OPXS 10-K & 10-Q changes, risk factors and insider trading
Optex Systems Holdings Inc · Nasdaq · Optical Instruments & Lenses · CIK 1397016 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “A delay in the completion of the U.S. government’s budget and appropriation process could delay procurement of our products and services and have an adverse effect on our future revenues.”
Largest changes
“Economic and political events in the past few years have altered the landscape in which we and other U.S. companies operate in a variety of ways. In response to inflationary pressures, between January 2022 and July 2023, the U.S. Federal Reserve incrementally raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. …”see in full comparison
“The volatile global economic and political environment has created market uncertainty. A slowdown in the financial markets or other economic conditions, including but not limited to global supply chain issues, inflation, fuel and energy costs, freight costs, lack of available credit, sovereign debt crises, interest rates, and tax rates, may adversely affect the Company’s growth and profitability. In response to inflationary pressures, between January 2022 and July 2023, the U.S. …”see in full comparison
“A delay in the completion of the U.S. government’s budget and appropriation process could delay procurement of our products and services and have an adverse effect on our future revenues.”see in full comparison
We are a “smaller reporting company” as defined in SEC regulations, andsee in full comparisontheareduced“babydisclosureshelf”requirements applicableissuertobasedsmalleronreportingourcompaniespublic float, which may make our common stock less attractive toinvestors.investors due to the reduced disclosure requirements of smaller reporting companies and certain limitations on our ability to raise capital as a “baby shelf” issuer.
“If a contract has a single source supplier and that supplier fails to meet their obligations (e.g., quality, delivery), then we would seek to find an alternate supplier and bring this information back to the final customer. Contractual deliverables would then generally be re-negotiated (e.g., specifications, delivery, price). As of September 28, 2025, approximately 83% of our material requirements were single-sourced across 104 suppliers representing approximately 96% of our active supplier order values. Single-sourced component requirements span across all of our major product lines.”see in full comparison
Each contract has a specific quantity of material which needs to be purchased, assembled, and shipped. Prior to bidding on a contract, we contact potential sources of material and receive qualified quotations for this material. In some cases, the entire volume is given to a single supplier and in other cases, the volume might be split between several suppliers.see in full comparisonIf a contract has a single source supplier and that supplier fails to meet their obligations (e.g., quality, delivery), then we would seek to find an alternate supplier and bring this information back to the final customer. Contractual deliverables would then generally be re-negotiated (e.g., specifications, delivery, price). As of September 29, 2024, approximately 7% of our material requirements were single-sourced across 10 suppliers representing approximately 15% of our active supplier order value. Single-sourced component requirements span across all of our major product lines.
Full comparison: every changed paragraph (14)
Economic
and political events in the past few years have altered the landscape in which we and other U.S. companies operate in a variety of ways.
In response to inflationary pressures, between January 2022 and July 2023, the U.S. Federal Reserve incrementally raised interest rates,
resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing.
World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy, including
by exacerbating inflationary and other pressures linked to COVID-related supply chain disruptions. In addition, the threat of a larger
war in the Middle East after the Hamas terrorist attacks on Israel could affect oil prices and have other, potentially recessionary,
effects on the global economy. Prolonged inflationary conditions and prolonged periods of high interest rates could further negatively
affect U.S. and international commerce and exacerbate or prolong the period of high energy prices and supply chain constraints. At this
time, the extent and duration of these economic and political events and their effects on the economy and the Company are impossible
to predict.
Approximately
96%99% of our contracts contain termination clauses for convenience. In the event these clauses should be invoked by our customer, future
revenues against these contracts could be affected. HoweverHowever, these clauses allow for a full recovery of any incurred contract costs plus
a reasonable fee up through and as a result of the contract termination. We currently have eight customer awards, representing $1.1 million
of our current backlog, which are associated with two government prime contracts pending termination. We are currently unawarein negotiation
with the customer regarding the final termination claim amount, but expect to recover all of anyour pendingincurred terminationscost onto ourdate, plus a reasonable
existingfee, against these contracts.
A delay in the completion of the U.S. government’s budget and appropriation process could delay procurement of our products and services and have an adverse effect on our future revenues.
The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a CR, which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle, but does not authorize new spending initiatives. When the U.S. government operates under a CR, delays can occur in the procurement of the products, services and solutions that we provide and may result in new initiatives being canceled. We have on occasion experienced delays in contract awards which affect our future revenues as a result of this annual appropriations cycle, and we could experience similar declines in revenues from future delays in the appropriations process. When the U.S. government fails to complete its appropriations process or to provide for a CR, a full or partial federal government shutdown may result. A federal government shutdown could result in delays or cancellations of key programs and during extended government shutdown periods, the delay of contract payments, which could have a negative effect on our cash flows and adversely affect our future results. We refer also to “Item 1. Business – Market Opportunity: U.S. Military” of this Annual Report on Form 10-K for a description of current trends in U.S. government military spending and its potential impact on the Company.
The volatile global economic and political environment has created market uncertainty. A slowdown in the financial markets or other economic conditions, including but not limited to global supply chain issues, inflation, fuel and energy costs, freight costs, lack of available credit, sovereign debt crises, interest rates, and tax rates, may adversely affect the Company’s growth and profitability. In response to inflationary pressures, between January 2022 and July 2023, the U.S. Federal Reserve incrementally raised interest rates, resulting in an increase in the cost of borrowing for us, our customers, our suppliers, and other companies relying on debt financing. While the U.S. Federal Reserve lowered interest rates slightly during 2025, future increases in interest rates may again result in an increase in the cost of borrowing for us, our customers, our suppliers and other companies relying on debt finance. Prolonged inflationary conditions and prolonged periods of high interest rates could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices and supply chain constraints. In addition, the continuing conflict in the Middle East could affect oil prices and have other, potentially recessionary, effects on the global economy. At this time, the extent and duration of global economic and political events and their effects on the economy and the Company are impossible to predict.
We
do not have employment agreements with our key personnel, other than our Chief Executive Officer andOfficer, Chief Financial Officer, and President
and our
management has minimal unencumbered equity ownership in us. If we are not able to retain our key personnel or attract additional
key key
personnel as required, we may not be able to implement our business plan and our results of operations could be materially and adversely
affected.
We
expect recent supply chain disruptions driven by Russia’s invasion of Ukraine and the related sanctions, combined with raw material
shortages, labor shortages, and transportation delays, to continue for the foreseeable future. These conditions have strained our suppliers
and extended supplier delivery lead times, affecting their ability to sustain operations. Further, a dockworker strike on the east coast
which has been suspended until January 15, 2025, pending negotiations, could have a negative impact on our ability to obtain key manufacturing
materials such as adhesives and epoxies should the strike ensue and continue for a sustained period of time beyond our safety stock levels.
We have experienced market wide material shortages
for paint and resin products as well as critical epoxies and chemicals used in our
manufacturing process. In addition, we have seen substantial
increases in the costs of aluminum, steel and acrylic commodities and experienced
supplier schedule delays for other key components which
were driven by supplier labor and material shortages. In several cases, spotty
supply and material shortages have resulted in stocking
higher inventory “safety stock” levels to ensure adequate lead time
to replenish critical supplies.
Each
contract has a specific quantity of material which needs to be purchased, assembled, and shipped. Prior to bidding on a contract, we
contact potential sources of material and receive qualified quotations for this material. In some cases, the entire volume is given to
a single supplier and in other cases, the volume might be split between several suppliers. If a contract has a single source supplier
and that supplier fails to meet their obligations (e.g., quality, delivery), then we would seek to find an alternate supplier and bring
this information back to the final customer. Contractual deliverables would then generally be re-negotiated (e.g., specifications, delivery,
price). As of September 29, 2024, approximately 7% of our material requirements were single-sourced across 10 suppliers representing
approximately 15% of our active supplier order value. Single-sourced component requirements span across all of our major product lines.
If a contract has a single source supplier and that supplier fails to meet their obligations (e.g., quality, delivery), then we would seek to find an alternate supplier and bring this information back to the final customer. Contractual deliverables would then generally be re-negotiated (e.g., specifications, delivery, price). As of September 28, 2025, approximately 83% of our material requirements were single-sourced across 104 suppliers representing approximately 96% of our active supplier order values. Single-sourced component requirements span across all of our major product lines.
We
rely on information technology systems to process, transmit, and store electronic information in our day-to-day operations. Similar to
other companies, the size and complexity of our information technology systems makesmake them vulnerable to a cyber-attack, malicious intrusion,
breakdown, destruction, loss of data privacy, or other significant disruption. Our information systems require an ongoing commitment
of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes
in information processing technology, evolving systems and regulatory standards.
The
Company’s revenues for fiscal year ended September 29,28, 20242025 were derived from sales to U.S. government agencies (20%29%), four major
U.S. defense contractors (25%,19%, 7%,10%, 6% and 6%), one major commercial customer (13%) and all other customers (23%30%). Approximately 94%95% of
total Company revenue is generated
from domestic customers and 6%5% is derived from foreign customers. In particular, a decision by one
of our major defense contract customers,
U.S. government agencies or other major customers to cease issuing contracts to us could have
a significant material impact on our business
and results of operations given that they represent over 77%70% of our gross business revenue.
There can be no assurance that we could replace
these customers on a timely basis or at all.
We
possess only sixeight patents and rely primarily on trade secrets to protect our intellectual property.
We
are a “smaller reporting company” as defined in SEC regulations, and thea reduced“baby disclosureshelf” requirements
applicableissuer tobased smalleron reportingour companiespublic float, which may make our common stock less attractive to investors.investors
due to the reduced disclosure requirements of smaller reporting companies and certain limitations on our ability to raise capital as a
“baby shelf” issuer.
