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Optex Systems Holdings Inc

Optex Systems Holdings IncOPXSEarnings & Financial Report

Nasdaq · Industrials · Optical Instruments & Lenses

Optex Systems Holdings Inc. designs, manufactures and supplies high-performance optical, optoelectronic components and integrated subsystems. Its core products include military sighting systems, laser protection solutions and precision optical assemblies, serving defense, aerospace and industrial manufacturing markets globally.

What changed in Optex Systems Holdings Inc's 10-K — 2024 vs 2025

Top changes in Optex Systems Holdings Inc's 2025 10-K

205 paragraphs added · 337 removed · 70 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

0 edited+114 added−144 removed0 unchanged
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Item 1.A. Risk Factors – Risks Relating 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 ” for a description of certain supplier risks we face, which description is incorporated herein by reference.
Added
Item 1. Business – Recent Events ” of this report for recent developments affecting the Company. Results of Operations by Segment We have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results.
Removed
Approximately 96% 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. However, 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.
Added
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.
Removed
We are currently unaware of any pending terminations on our existing contracts. In some cases, contract awards may be issued that are subject to renegotiation at a date (up to 180 days) subsequent to the initial award date. Generally, these subsequent negotiations have had an immaterial impact (0% to 5%) on the contract price of the affected contracts.
Added
Management has determined that the Optex Richardson plant 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.
Removed
Currently, none of our awarded contracts are subject to renegotiation. We are subject to, and must comply with, various laws and governmental regulations that impact, among other things, our revenue, operating costs, profit margins and the internal organization and operation of our business.
Added
The table below provides a summary of selective statement of operations data by operating segment for the years ended September 29, 2024 and September 28, 2025 reconciled to the Audited Consolidated Results of Operations as presented in Item 8, “Financial Statements and Supplementary Data”. 34 Results of Operations Selective Financial Info (Thousands) Twelve months ended September 28, 2025 September 29, 2024 Optex Systems Richardson Applied Optics Center Dallas Other (non- allocated costs and eliminations) Consolidated Optex Systems Richardson Applied Optics Center Dallas Other (non- allocated costs and eliminations) Consolidated Revenue from External Customers $ 23,761 $ 17,576 $ - $ 41,337 $ 18,171 $ 15,824 $ - $ 33,995 Intersegment Revenues - 1,157 (1,157 ) - - 1,042 (1,042 ) - Total Segment Revenue 23,761 18,733 (1,157 ) 41,337 18,171 16,866 (1,042 ) 33,995 Total Cost of Sales 17,699 12,738 (1,157 ) 29,280 14,401 11,107 (1,042 ) 24,466 Gross Profit 6,062 5,995 - 12,057 3,770 5,759 - 9,529 Gross Margin % 25.5 % 32.0 % - 29.2 % 20.7 % 34.1 % - 28.0 % General and Administrative Expense 3,771 771 383 4,925 3,630 653 425 4,708 Segment Allocated G&A Expense (1,356 ) 1,356 - - (1,486 ) 1,486 - - Net General & Administrative Expense 2,415 2,127 383 4,925 2,144 2,139 425 4,708 Operating Income (Loss) 3,647 3,868 (383 ) 7,132 1,626 3,620 (425 ) 4,821 Operating Income (Loss) % 15.3 % 20.6 % - 17.3 % 8.9 % 21.5 % - 14.2 % Asset Impairment (804 ) - - (804 ) - - - - Interest Income (Expense) - - 23 23 - - (47 ) (47 ) Income (Loss) before taxes $ 2,843 3,868 (360 ) 6,351 $ 1,626 3,620 (472 ) 4,774 Income (loss) before taxes % 12.0 % 20.6 % - 15.4 % 8.9 % 21.5 % - 14.0 % Our total external revenues increased by $7.3 million for the 2025 fiscal year, or 21.6%, compared to the 2024 fiscal year.
Removed
The material laws and regulations affecting our U.S. government business are summarized in the table below. 6 Law/Regulation Summary Federal Acquisition Regulation (FAR) The principal set of rules is the Federal Acquisition Regulation System.
Added
The Optex Richardson segment realized a $5.6 million, or 30.8% increase, and the Applied Optics Center segment realized an increase of $1.8 million, or 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 fiscal year.
Removed
This system consists of sets of regulations issued by agencies of the federal government of the United States to govern what is called the “acquisition process,” which is the process through which the government acquires goods and services. That process consists of three phases: (1) need recognition and acquisition planning, (2) contract formation, and (3) contract administration.
Added
Intersegment revenues relate primarily to coated filters provided by the Applied Optics Center to Optex Richardson in support of the Optex Richardson periscope line. Gross profit increased $2.5 million, and the gross margin percentage increased by 1.2 points from 28.0% for the 2024 fiscal year to 29.2% for the 2025 fiscal year.
Removed
This system regulates the activities of government personnel in carrying out that process. It does not regulate the purchasing activities of private sector firms, except to the extent that those activities involve government solicitations and contracts by reference.
Added
Optex Richardson gross profit increased by $2.3 million and the gross margin percentage increased to 25.5% for the 2025 fiscal year from 20.7% for the prior year. The 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.
Removed
International Traffic in Arms Regulations (ITAR) United States government regulations that control the export and import of defense-related articles and services on the United States Munitions List. These regulations implement the provisions of the Arms Export Control Act.
Added
Applied Optics Center’s gross profit increased by $0.2 million and the gross margin percentage decreased to 32.0% for the 2025 fiscal year from 34.1% for the prior year period. The gross profit percentage decrease at the Applied Optics Center was attributable to changes in mix combined with increased costs for warranties and gold with respect to our Day Window products.
Removed
Truth in Negotiations Act (TINA) A public law enacted for the purpose of providing for full and fair disclosure by contractors in the conduct of negotiations with the government.
Added
Consolidated general and administrative costs increased from $4.7 million for the twelve months ended September 29, 2024 to $4.9 million for the twelve months ended September 28, 2025.
Removed
The most significant provision included is the requirement that contractors submit certified cost and pricing data for negotiated procurements above a defined threshold of $2 million for contracts entered into after June 30, 2018.
Added
General and administrative costs increased $0.2 million due to increased royalties and selling expenses of $0.1 million, increased labor and fringe costs of $0.1 million and increased information technology costs of $0.1 million, offset by decreased investor relation expenses of $0.1 million.
Removed
The law requires contractors to provide the government with an extremely broad range of cost or pricing information relevant to the expected costs of contract performance, and it requires contractors and subcontractors to submit cost or pricing data to the government and to certify that, to the best of their knowledge and belief, the data are current, accurate, and complete.
Added
During the fiscal years 2025 and 2024, Applied Optics Center absorbed $1.4 million and $1.5 million, respectively, of fixed general and administrative costs incurred by Optex Richardson for support services.
Removed
A contracting officer may still request cost or price data, if necessary, without certification, to determine whether the proposed cost or price is fair and reasonable for contracts which are below the threshold. We are responsible for full compliance with the Federal Acquisition Regulation (FAR). Upon award, the contract may identify certain regulations that we need to meet.
Added
These expenses cover accounting, executive, human resources, information technology, board fees and other corporate expenses paid by Optex Richardson and shared across both operating segments. 35 Consolidated operating income increased by $2.3 million in the year ended September 28, 2025 to $7.1 million as compared to the prior fiscal year operating income of $4.8 million.
Removed
For example, a contract may allow progress billing pursuant to specific FAR clauses incorporated into the contract. Other contracts may call for specific first article acceptance and testing requirements.
Added
Operating income increased as a result of higher revenues and increased gross profit as compared to the prior fiscal year. Income before taxes increased $1.6 million, to $6.4 million in the 2025 fiscal year from a prior fiscal year income before taxes of $4.8 million as a result of higher operating income offset by $0.8 million in asset impairment.
Removed
The FAR will identify the specific regulations that we must follow based on the type of contract awarded and contains guidelines and regulations for managing a contract after award, including conditions under which contracts may be terminated, in whole or in part, at the government’s convenience or for default.
Added
New Orders and Backlog Product backlog represents the value of unfulfilled customer manufacturing orders yet to be recognized as revenue. While backlog is not a non-GAAP financial measure, it is also not defined by GAAP. Therefore, our methodology for calculating backlog may not be consistent with methodologies used by other companies.
