consumed. You want as much power for the motors as you want for, as you can, for distance and time up front. And so the government, different branches of the government with different data and so on, have been working at developing sensors that can image multiple wave bands at the same time. So these are programs you can go and you can find some public information about them, some are not public, but there's enough there that you can find it. What wasn't available was the material, the glass. As I mentioned earlier, geomanium transmits mid-wave and long-wave. It cannot transmit short-wave. Silicon can transmit short-wave and mid-wave. It cannot transmit visible nor long-wave, nor near-infrared, which is what colloquially is called night vision. These materials, because they're kerosene, because they're not a crystal and they're fine-tuned, that is why NRL developed 20 materials like that, because they give you lots of different properties that they carefully fine-tuned to be able to see what we are showing here on the left. One system that can actually image maybe all wavelength, spirit, eukaryte, and that's the mantis. If you recall back, we talked about the mantis, the camera that does two wave ramps. That's why it's so important. That's why black diamond can make it happen. You couldn't do that without those materials. It also comes into play in reducing the overall size and weight of the surface. In visible light applications, like cameras that we're used to, you know, like the big Sony SLR and so on, these big lenses and so on. There's 300 something types of glass that can be used to make those cameras. You can choose the most perfect glass for your application. In Zinfrared, there were maybe 10 materials. The germanium, the silicon, the selenite, sulfides, and maybe 5K glasses that were made by shuttles. Now we're adding 20. So we're adding much more variables for engineers to play with. And what do engineers like to do is they like to design stuff. And so when they design a zoom lens, like this is an example from a paper published with the Army, I believe, Army Night Vision Lab, of a zoom lens, and attempt to make a zoom lens that would do both mid-wave and long-wave simultaneously, systems that already are starting to exist, where existing materials would require 21 individual lenses. Huge weight, cost, and a lot of optical loss because every time the light goes in and out of the lens, you lose a tiny bit of light, even though the coatings help. With our materials, because they add so many valuables and capabilities, you can take this down to 12 elements. It's hidden down here, but it says 12 elements. Then you gain a significant weight advantage, you gain higher throughput of light, you gain a cheaper system. I mean, and the weight translates again to longer range for the drone. So these are some of the examples. People keep asking, well, why do you need 20 materials? I I mean, there isn't one enough to replace germanium. This isn't about replacing germanium only. Replacing germanium as I will weigh in, that created the need for everyone to take a look at what's out there and what can I do. But once they look at it and see what it is, they realize, oh my God, I can do much more

Speaker 3

with these materials than I can do with germanium.

Speaker 4

Okay, one area I want to talk about specifically is, you know, next frontier, so to speak, from Captain Picard's words, large diameter optics and specifically for space applications. We were making glass in 5 inches diameter. We could slump it, a process that would allow us to get sometimes to 7 inches in diameter lens. That was okay for like the camera we see here, what's called the mid-range camera of G5, whereas the front lens is about 140 millimeters in layers, I think. So we could probably make the lens for this. We couldn't make it for the large cameras of G5, which is really where the big revenue is, most of it. And we definitely couldn't do it for the space applications, which are a very fast-growing area. And so in space, to do multispectral imaging, because materials like Black Diamond didn't exist before, you use VIRITs. you use some very, very large mirrors to build a telescope that can image in both short wave and mid wave and long wave and visible. So what you see here, this satellite, you know, the reason they were the size of a bus is they had like, think of a classic telescope with a not a Newtonian, a reflective telescope with massive mirrors, off axis and on axis. Think about not the Hubble but the James Webb telescope. What was it? It's a massive mirror. Just they had to unfold and there's so many of them. But with Black Diamond, you can do it in a refractive way instead of reflective. For the geeks among us, that means you pass the light through the lens instead of reflecting it in order to shape it. But you need large diameter. These are the longer you want it, the longer away you are from what you want to image,

Speaker 2

the larger the optic needs to be, basic geometrical optics, you need to get to at least 10 inches in