We have a public float of less than $75 million, which classifies us a “baby shelf” issuer. Our status as a “baby shelf” issuer limits our ability to raise significant equity capital under a shelf registration statement in a public offering and may restrict our financing options and flexibility. These constraints could lead to higher costs and potential delays in accessing additional capital.
Management's Discussion & Analysis (MD&A)
New heading “Twelve months ended September 28, 2025 compared to the twelve months ended September 29, 2024”
Removed heading “Twelve months ended September 29, 2024 compared to the twelve months ended October 1, 2023”
Largest changes
“We currently do not anticipate any significant material risks as a result of the recent tariff uncertainties. Our defense products are primarily sourced domestically, but those which are imported are primarily duty free. We produce some commercial optical assemblies with selective components sourced from Taiwan; however, our existing customer backlog is covered with existing material in inventory. We anticipate any future orders for these commercial products will have updated pricing inclusive of any tariff impact.”see in full comparison
“Twelve months ended September 28, 2025 compared to the twelve months ended September 29, 2024”see in full comparison
“Twelve months ended September 29, 2024 compared to the twelve months ended October 1, 2023”see in full comparison
As of Septembersee in full comparison29,28,20242025 andOctoberSeptember1,29,2023,2024, we had$259$132 thousand, and$243$259 thousand, respectively, of contract loss reserves included in our balance sheet accrued expenses. These loss contracts are related to some of our older legacy periscopeIDIQcontracts which were priced in2018 through early2019 and 2020, prior toCovid-19 and the subsequent decline in revenue at the Optex Systems Richardson segment combined with significant inflationary pressures on materials and labor in the last two years.Covid-19. Due to inflationary price increases on component parts and higher internal manufacturing costs (as a result of escalating labor costs and higher burden rates), some oftheseour contracts are in a loss condition, or at marginal profit rates. These contracts are typically three-year IDIQ contracts with two optional award years, and as such, we are obligated to accept new task awards against these contracts until the contract expiration. Should contract costs continue to increase above the negotiated selling price, or in the event the customer should release substantial quantities against these existing loss contracts, the losses could be material. For contracts currently in a loss status based on the estimated per unit contract costs, losses are booked immediately on new task order awards. There is one open IDIQ option year to which the customer may place additional awards through January 5, 2026. During the twelve months ended September29,28,2024,2025, the accrued contract lossesincreaseddecreased by$16$127 thousand onnewshipmentsawardsforagainsttheone of our lossexisting IDIQcontracts, partially offset by shipmentscontracts during thetwelve monthtwelve-month period. There is no way to reasonably estimate future inflationary impacts, or customer awards on the existing loss contracts. We continue to monitor these contracts throughout the year for any significant changes in addition to seeking potential cost saving strategies to mitigate risk.
As of Septembersee in full comparison29,28,2024,2025, Optex Systems Holdings had working capital of$15.1$21.1 million, as compared to$13.5$15.1 million as ofOctoberSeptember1,29,2023.2024. During the twelve months ended September29,28,2024,2025, we generated operating cash of$1.8$6.9 million, primarily driven by increased netrevenueincome of $5.1 million, non-cash expenses of $1.7 million for depreciation andnetamortization,income.assetAsimpairment and stock compensation, and all other changes in other working capital of $0.1 million. During the twelve months ended September29,28,2024,2025,therewewaspaidno$1.0net changemillion against theoutstandingcreditcreditfacilitybalanceand purchased capital assets of$1.0$0.5 million.
During the year ended Septembersee in full comparison29,28,2024,2025, orders in the Company’s Optex Richardson segmentincreaseddecreased by$0.2$2.2 million, or0.9%,9.4%, as comparedcomparedto the prior year. Theprimarydecreasereasonin orders was primarily driven by lower customer demand for periscopes, mostly offset by increased demand for sighting system and other products. During theincreasetwelverelatesmonths ended September 28, 2025, the Company experienced a 42.2%, or $8.4 million reduction in military periscope orders as compared toathe prior yearawardtwelve-monthforperiod.$3.4 million in sighting systems to repair and refurbish night vision equipment for the Government of Israel. We began shipments against the contract in December 2023. The decrease in orders for sighting systems and other products was offset by a significant increase in periscope orders inDuring the year ended September29,2024.28,The2025, Applied Optics Center orders increased$1.6by $2.0 million, or14.2%,15.5%,asonweincreasedcontinuecustomerto see increases in ordersdemand for laser filters,filter unitsday windows and other products, offset by lower demand forseveral prime government contractors, in addition to an increase in customer orders for other products driven byournewcommercialprogram ofopticalInfrared (IR) Signature Reduction Coatings used on aircraft.assemblies.
Full comparison: every changed paragraph (72)
All
references in the following section to 20232024 or 20242025 with respect to our financial position and results of operations are to our fiscal
years ended OctoberSeptember 1,29, 20232024 or September 29,28, 2024,2025, respectively.
Our
wholly-owned subsidiary, Optex
Systems, Inc.Inc., manufactures optical sighting systems and assembliesassemblies, primarily for theDoD U.S. Department of Defense, foreign military applications
and commercial markets.applications. Its
products are installed on avarious varietytypes of U.S. military land vehicles, such as the Abrams and Bradley fighting
vehicles, vehicles and light armored
and advanced security vehiclesvehicles, and have been selected for installation on the Stryker family of vehicles. Optex Systems, Inc. (Delaware) also manufactures
and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies. Optex Systems, Inc.
(Delaware) products consist primarily of build-to-customer print products that are delivered both directly to the armed services and
to other defense
prime contractors. Less than 1% of our revenue is related to the resale of products substantially manufactured by others.
In this case, the
product would likely be a simple replacement part of a larger system previously produced by Optex Systems, Inc. (Delaware).
We
are both a prime and sub-prime contractor to the Department of Defense.DoD. Sub-prime contracts are typically issued through major defense
contractors such
as General Dynamics Land Systems, Raytheon Corp., BAE, ADS Inc. and others. We are also a military supplier to foreign
governments such
as Israel, Australia and the NATO Support and Procurement Agency and South American countries,countries and as a subcontractor for several large U.S. defense companies
serving foreign governments.
ByThe
way of background, the Federal Acquisition Regulation (“FAR”) is the principal set of regulations that govern the
acquisition process of government
agencies and contracts with the U.S. government. In general, parts of the FAR are incorporated into government solicitations and contracts
by reference as terms and conditions effecting contract
awards and pricing solicitations.
Many
of our contracts are prime or subcontracted directly with the FederalU.S. federal government and, as such, are subject to FAR
Subpart 49.5, “Contract
Termination Clauses” and more specifically Federal Acquisition Regulation clauses 52.249-2 “Termination
for Convenience of
the Government (Fixed-Price)”, and 49.504 “Termination of fixed-price contracts for default”. These
clauses are standard
clauses on our prime military contracts and generally apply to us as subcontractors. It has been our experience
that the termination
for convenience is rarely invoked, except where it is mutually beneficial for both parties. We are currently not
aware of any material
pending terminations for convenience or for default on our existing contracts.
In
addition, some of our contracts allow for government contract financing in the form of contract progress payments pursuant to FAR 52.232-16, “Progress Payments”. Subject to certain limitations, this clause provides for government
payment of up to 90% of incurred program costs prior to product delivery for small businesses like us. To the extent our contracts allow
for progress payments, we intend to utilize this benefit, thereby minimizing the working capital impact on Optex Systems Holdings for
materials and labor required to complete the contracts.
WeThe
Optex Richardson segment has numerous fixed price multi-year contracts covering delivery periods up to five years from the contract
award. Approximately 4% of our Optex Richardson segment backlog are for items priced prior to fiscal year 2021. Since fiscal year
2021, we have experienced substantial increases in the costs of aluminum, steel and acrylic commodities, which has affected ourthe
Optex netRichardson incomesegment in
margins for deliveries against those orders during the year ended September 29,28, 20242025 and which is expected
to continue to have a negative effect onthrough the marginsfirst generatedfiscal under severalquarter of our
long-term fixed contracts over the next two years.2026. See also “Item 1A. Risk Factors –
Risks Related to Our Business
- Certain of our products are dependent on specialized sources of supply potentially subject to
disruption which could have a material,
adverse impact on our business.”
We
have experienced significant material shortages during the fiscal year ended October 1, 2023 and the first half of fiscal year ended
September 29, 2024 from several significant suppliers of our
periscope covers and housings. These shortages affectaffected several of our
periscope products at the Optex Richardson segment. The
delays in key components, combined with labor shortages duringexperienced the first
half of thein fiscal year ended September 29, 2024, have2023, negatively impacted our production levels
and pushed the delivery dates of several of our contracts into fiscal year 2025 and haveearly pushedfiscal backyear expected
delivery dates.2026. We have obtained an
alternative source for one of our key components and are expeditingexpedited our other suppliers to
support the increased production
levels.
We
have seen improvements in the local labor market since fiscal year 2023 and increased our direct labor force and employee overtime
in concert with
improvements in our supplier delivery performance. Further, we have invested in additional machinery and equipment
and other process
improvements to increase production capacity and alleviate process bottlenecks. While we are encouraged by improvements in supplier performance
and available manpower forDuring the Optex Richardson segment periscope line which yielded increased revenue performance during2025 fiscal year
2024,year, we have yet to ramp up deliveries sufficiently to keep pace with our current customer demands. As such, we cannot give any assurances
that expected customer delivery dates forincreased our periscope productsproduction willlevels notby experience56% furtherover delays.the 2024 fiscal year levels.