Removed
These regulations also subject us to financial audits and other reviews by the government of our costs, performance, accounting and general business practices relating to our government contracts, which may result in adjustment of our contract-related costs and fees and, among other things and impose accounting rules that define allowable and unallowable costs governing our right to reimbursement under certain contracts.
Added
The booked backlog by period may also not be fully indicative of the predicted revenues for those periods as many of our orders provide for accelerated delivery without penalty and may additionally provide customers the option to adjust schedules to meet their most recent projected demand quantities.
Removed
First Article Acceptance and Testing requirements consist of specific steps which could be comprehensive and time consuming. The dimensions and material specifications of each piece of the assembly must be verified, and some products may have in excess of 100 assembled parts.
Added
However, we provide customer order and backlog information as we believe it provides significant insight into forward demand, with some predictive power to short term future revenues. During the twelve months ended September 28, 2025, the Company booked $36.2 million in new orders, representing a 0.5% decrease from the prior year period orders of $36.4 million.
Removed
Once the individual piece parts are verified to be compliant to the specification, the assembly processes are documented and verified. A sample of the production (typically three units) is verified to meet final performance specifications.
Added
The orders for the most recently completed twelve months consist of $21.3 million for our Optex Richardson segment and $14.9 million attributable to the Applied Optics Center segment.
Removed
Once the units meet the final performance specification, they are then subjected to accelerated life testing, a series of tests which simulate the lifetime use of the product in the field. This consists of exposing the units to thermal extremes, humidity, mechanical shock, vibration, and other physical exposure tests.
Added
The following table depicts the new customer orders for the twelve months ending September 28, 2025 as compared to the prior year period in millions of dollars: (Millions) Product Line Twelve months ended September 28, 2025 Twelve months ended September 29, 2024 Variance % Chg Periscopes $ 11.5 $ 19.9 $ (8.4 ) (42.2 ) Sighting Systems 3.3 0.4 2.9 725.0 Howitzer - - - - Other 6.5 3.2 3.3 103.1 Optex Systems – Richardson 21.3 23.5 (2.2 ) (9.4 ) Optical Assemblies 1.0 1.8 (0.8 ) (44.4 ) Laser Filters 10.2 9.2 1.0 10.9 Day Windows 0.9 0.1 0.8 800.0 Other 2.8 1.8 1.0 55.6 Applied Optics Center – Dallas 14.9 12.9 2.0 15.5 Total Customer Orders $ 36.2 $ 36.4 $ (0.2 ) (0.5 ) During the year ended September 28, 2025, orders in the Company’s Optex Richardson segment decreased by $2.2 million, or 9.4%, as compared to the prior year.
Removed
Once completed, the units undergo a final verification process to ensure that no damage has occurred as a result of the testing and that they continue to meet the performance specification.
Added
The decrease in orders was primarily driven by lower customer demand for periscopes, mostly offset by increased demand for sighting system and other products. During the twelve months ended September 28, 2025, the Company experienced a 42.2%, or $8.4 million reduction in military periscope orders as compared to the prior year twelve-month period.
Removed
All of the information and data is recorded into a final first article inspection and test report and submitted to the customer along with the test units for final approval.
Added
During the year ended September 28, 2025, Applied Optics Center orders increased by $2.0 million, or 15.5%, on increased customer demand for laser filters, day windows and other products, offset by lower demand for our commercial optical assemblies.
Removed
First Article Acceptance and Testing is generally required on new contracts/product awards but may also be required on existing products or contracts where there has been a significant gap in production, or where the product has undergone significant manufacturing process, material, tooling, equipment or product configuration changes.
Added
The Optex Richardson segment currently has four open US Government IDIQ type military contracts for periscopes, vision blocks and collimators with unspent funding which covers base year and option year requirement ordering periods into July 2030. During the 2025 fiscal year, approximately 31% of Optex Richardson’s segment orders, or $6.7 million, were awards against active IDIQ contracts.
Removed
We are also subject to laws, regulations and executive orders restricting the use and dissemination of information deemed classified for national security purposes and the exportation of certain products and technical data as covered by the International Traffic in Arms Regulation (ITAR).
Added
We anticipate additional orders throughout the next five years for these ongoing contracts. In addition, the Company has an active bid request for a new multi-year IDIQ contract pending with the U.S. government for additional periscopes and infrared filter assemblies that are expected to be awarded in the next three to six months.
Removed
In order to import or export items listed on the United States Munitions List, we are required to be registered with the Directorate of Defense Trade Controls office. The registration is valid for one year, and the registration fees are established based on the number of license applications submitted the previous year.
Added
The Applied Optics Center has no open US government IDIQ orders. 36 Backlog as of September 28, 2025 was $39.1 million as compared to a backlog of $44.2 million as of September 29, 2024, representing a decrease of 11.5%.
Removed
We currently have an approved and current registration on file with the Directorate of Defense Trade Controls office. Once the registration is approved, each import/export license must be filed separately.
Added
The following table depicts the current expected delivery by quarter of all contracts awarded as of September 28, 2025, as well as the September 28, 2025 backlog as compared to the backlog on September 29, 2024.
Removed
License approval requires the company to provide proof of need, such as a valid contract or purchase order requirement for the specific product or technical data requested on the license and requires a detailed listing of the items requested for export/import, the end-user, the end-user statement, the value of the items, consignees/freight forwarders and a copy of a valid contract or purchase order from the end-user.
Added
(Millions) Product Line Q1 2026 Q2 2026 Q3 2026 Q4 2026 2026 Delivery 2027+ Delivery Total Backlog 9/28/2025 Total Backlog 9/29/2024 Variance % Chg Periscopes $ 4.2 $ 3.1 $ 2.7 $ 1.3 $ 11.3 $ 3.7 $ 15.0 $ 22.7 $ (7.7 ) (33.9 ) Sighting Systems 0.4 2.2 1.4 0.9 4.9 0.7 5.6 3.8 1.8 47.4 Howitzer - - - - - 2.3 2.3 2.3 - - Other 0.6 0.4 2.5 1.6 5.1 1.4 6.5 3.0 3.5 116.7 Optex Systems – Richardson 5.2 5.7 6.6 3.8 21.3 8.1 29.4 31.8 (2.4 ) (7.5 ) Optical Assemblies 0.1 - - - 0.1 - 0.1 0.7 (0.6 ) (85.7 ) Laser Filters 2.5 1.7 1.0 1.0 6.2 1.1 7.3 9.5 (2.2 ) (23.2 ) Day Windows 0.4 0.2 0.2 0.1 0.9 0.1 1.0 1.1 (0.1 ) (9.1 ) Other 0.7 0.4 - 0.1 1.2 0.1 1.3 1.1 0.2 18.2 Applied Optics Center – Dallas 3.7 2.3 1.2 1.2 8.4 1.3 9.7 12.4 (2.7 ) (21.8 ) Total Backlog $ 8.9 $ 8.0 $ 7.8 $ 5.0 $ 29.7 $ 9.4 $ 39.1 $ 44.2 $ (5.1 ) (11.5 ) Optex Systems - Richardson At September 28, 2025, backlog for our Optex Richardson segment was 7.5%, or $2.4 million lower than the prior fiscal year backlog of $31.8 million.
Removed
The approval process for the license can vary from several weeks to six months or more. The licenses we currently use are the Department of State licenses: DSP-5 (permanent export), DSP-6 (license revisions) and DSP-73 (temporary export) and Department of Commerce: BIS-711 (export). 7 The above licenses are valid for 48 months from date that each license is issued.
Added
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.
Removed
A summary of our active ITAR licenses is presented below (updated as of November 15, 2024): Fiscal Year Number of Total Contract Value of Active ITAR Licenses of Expiration Licenses Licenses DSP-5 Issued 2021 2025 3 $ 232,630 Issued 2022 2026 4 321,722 Issued 2023 (none issued) N/A — — Issues 2024 2028 3 125,577 Total DSP-5 Licenses 10 $ 679,929 DSP-6 (no active licenses) N/A — $ — DSP-73 (no active licenses) N/A — — BIS-711 Issued 2020 (expires December 31, 2024) 2024 2 15,016 Issued 2021 2025 4 323,911 Issued 2022 2026 1 9,372 Issued 2023 2027 10 1,359,344 Issued 2024 2028 7 1,270,327 Total BIS-711 Licenses 24 $ 2,977,970 Total All Licenses 34 $ 3,657,899 These licenses are subject to termination if a licensee is found to be in violation of the Arms Export Control Act or the ITAR requirements.