Speaker 4

diameter, sometimes as much as 15 inches. We couldn't do that with our technology. Amorphous can do. And so the acquisition of amorphous materials enables us to make up to 17 inches in diameter as a second manufacturing location, as our technical capabilities big time, or more importantly, takes away from competitors' technical capabilities to develop others, and gives us another set of materials that they develop. So this acquisition is significant in many ways. I get asked, what's the size of the market? What is it? So pretty easy way to calculate public information. SBA, Space Development Agency, last month, I think, or two months ago, awarded four companies to build 72 missile tracking satellites. Influencers by far, there's no other way on that, three and a half billion. $48 million per satellite. Rule of thumb is the entire optical payload with the sensor and with all of that is about one third of the value. And of that, there is a telescope, optical telescope. Again, we're not going to go and to do one third of a $48 million way. We are not gonna do $16 million per satellite. We're not there yet maybe one time down to both. But we are gonna do a very big chunk of that $16 million, which is the optical telescope that again is enabled by our materials. So a pretty significant capability for us

Speaker 3

that I think will play very nicely.

Speaker 4

Okay, counter UAS, we talked a bit about it. I just have to keep emphasizing because it's like every major one that we announced, like the nine point something million only a week or two ago, 20 before the thing. Most of them are heavy on the counter UAS. It's a very, very fast growing market for us. It's an incredible market. And cameras from G5 fit perfectly in. And every one of those systems that you see, a laser system here, a remote weapon system, or just an infection system, all of them pretty much are using those same cameras, those same technology. So that's very fast growing for us. G5 is the best in class by far. I mean, you can go and we have some information published. You can go and you can see what's called the DRI, the Detection of Recognition Identification Ranges. We published them on that with off-day material. You can take a look at, for example, last week, FLIR was doing a new 1,000-millimeter lens or 1,000-millimeter camera or similar applications. And you can see their DRI, what their detection recognition identification ranges are compared to the G5. I'm not going to, you know, spell it out for you, but it's easy to find, and the numbers are staggering at how much better we are. So to put it into perspective, for those of you that know the DC metro area, if we were to put our 1,000-millimeter camera on a pole in Washington, DC, we would detect a tiny drone like this, like this DJI, flying over Silver Springs or the sensor.

Speaker 1

That's the kind of breakthrough tool.

Speaker 3

Okay, a bit about commercial applications, really quick.

Speaker 4

not a huge part of our revenue now, but always is there because pretty much everything we do are those things we do or do on you. So cameras can be used for, same cameras that can be used for detecting a drone, can be used for detecting someone at the seat, for example, or things like that. So there's some security applications, some pure industrial applications. We talked about gas imaging is up and down. In Europe, it's up. In the U.S., it's a bit down with the current administration, so I'm not sure about that one. But if we look at furnace cameras, something we've talked a bit about in the past, our Mantis camera offers the ability to image inside a furnace running at thousands of degrees, 2,000 degrees Celsius in this case. So this is what a power plant furnace would look like, and you have the burners, and you heat up the water, and the pipes goes there and the ash goes down that's about as much as i understand of that but you want to all the time monitor what's going on you want to monitor what's going on because ash can build up on the pipes like you see here at the top or it could clock in the burner or it could fall down in one big heap and cause a massive dent down here that can impact your performance or the worst of everything a water pipe can burst and start leaking and you wouldn't know it without imaging inside that. Every single furnace like this, whether it's a power plant, a paper mill, a steel mill, or thing, has multiple of those. In this case, three cameras. Those are kind of the images you see in there. We sell those for $20,000 to $30,000 a piece. So that's one example of a nice application that we're really enjoying and managed to be condensed there. Talking quickly about program. I do not have any news about NGSRI. I will only be sharing whatever not teachers publicly with a very critical point of the program right now, and we have to be extremely sensitive both in terms of competition and that we're under very strict directions there. But everyone knows the potential there for us is per missile five to ten thousand dollars and the volume of missiles could be up to ten thousand dollars, ten thousand missiles a year at full rate production. You can do your own homework and estimates of how many missiles the Army is going to want, when and how, that's roughly the numbers we share. The SPHER program, the Shipboard Panoramic Electro-Optic Infrared. The full name of it is a program in which we install on every Navy surface vessel at least two ultra long-range cameras, sometimes four. The US has some hundreds of vessels. It finds the numbers publicly. Again, I'm not going to go into those, but we expect it to be at up to $20 million a year. We are right now actually shipping first units for that, And I'm expecting the ELRIP. ELRIP stands for Low Rate Initial Production during any day. And the Border Patrol, where we went into this knowing that G5 went into this acquisition, knowing G5 provides Elbit of America, the cameras, Elbit of one of three players there. We are now providing the cameras to at least two players. We might be providing two three players, for example. the number of towers went up significantly. They were talking about 300 towers, now it's like 1,200 towers, adding towers along the northern border, because apparently Canadians want to infiltrate as well. I would make a joke about hockey and thing, but I don't know. Lots of other programs I'm not going to go into all of, so we don't have enough time, But just some looking ahead, this is here on, okay.