We currently do not anticipate any significant material risks as a result of the recent tariff uncertainties. Our defense products are primarily sourced domestically, but those which are imported are primarily duty free. We produce some commercial optical assemblies with selective components sourced from Taiwan; however, our existing customer backlog is covered with existing material in inventory. We anticipate any future orders for these commercial products will have updated pricing inclusive of any tariff impact.
We
refer also to “Item 1. Business – Market Opportunity: U.S. Military” for a description of current trends in
U.S. government military spending and its potential impact on Optex, which may be material, including particularly the tables included
in that section and disclosure on the significant reduction in spending for U.SU.S. ground system military programs, in combination with
the U.S. government shutdown and CR which has a direct impact
on the Optex Systems Richardson segment revenue, all of which
is incorporated herein by reference.
We
have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results. Management
of Optex Systems Holdings uses the selected financial measures by segment internally to evaluate its ongoing segment operations and to
allocate resources within the organization accordingly. Segments are determined based on differences in products, location, internal
reporting and how operational decisions are made. Management has determined that the Optex Systems, Richardson plant (to which we refer
below as the Optex Systems segment or Optex Systems), and the Applied Optics Center,
Dallas plant, which was acquired on November 3,
2014 (to which we refer below as the Applied Optics Center segment or Applied Optics
Center), are separately managed, organized, and
internally reported as separate business segments. The table below provides a summary
of selective statement of operations data by operating
segment for the years ended September 29, 2024 and OctoberSeptember 1,28, 20232025 reconciled
to the Audited Consolidated Results of Operations as presented
in Item 8, “Financial Statements and Supplementary Data”.
Our
total external sales revenues increased by $8.3$7.3 million infor the 2025 fiscal year 2024,year, or 32.5%21.6%, compared to the 20232024 fiscal year. The Optex
SystemsRichardson segment realized a $6.1$5.6 million, or 49.9%30.8% increase, and the Applied Optics Center segment realized an increase of $2.3$1.8
million, million,
or 16.9%,11.1%, in external revenue compared to the prior year period. Intersegment revenues were $1.2 million for the 2025
fiscal year and $1.0 million for the 2024 andfiscal $0.9 million in
2023.year. Intersegment revenues relate primarily to coated filters provided by the
Applied Optics Center to Optex SystemsRichardson in support of the
Optex SystemsRichardson periscope line.
Gross
profit increased $2.9$2.5 millionmillion, and the gross
margin percentage increased by 2.21.2 points from 25.8%28.0% infor the 20232024 fiscal year to 28.0%29.2% in
for the 20242025 fiscal year. Optex SystemsRichardson gross
profit increased by $1.4$2.3 million and the gross margin percentage increased to 25.5% for the 2025 fiscal year from 20.7% as compared
to 19.7% infor the prior
year. yearThe period.gross profit and gross margin percentage increases were primarily attributable to improved manufacturing overhead rates as the
fixed costs were spread across a higher revenue base. Applied Optics CenterCenter’s gross profit increased by $1.5$0.2 million and the gross
margin percentage increased
decreased to 32.0% for the 2025 fiscal year from 34.1% as compared to 29.3% infor the prior year period. The increase in each segment and consolidated gross profit ispercentage primarilydecrease
at the Applied Optics Center was attributable
to higherchanges revenuein mix combined with increased costs for warranties and increasedgold absorptionwith ofrespect fixedto
our cost.Day Window products.
Consolidated
general and administrative costs increased from $3.8$4.7 million for the twelve months ended OctoberSeptember 1,29, 20232024 to $4.7$4.9 million for the twelve
months ended September 29,28, 2024.2025. General and administrative costs increased $0.9$0.2 million due to increased
royalties and selling expenses
of $0.4 million, increased stock compensation expenses of $0.2$0.1 million, increased labor and fringe costs
of $0.2$0.1 million and increased information technology costs of $0.1 million, offset by
decreased investor relation expenses of $0.1 million. During the fiscal years 20242025 and 2023,2024, Applied Optics Center
absorbed $1.5$1.4 million
and $1.3$1.5 million, respectively, of fixed general and administrative costs incurred by Optex SystemsRichardson for support
services. The increase in allocated general and administrative expenses during the 2024 year is directly attributable to increased general
and administrative costs during the current year period as compared to the prior year. These expenses
cover accounting, executive, human
resources, information technology, board fees and other corporate expenses paid by Optex Systems Richardson
and shared across both operating segments.
Consolidated
operating income increased by $2.0$2.3 million in the year ended September 29,28, 20242025 to $4.8$7.1 million as compared to the prior fiscal year
year operating income of $2.8$4.8 million. The increase in operating income is primarily attributable to higher revenue and gross profit, partially
offset by increases in general and administrative costs. The operatingOperating income increased acrossas botha segmentsresult of higher revenues and increased gross profit as compared
to the prior
year onfiscal higher revenue and gross profit.year.
Income
before taxes increased $2.0$1.6 million, to $4.8$6.4 million in the 20242025 fiscal year from a prior fiscal year income before taxes of $2.7$4.8
million million.
Theas increasea inresult income before taxes year over year is primarily due toof higher revenueoperating and gross profit, partiallyincome offset by
increased general$0.8 andmillion administrativein costs.asset impairment.
During
the twelve months ended September 29,28, 2024,2025, the Company booked $36.4$36.2 million in new orders, representing a 5.2%0.5% increasedecrease from the prior
year period orders of $34.6$36.4 million. The orders for the most recently completed twelve months consist of $23.5$21.3 million for our Optex
Richardson segment and $12.9$14.9 million attributable to the Applied Optics Center segment.
During
the year ended September 29,28, 2024,2025, orders in the Company’s Optex Richardson segment increaseddecreased by $0.2$2.2 million, or 0.9%,9.4%, as
compared compared
to the prior year. The primarydecrease reasonin orders was primarily driven by lower customer demand for periscopes, mostly offset by
increased demand for sighting system and other products. During the increasetwelve relatesmonths ended September 28, 2025, the Company experienced
a 42.2%, or $8.4 million reduction in military periscope orders as compared to athe prior year awardtwelve-month forperiod. $3.4 million in sighting systems to repair and
refurbish night vision equipment for the Government of Israel. We began shipments against the contract in December 2023. The decrease
in orders for sighting systems and other products was offset by a significant increase in periscope orders inDuring the year
ended September
29, 2024.28, The2025, Applied Optics Center orders increased $1.6by $2.0 million, or 14.2%,15.5%, ason weincreased continuecustomer to see increases in ordersdemand for laser
filters, filter
unitsday windows and other products, offset by lower demand for several prime government contractors, in addition to an increase in customer orders for other products driven by our newcommercial program
ofoptical Infrared (IR) Signature Reduction Coatings used on aircraft.assemblies.
The
Optex Richardson segment currently has fivefour open US Government IDIQ type military contracts for periscopes, collimators,vision blocks and big eye
assembliescollimators with unspent funding which covers base year and option year requirement ordering periods into JanuaryJuly 2029.2030. During the 2025
fiscal year,
approximately 20%31% of Optex Richardson’s segment orders, or $4.8$6.7 million, were awards against active IDIQ contracts. The Applied
Optics Center has two open US Government IDIQ orders. During the year, approximately 22% of Applied Optics Center segment orders, or
$2.8 million, were awards against active IDIQ contracts. We anticipate additional orders throughout the next five years for these ongoing
contracts. In addition, the Company has
an several openactive bid requestsrequest for a new multi-year IDIQ contractscontract pending with the U.S. Government
and other prime contractorsgovernment for additional periscopes,periscopes and unityinfrared
filter mirrorsassemblies that are expected to be awarded in the next three to six months. The Applied Optics Center has no open US
government IDIQ orders.
Backlog
as of September 29,28, 20242025 was $44.2$39.1 million as compared to a backlog of $41.8$44.2 million as of OctoberSeptember 1,29, 2023,2024, representing ana increasedecrease
of 5.7%.11.5%. The following table depicts the current expected delivery by quarter of all contracts awarded as of September 29,28, 2024,2025, as
well well
as the September 29,28, 20242025 backlog as compared to the backlog on OctoberSeptember 1,29, 2023.2024.
DuringAt
the twelve months ended September 29,28, 2024,2025, backlog for our Optex Richardson segment increasedwas by 20.0%,7.5%, or $5.3$2.4 million tolower $31.8 million,
as compared tothan the prior fiscal year ending backlog of $26.5$31.8 million.
Backlog for our periscope product line for our 2025 fiscal year was 33.9% or $7.7 million lower than our 2024 fiscal year end level, primarily on lower customer demand during the twelve-month period. We believe the reduced demand is partially related to the delay in the award of ARC III Abrams replenishment contracts to the prime contractors, which had been anticipated in early 2025.
Fiscal year end 2025 sighting systems backlog increased 47.4%, to $5.6 million, from our 2024 fiscal year end level of $3.8 million. The primary reason for the increase in backlog relates to a new $2.8 million purchase order from a major U.S. prime contractor in support of the XM30 Combat Vehicle. This contract will provide 13 sighting systems with deliveries in the 2026 fiscal year. The XM30 backlog increase was partially offset by deliveries of refurbished units against the night vision equipment program for the Government of Israel. The current order Israeli order is expected to complete within the next twelve months and includes an option for an additional quantity up to 100% of the original contract. We anticipate the option to be exercised in the next twelve months.