Added
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.
Removed
If a licensee is found to be in violation, in addition to a termination of its licenses, it can be subject to fines and penalties by the government.
Added
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.
Removed
Our contracts may also be governed by the Truth in Negotiation Act (TINA) requirements where certain of our contracts or proposals exceed the TINA threshold ($2 million for awards after June 30, 2018), and/or are deemed as sole source, or non-competitive awards, covered under this act.
Added
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.
Removed
For these contracts, we must provide a vast array of cost and pricing data in addition to certification that our pricing data and disclosure materials are current, accurate and complete upon conclusion of the negotiation.
Added
We anticipate the option to be exercised in the next twelve months. The Howitzer contract awarded in July 2020 continues to experience customer driven delays related to customer furnished materials. This program is currently on hold pending statement of work changes and materials furnished by the customer. We anticipate deliveries against the Howitzer contract to begin in fiscal year 2027.
Removed
Due to the additional disclosure and certification requirements, if a post contract award audit were to uncover that the pricing data provided was in any way not current, accurate or complete as of the certification date, we could be subjected to a defective pricing claim adjustment with accrued interest.
Added
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.
Removed
We have no history of defective pricing claim adjustments and have no outstanding defective pricing claims pending. Additionally, as a result of this requirement, contract price negotiations may span from two to six months and can result in undefinitized or not to exceed ceiling priced contracts subject to future downward negotiations and price adjustments.
Added
Applied Optics Center – Dallas The Applied Optics Center backlog decreased by $2.7 million, or 21.8%, for the year ended September 28, 2025, from $12.4 million in fiscal 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.
Removed
Currently, we do not have any undefinitized contracts subject to further price negotiation.
Added
Backlog for our optical assemblies decreased by $0.6 million, or 85.7%, during the 2025 fiscal year, compared to prior fiscal year-end backlog on lower customer demand for commercial optical assemblies.
Removed
Our failure to comply with applicable regulations, rules and approvals or misconduct by any of our employees could result in the imposition of fines and penalties, the loss of security clearances, the loss of our U.S. government contracts or our suspension or debarment from contracting with the U.S. government generally, any of which could have a material adverse effect our business, financial condition, results of operations and cash flows.
Added
We anticipate new orders during the next three to six months for deliveries in fiscal year 2026. 37 Laser filter backlog decreased by $2.2 million, or 23.2%, during the 2025 fiscal year due to the timing of customer orders versus customer delivery schedule.
Removed
We are currently in compliance with all applicable regulations and do not have any pending claims as a result of noncompliance. 8 The terms of our significant contracts with a total award value of more than $1.0 million as of December 9, 2024, are as follows: ( $ in millions) Location Customer Contract/PO Product Type Award Backlog Delivery Period OPX U.S.
Added
Our laser filter orders increased 10.9%, or $1.0 million, during the 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 2026 fiscal year.
Removed
Prime Contractor (1) PO 35515590 Sighting Systems FFPQ $ 4.6 $ 1.3 Dec 2024 - Mar 2027 OPX DLA Land and Maritime (2) SPE7LX19D0089 Periscopes IDIQ 1.7 0.7 Dec 2024 - Nov 2025 OPX U.S.
Added
Day window backlog decreased by $0.1 million, or 9.1%, during the 2025 fiscal year primarily due to lower customer demand. We anticipate additional orders over the next twelve months. Other Applied Optics Center backlog increased by $0.2 million, or 18.2% during the 2025 fiscal year on increased customer orders on for our specialty coatings products .
Removed
Prime Contractor (3) PO 63659 XM10 Aiming Circles FFPQ 2.3 2.3 Estimated 2026 OPX DLA Land and Maritime (4) SPE7LX21D0057 Periscopes IDIQ 7.4 2.5 Dec 2024 - Jun 2025 OPX Government of Israel MOD (5) PO 40385578 Refurbish Night Vision Equipment FFPQ 3.1 2.3 2025 - 2026 OPX DLA Land and Maritime (6) SPE7LX23D0092 Periscopes IDIQ 2.0 1.1 Dec 2024 - Oct 2025 OPX U.S.
Added
Please refer to “ Material Trends and Recent Events ” above or “ Liquidity and Capital Resources ” below for more information on recent developments and trends with respect to our orders and backlog, which information is incorporated herein by reference.
Removed
Prime Contractor (7) PO 40431189 Periscopes FFPQ 1.9 1.3 Dec 2024 - Nov 2025 OPX U.S. Prime Contractor (8) PO 40431702 Collimators FFPQ 1.3 1.3 Jul 2025 - Mar 2027 OPX U.S. Prime Contractor (9) PO 363920 Periscopes FFPQ 3.7 3.6 Dec 2024 - Mar 2026 OPX U.S.
Added
The Company continues to pursue domestic, international and commercial opportunities in addition to maintaining its current footprint with U.S. vehicle manufactures, with existing as well as new product lines. We are also reviewing potential products outside our traditional product lines.
Removed
Prime Contractor (10) PO 1402471 Periscopes FFPQ 1.2 1.2 Mar 2025 AOC U.S. Prime Contractor (11) PO 40385578 Day Windows IDIQ 2.9 1.0 Dec 2024 - Nov 2025 AOC DLA Land at Aberdeen (12) SPRBL123D0001 Light Interference Filters IDIQ 4.2 2.2 Dec 2024 - Dec 2025 AOC U.S.
Added
Further, we continue to look for strategic businesses to acquire that will strengthen our existing product line, expand our operations, offer operational scale and enter new markets.
Removed
Prime Contractor (13) PO 4500045346 Laser Filter Units FFPQ 1.1 0.5 Dec 2024 - June 2025 AOC U.S. Prime Contractor (14) PO 921424 Light Interference Filters FFPQ 1.1 1.1 Dec 2024 - Sept 2025 AOC U.S.
Added
Twelve months ended September 28, 2025 compared to the twelve months ended September 29, 2024 Revenues The table below details the revenue changes by segment and product line for the year ended September 28, 2025 as compared to the year ended September 29, 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

44 edited+17 added−6 removed65 unchanged
Finding another source would be very expensive and take approximately 1 year to transition Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. 21 Applied Optics Center LIF Assembly Rubber Seal Mold tooling was manufactured by and used by one source.
Finding another source would be very expensive and take approximately 1 year to transition Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. Applied Optics Center LIF Assembly Rubber Seal Mold tooling was manufactured by and used by one source.
Costs associated with warranty and product liability claims could materially affect our financial condition and results of operations. We rely on the proper function, availability and security of information technology systems to operate our business and a cyber-attack or other breach of these systems could have a material adverse effect on our business, financial condition or results of operations.
Costs associated with warranty and product liability claims could materially affect our financial condition and results of operations. 26 We rely on the proper function, availability and security of information technology systems to operate our business and a cyber-attack or other breach of these systems could have a material adverse effect on our business, financial condition or results of operations.
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.
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.
We do not have employment agreements with our key personnel, other than our Chief Executive Officer and Chief Financial Officer, and our management has minimal unencumbered equity ownership in us.
We do not have employment agreements with our key personnel, other than our Chief Executive Officer, Chief Financial Officer, and President and our management has minimal unencumbered equity ownership in us.
We may be unable to fill the labor positions required to meet our customer demands in a timely or cost-effective manner, which would impede our ability to meet current or increasing production levels in line with our customer expectations and adversely affect our ability to grow revenue or maintain our current margin levels. 19 Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current contracts.
We may be unable to fill the labor positions required to meet our customer demands in a timely or cost-effective manner, which would impede our ability to meet current or increasing production levels in line with our customer expectations and adversely affect our ability to grow revenue or maintain our current margin levels. 23 Our ability to fulfill our backlog may have an effect on our long-term ability to procure contracts and fulfill current contracts.