Speaker 6

Oh, no, you've got swine after this.

Speaker 4

I can rest a bit.

Speaker 6

You can take a swig. So what you really want to know is what's going to happen next, I think. And so backlog at the end of December, 97 million. Little spoiler alert, it's 103 million as of yesterday afternoon. So we're tracking pretty well against our overall revenue goal there. We looked at the backlog a little bit. It's 85% of the backlog is defense, surveillance, security, and public safety. And I call out those four things because, as Sam said, our products are dual use. So some of them are not really purely defense. Public safety, for example, is not purely defense. But it's the same system. This could be just for public safety or it could be used for defense. 30% of the backlog is commercial. However, caution you, commercial orders tend to be shorter in duration, three months, six months. So the backlog doesn't reflect like defense would. Defense tends to be long-term, 12 and even 18 months of orders. You don't normally get that from the commercial side. So I don't think the revenue split will be 85% defense and 15%. The interesting part here, though, is 70% of that backlog is scheduled to be shipped

Speaker 3

in the calendar year of 2026, so that will give you an idea of why we're up to, what we're up to these days, but, hang on, okay, some of the near-time pipeline opportunities,

Speaker 4

I'll emphasize opportunities, I'm not saying we necessarily want those, or it gives you a sort of where we're dabbling about and what we're playing with. So counter UAS, I mentioned a few times, just to mention free program, an example, the FIFA World Cup, very big one, actually started awarding some. Every stadium has to be protected for counter UAS. This is now being well below, well over the FIFA, where we know of NFL teams that are looking at our systems and testing them for drone detection. and such. Again, we don't shoot down the drone, right? So it's more of a knowing that it's there and being able to take different actions. But the optical system or eyes on the target or a must for any drone detection system. So there are many other technologies there. There's radar, can cue, there is acoustic detection. There will always in every system be at least one camera there. You have to have a visual. All these other things can never get you guaranteed to know that, you know, that's a drone and not a bird or a plane or a thing. And we've seen images where it looks even as a visible camera as a drone, and you realize it's actually a plane just way further up. So you need a lot of those technologies working together. Integrators, there's a lot of software behind that. Department of Homeland Security, DHS, has a few programs. One is for border patrol, one is along the border, so I guess that ties into everyone knows now about the lasers that was used to or tried there, and some are internal in the U.S. Then you have the Defense of National Capital Region is another one. And then you have the Air Force Sewer System, SUADS, which I talked about. So three different systems there. Wheels, camera of choice in every one of them. They're being deployed already around every Air Force base, at least in Europe and later maybe. Other things, we have additional seeking opportunities. I would say that to some degree, Vizibit has turned into a sort of heat-seeking expert, if you would. The NGSRI has driven quite a bit of interest and quite a bit going on there that we have quite some there. Space programs, we talked about. Optical assemblies for FPV drones, we do a lot of things. We just do a tremendous amount of those assemblies, like we saw in that image, those tiny one-lens, two-lens assemblies. We produce them now also in Rico because they produce them to some country nearby, in very large volumes. And the different programs here, from Dominant or whatever the name it is, pretty much all of them have this in some high volume. We are not playing on the tall camera side in that. That is more driven by the sensor companies like FLIR, the OS and such. But we are providing the optical assemblies for most of them.