Backlog
for our periscope product line has increased 52.3% or $7.8 million to $22.7 million, from our 2023 fiscal year end level of $14.9 million,
primarily on increased orders above our delivery capacity during the 2024 year. With the majority of material shortages behind us, we
have substantially increased the headcount and overtime hours in addition to the purchase of machinery and equipment to eliminate process
bottlenecks and increase periscope throughput up to 60-75% over the next year in line with our customer demands. We are anticipating
an increase of approximately 60% in periscope revenue in fiscal year 2025 as compared to 2024.
Sighting
Systems product line backlog decreased 19.1%, or $0.9 million, to $3.8 million, from our 2023 fiscal year end level of $4.7 million.
The decreased backlog is primarily driven by deliveries of $0.7 million against our 2023 order for sighting systems to repair and refurbish
night vision equipment for the Government of Israel combined with revenues of $0.2 million recognized against our long term OWSS maintenance
contract.
Our backlog in other product groups increased by $3.5 million, or 116.7%, from $3.0 million at fiscal year end 2024 to $6.5 million at fiscal year end 2025, primarily due to the award of a $4.3 million order for MRS collimator assemblies against a five-year requirement-type contract by the Army Contracting Command - Detroit Arsenal.
Our
backlog in other product groups decreased by $1.6 million or 34.8% from $4.6 million in 2023 to $3.0 million in 2024 on shipments against
a long-term collimator IDIQ of $1.3 million and commercial wedge assemblies of $0.3 million.
The
Applied Optics Center backlog decreased by $2.9$2.7 million, or 19.0%,21.8%, for the year ended September 29,28, 2024,2025, from $15.3 million in 2023
to $12.4 million in
fiscal 2024.year 2024 to $9.7 million in fiscal year 2025. The majority of this reduction is due the delay in award for the BNVG Night
Vision Goggle program.
Backlog
for our optical assemblies decreased by $2.1$0.6 million, or 75.0%,85.7%, asduring the 2025 fiscal year, compared to the prior yearfiscal year-end
backlog on lower customer demand.demand for commercial optical assemblies. We anticipate
new orders during the next three to six months for
deliveries in 2025.fiscal year 2026.
Laser
filter backlog decreased by $0.4$2.2 million, or 4.0%,23.2%, during the 2025 fiscal year due to increasedthe shipmentstiming againstof ourcustomer laserorders interfaceversus filtercustomer
delivery and
schedule. Our laser filter unitsorders increased 10.9%, or $1.0 million, during the year.2025 fiscal year as compared to the prior
year, but were below the pace of our 2025 fiscal year shipments. We are anticipating additional orders over the next six months for
shipment during the 20252026 fiscal year.
Day
window backlog decreased by $0.6$0.1 million, or 35.3%,9.1%, during the period2025 as compared to the priorfiscal year primarily due to shipmentslower against
acustomer long-term IDIQ contract with deliveries scheduled into 2026.demand. We anticipate
additional orders inover the next threetwelve months.
Other
Applied Optics Center backlog increased by $0.2 million, or 22.2%18.2% forduring the 2025 fiscal year ended September 29, 2024, on an
increase inincreased customer orders for Infrared (IR) Signature Reduction Coatings used on aircraft.for
our specialty coatings products.
Twelve months ended September 28, 2025 compared to the twelve months ended September 29, 2024
Twelve
months ended September 29, 2024 compared to the twelve months ended October 1, 2023
The
table below details the revenue changes by segment and product line for the year ended September 29,28, 20242025 as compared to the year ended
OctoberSeptember 1,29, 2023.2024.
Our
total revenues increased by $8.3$7.3 million, or 32.3%21.6% in fiscal year 20242025 compared to fiscal year 2023.2024. The Optex Systems Richardson segment realized
realized a $6.1$5.6 million, or 50.4%,30.8%, increase in revenue and the Applied Optics Center segment realized an increase of $2.2$1.7 million, or
16.2%, 10.8%, in
revenue compared to the prior fiscal year.
Revenues on our periscope line increased $7.1 million, or 58.7%, for the twelve months ended September 28, 2025 compared to the twelve months ended September 29, 2024 on higher production throughput. We have increased our direct labor force and employee overtime in concert with improvements in our supplier delivery performance as well as invested in additional machinery and equipment and other process improvements to increase production capacity and alleviate process bottlenecks. During the 2025 fiscal year, we increased our periscope production levels by approximately 56% over the 2024 fiscal year levels.
Revenues
on our periscope line increased $3.5 million, or 40.7%, during the twelve months ended September 29, 2024 and October 1, 2023 on increased
customer demand and higher production throughput during the year.
Revenues
on sighting systems increased by $0.4$0.1 million, or 40.0%7.1% from the prior fiscal year period due to increased deliveries againstof therefurbished 2023 orderunits for repair
and refurbishment ofthe night vision equipment program to the Government of Israel.
Optex
Systems-RichardsonRichardson revenue on other product lines increaseddecreased by $2.2$1.6 million, or 88.0%,34.0%, compared to revenues in the prior fiscal year due to
increasedlower orderscustomer demand for collimators, windows, beamsplitters, cellunity mirrors, bonded mirrors, wedge prism assemblies and other spares.spare parts.
Revenue
on optical assemblies decreased by $1.7 million, or 30.4%, during the twelve months ended September 29, 2024 as compared to the prior
twelve-month period on lower customer demand. We are anticipating revenue over the next twelve months to approximate the 2024 revenue
level pending new customer orders in the next three to six months.
LaserRevenue
filterfrom revenueoptical increasedassemblies decreased by $3.2$2.3 million, or 50.0%,60.0%, duringfor the twelve months ended September 29,28, 20242025 as compared to the prior
twelve-month twelve-month
period on increasedlower customer demand. We anticipate revenue to continue at the higher levels throughout 2025.
RevenuesLaser
onfilter our day windowsrevenue increased by $0.1$2.8 million, or 16.7%,29.2%, duringfor the twelve months ended September 29,28, 20242025 as compared to October 1, 2023
as we continue to ship against the long-termprior IDIQtwelve-month
period contracton forhigher thesecustomer units. We anticipate revenues to continue at this, or a slightly
increased, level through 2025.demand.
Revenues on our day windows increased by $0.3 million, or 42.9%, for the twelve months ended September 28, 2025 as compared to September 29, 2024 on higher customer orders.
Applied
Optics Center revenue for other product lines increased by $0.6$0.9 million, or 60.0%,56.3%, duringfor the twelve months ended September 29,28, 20242025 as
as compared to the prior twelve-month period on increased deliveries inof productsbinoculars forover Infraredthe (IR)prior
Signature Reduction Coatings used on aircraft. We anticipate these delivery levels to continue into 2025year combined with additional
increaseshigher customer demand for shipmentsspecialty against our current binocular contract.coatings.
Gross
Margin. The gross margin for the year ended September 29,28, 20242025 was 28.0%29.2% of revenue as compared to a gross margin of 25.8%28.0% of
revenue revenue
for the year ended OctoberSeptember 1,29, 2023.2024. Cost of sales increased by $5.4$4.8 million to $29.3 million for fiscal year 2025
compared to $24.5 million for 2024fiscal comparedyear to2024. $19.0 million for 2023.
The gross profit increased by $2.9$2.5 million to $12.1 million in fiscal year 2025 as
compared to $9.5 million in 2024fiscal year 2024. The increased gross profit as compared to $6.6the millionprior in 2023. The increaseyear is primarily duedriven by higher
to increased revenue,revenue and higher absorption of fixed cost and changes in product mix betweenchanges combined with improved manufacturing overhead rates as the segments.fixed overhead costs are spread across a
significantly higher revenue base.
G&A
Expenses. For the years ended September 29,28, 20242025 and OctoberSeptember 1,29, 2023,2024, we recorded operating expenses of $4.7$4.9 million and $3.8$4.7
million, respectively. General and administrative costcosts increased $0.9$0.2 million, or 22.9%,4.3%, forduring the fiscal year 2024 as compared to the
prior year2025 due to
increased royalties and selling expenses of $0.4$0.1 million, increased stock compensation expenses of $0.2 million,
increased labor and fringe costs of $0.2$0.1 million and increased information
technology costs of $0.1 million.million Theoffset sellingby decreased investor relation expenses
are directly related to new products including the Speedtracker acquisition and the Government of Israel repair and refurbishment on
night vision products and the royalties are related to the new Infrared (IR$0.1) Signature
Reduction Coatings product.million.
Operating
Income. For the year ended September 29,28, 2024,2025, we recorded operating income of $4.8$7.1 million as compared to operating income of $2.8$4.8
million during the year ended OctoberSeptember 1,29, 2023.2024. The $2.0$2.3 million increase in operating income is primarily due to increased revenue and
gross profit,profit
of $2.5 million, offset by higheran increase of ($0.2) million in general and administrative costs.spending.
Net
income applicable to common shareholders. During the year ended September 29,28, 2024,2025, we recorded net income applicable to common shareholders
shareholders of $3.8$5.1 million as compared to net income applicable to common shareholders of $2.3$3.8 million during the year ended September 29, 2024.
October 1, 2023. The increase of net income of $1.5$1.3 million is primarily attributable to increased revenueoperating andincome grossof profit,$2.3 million, offset
by higher($0.8) generalmillion
in andasset administrativeimpairment costsfor our Speedtracker product line acquisition and increased federal income taxestax expense of $0.5($0.2) million.
The
table below summarizes our twelve-month operating results for the periods ended September 29,28, 20242025 and OctoberSeptember 1,29, 2023,2024, in terms of
both both
the GAAP net income measure and the non-GAAP Adjusted EBITDA measure.
Our
Adjusted EBITDA increased by $2.4$2.3 million to $5.7 million during the
twelve months ended September 29, 2024 as compared to $3.4$8.0 million during the twelve months ended OctoberSeptember 1,28, 2023.2025 as compared to $5.7 million
during the twelve months ended September 29, 2024. The increase in EBITDA
is primarily driven by increased net income, offset by increased taxes, depreciationrevenue and amortization,gross andprofit.