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% of our gross business revenue.
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 70% of our gross business revenue.
If they choose to terminate these contracts, we are entitled to fully recover all contractual costs and reasonable profits incurred up to or as a result of the terminated contract. We possess only six patents and rely primarily on trade secrets to protect our intellectual property.
If they choose to terminate these contracts, we are entitled to fully recover all contractual costs and reasonable profits incurred up to or as a result of the terminated contract. We possess only eight patents and rely primarily on trade secrets to protect our intellectual property.
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 makes them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption.
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 make them vulnerable to a cyber-attack, malicious intrusion, breakdown, destruction, loss of data privacy, or other significant disruption.
There can be no assurance that we could replace these customers on a timely basis or at all. We have approximately 150 discrete contracts with major defense contractors, the U.S. Government (primarily Defense Logistics Agencies (DLA)), and other prime U.S. defense contractors.
There can be no assurance that we could replace these customers on a timely basis or at all. We have approximately 120 discrete contracts with major defense contractors, the U.S. government (primarily Defense Logistics Agencies (DLA)), and other prime U.S. defense contractors.
The trading price of our common stock has in the past and may in the future be subject to wide fluctuations in response to factors such as the following: ● revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community; ● speculation in the press or investment community; ● wide fluctuations in stock prices, particularly with respect to the stock prices for other defense industry companies; ● announcements of technological innovations by us or our competitors; ● new products or the acquisition of significant customers by us or our competitors; ● changes in investors’ beliefs as to the appropriate price-earnings ratios for us and our competitors; ● changes in management; ● sales of common stock by directors and executive officers; ● rumors or dissemination of false or misleading information, particularly through Internet chat rooms, instant messaging, and other rapid-dissemination methods; ● conditions and trends in the defense industry generally; ● the announcement of acquisitions or other significant transactions by us or our competitors; ● adoption of new accounting standards affecting our industry; ● general market conditions; ● domestic or international terrorism and other factors; and ● other factors as described in this section. 25 Fluctuations in the price of our common stock may expose us to the risk of securities class action lawsuits.
The trading price of our common stock has in the past and may in the future be subject to wide fluctuations in response to factors such as the following: ● revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of the investment community; ● speculation in the press or investment community; ● wide fluctuations in stock prices, particularly with respect to the stock prices for other defense industry companies; ● announcements of technological innovations by us or our competitors; ● new products or the acquisition of significant customers by us or our competitors; ● changes in investors’ beliefs as to the appropriate price-earnings ratios for us and our competitors; ● changes in management; ● sales of common stock by directors and executive officers; ● rumors or dissemination of false or misleading information, particularly through Internet chat rooms, instant messaging, and other rapid-dissemination methods; ● conditions and trends in the defense industry generally; 30 ● the announcement of acquisitions or other significant transactions by us or our competitors; ● adoption of new accounting standards affecting our industry; ● general market conditions; ● domestic or international terrorism and other factors; and ● other factors as described in this section.
Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. Applied Optics Center LIF Assembly Container Wrench and Retaining Ring Mold tooling was manufactured by and used by one source. Tooling would not fit other potential supplier’s equipment.
Alternate source cannot be developed. Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. Applied Optics Center LIF Assembly Container Wrench and Retaining Ring Mold tooling was manufactured by and used by one source. Tooling would not fit other potential supplier’s equipment.
In the table below, we identify those specialized single source suppliers with respect to which we face such a material risk and the product lines supported by those materials utilized by us as of September 29, 2024.
In the table below, we identify those specialized single source suppliers with respect to which we face such a material risk and the product lines supported by those materials utilized by us as of September 28, 2025.
Beamsplitter Glass tight dimensions and Special Coating Limited number of suppliers that can meet tight customer specifications without deviation Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Applied Optics Center M22/M24 Binocular Spare Components Only approved source due to proprietary rights. Alternate source cannot be developed.
Beamsplitter Glass tight dimensions and Special Coating Limited number of suppliers that can meet tight customer specifications without deviation Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. 25 Applied Optics Center M22/M24 Binocular Spare Components Sole source provider. Only approved source due to proprietary rights.
Since our common stock was listed on Nasdaq in March 2023, our stock price, as reported by Nasdaq, has ranged from a low of $2.87 to a high of $10.30.
Since our common stock was listed on Nasdaq in March 2023, our stock price, as reported by Nasdaq, has ranged from a low of $2.87 to a high of $17.76.
Any of these events may cause us to have difficulty preventing, detecting, and controlling fraud, be subject to legal claims and liability, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach or theft of intellectual property, or suffer other adverse consequences, any of which could have a material adverse effect on our business, financial condition or results of operations. 22 We derive almost all of our revenue from a small number of customers and the loss of any of these customers could have a material adverse effect on our revenues.
Any of these events may cause us to have difficulty preventing, detecting, and controlling fraud, be subject to legal claims and liability, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach or theft of intellectual property, or suffer other adverse consequences, any of which could have a material adverse effect on our business, financial condition or results of operations.
As of September 29, 2024, there was $259 thousand in accrued loss provisions for loss contracts or cost overruns. Approximately 96% 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.
As of September 28, 2025, there was $132 thousand in accrued loss provisions for loss contracts or cost overruns. Approximately 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.
Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Vision Blocks Military Spec welded housings for vision blocks Would take approximately 8-10 months to re-qualify a new supplier source.
Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Vision Blocks Military Spec welded housings for vision blocks Would take approximately 8-10 months to re-qualify a new supplier source. Currently working with single source for purchasing material on a forecast projection basis.
We anticipate that our capital requirements will depend on many factors, including: ● our ability to fulfill backlog; ● our ability to procure additional production contracts; ● our ability to control costs; ● the timing of payments and reimbursements from government and other contracts, including but not limited to changes in federal government military spending and the federal government procurement process; ● increased sales and marketing expenses; ● technological advancements and competitors’ response to our products; ● capital improvements to new and existing facilities; ● our relationships with customers and suppliers; and ● general economic conditions including the effects of future economic slowdowns, acts of war or terrorism and the current international conflicts. 23 Even if available, financings may involve significant costs and expenses, such as legal and accounting fees, diversion of management’s time and efforts, and substantial transaction costs.
We anticipate that our capital requirements will depend on many factors, including: ● our ability to fulfill backlog; ● our ability to procure additional production contracts; ● our ability to control costs; ● the timing of payments and reimbursements from government and other contracts, including but not limited to changes in federal government military spending and the federal government procurement process; ● increased sales and marketing expenses; ● technological advancements and competitors’ response to our products; ● capital improvements to new and existing facilities; ● our relationships with customers and suppliers; and ● general economic conditions including the effects of future economic slowdowns, acts of war or terrorism and the current international conflicts.
Tooling would not fit other potential supplier’s equipment. Finding another source would be very expensive and take approximately 1 year to transition Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule.
Tooling would not fit other potential supplier’s equipment. Finding another source would be very expensive and take approximately 1 year to transition Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. Applied Optics Center Assorted LFU Assemblies Anti-Reflective Device Sole source provider.
Applied Optics Center Assorted LFU Assemblies Anti-Reflective Device Only one approved government source of supply at this time Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule.
Only one approved government source of supply at this time Current firm fixed price and quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule.
General Risk Factors Changes in current economic conditions may adversely affect our ability to continue operations. Changes in current economic conditions may cause a decline in business, consumer and defense spending and capital market performance, which could adversely affect our business and financial performance.
These constraints could lead to higher costs and potential delays in accessing additional capital. 29 General Risk Factors Changes in current economic conditions may adversely affect our ability to continue operations. Changes in current economic conditions may cause a decline in business, consumer and defense spending and capital market performance, which could adversely affect our business and financial performance.
Product Line Supply Item Risk Purchase Orders Sighting Systems DDAN Digital camera system Alternative source would take in excess of six months to qualify Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Periscopes Die-cast housings All die cast tooling is consolidated at this supplier.
Product Line Supply Item Risk Purchase Orders Sighting Systems DDAN Digital camera system Alternative source would take in excess of six months to qualify Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Periscopes Steel castings Several suppliers qualified and vetted. Risk is overloading current supplier capacity.