Speaker 3

And then we have existing missile programs.

Speaker 4

Some of them have been going on for years. Light Pathway, for example, has publicly talked about making optics that go into the A9 side window. You might have seen images of it here. We're very proud of it. It's been ongoing for many, many years. Those are scaling up. Every missile program we're in, existing program, is pretty much tripling in size and production throughput. So we're enjoying that too. So what's coming up with the pipeline, just to give some taste there. So obviously on G5 side, quite a bit, the redesign of the cameras by end of the autumn, we'd like to have all the cameras using Black Diamond instead of Geomania. Performance is the same or improved. So So you wouldn't even be able to know it's a different camera design when you look at it, even when you take it apart, to be honest, you wouldn't probably know that. It's the same size, identical size, weight, interface, nothing changes in that. Optical performance is at least the same. In some cases, it's even a bit better. So we're redesigning the 1,000-millimeter camera. With the Black Diamond, we actually might be able to push it to be a 1,030 millimeter. So it's small, but it's actually a real bit cancer. So that's a very big effort inside the company. On the optics side, we continue to expand offering by adding more and more of those fixed focus assemblies. They work with detectors such as FLIR's Ozone, ER's Tenem, and so on. And sometimes we provide them to customers that buy from them the detector and assemble it. Sometimes we provide them to the company that makes the detectors. For example, SeekFirmal is one of those companies out in Santa Barbara. We provide them with all their optics that goes into their cameras, and it's being talked about publicly. Driving the TRL level, technology readiness level for more of the NRL compositions, That's now with effort by Steve Mielke and the team in Amorphous helping a lot there. All the times, more and more design wins for Black Diamond in defense programs. And for the Amorphous materials that we acquired, I mentioned Amorphous had a portfolio of eight materials, some of their own. Amorphous never offered them as optics, only as raw material for others to make lenses pop. So of course we can immediately offer lenses if anyone wants, but more importantly is between the 14 coating chambers that we have in Riga, in G5, in New Hampshire, and here in Orlando, we can also are developing coatings for all those materials. So we'll be able to offer much more of that. So our offices revenue is probably about three million a year, two, three million a year, give or take only of selling the material. We'll expand on that because we can offer much more now.

Speaker 3

All right, so our approach to M&A,

Speaker 6

Sam actually said a lot of this already, so it's a little bit of a repeat. Obviously, it's a creative. We do not want to buy a fixer-upper. We want something that we can plug and play into our organization. Obviously, technology, product, we're looking for something in a fast-growing market segment. Culture, we're looking for strong cultural fit. I'll come back to that. Growth, so far, we've identified companies that are pretty great stage. BusyMed, G5, and dare I say, Amorphous, and we'll have 3 million a year from now. I'm hoping we'll tell you something completely different there. Not so easy to find. You really have to spend a lot of time up front in, you know, pre-due diligence just to get to know the firm. So definitely looking for companies that fit that profile. And vertical integration, so anything that helps us in our strategy of vertical integration. Why I want to jump back to culture is because culture eats strategy for lunch. I didn't make that up. You guys know that. So culture is very, very important in terms of the post-merger integration process, so that what we buy fits, right? And we don't have that hurdle.

Speaker 3

We have every other hurdle in integration, but not that one. Pathway to profitability.

Speaker 6

This is now just a summary of everything that's set up until now, right? We're in a multibillion-dollar infrared imaging market. Black Diamond is a differentiator. it's an alternative to germanium of course but it's also technologically superior right in a bunch of different ways strategically or directionally we're a solutions provider that doesn't change uh we have 90 million sorry for that 103 million as of today uh in backlog and it is predominantly going new commercial application sim went through um we didn't talk a lot about this. I did have some side conversations with a few of you about efficiency within the design team, taking design to manufacturing and manufacturing itself. Having this level of backlog, we have to be very efficient on the back end. But ultimately, our pathway to profitability comes through revenue growth. But it's not like we're not doing the blocking and tackling to get things right as well. We do both of that. And we're We're sizing the company, the production, the new product introduction, happy, for capabilities to trust revenue in excess of $300 million in five years.