Operating stock compensation. Operating
segment performance is discussed in greater detail throughout the previous sections.
As
of September 29,28, 2024,2025, Optex Systems Holdings had working capital of $15.1$21.1 million, as compared to $13.5$15.1 million as of OctoberSeptember 1,29,
2023.2024. During the twelve months ended September 29,28, 2024,2025, we generated operating cash of $1.8$6.9 million, primarily driven by increased net
revenueincome of $5.1 million, non-cash expenses of $1.7 million for depreciation and netamortization, income.asset Asimpairment and stock compensation,
and all other changes in other working capital of $0.1 million. During the twelve months ended September 29,28, 2024,2025, therewe waspaid no$1.0 net change million
against the outstandingcredit credit
facility balanceand purchased capital assets of $1.0$0.5 million.
As of September 28, 2025, the Company had no outstanding capital commitments for the purchase of property and equipment. The Company plans to spend $2.4 million in capital investment over the next twelve months to expand its current capacity as well as develop new capabilities to expand into adjacent markets. Obsolete equipment will be replaced with new or upgraded systems to reduce downtime and drive capacity improvements for both Optex Richardson and the Applied Optics Center. Also, new capabilities will be required to support new product lines at AOC, as well as support the increased focus on research and rapid prototype development at Optex Richardson.
The
Company has capital commitments of $0.3 million for the purchase of property and equipment consisting of a significant coating chamber
upgrade, a black bond dispensing machine, an air compressor, and an Opotek tunable laser system.
Backlog
as of September 29,28, 20242025 was $44.2$39.1 million as compared to a backlog of $41.8$44.2 million as of OctoberSeptember 1,29, 2023,2024, representing ana increasedecrease
of 5.7%.11.5%. For further details, see “Results of Operations – New Orders and Backlog”
above.
At
September 29,28, 2024,2025, the Company had approximately $1.0$6.4 million in cash and anno outstanding payable balance of $1.0draws against its $3.0revolving millioncredit line. Our cash balance
lineis split between current operating interest-bearing money market accounts based on our immediate working capital requirements.
As of credit.September 28, 2025, $4.0 million of our cash balance was carried in a money market account with an annual interest rate of 3.84%.
For the twelve months ended September 28, 2025, the total interest income under such money market account was $35 thousand. As of September
28, 29, 2024,2025, our outstanding accounts receivable balance was $3.8$4.6 million, which has been collected during
the first quarter of fiscal 2025.year
2026. During the first quarter of 2025, we paid down$1.0 million against our credit facility bringing the balance to zero.
On
January 18, 2024, the Company acquired certain intellectual property and technical and marketing information relating to the Speedtracker
Mach product line and entered into an asset purchase agreement and a contract manufacturing agreement with RUB Aluminium s.r.o. (“RUB”).
The Company acquired the assets using $1 million cash on hand, with potential additional future cash payments based on successful completion
completion of defined milestones. The initial term of the contract manufacturing agreement iswas one year, subject to additional one-year renewal
renewal terms. After the acquisition, the Company determined it would be more economical to move the manufacturing operations in
house and is
no longer ordering assembled units under the original contract manufacturing agreement. RUB will continue to provide the
Company with
purchased kit parts for the manufacture of the Speedtracker Mach products.
The
acquisition included transaction costs of $30 thousand for legal fees.thousand. Pursuant to the asset purchase agreement, the total earnout payment
will be $238
thousand only if the earnout revenue milestone is achieved during the earnout period, otherwise the earnout will be zero.
As of September
28, 29, 2024,2025, it was determined that the earnout revenue milestone was unlikely to be achieved during the earnout period and the
fair value
of the contingent liability was zero. The asset will bewas amortized on a straight-line basis over a seven-year period.period through September 28,
2025. On September 28, 2025, the Company reviewed the intangible asset value based on the anticipated revenues and cash flow of the product
line over the next five years and determined that the remaining asset value could not be recovered. As a result, the remaining $0.8 million
of unamortized intangible assets was impaired and as of September 28, 2025, the remaining balance of intangible assets is zero.
In
some instances, new contract awards may allow for government contract financing in the form of contract progress payments pursuant to
FAR 52.232-16, “Progress Payments.” Subject to certain limitations, this clause provides for government
payment of up to 90% of incurred program costs prior to product delivery for small businesses like us. To the extent any contracts allow
for progress payments and the respective contracts would result in significant preproduction cash requirements for design, process development,
tooling, material or other resources which could exceed our current working capital or line of credit availability, we intend to utilize
this benefit to minimize any potential negative impact on working capital prior to receipt of payment for the associated contract deliveries.
Currently none of our existing contracts allow for progress payments.
What changed in the latest 10-Q
Risk Factors
There have been no material changes in risk factors since the risk factors set forth in the Form 10-K filed for the year ended September 28, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
Largest changes
“On July 14, 2026, Optex Systems Holdings, Inc., a Delaware corporation (the “Company”), and its subsidiary, Optex Systems, Inc., a Delaware corporation (“Optex”, and with the Company, the “Borrowers”), entered into a master equipment finance loan and security agreement (the “Master Agreement”) with Texas Capital Bank (the “Bank”). Under a related interim funding addendum (the “Addendum”), the Bank provided interim funding of $246,783 (the “First Interim Loan”) to cover the first installment of an installment purchase of an approximately $2.1 million high vacuum coating system. …”see in full comparison
Many of our contracts are prime or subcontracted directly with the U.S.see in full comparisonGovernmentgovernment and, as such, are subject to FAR Subpart 49.5, “Contract Termination Clauses” and more specifically FAR clauses 52.249-2 “Termination for Convenience of the Government (Fixed-Price),”,and 49.504 “Termination of fixed-price contracts fordefaultdefault.”.These clauses are standard clauses on our prime military contracts and generally apply to us as subcontractors. It has been our experience that the termination for convenience is rarely invoked, except where it is mutually beneficial for both parties. However, a material termination for convenience of several of our purchase contracts related to the U.S. Army M10 Booker Combat Vehicle is currently pending. The total backlog value subject to such termination is approximately $1.3 million. We are currently under audit with the customer to recover all of our incurred costs plus fee against the program to date, but do not expect resolution and payment against the final contract balance until sometime in 2027. We expect to recover up to approximately $1.0 million against the pending termination claim. We are currently not aware of any other material pending terminations for convenience or for default on our existing contracts.
“Optex Richardson revenue decreased by $0.1 million or 1.2% for the three months ended March 29, 2026 as compared to the prior year period with lower revenue in our periscope product line. We are seeing lower demand for our standard periscopes based on the most recent U.S. defense budget appropriation and the entrance of new competition for several of our periscope products. …”see in full comparison
G&A Expenses. During the three months endedsee in full comparisonMarchJune29,28, 2026 andMarchJune30,29, 2025, we recorded operating expenses of$1.7$1.9 million and$1.1$1.3 million, respectively.OperatingTheexpensesincreaseincreasedinbygeneral$0.6and administrative costs consisted of approximately $0.3 millionover the prior year period primarily due approximately $0.2 millionin higher labor and fringe benefit costs, $0.2 million in increased stock-based compensation expense,and $0.2$0.1 million inotherhigherspending. Higherroyaltylabor costs were primarily attributable to the addition of the Optex Richardson General Manager positionexpenses, andother$0.1 millionstaffingin higher professional fees, information technology support services, research and development costs, consulting fees, andorganizationalotherchanges within the engineering and administrative functions.expenses.
G&A Expenses. For thesee in full comparisonsixnine months endedMarchJune29,28, 2026 andMarchJune30,29, 2025, general and administrative expenses were$3.7$5.6 million and$2.3$3.6 million, respectively, representing an increase of$1.3$2.0 million compared to the prior-year period. The increasewasinprimarilygeneralattributableand administrativetocosts consisted of approximately$0.7$1.0 million in higher labor and fringe benefit costs,$0.3$0.5 million in increased stock-based compensation expense, $0.2 million in royalty expenses, and $0.3 million in higherspendingprofessionalonfees,otherinformationgeneraltechnology support services, research andadministrative costs. Higher labor costs were primarily driven by executive leadership transitiondevelopment costs,includingconsultingoverlapping compensation associated with the former and current CEO, the addition of the Optex Richardson General Manager position,fees, and otherorganizational changes.expenses.
“Delayed appropriations funding for fiscal year 2026 shifted certain contract awards for specific products from the first fiscal quarter to the second fiscal quarter of fiscal year 2026. As a result, the related revenue was deferred into the last quarter of fiscal year 2026. We are also experiencing lower demand for standard periscopes due to new competition affecting several of our periscope products. If and as competition increases, future orders for these products may require pricing concessions, which could reduce margins over the next fiscal year.”see in full comparison
Full comparison: every changed paragraph (65)
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) reflects information
known to management as of the quarter ended MarchJune 29,28, 2026, and the date of filing. This MD&A is intended to supplement and complement
our audited consolidated financial statements and notes thereto for the fiscal year ended September 28, 2025 and our unaudited condensed
consolidated financial statements and notes thereto for the quarter ended MarchJune 29,28, 2026, prepared in accordance with U.S. generally accepted
accepted accounting principles (“GAAP”). You are encouraged to read our condensed consolidated financial statements in conjunction
with with
this MD&A. The financial information in this MD&A has been prepared in accordance with GAAP, unless otherwise indicated.