Single-sourced component requirements span across all of our major product lines. 20 We consider it a material financial or schedule risk if we believe it will take us at least three months to identify and qualify a suitable replacement for specialized single source suppliers.
We consider it a material financial or schedule risk if we believe it will take us at least three months to identify and qualify a suitable replacement for specialized single source suppliers.
The Company’s revenues for fiscal year ended September 29, 2024 were derived from sales to U.S. government agencies (20%), four major U.S. defense contractors (25%, 7%, 6% and 6%), one major commercial customer (13%) and all other customers (23%). Approximately 94% of total Company revenue is generated from domestic customers and 6% is derived from foreign customers.
The Company’s revenues for fiscal year ended September 28, 2025 were derived from sales to U.S. government agencies (29%), four major U.S. defense contractors (19%, 10%, 6% and 6%) and all other customers (30%). Approximately 95% of total Company revenue is generated from domestic customers and 5% is derived from foreign customers.
Even if our estimates are reasonable at the time made, prices of materials are subject to unanticipated adverse fluctuation, and are affected by inflationary pressures.
Some of those contracts are for products that are new to our business and are thus subject to unanticipated impacts to manufacturing costs. Even if our estimates are reasonable at the time made, prices of materials are subject to unanticipated adverse fluctuation, and are affected by inflationary pressures.
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.
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.
Although based upon our general knowledge (and we have not conducted patent searches), we believe that our products do not infringe on the patents or other proprietary rights of third parties; however, we cannot assure you that third parties will not assert infringement claims against us or that such claims will not be successful.
Although based upon our general knowledge (and we have not conducted patent searches), we believe that our products do not infringe on the patents or other proprietary rights of third parties; however, we cannot assure you that third parties will not assert infringement claims against us or that such claims will not be successful. 27 We may need to raise additional capital in the future beyond any cash flow from our existing business; additional funds may not be available on terms that are acceptable to us, or at all.
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.
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.
If our debt level significantly increases in the future, it could have significant consequences on our ongoing operations including requiring us to dedicate a significant portion of our cash flow from operations to servicing debt rather than using it to execute our strategic initiatives; limiting our ability to obtain additional debt financing for future working capital, capital expenditures, or other worthwhile endeavors; and limiting our ability to react to changes in the market.
We may not have sufficient funds on hand to repay the loan, and if we are forced to refinance these borrowings on less favorable terms, or are unable to refinance at all, our results of operations and financial condition could be materially adversely affected by increased costs and rates. 28 If our debt level significantly increases in the future, it could have significant consequences on our ongoing operations including requiring us to dedicate a significant portion of our cash flow from operations to servicing debt rather than using it to execute our strategic initiatives; limiting our ability to obtain additional debt financing for future working capital, capital expenditures, or other worthwhile endeavors; and limiting our ability to react to changes in the market.
In some cases, contract awards may be issued that are subject to renegotiation at a date (up to 180 days) subsequent to the initial award date. Generally, these subsequent negotiations have had an immaterial impact (zero to 5%) on the contract price of the affected contracts. Currently, none of our awarded contracts are subject to renegotiation.
Generally, these subsequent negotiations have had an immaterial impact (zero to 5%) on the contract price of the affected contracts. Currently, none of our awarded contracts are subject to renegotiation.
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).
In some cases, the entire volume is given to a single supplier and in other cases, the volume might be split between several suppliers. 24 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.
Currently working with current vendor to keep supply of these parts Vision Blocks Large/Small/Customs Blocks Would take approximately 4-6 months to re-qualify a new supplier source. Currently working with single source for purchasing material on a forecast projection basis MRS Aluminum Castings for Housing Would take approximately 8-12 months to re-qualify a new supplier source.
Vision Blocks Large/Small/Customs Blocks Would take approximately 4-6 months to re-qualify a new supplier source. Currently working with single source for purchasing material on a forecast projection basis MRS Aluminum Castings for Housing Would take approximately six months to re-qualify a new supplier source and cost/time for new tooling. Looking at investment castings (3D printing) as mitigation.
However 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 are currently unaware of any pending terminations on our existing contracts.
However, 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 cannot assure you that any additional capital will be available on a timely basis, on acceptable terms, or at all. Future equity or debt financings may be difficult to obtain. If we are not able to obtain additional capital as may be required, our business, financial condition and results of operations could be materially and adversely affected.
We may need to raise additional capital in the future to finance our future working capital needs. We cannot assure you that any additional capital will be available on a timely basis, on acceptable terms, or at all. Future equity or debt financings may be difficult to obtain.
In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment. The risks and uncertainties described below are not exclusive and are intended to reflect the material risks that are specific to us, our industry and companies that have securities trading on an over-the-counter market.
The risks and uncertainties described below are not exclusive and are intended to reflect the material risks that are specific to us, our industry and companies that have securities trading on an over-the-counter market. 21 Risks Related to our Business Our historical operations depend on government contracts and subcontracts.
Future general political and economic conditions, which cannot be accurately predicted, may directly and indirectly affect the quantity and allocation of expenditures by federal agencies and foreign governments. Even the timing of incremental funding commitments to existing, but partially funded, contracts can be affected by these factors.
We face risks related to contracting with the federal government, including federal budget issues and fixed price contracts. Future general political and economic conditions, which cannot be accurately predicted, may directly and indirectly affect the quantity and allocation of expenditures by federal agencies and foreign governments.
Therefore, cutbacks or re-allocations in the federal or foreign government budgets could have a material adverse impact on our results of operations. Obtaining government contracts may also involve long purchase and payment cycles, competitive bidding, qualification requirements, delays or changes in funding, budgetary constraints, political agendas, extensive specification development, price negotiations and milestone requirements.
Obtaining government contracts may also involve long purchase and payment cycles, competitive bidding, qualification requirements, delays or changes in funding, budgetary constraints, political agendas, extensive specification development, price negotiations and milestone requirements. In addition, our government contracts are primarily fixed price contracts, which may prevent us from recovering costs incurred in excess of budgeted costs.
The financial viability of any given project depends in large part on our ability to estimate such costs accurately and complete the project on a timely basis. Some of those contracts are for products that are new to our business and are thus subject to unanticipated impacts to manufacturing costs.
Fixed price contracts require us to estimate the total project cost based on preliminary projections of the project’s requirements. The financial viability of any given project depends in large part on our ability to estimate such costs accurately and complete the project on a timely basis.
If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business. 24 We are a “ smaller reporting company ” as defined in SEC regulations, and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business.
Currently, ordering for a single source, new casting tool and FAT will be required to qualify a new source Big Eye Sand castings for big eye binocular parts Would take approximately 4-6 months to re-qualify a new supplier source Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements.
Currently, ordering for a single source, new casting tool and FAT will be required to qualify a new source. Big Eye Sand castings for big eye binocular parts Would take approximately six months to re-qualify a new supplier source and cost/time for new tooling. Looking at investment castings (3D printing) as mitigation.
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. 18 Our historical operations depend on government contracts and subcontracts. We face risks related to contracting with the federal government, including federal budget issues and fixed price contracts.
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.
It would take approximately six months to move tooling and re-qualify a new supplier. Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements. Supplier is on schedule. Periscopes Steel castings Alternative supplier source would take six months to qualify.
Current firm fixed price & quantity purchase orders are in place with the supplier to meet all contractual requirements.
Risks Related to our Business Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity. 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.
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. Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity.
We may not have sufficient funds on hand to repay the loan, and if we are forced to refinance these borrowings on less favorable terms, or are unable to refinance at all, our results of operations and financial condition could be materially adversely affected by increased costs and rates.
If we are not able to obtain additional capital as may be required, our business, financial condition and results of operations could be materially and adversely affected.
Removed
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.
Added
In such case, the trading price of our common stock could decline and investors in our common stock could lose all or part of their investment.
Removed
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.
Added
Even the timing of incremental funding commitments to existing, but partially funded, contracts can be affected by these factors. Therefore, cutbacks or re-allocations in the federal or foreign government budgets could have a material adverse impact on our results of operations.
Removed
In addition, our government contracts are primarily fixed price contracts, which may prevent us from recovering costs incurred in excess of budgeted costs. Fixed price contracts require us to estimate the total project cost based on preliminary projections of the project’s requirements.