Speaker 4

Sam mentioned $150 million. It's just no longer a chat.

Speaker 6

Five years ago, he said $100 million. Even three years ago, I said $150 million. Sam believes in being ambitious, so we are literally building an organization to do that. All right. We talked a little bit about the facilities. Sam did mention that the one place where we had, we didn't have backup was glass and in Orlando in the next, well, the acquisition solves that problem, but certainly within the next three to six months, we'll have sufficient dependencies in both areas. these are great locations by the way you know if you're in the defense and commercial business these are great footprints for manufacturing and being sort of the right place at the right time for engineers and competency in the markets that we play in yeah well everybody always wants to know about cash right because we're small companies how much cash you guys didn't eat I'm not going to give you an exact answer but we had 73 and a half million cash on hand as of 1231 we also paid off so uh 5.4 million dollar note for as part of the g5 acquisition so that was done before december 31st as well for fiscal year 26 we obviously just already did the ami acquisition we have the g5 burnout that actually is three days from now um we started the capex expansion for those of you here physically you start started you saw some of the work that's being done certainly not all. And most of that will be here and in Texas. And for the fiscal year will be operating cash positive at the operating level. And fiscal 27, G5 earnout, these are major cash events we've called, G5 earnout number two, continue the capital X expansion, you know, more related to growth and capability. If you imagine that chart to the right, we definitely have our our work cut out for us but we'll finish fiscal year 2027 well positioned on cash uh 65 million dollar raise does put us in a different position and we'll have dry powder for acquisitions even you know if you allow me so yes yes true it's not just me

Speaker 3

but we're positioned pretty well even then right so we're in we're in a good spot uh question i do

Speaker 6

get asked uh often is sort of where we are in terms of shares and dilution the common shares are 55 million out there that's the basis for the dps you saw that in the filing in december uh we just come up with sort of the all-in comment if you convert the series g uh and pet preferred which is for the g5 acquisition there's no more warrants outstanding so that's great those are gone uh g5 and don't ask and just your general stock that dips for director is on and our esop program and everything else um we're sort of fully diluted about 73

Speaker 3

though. That opens it up for questions. Yeah. We're taking virtual questions, also, or just

Speaker 5

here? Yeah, just here. Okay. Hit me. Hi, Austin Moore, Canicourt. So, I cover a lot of satellite companies on the electrophical and infrared side, Maxar, Black Sky, Manaric, et cetera. And so, I was just wondering where you think your products would be strategically positioned in the telescope sector. I know like Raytheon is at the very high end and then there's like DRS that's becoming involved as well. And so I guess it's based on like 17-inch diameter versus some of the other really very high-resolution, exquisite telescopes where your products make sense. Yeah, so I'd say from a supply point of view of stuff,

Speaker 4

there's something like L3 Harris, for example, that have extensive design capabilities in health. they're not going to design in production. They would probably want us to make the optics, but maybe not for telescopes. The newer player that new entrants tend to be, they're focusing on their strengths and not trying to do everything for themselves. And so in those cases, we could be supplying a fully assembled telescope. In terms of size and such, it's very dependent on functionality and distance of the satellite. So lower orbit, geosynchronous, such can be a very different one. The SDA has been talking about what they call a neighborhood satellite. So I guess sort of in the sense of satellites that are so specific to an area they almost like cover a neighborhood or a very small portion. Historically, because the satellites so expensive, launch so expensive, everything, you would have one, two, three mega satellites sitting in geosynchronous and imaging the entire half of the planets they can see. Now with lower orbit with constellations, is about hundreds of satellites, thousands of them, almost disposable. So on one hand, short lifespan of two years. On the other hand, launch is already becoming so readily available as programs talking about having an inventory of satellites ready to launch at 24-hour notice so that they can launch and cover specific areas when they need it. So I'm not sure if that answers the question in full of it. That's how I see it.

Speaker 5

And I would assume the replacement cycle there on LEO and VLEO is obviously very favorable to your operation.

Speaker 4

Two-year crunches, pretty much. So the commercial go much faster, and we work with quite a few of the commercial ones. The planning of SDA and those guys are crunches every time.