In addition,
we use non-GAAP financial measures as supplemental indicators of our operating performance and financial position. We use
these non-GAAP
financial measures internally for comparing actual results from one period to another, as well as for planning purposes.
We will also
report non-GAAP financial results as supplemental information, as we believe their use provides more insight into our performance.
When When
a non-GAAP measure is used in this MD&A, it is clearly identified as a non-GAAP measure and reconciled to the most closely corresponding
GAAP measure.
These
forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but
not not
limited to, any statements regarding growth strategy; product and development programs; financial performance and financial
condition condition
(including revenue, net income, profit margins and working capital); expected awards, orders and backlog; expected timing
of contract deliveries to customers
and corresponding revenue recognition; increases in the cost of materials and labor; costs
remaining to fulfill contracts; contract loss
reserves; labor shortages; follow-on orders; supply chain challenges; the continuation
of historical trends; the sufficiency of our cash
balances for future liquidity and capital resource needs; the expected impact of
changes in accounting policies on our results of operations,
financial condition or cash flows; anticipated problems and our plans
for future operations; and the economy in general or the future
of the defense industry.
We
caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual
results results
may differ materially depending on a variety of important factors. Such risks and uncertainties include, but are not limited
to, continued
funding of defense programs and military spending, the timing of such funding, general economic and business
conditions, including unforeseen
weakness in the Company’s markets, effects of continued geopolitical unrest and regional
conflicts conflicts,(including the U.S.-Israeli war with Iran), competition, changes in technology
and methods of marketing, delays in
completing engineering and manufacturing programs, changes in customer order patterns, changes in
product mix, continued success in
technological advances and delivering technological innovations, changes in the U.S. Government’s
government’s interpretation of federal
procurement rules and regulations, changes in spending due to policy changes in any new federal presidential
administration, market
acceptance of the Company’s products, shortages in components, production delays due to performance quality
issues with
outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing
realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations,
increases in tax rates, changes to generally accepted accounting principles, difficulties in retaining key employees and customers,
unanticipated unanticipated
costs under fixed-price service and system integration engagements, changes in the market for microcap stocks
regardless of growth and
value and various other factors beyond our control. Some of these risks and uncertainties are identified in
this Management’s Discussion
and Analysis of Financial Condition and Results of Operations and the section “Risk
Factors” in our Annual Report on Form
10-K and you are urged to review those sections. You should understand that it is not
possible to predict or identify all such factors.
Consequently, you should not consider any such list to be a complete list of all
potential risks or uncertainties.
Many
of our contracts are prime or subcontracted directly with the U.S. Governmentgovernment and, as such, are subject to FAR Subpart 49.5,
“Contract
Termination Clauses” and more specifically FAR clauses 52.249-2 “Termination for Convenience of the
Government (Fixed-Price),”,
and 49.504 “Termination of fixed-price contracts for defaultdefault.”. These clauses are
standard clauses on our prime military contracts
and generally apply to us as subcontractors. It has been our experience that the
termination for convenience is rarely invoked, except
where it is mutually beneficial for both parties. However, a material
termination for convenience of several of our purchase contracts related to the U.S. Army M10 Booker Combat Vehicle is currently pending. The total
backlog value subject to such termination is approximately $1.3 million. We are currently under audit with the customer
to recover all of our incurred costs plus fee against the program to date, but do not expect resolution and payment against the
final contract balance until sometime in 2027. We expect to recover up to approximately $1.0 million against the pending termination
claim. We are currently not aware of any other material pending terminations for convenience or
for default on our existing
contracts.
We
have had numerous fixed price multi-year contracts covering delivery periods up to five years from the contract award. Since fiscal year
year 2021, we have experienced substantial increases in the costs of aluminum, steel, gold and acrylic commodities, which have
affected both the Optex Richardson and Applied Optics segment
margins for deliveries against those orders during the year ended
September 28, 2025 and during the first half of 2026.fiscal year 2026 for
both Optex Richardson, our Richardson plant (“Optex Richardson”), and the Applied Optics Center, our Dallas plant (“Applied
Optex Center” or “AOC”). As of MarchJune 29,28, 2026, all but one of these legacy fixed price contracts have
been completed, and thecompleted.
The sole contract that remains active represents approximately 1% of our total contract backlog, is for items priced prior to fiscal year
2021,backlog and is in a current loss condition due
to cost increases.increases on the price of gold.
From
October 1, 2025 through November 12, 2025, the U.S. federal government was in a shutdown as Congress did not pass appropriations legislation
for fiscal year 2026. On November 10, 2025, Congress passed a CR that funded the federal government at existing spending levels through
January 30, 2026. On February 3, 2026, Congress passed and the President signed an appropriations bill funding the majority of U.S. Governmentgovernment
operations for fiscal year 2026.2026, Thisand legislationon excludedApril the30, 2026, a Department of Homeland Security,Security whichappropriations remainsbill subjectwas toenacted furtherfor negotiations.fiscal
year 2026.
Delayed appropriations funding for fiscal year 2026 shifted certain contract awards for specific products from the first fiscal quarter to the second fiscal quarter of fiscal year 2026. As a result, the related revenue was deferred into the last quarter of fiscal year 2026. We are also experiencing lower demand for standard periscopes due to new competition affecting several of our periscope products. If and as competition increases, future orders for these products may require pricing concessions, which could reduce margins over the next fiscal year.
The
Company did not experience a material decline in total consolidated contract awards during the first six months of fiscal year 2026.
However, certain contract awards for specific products were delayed from the first fiscal quarter into the second fiscal quarter of 2026.
As a result, revenue associated with these awards was deferred into the second half of fiscal year 2026.
We
refer also to “Item 1. Business – Market Opportunity: U.S. Military” in our Annual Report on Form 10-K for the
year ended September 28, 2025 for a description of current trends in U.S. government military spending and its potential impact on the
Company, which may be material, including particularly the tables included in that section and disclosure on the significant reduction
in spending for U.S. ground system military programs, in combination with the U.S. Governmentgovernment shutdown and CR which hashad a direct impact
on the Company’s revenue, all of which is incorporated herein by reference.
We
have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results and to
have a better understanding of the overall performance of each business segment. Management of Optex Systems Holdings uses the selected
financial measures by segment internally to evaluate its ongoing segment operations and to allocate resources within the organization
accordingly. Segments are determined based on differences in products, location, internal reporting and how operational decisions are
made. Management has determined that Optex Richardson, our Richardson plant (“Optex Richardson”), and the Applied Optics
Center (“Applied Optex Center” or “AOC”), our Dallas plant, are separately managed, organized, and internally
reported as separate business segments. The tables below provides a summary of selective statement of operations data by operating segment
for the three and sixnine months ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025 reconciled to the Condensed Consolidated Results of Operations as
presented in Item 1, “Condensed Consolidated Financial Statements.”
For
the three months ended MarchJune 29,28, 2026, consolidated revenue decreased by $1.1$1.4 million, or 10.3%,12.4%, compared to the same period in the prior
prior year. The decrease was primarily attributable to a $1.0 million decline
in revenue at the Applied Optics Center.
For
the sixnine months ended MarchJune 29,28, 2026, consolidated revenue decreased by $0.2$1.5 million, or 0.8%,5.1%, compared to the same period in the prior
prior year. The decrease was primarily driven by a $2.0 million decline in revenue at the Applied Optics Center, partially offset
by a $1.8 million increase in revenue at Optex Richardson.
The
decrease in revenue for the three and nine month periods was primarily attributable to lower revenue on our periscope product line at
the Optex Richardson segment and lower revenue on our laser filter products at the Applied Optics Center segment. More specifically,
the decline was primarily due to (1) delayed delivery of approximately $1.5 million of periscopes
from the third fiscal quarter into the fourth fiscal quarter, and (2) the federal government shutdown during October and November 2025
and the delayed enactment
of the annual appropriations bill, which was not approved until February 3, 2026. These events delayed contract awards2026 and deferred anticipated revenue
revenue into the second half of fiscal year 2026.
In addition, we are seeing lower demand for our standard periscopes attributable to the entrance of new competition for several of our periscope products and the most recent U.S. defense budget appropriation. However, we are anticipating significantly higher revenue for both of these product lines in the next fiscal quarter based on our current order backlog.
Consolidated
gross profit for the three months ended MarchJune 29,28, 2026 increased slightlyfrom compared$3.2 to the same periodmillion in the priorprior-year yearperiod despiteto $3.3 million due to
lowerhigher revenue.profits Thein increaseboth was primarilysegments attributable to changes in product mix combined with the completion of legacyseveral loss-making contracts at Optex Richardson, which
were replaced by more favorably priced contracts,loss and favorablelow-margin adjustmentslong-term
contracts to warranty and contract loss accruals atduring the Applied
Opticsfirst Center.half Theseof adjustmentsthe resultedcurrent fromfiscal lower-than-expected customer return rates and costs below estimated losses associated
with our day window program.year. Consolidated gross margin increased to 35.2%,34.2%, compared to 31.3%28.5% in the
prior prior-yearyear period.
For
the sixnine months ended MarchJune 29,28, 2026, consolidated gross profit wasincreased relatively$0.2 unchangedmillion compared to the same period in the prior year.
year. Gross profit at the Applied Optics Center decreased $0.9 million primarily due to higherlower costrevenue ofand sales resulting from increased contract
loss reserves, higher gold prices usedchanges in the coating process for one product line, and fixed manufacturing costs spread over lower
revenue.mix. This decrease
was offset by higherincreased gross profit at the Optex Richardson,Richardson reflectingsegment with changes in product mix and the completionreplacement of loss-makinglow margin and
loss contracts and
increasedwith revenuenewer fromorders at more favorablyfavorable priced programs.pricing. Consolidated gross margin increased slightly to 29.2%,30.9%, compared to 29.0%28.8% in
the prior-yearprior
year period.