Added
We are currently in negotiation with the customer regarding the final termination claim amount, but expect to recover all of our incurred cost to date, plus a reasonable fee, against these contracts. 22 In some cases, contract awards may be issued that are subject to renegotiation at a date (up to 180 days) subsequent to the initial award date.
Removed
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.
Added
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.
Removed
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.
Added
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.
Removed
We may need to raise additional capital in the future beyond any cash flow from our existing business; additional funds may not be available on terms that are acceptable to us, or at all. We may need to raise additional capital in the future to finance our future working capital needs.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
We derive almost all of our revenue from a small number of customers and the loss of any of these customers could have a material adverse effect on our revenues.
Added
Even if available, financings may involve significant costs and expenses, such as legal and accounting fees, diversion of management’s time and efforts, and substantial transaction costs.
Added
We are a “ smaller reporting company ” as defined in SEC regulations, and a “baby shelf” issuer based on our public float, which may make our common stock less attractive to 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.
Added
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.
Added
Fluctuations in the price of our common stock may expose us to the risk of securities class action lawsuits.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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In the event of a major incident, the Company’s Incident Response policy will be executed and the appropriate parties notified.
In the event of a major incident, the Company’s Incident Response policy will be executed and the appropriate parties notified. 31
Our IT Manager provides timely reports on cyber security incidents to the FSO, Danny Schoening, who also serves as the CEO and as Chairman of the board of directors. These reports may in turn be presented to the full board depending on the severity of the incident.
Our IT Manager provides timely reports on cyber security incidents to the FSO, Danny Schoening, who also serves as the Chief Executive Officer and as Chairman of the board of directors. These reports may in turn be presented to the full board depending on the severity of the incident.
We use a third-party service which monitors the Company’s security threats twenty-four hours each day throughout the year. Any detected deviation from the expected operating parameters will initiate a communication to our IT Manager for investigation and remediation of the detected deviation in a timely manner.
We use a third-party service which monitors the Company’s security threats twenty-four hours each day throughout the year. Any detected deviation from the expected operating parameters will initiate a communication to our IT Manager for investigation and remediation of the detected deviation in a timely manner. Our IT Manager has over 30 years of IT and cybersecurity experience.
Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management. Our Board is responsible for oversight of our cybersecurity risk, including the effectiveness of cybersecurity risk management policies and protocols, while our Facilities Security Officer (“FSO”), and IT Manager are responsible for assessing and managing cybersecurity risk.
Cybersecurity Governance Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management . Our Board is responsible for oversight of our cybersecurity risk, including the effectiveness of cybersecurity risk management policies and protocols, while our FSO and IT Manager are responsible for assessing and managing cybersecurity risk.

Item 2. Properties

Properties — owned and leased real estate

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We renewed the lease on our 49,100 square foot, Richardson, Texas facility, effective as of January 11, 2021, for eighty-six (86) months, commencing on April 1, 2021 and ending on May 31, 2028. Our Applied Optics Center, is located in Dallas, Texas with leased premises consisting of approximately 44,867 square feet of space.
Our Applied Optics Center, which houses our AOC segment, is located in Dallas, Texas with leased premises consisting of approximately 44,867 square feet of space. The Applied Optics Center lease was renewed on January 11, 2021 for eighty-six (86) months, commencing on November 1, 2021 and ending on December 31, 2028.
The Applied Optics Center lease was renewed on January 11, 2021 for eighty-six (86) months, commencing on November 1, 2021 and ending on December 31, 2028. The Applied Optics Center amendment provides for a five-year renewal option at the end of the lease term at the greater of the then “prevailing rental rate” or the then current base rent rate.
The Applied Optics Center amendment provides for a five-year renewal option at the end of the lease term at the greater of the then “prevailing rental rate” or the then current base rent rate.
Added
We renewed the lease on our 49,100 square foot, Richardson, Texas facility, which houses our Optex Richardson segment and our corporate headquarters, effective as of January 11, 2021, for eighty-six (86) months, commencing on April 1, 2021 and ending on May 31, 2028.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Item 4. Mine Safety Disclosures 26 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 27 Item 8. Financial Statements and Supplementary Data 37
Item 4. Mine Safety Disclosures 32 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations 33 Item 8. Financial Statements and Supplementary Data 43

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Issuer Purchases of Equity Securities There were no purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) of its common stock under the Exchange Act) during the three months ended September 29, 2024.
Issuer Purchases of Equity Securities There were no purchases made by or on behalf of the Company or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) of its common stock under the Exchange Act) during the three months ended September 28, 2025. 32
Securities outstanding and holders of record On December 18, 2024, there were approximately 87 shareholders of record for our common stock and 6,896,738 shares of our common stock issued and outstanding. Dividends We have in the past paid dividends but we have no plans to do so in the foreseeable future.
Securities outstanding and holders of record On December 16, 2025, there were approximately 87 shareholders of record for our common stock and 6,937,358 shares of our common stock issued and outstanding. Dividends We have in the past paid dividends but we have no plans to do so in the foreseeable future.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information Our common stock is listed on the Nasdaq Capital Market under the symbol “OPXS”. On December 18, 2024, the closing price for our common stock was $8.91 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information Our common stock is listed on the Nasdaq Capital Market under the symbol “OPXS”. On December 16, 2025, the closing price for our common stock was $14.31 per share.
Added
Unregistered Sales of Equity Securities Effective August 11, 2025, the Board granted Chad George 10,000 shares of restricted stock in connection with Mr. George’s appointment as President of the Company. The shares will vest on January 1, 2026. The grant was exempt from registration under the Securities Act in reliance on Section 4(a)(2) and Rule 506 thereunder.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

16 edited+2 added−117 removed8 unchanged
Many of our contracts are prime or subcontracted directly with the 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”.
Many of our contracts are prime or subcontracted directly with the U.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”.
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. Sub-prime contracts are typically issued through major defense contractors such as General Dynamics Land Systems, Raytheon Corp., BAE, ADS Inc. and others.
In this case, the product would likely be a simple replacement part of a larger system previously produced by Optex Systems, Inc. We are both a prime and sub-prime contractor to the DoD. Sub-prime contracts are typically issued through major defense contractors such as General Dynamics Land Systems, Raytheon Corp., BAE, ADS Inc. and others.
This management’s discussion and analysis reflects information known to management as of our fiscal year end, September 29, 2024, and the date of filing. This MD&A is intended to supplement and complement our audited financial statements and notes thereto for the year ended September 29, 2024, prepared in accordance with U.S. generally accepted accounting principles (GAAP).
This management’s discussion and analysis reflects information known to management as of our fiscal year end, September 28, 2025, and the date of filing. This MD&A is intended to supplement and complement our audited financial statements and notes thereto for the year ended September 28, 2025, prepared in accordance with U.S. generally accepted accounting principles (GAAP).
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.S ground system military programs, which has a direct impact on the Optex Systems Richardson segment revenue, all of which is incorporated herein by reference.
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.S. ground system military programs, in combination with the U.S. government shutdown and CR which has a direct impact on the Optex Richardson segment revenue, all of which is incorporated herein by reference.
We have obtained an alternative source for one of our key components and are expediting our other suppliers to support the increased production levels. We have seen improvements in the local labor market since 2023 and increased our direct labor force and employee overtime in concert with improvements in our supplier delivery performance.
We have obtained an alternative source for one of our key components and expedited 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.
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.
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 experienced significant material shortages during the first half of fiscal year 2024 from several significant suppliers of our periscope covers and housings.
(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.
Optex Systems, Inc. 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 revenue is related to the resale of products substantially manufactured by others.
Its products are installed on a variety of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, light armored and advanced security vehicles and 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.
Its products are installed on various types of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles and light armored and advanced security vehicles, and have been selected for installation on the Stryker family of vehicles. Optex Systems, Inc. also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies.
We are also a military supplier to foreign governments such as Israel, Australia and the NATO Support and Procurement Agency and South American countries, and as a subcontractor for several large U.S. defense companies serving foreign governments. 27 By 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.
We are also a military supplier to foreign governments such as Israel, Australia and South American countries and a subcontractor for several large U.S. defense companies serving foreign governments. The FAR is the principal set of regulations that govern the acquisition process of government agencies and contracts with the U.S. government.