Speaker 2

Maybe a question for both of you on M&A. You had a slide there and talked a little bit about it. I'd love to get your sense of a few different things here. I guess the first thing is, excuse me, about where, you know, any other, so the ones you've done so far, which obviously have been successful, other than Amorphous, which seems like it can be very successful, but it's been a company you've known very well and even worked with. I would also imagine another avenue to identifying these companies is through Defense Primes, who, you know, might see us, Visumid is doing some great work, but it isn't big enough. Are you seeing that as another avenue to find these companies, and then ultimately what's the appetite for doing something in the next year of any real size like G5? So, of course, the appetite.

Speaker 4

Definitely so. We're actually seeing it all sometimes the other way around. We're seeing a small company. We love the potential, and we validate within Defense Prime that they're really going to be a major part of it, or the Defense Prime is thinking of them for a specific program. or so on. So it's kind of similar to Visumit in a way, you know, Visumit, we didn't come across them because of NGSRI like that. A map located basically during the due diligence when you contacted them that they would be thrilled by that, and it worked out very well. They are morphed. They are morphed to the 8% of their revenue or so goes to one very large defense prime, and that defense prime was ecstatic by the fact that we picked them up they're part of our family now. So definitely see that as a possibility. We try to keep in touch with the defense time to make it clear that, you know, that is something we're open to discussing when they have that. Not always know who are the right people to talk to there, but we try to do that. In terms of appetite, the answer will be very different here. So I have an appetite all

Speaker 3

the time. But the team, you know, is very, very stretched, like sides pretty much. We're on track

Speaker 4

to continue at a very breakneck speed. We have a lot of different things we need to execute on. And even though the size of our bench has increased, you know, three years ago, through an acquisition, it was the two of us. We did the entire due diligence and everything, and pretty much, or with Natalie actually doing most of it. But now, you know, we have a bigger bench, and we have WIPs acquisitions, came more people, very, very talented people, and we recruit more seniors so we can do a bit more. But the Morphids one moved very, very quickly. I mean, it was like less than two months from concerts, from contacting them to closing the acquisition. So I think the team needs to signal to me when they're ready. But we definitely have the opportunity. We have an interesting pipeline and the nice thing about having cash in the bank and about showing that you've done three successful acquisitions is

Speaker 6

people stop calling you. You know anybody, Richard, you'll have to know.

Speaker 3

In terms of capacity expansion, you're talking pretty aggressively. When we think about CapEx

Speaker 2

for that? Is it pretty linear or are there any sort of long lead time, big step function capacity that has to be added or is this a pretty linear process?

Speaker 4

The next 12 to 18 months will probably be a bit heavier because we need to catch up on some traffic that we were sort of not doing when we were playing on cash and couldn't do And we're launching some, you know, very significant product lines. And after that, it's pretty new now. It is the, again, the higher value items, if we go to the value of food chains and less capex intensivity, right? So we're starting to benefit from that. I mean, the old life path would meet very significant capex and percent of revenue

Speaker 3

compared to what we need there.

Speaker 2

Yeah, just you've mentioned sort of this three to five year window, is that just based on kind of other competitors that will catch up from a product standpoint or just given the number of

Speaker 4

programs you were? Oh yeah, it's just paranoia. It's based on the assumptions that no one is sitting back and just letting us, you know, eat their cake and take their lunch. People are working on alternatives to a lot of alternatives to Germany. U.S. governments and other governments or working on getting production of germanium. But it's also, as we've shown, our materials are also a lot more than just alternative to germanium. So it's more of a, we have a golden

Speaker 1

opportunity right now to be a bit more aggressive and capture more significant infrastructure.

Speaker 3

Mark Jeffries and Mark Sandler, I was just curious about the implication of the cost

Speaker 2

structure as you decontent G5, you know, is this a place where there's immediate cost benefit or will you have to scale into those new products of BlackBandry?