Operating
income for the three months ended MarchJune 29,28, 2026 decreased by $0.6$0.5 million compared to the same period in the prior year. The
decrease decrease
was primarily attributable to higherincreased general and administrative expenses,expenses whichof increased$0.7 million, partially offset by $0.6higher
gross million.profit of $0.2 million as compared to the prior year period. The increase in general and administrative costs consisted of
approximately $0.2$0.3 million in higher labor and fringe benefit costs, $0.2 million in increased stock-based compensation expense, and
$0.2$0.1 million in higher legalroyalty expenses, royalties,and $0.1 million in higher professional fees, information technology support services,
research and development costs, consulting
fees, and other expenses. Higher labor costs were primarily attributable to the addition of
the Optex Richardson General Manager position
position, and other staffing and organizational changes withinin engineeringsupport of research and administrativeproduct functions.development
programs.
Operating
income for the sixnine months ended MarchJune 29,28, 2026 decreased by $1.3$1.9 million compared to the same period in the prior year. The decrease
primarily resulted from ageneral $1.3and administrative expenses of $2.0 million, offset by higher gross profit of $0.2 million as
compared to the prior year period. The increase in general and administrative expenses,costs consistingconsisted of approximately $0.7$1.0 million in
higher labor and fringe benefit costs, $0.3$0.5 million in increased stock-based compensation expense, $0.2 million in higher royalty
expenses, and $0.3 million in higher
professional fees, information technology support services, research and development costs,
consulting fees, and other expenses.
Higher labor costs were primarily attributable to executive leadership transition costs,
including overlapping compensation
associated with the former and current Chief Executive Officer (“CEO”), the addition
of the Optex Richardson General Manager position, and
other organizational changes.changes in support of research and product development
programs.
Management expects general and administrative expenses to remain elevated as the Company continues to realign its organizational structure to support increased research and development activity, comply with Cybersecurity Maturity Model Certification (CMMC) and National Institute of Standards and Technology (NIST) requirements, and enhance internal software reporting systems.
We
use adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) as an additional measure for evaluating the
performance performance
of our business as “net income” includes the significant impact of non-recurring general and administrative
expense (including noncash compensation expenses related to equity stock
issues, issues), as well as depreciation, amortization, interest
expenses and federal income taxes. We believe that Adjusted EBITDA is a meaningful
indicator of our operating performance because it
permits period-over-period comparisons of our ongoing core operations before the excluded
items, which we do not consider relevant
to our operations. Adjusted EBITDA is a financial measure not required by, or presented in accordance
with, U.S. generally accepted
accounting principles (“GAAP”).
The
table below summarizes our three-month and six-monthnine-month operating results for the periods ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025, in terms
of both the GAAP net income measure and the non-GAAP Adjusted EBITDA measure. We believe that including both measures allows the reader
better to evaluate our overall performance.
Net
income declined in both the quarter and year-to-date periods ended MarchJune 29,28, 2026, reflecting a deliberate step-up in corporate overhead
overhead during a leadership transition. Quarterly net income decreased by $0.4$0.2 million to $1.4$1.3 million from $1.8$1.5 million, and
year-to-date net
income decreased by $1.0$1.3 million to $1.6$2.9 million from $2.6$4.1 million. The primary cause was higher general and
administrative expense,
partially offset by higher gross profit, interest income and lower federal income taxes.
The
Company incurred increased non-recurring general and administrative expenses of $0.3 million,million in the nine months ended June 28, 2026, primarily due to higher salaries and benefits
resulting from executive leadership changes. These changes included Chad George’s transition to President and CEO
following Danny
Schoening’s, retirement effective December 20, 2025, as well as the temporary double-staffing of certain senior
roles during theirthe retirementrelated transition periodsperiod to allow for training and knowledge transfer.
During
the three-month and six-monthnine-month periods ended MarchJune 29,28, 2026, the Company incurred approximately $0.2 million and $0.3$0.5 millionmillion, respectively,
in
additional stock-based compensation compared to the same periods in the prior year. This increase was primarily attributable to the
issuance of market-based equity awards to the Company’s CEO and Chief Financial Officer on December 18, 2025. The fair value of
these awards
totaled $679 thousand as of the grant date and is being amortized over the estimated service period based on a Monte Carlo
valuation valuation
model.
Depreciation
and amortization expense decreased by approximately $0.03$0.02 million and $0.1$0.09 million for the three-month and six-monthnine-month periods ended June
March 29,28, 2026, respectively, compared to the corresponding prior year periods. This decline was primarily driven by the write-off of intangible
intangible assets related to the Speedtracker product line acquisition on September 29,28, 2025, which eliminated the associated
amortization expense.
The reduction was partially offset by increased depreciation related to the acquisition of new capital
equipment during the current year.
During
the sixnine months ended MarchJune 29,28, 2026, the Company booked $16.3$19.5 million in new orders, representing a 3.8%19.1% increasedecrease compared to the prior
year period orders of $15.7$24.1 million. The orders for the most recently completed sixnine months consist of $7.4 million for our Optex Richardson
segment and $8.9$6.5 million attributable to theour
Optex Richardson segment and $13.0 million attributable to our Applied Optics Center segment.
The
following table depicts the new customer orders for the sixnine months ending MarchJune 29,28, 2026 as compared to the prior year period in millions
of dollars:
Orders
for the Optex Richardson segment decreased by $1.5$4.0 million, or 16.9%,38.1%, from the prior year period, primarily as a result of lower
customer customer
demand for periscopes and other optical assemblies.assemblies combined with the cancellation of a $2.0 million Howitzer order. The
Howitzer order cancellation was at our request as we were unable to come to an acceptable agreement on an equitable adjustment
associated with the significant schedule delays in the receipt of customer furnished material and first article
inspection.
InOrders
contrast, orders for the Applied Optics Center increaseddecreased by $2.1$0.6 million, or 30.9%,4.4%, compared to the prior-year period. The increasedecrease was
primarily driven
by newlower customer orders for commerciallaser opticalfilters and day windows, offset by increases in Optical assemblies and higher demand for specialty coating products.
Orders for the Applied
Optics Center may fluctuate from quarter to quarter due to factors such as government funding levels and the timing
of orders from key
customers.
Backlog
as of MarchJune 29,28, 2026 was $36.6$30.1 million as compared to a backlog of $41.1$38.3 million as of MarchJune 30,29, 2025, representing a decrease of 10.9%.21.4%.
The following table depicts the current expected delivery by quarter of all contracts awarded as of MarchJune 29,28, 2026, as well as the Marchbacklog
29,as of June 28, 2026 backlog as compared to the backlog onas Marchof 30,June 29, 2025.
Optex Richardson backlog declined to $19.7 million as of June 28, 2026, a decrease of $6.0 million, or 23.3%, compared to the prior year. The decrease primarily reflects lower customer demand for periscopes combined with the cancellation of the Howitzer XM10 aiming circle order.
We are seeing lower demand for our standard periscopes based on the most recent U.S. defense budget appropriation and the entrance of new competition for several of our periscope products.
Optex
Richardson backlog declined to $25.2 million as of March 29, 2026, a decrease of $5.8 million, or 18.7%, compared to the prior year.
The decrease primarily reflects the planned completion of several long-duration periscope contracts in the first half of the fiscal
year, combined with shifts in government defense spending priorities and increased competitive pressure following the entry of a new
market participant in select periscope products. The reduction in periscope backlog is somewhat offset by increased backlog in
sighting systems for the XM30 program and muzzle reference systems in our other product lines.
Applied
Optics Center backlog as of MarchJune 29,28, 2026 was $11.4$10.4 million as compared to a backlog of $10.1$12.6 million as of MarchJune 30,29, 2025, representing
representinga an increasedecrease of $1.3$2.2 million, or 12.9%.17.5%. The increasedecrease in backlog for the Applied Optics Center is primarily due to new
orders received for our commercial optical assemblies. We attribute the increase in orders to the timing oflower customer replenishmentdemand
ordersfor laser filters and higherday demand in the first half of the current year as compared to the prior year first half.windows.
We anticipate orders of approximately $4 million for laser filter units in support of the Next Gen Squad weapon fire control system which has been delayed by the customer and is expected to be awarded in the next three to six months. In addition, we currently have in excess of $24 million in open customer quotes for new products that we expect to yield between $10 million and $12.5 million in customer awards during the next 6 months.
Three
Months Ended MarchJune 29,28, 2026 Compared to the Three Months Ended MarchJune 30,29, 20262025
Revenue.
For the three months ended MarchJune 29,28, 2026, revenue decreased by $1.1$1.4 million or 10.3%12.4% compared to the prior year period as set forth in
in the table below:
Optex Richardson revenue decreased by $2.2 million or 31.6% for the three months ended June 28, 2026 as compared to the prior year period with lower deliveries on periscopes and other, partially offset by increases in the XM30 sighting system program and completion of first article inspection on the SM10 Howitzer program. Periscope revenues of approximately $1.5 million were pushed from the current fiscal quarter into the fourth quarter as a result of delivery schedule issues with two key customers. The parts were completed in finished goods as of June 28, 2026 pending delivery date changes from the customer. We anticipate our fourth fiscal quarter revenue to be substantially higher.