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.
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.
All references in the following section to 2023 or 2024 with respect to our financial position and results of operations are to our fiscal years ended October 1, 2023 or September 29, 2024, respectively. Background Optex Systems, Inc. manufactures optical sighting systems and assemblies for the U.S. Department of Defense, foreign military applications and commercial markets.
All references in the following section to 2024 or 2025 with respect to our financial position and results of operations are to our fiscal years ended September 29, 2024 or September 28, 2025, respectively. Background Our wholly-owned subsidiary, Optex Systems, Inc., manufactures optical sighting systems and assemblies, primarily for DoD applications.
In the event a termination for convenience were to occur, FAR clause 52.249-2 provides for full recovery of all contractual costs and profits reasonably occurred up to and as a result of the terminated contract.
We are currently not aware of any material pending terminations for convenience or for default on our existing contracts. 33 In the event a termination for convenience were to occur, FAR clause 52.249-2 provides for full recovery of all contractual costs and profits reasonably occurred up to and as a result of the terminated contract.
These shortages affect several of our periscope products at the Optex Richardson segment. The delays in key components, combined with labor shortages during the first half of the fiscal year ended September 29, 2024, have negatively impacted our production levels and have pushed back expected delivery dates.
These shortages affected several of our periscope products at the Optex Richardson segment. The delays in key components, combined with labor shortages experienced in fiscal year 2023, negatively impacted our production levels and pushed the delivery dates of several of our contracts into fiscal year 2025 and early fiscal year 2026.
Material Trends and Recent Developments We have experienced substantial increases in the costs of aluminum, steel and acrylic commodities, which has affected our net income in the year ended September 29, 2024 and is expected to continue to have a negative effect on the margins generated under several of our long-term fixed contracts over the next two years.
Since fiscal year 2021, we have experienced substantial increases in the costs of aluminum, steel and acrylic commodities, which has affected the Optex Richardson segment margins for deliveries against those orders during the year ended September 28, 2025 and which is expected to continue to have a negative effect through the first fiscal quarter of 2026.
Further, we have invested in additional machinery and equipment and other process improvements to increase production capacity and alleviate process bottlenecks.
Further, we have 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 56% over the 2024 fiscal year levels. We currently do not anticipate any significant material risks as a result of the recent tariff uncertainties.
As such, we cannot give any assurances that expected customer delivery dates for our periscope products will not experience further delays. We refer also to “ Item 1. Business – Market Opportunity: U.S.
We refer also to “ Item 1. Business – Market Opportunity: U.S.
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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.
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Material Trends and Recent Developments The 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.
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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.
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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.
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While we are encouraged by improvements in supplier performance and available manpower for the Optex Richardson segment periscope line which yielded increased revenue performance during fiscal year 2024, we have yet to ramp up deliveries sufficiently to keep pace with our current customer demands.
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We refer to “ Item 1. Business – Recent Events ” of this report for recent developments affecting the Company. 28 Results of Operations by Segment We have presented the operating results by segment to provide investors with an additional tool to evaluate our operating results.
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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.
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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.
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The table below provides a summary of selective statement of operations data by operating segment for the years ended September 29, 2024 and October 1, 2023 reconciled to the Audited Consolidated Results of Operations as presented in Item 8, “Financial Statements and Supplementary Data”.
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Results of Operations Selective Financial Info (Thousands) Twelve months ended September 29, 2024 October 1, 2023 Optex Systems Richardson Applied Optics Center Dallas Other (non- allocated costs and eliminations) Consolidated Optex Systems Richardson Applied Optics Center Dallas Other (non- allocated costs and eliminations) Consolidated Revenue from External Customers $ 18,171 $ 15,824 $ - $ 33,995 $ 12,120 $ 13,539 $ - $ 25,659 Intersegment Revenues - 1,042 (1,042 ) - - 893 (893 ) - Total Segment Revenue 18,171 16,866 (1,042 ) 33,995 12,120 14,432 (893 ) 25,659 Total Cost of Sales 14,401 11,107 (1,042 ) 24,466 9,729 10,204 (893 ) 19,040 Gross Profit 3,770 5,759 - 9,529 2,391 4,228 - 6,619 Gross Margin % 20.7 % 34.1 % - 28.0 % 19.7 % 29.3 % - 25.8 % General and Administrative Expense 3,630 653 425 4,708 3,121 464 247 3,832 Segment Allocated G&A Expense (1,486 ) 1,486 - - (1,338 ) 1,338 - - Net General & Administrative Expense 2,144 2,139 425 4,708 1,783 1,802 247 3,832 Operating Income (Loss) 1,626 3,620 (425 ) 4,821 608 2,426 (247 ) 2,787 Operating Income (Loss) % 8.9 % 21.5 % - 14.2 % 5.0 % 16.8 % - 10.9 % Interest Expense - - (47 ) (47 ) - - (55 ) (55 ) Income (Loss) before taxes $ 1,626 3,620 (472 ) 4,774 $ 608 2,426 (302 ) 2,732 Income (loss) before taxes % 8.9 % 21.5 % - 14.0 % 5.0 % 16.8 % - 10.6 % Our total external sales revenues increased by $8.3 million in the fiscal year 2024, or 32.5% compared to the 2023 fiscal year.
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The Optex Systems segment realized a $6.1 million, or 49.9% increase, and the Applied Optics Center segment realized an increase of $2.3 million, or 16.9%, in external revenue compared to the prior year period. Intersegment revenues were $1.0 million for 2024 and $0.9 million in 2023.
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Intersegment revenues relate primarily to coated filters provided by the Applied Optics Center to Optex Systems in support of the Optex Systems periscope line. 29 Gross profit increased $2.9 million and the gross margin percentage increased by 2.2 points from 25.8% in the 2023 fiscal year to 28.0% in the 2024 fiscal year.
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Optex Systems gross profit increased by $1.4 million and the gross margin percentage increased to 20.7% as compared to 19.7% in the prior year period. Applied Optics Center gross profit increased by $1.5 million and the gross margin percentage increased to 34.1% as compared to 29.3% in the prior year period.
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The increase in each segment and consolidated gross profit is primarily attributable to higher revenue and increased absorption of fixed cost. Consolidated general and administrative costs increased from $3.8 million for the twelve months ended October 1, 2023 to $4.7 million for the twelve months ended September 29, 2024.
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General and administrative costs increased $0.9 million due to increased royalties and selling expenses of $0.4 million, increased stock compensation expenses of $0.2 million, increased labor and fringe costs of $0.2 million and increased information technology costs of $0.1 million.
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During the fiscal years 2024 and 2023, Applied Optics Center absorbed $1.5 million and $1.3 million, respectively, of fixed general and administrative costs incurred by Optex Systems for support services.
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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 and shared across both operating segments.
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Consolidated operating income increased by $2.0 million in the year ended September 29, 2024 to $4.8 million as compared to the prior year operating income of $2.8 million. The increase in operating income is primarily attributable to higher revenue and gross profit, partially offset by increases in general and administrative costs.
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The operating income increased across both segments as compared to the prior year on higher revenue and gross profit. Income before taxes increased $2.0 million, to $4.8 million in the 2024 fiscal year from a prior year income before taxes of $2.7 million.
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The increase in income before taxes year over year is primarily due to higher revenue and gross profit, partially offset by increased general and administrative costs. New Orders and Backlog Product backlog represents the value of unfulfilled customer manufacturing orders yet to be recognized as revenue.
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While backlog is not a non-GAAP financial measure, it is also not defined by GAAP. Therefore, our methodology for calculating backlog may not be consistent with methodologies used by other companies.
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The booked backlog by period may also not be fully indicative of the predicted revenues for those periods as many of our orders provide for accelerated delivery without penalty and may additionally provide customers the option to adjust schedules to meet their most recent projected demand quantities.
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However, we provide customer order and backlog information as we believe it provides significant insight into forward demand, with some predictive power to short term future revenues. During the twelve months ended September 29, 2024, the Company booked $36.4 million in new orders, representing a 5.2% increase from the prior year period orders of $34.6 million.