Speaker 4

It didn't cost G1. On redesign G.7? Let me put it this way. When Germania was $1,000 a kilo, we were struggling to be competitive with BlackBandry. When Germania was $1,000 a kilo because China was subsidizing it heavily to drive all other players out of the market. When Germanium went up to $2,000 a kilo, which happened after the first announcement of China, Black Diamond became competitive easily. Germanium is now at $6,800 a kilo, and we're not planning to change the pricing of the cameras of G5 when we

Speaker 1

fix them with Black Diamond, so we'll benefit from that. Any other questions?

Speaker 2

yep please um kind of looking at the technology product development i'll see more of a technology question here but um amorphous materials acquisition gave you um bigger geometries yeah black diamond is a different material composition and then you talked about coatings is there any other major elements to you know today's uh differentiation or where you may be going like are there other angles of differentiation you can add in the future um yes but i'm sure

Speaker 3

you know that's the point of sharing some too much um you know it ties into the three

Speaker 4

to five year it's we get we never have a vexed and say this is what we have and that is it um you know the things we can develop and do now with an office with people like you know Steve Milkey here and capabilities of the different teams that will keep creating differentiators. I don't want to share too much about what they are because it's a public podcast. I don't know who is everyone listening, but we're investing some of our money in our part of R&D

Speaker 2

to continue to develop differentiators. And then just a quick follow-up on two of these angles here so obviously amorphous gives you the bigger diameter lens is up to 17 inches is there a need and interest in going much bigger than that i'm not familiar with any need right now then you said you have 20 material systems in the black diamond profile maybe not just in black diamond but in total like how many more could there need what are some ways that you're learning something so some other types of materials we might look at doing down to both so

Speaker 4

For example, the Black Diamond, which I mentioned, cover long-wave, mid-wave, short-wave, some of them cover the near-infrared, none of them cover the visible. We've been focusing on infrared, not because we want to do just infrared, but because when we decided to do the shift, it was clear that the visible was much more crowded in terms of technology and established technology, where infrared was changing, and it was an opportunity for us to enter. But our technologies of making the materials, whether they are an amorphous type of material or other types of glass, or fabricating from them and building systems could apply to visible light, or to ultraviolet light, apply to our friends. So, you know, we could see ourselves going down

Speaker 5

that path. So obviously, there's a lot of opportunity right now on the military side with like the drone dominance program and the initiative to procure 2 million drones in the next two to three years. How does, on the commercial side, the ban, the FCC ban on Chinese drones open up the opportunity for a white path? And how might you think about optics for commercial drones in the US and your revenue mix? So I think the drill is still out a bit in

Speaker 4

how exactly the FCC ban is going to roll out. It's been, on one hand, it was, for those that don't know, the FCC ban was supposed to be the DJI ban called colloquially. And it turns out when they published it, that the FCC is banning any new drones or critical drone components from any country outside the US. But in fine print, unless DOD or DOW now and Department of Homeland Security provide an exemption to those companies. So I don't know yet what the level of that exemption is going to be, how it's going to play out to the cameras. I do know that there are companies looking at doing final assembly for the cameras here in the U.S., so not necessarily building the entire camera, but doing the final assembly. And in that case, they will need our thermal imaging assembly. So those same fixed-focused small assemblies that we were showing, we provided a lot of them to job companies. We were not looking at providing them. We were not thinking that would be necessarily an opportunity for the U.S. part that much because we thought the cameras would be coming from Taiwan, where they produced those lenses, similar lenses in volume. Now that it looks like they would need to be assembled here, it is very likely that those assemblies we're going to need to produce here. and Israel-Pierre Giovanni, our VP Manufacturing, is tasked with scaling up that production here in Orlando. So there's a good opportunity there. We're probably not going to go into the complete camera part for the smaller drones. That is driven and dominated by whoever makes the sensor. So we're less positioned to be able to have a dominant position there, so to speak. but the larger drones where it's a payload and more than just a tiny camera, there we can start providing with our newer compact cameras and Zoom. Richard? Quick question for Al. You mentioned

Speaker 2

being operating cash flow positive in fiscal 26 and 27. So those include or exclude the G5 or notes?

Speaker 6

and exclude it, except it would be financial or investment, so just at the operating frame.

Speaker 3

Okay. All right. Thank you, William. This concludes today's webcast. Thank you for attending. You may not disconnect.