Optex
Richardson revenue decreased by $0.1 million or 1.2% for the three months ended March 29, 2026 as compared to the prior year period
with lower revenue in our periscope product line. We are seeing lower demand for our standard periscopes based on the most recent
U.S. defense budget appropriation and the entrance of new competition for several of our periscope products. The lower periscope
revenue was mostly offset by increased revenue in sighting systems under our XM30 display periscope assemblies program, sales of
back-up sight units, and shipments under our Israel Aquila repair program, combined with increased revenue in other product
lines including muzzle reference systems, big eye units, beamsplitters, and mirrors.
Applied
Optics Center revenue declinedincreased by $1.0$0.8 million or 23.3%18.3% for the three months ended MarchJune 29,28, 2026, compared with the prior-year period.
period. This shortfallincrease was primarily driven by thenew 2025orders governmentfor shutdowncommercial optical assemblies and delayedother passagespecialty ofcoatings, thepartially 2026offset fiscalby
a year
appropriationsdecrease bill,in which deferred order placements rather than reflecting underlyingcustomer demand weakness.for laser filters.
Gross
Margin. The gross margin during the three-month period ended MarchJune 29,28, 2026 was 35.2%34.2% of revenue as compared to a gross margin of
31.3%28.5% of revenue for the prior year period. Consolidated gross profit for the three months ended MarchJune 29,28, 2026 increased $0.03$0.2 million
compared to the same period in the prior year, despite lower revenue.year. Cost of sales decreased to $6.2$6.4 million for the recently completed
period as compared
to the prior year period of $7.4$7.9 million on lower revenue, a changechanges in mix towardand morecompletion profitableof low margin and loss contracts andduring improvedthe
warrantyfirst trends.half of fiscal year 2026.
G&A
Expenses. During the three months ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025, we recorded operating expenses of $1.7$1.9 million and $1.1$1.3
million, respectively. OperatingThe expensesincrease increasedin bygeneral $0.6and administrative costs consisted of approximately $0.3 million over the prior year period primarily due approximately $0.2 million
in higher labor and
fringe benefit costs, $0.2 million in increased stock-based compensation expense, and $0.2$0.1 million in otherhigher spending.
Higherroyalty labor costs were primarily attributable to the addition of the Optex Richardson General Manager positionexpenses, and other$0.1
million staffingin higher professional fees, information technology support services, research and development costs, consulting fees, and
organizationalother changes within the engineering and administrative functions.expenses.
Operating
Income. For the three months ended MarchJune 29,28, 2026, we recorded operating income of $1.7$1.4 million, as compared to operating income of
of $2.2$1.9 million for the three months ended MarchJune 30,29, 2025. The $0.5 million decrease was primarily attributable to increased general and
administrative costs, partially offset by higher general
andgross administrative expenses of $0.6 million.profit.
SixNine
Months Ended MarchJune 29,28, 2026 Compared to the SixNine Months Ended MarchJune 30,29, 20262025
Revenue.
For the sixnine months ended MarchJune 29,28, 2026, revenue decreased by $0.2$1.5 million or 0.8%5.1% compared to the prior year period as set forth in
the table below:
Optex
Richardson revenue increaseddecreased by $1.8$0.3 million or 18.9%2.0% for the sixnine months ended MarchJune 29,28, 2026 as compared to the prior year period with
with increaseddecreased revenue in sighting systems under our XM30 display periscope assemblies program, sales of back-up sight units, and
shipments under our Israel aquila repair program, combined with increased revenue in other product lines including muzzle reference
systems, big eye units, beamsplitters, and mirrors.products.
Applied Optics Center revenue decreased by $1.2 million or 9.0% for the nine months ended June 28, 2026 as compared to the prior year period. This shortfall was primarily driven by lower revenue in laser filters partially offset by increased revenue in other specialty coatings.
Applied
Optics Center revenue decreased by $2.0 million or 21.7% for the six months ended March 29, 2026 as compared to the prior year
period. This shortfall was primarily driven by the 2025 government shutdown and delayed passage of the 2026 fiscal year
appropriations bill, which deferred order placements rather than reflecting underlying demand weakness. Based on current order
bookings and expected contract awards, we anticipate a strong rebound in the second half of fiscal year 2026, with revenue
increasing significantly, led by growth in laser filters, optical assemblies, and related
products.
Gross
Margin. The gross margin during the six-monthnine-month period ended MarchJune 29,28, 2026 was 29.2%30.9% of revenue as compared to a gross margin of 28.8%
29.0% of revenue for the prior year period and consolidated gross profit wasincreased relatively$0.2 unchangedmillion compared to the same period in the
prior yearyear.
Cost withof highersales grossdecreased profitto $19.7 million for the Optexrecently Richardsoncompleted segmentperiod offsetas bycompared reduced gross profit forto the Appliedprior Opticsyear Centerperiod of $21.4 million on lower
segment.revenue, changes in mix and completion of low margin and loss contracts during the first half of fiscal year 2026.
G&A
Expenses. For the sixnine months ended MarchJune 29,28, 2026 and MarchJune 30,29, 2025, general and administrative expenses were $3.7$5.6 million and $2.3$3.6
million, respectively, representing an increase of $1.3$2.0 million compared to the prior-year period. The increase wasin primarilygeneral attributableand administrative
tocosts consisted of approximately $0.7$1.0 million in higher labor and fringe benefit costs, $0.3$0.5 million in increased stock-based compensation
expense, $0.2 million in royalty expenses, and
$0.3 million in higher spendingprofessional onfees, otherinformation generaltechnology support services, research
and administrative costs. Higher labor costs were primarily driven by executive leadership
transitiondevelopment costs, includingconsulting overlapping compensation associated with the former and current CEO, the addition of
the Optex Richardson General Manager position,fees, and other organizational changes.expenses.
Operating
Income. For the sixnine months ended MarchJune 29,28, 2026, operating income was $1.8$3.2 million, compared to $3.2$5.1 million for the sixnine months
ended ended
MarchJune 30,29, 2025. The decrease in operating income was primarily attributable to the increase inincreased general and administrative expensescosts describedpartially
above.offset by higher gross profit.
As
of MarchJune 29,28, 2026, Optex Systems Holdings had working capital of $22.6$23.9 million, as compared to $21.1 million as of September 28, 2025.
During the sixnine months ended MarchJune 29,28, 2026, we usedgenerated operating cash of $1.3$1.0 million, primarily driven by $1.3net millionincome, partially offset
by changes in increasedworking inventory.
capital. During the sixnine months ended MarchJune 29,28, 2026, there were no borrowings or payments against the Texas Capital
Facility (as defined below).
Backlog
as of MarchJune 29,28, 2026 was $36.6$30.1 million as compared to $41.1$38.3 million as of MarchJune 30,29, 2025, representing a decrease of 10.9%.21.4%. For further
details, see “Results of Operations – New Orders and Backlog” above.
At
MarchJune 29,28, 2026, the Company had approximately $4.2$6.2 million in cash and no outstanding balance on our revolving credit line. As of June
March 29,28, 2026, our outstanding accounts receivable balance was $5.7$4.3 million which will be collectible during the following
quarter.
Please
refer to “Note 4 – Commitments and Contingencies – Non-cancellable Operating Leases” for a tabular depiction
of our remaining minimum lease and estimated Common Area Maintenance (“CAM”) payments under our leases as of MarchJune 29,28, 2026,
which disclosure is incorporated herein by reference.
On
March 22, 2023, the Company and its subsidiary, Optex Systems, Inc. (collectively, the “Borrowers”), entered into a Business
Loan Agreement with Texas Capital Bank (the “Lender”), pursuant to which the Lender will makemakes available to the Borrowers
a revolving
line of credit in the principal amount of $3 million. The commitment period for advances under the credit facility expired on May 22,
2025.
The
commitment period for advances under the credit facility expired on May 22, 2025. We refer to the expiration of that time period as the
“Maturity Date.” Outstanding advances under the facility accrued interest at a rate equal to the secured overnight financing
rate (“SOFR”) plus a specified margin, subject to a specified floor interest rate. The related agreement provided for a $125
thousand letter of credit sublimit.
On
May 21, 2025, the Company and Optex Systems, Inc. renewed their existing credit facility with the Lender by entering into a new Business
Loan Agreement (the “Loan Agreement”), effective May 22, 2025, pursuant to which the Lender will continuecontinues to make available to
Borrowers a revolving line of credit in the principal amount of $3 million (the “Texas Capital Facility”). The commitment
period for
advances under the Texas Capital Facility is twenty-four months, expiring on May 22, 2027 (the “Maturity Date”).
Outstanding Outstanding
advances under the Texas Capital Facility will accrue interest at a variable rate equal to SOFRsecured overnight financing rate
plus a specific margin. The interest
rate is currently 6.4% per annum.
The
Loan Agreement contains customary events of default and negative covenants, including but not limited to those governing capital expenditures
(limited to $1 million per year), indebtedness and liens, affiliate transactions, fundamental changes (including change in management),
investments, and restricted payments (including dividends). The Loan Agreement also requires the Borrowers to maintain a fixed charge
coverage ratio of at least 1.25:1 and a total leverage ratio of 3.00:1. The Texas Capital Facility is secured by substantially all of
the operating assets of the Borrowers as collateral. The Borrowers’ obligations under the Texas Capital Facility are subject to
acceleration upon the occurrence of an event of default as defined in the Loan Agreement. The Loan Agreement further provides for a $125,000
letter of Credit sublimit. As of MarchJune 29,28, 2026, the Company was in compliance with all covenants under the Texas Capital Facility.
As
of MarchJune 29,28, 2026, the outstanding balance under the Texas Capital Facility was zero. For the quarter ended MarchJune 29,28, 2026, the total
interest expense under the Texas Capital Facility was zero.
OPXS insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding OPXS (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 34,675 | $486.5K | 0.0% | Added 72% |