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The orders for the most recently completed twelve months consist of $23.5 million for our Optex Richardson segment and $12.9 million attributable to the Applied Optics Center segment.
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The following table depicts the new customer orders for the twelve months ending September 29, 2024 as compared to the prior year period in millions of dollars: (Millions) Product Line Twelve months ended September 29, 2024 Twelve months ended October 1, 2023 Variance % Chg Periscopes $ 19.9 $ 15.9 $ 4.0 25.2 Sighting Systems 0.4 4.0 (3.6 ) (90.0 ) Howitzer - - - - Other 3.2 3.4 (0.2 ) (5.9 ) Optex Systems – Richardson 23.5 23.3 0.2 0.9 Optical Assemblies 1.8 1.9 (0.1 ) (5.3 ) Laser Filters 9.2 7.6 1.6 21.1 Day Windows 0.1 0.3 (0.2 ) (66.7 ) Other 1.8 1.5 0.3 20.0 Applied Optics Center – Dallas 12.9 11.3 1.6 14.2 Total Customer Orders $ 36.4 $ 34.6 $ 1.8 5.2 30 During the year ended September 29, 2024, orders in the Company’s Optex Richardson segment increased by $0.2 million, or 0.9%, as compared to the prior year.
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The primary reason for the increase relates to a prior year award for $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.
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The decrease in orders for sighting systems and other products was offset by a significant increase in periscope orders in the year ended September 29, 2024.
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The Applied Optics Center orders increased $1.6 million, or 14.2%, as we continue to see increases in orders for laser filter units for several prime government contractors, in addition to an increase in customer orders for other products driven by our new program of Infrared (IR) Signature Reduction Coatings used on aircraft.
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The Optex Richardson segment currently has five open US Government IDIQ type military contracts for periscopes, collimators, and big eye assemblies with unspent funding which covers base year and option year requirement ordering periods into January 2029. During the year, approximately 20% of Optex Richardson’s segment orders, or $4.8 million, were awards against active IDIQ contracts.
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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.
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In addition, the Company has several open bid requests for new multi-year IDIQ contracts pending with the U.S. Government and other prime contractors for additional periscopes, and unity mirrors that are expected to be awarded in the next three to six months.
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Backlog as of September 29, 2024 was $44.2 million as compared to a backlog of $41.8 million as of October 1, 2023, representing an increase of 5.7%.
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The following table depicts the current expected delivery by quarter of all contracts awarded as of September 29, 2024, as well as the September 29, 2024 backlog as compared to the backlog on October 1, 2023.
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(Millions) Product Line Q1 2025 Q2 2025 Q3 2025 Q4 2025 2025 Delivery 2026+ Delivery Total Backlog 9/29/2024 Total Backlog 10/1/2023 Variance % Chg Periscopes $ 3.6 $ 5.7 $ 5.6 $ 4.7 $ 19.6 $ 3.1 $ 22.7 $ 14.9 $ 7.8 52.3 Sighting Systems 0.4 0.4 0.3 0.4 1.5 2.3 3.8 4.7 (0.9 ) (19.1 ) Howitzer - - - - - 2.3 2.3 2.3 - - Other 0.4 0.5 0.9 - 1.8 1.2 3.0 4.6 (1.6 ) (34.8 ) Optex Systems – Richardson 4.4 6.6 6.8 5.1 22.9 8.9 31.8 26.5 5.3 20.0 Optical Assemblies 0.5 0.2 - - 0.7 - 0.7 2.8 (2.1 ) (75.0 ) Laser Filters 3.3 2.7 1.8 0.9 8.7 0.8 9.5 9.9 (0.4 ) (4.0 ) Day Windows 0.2 0.2 0.2 0.2 0.8 0.3 1.1 1.7 (0.6 ) (35.3 ) Other 0.4 0.2 0.2 0.3 1.1 - 1.1 0.9 0.2 22.2 Applied Optics Center – Dallas 4.4 3.3 2.2 1.4 11.3 1.1 12.4 15.3 (2.9 ) (19.0 ) Total Backlog $ 8.8 $ 9.9 $ 9.0 $ 6.5 $ 34.2 $ 10.0 $ 44.2 $ 41.8 $ 2.4 5.7 Optex Systems - Richardson During the twelve months ended September 29, 2024, backlog for our Optex Richardson segment increased by 20.0%, or $5.3 million to $31.8 million, as compared to the prior year ending backlog of $26.5 million.
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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.
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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.
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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.
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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.
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The Howitzer contract awarded in July 2020 continues to experience customer driven delays related to customer furnished materials. This program is currently on hold pending statement of work changes and materials furnished by the customer.
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We anticipate deliveries against the Howitzer contract to begin in fiscal year 2026. 31 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.
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Applied Optics Center – Dallas The Applied Optics Center backlog decreased by $2.9 million, or 19.0%, for the year ended September 29, 2024, from $15.3 million in 2023 to $12.4 million in 2024. Backlog for our optical assemblies decreased by $2.1 million, or 75.0%, as compared to the prior year on lower customer demand.
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We anticipate new orders during the next three to six months for deliveries in 2025. Laser filter backlog decreased by $0.4 million, or 4.0%, during the year due to increased shipments against our laser interface filter and laser filter units during the year. We are anticipating additional orders for shipment during the 2025 year.
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Day window backlog decreased by $0.6 million, or 35.3%, during the period as compared to the prior year primarily due to shipments against a long-term IDIQ contract with deliveries scheduled into 2026. We anticipate additional orders in the next three months.
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Other Applied Optics backlog increased by $0.2 million, or 22.2% for the year ended September 29, 2024, on an increase in customer orders for Infrared (IR) Signature Reduction Coatings used on aircraft.
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Please refer to “ Material Trends and Recent Events ” above or “ Liquidity and Capital Resources ” below for more information on recent developments and trends with respect to our orders and backlog, which information is incorporated herein by reference.
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The Company continues to pursue domestic, international and commercial opportunities in addition to maintaining its current footprint with U.S. vehicle manufactures, with existing as well as new product lines. We are also reviewing potential products outside our traditional product lines.
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Further, we continue to look for strategic businesses to acquire that will strengthen our existing product line, expand our operations, offer operational scale and enter new markets.
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Twelve months ended September 29, 2024 compared to the twelve months ended October 1, 2023 Revenues The table below details the revenue changes by segment and product line for the year ended September 29, 2024 as compared to the year ended October 1, 2023.
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Twelve months ended (Millions) Product Line September 29, 2024 October 1, 2023 Variance % Chg Periscopes $ 12.1 $ 8.6 $ 3.5 40.7 Sighting Systems 1.4 1.0 0.4 40.0 Howitzers - - - - Other 4.7 2.5 2.2 88.0 Optex Systems – Richardson 18.2 12.1 6.1 50.4 Optical Assemblies 3.9 5.6 (1.7 ) (30.4 ) Laser Filters 9.6 6.4 3.2 50.0 Day Windows 0.7 0.6 0.1 16.7 Other 1.6 1.0 0.6 60.0 Applied Optics Center – Dallas 15.8 13.6 2.2 16.2 Total Revenue $ 34.0 $ 25.7 $ 8.3 32.3 Our total revenues increased by $8.3 million, or 32.3% in fiscal year 2024 compared to fiscal year 2023.
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The Optex Systems Richardson segment realized a $6.1 million, or 50.4%, increase in revenue and the Applied Optics Center segment realized an increase of $2.2 million, or 16.2%, in revenue compared to the prior year. 32 Optex Systems - Richardson 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.
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Revenues on sighting systems increased by $0.4 million, or 40.0% from the prior year period due to deliveries against the 2023 order for repair and refurbishment of night vision equipment to the Government of Israel.
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Optex Systems-Richardson revenue on other product lines increased by $2.2 million, or 88.0%, compared to revenues in the prior year due to increased orders for collimators, windows, beamsplitters, cell assemblies and other spares.
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Applied Optics Center - Dallas 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.
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Laser filter revenue increased by $3.2 million, or 50.0%, during the twelve months ended September 29, 2024 as compared to the prior twelve-month period on increased customer demand. We anticipate revenue to continue at the higher levels throughout 2025.
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Revenues on our day windows increased by $0.1 million, or 16.7%, during the twelve months ended September 29, 2024 as compared to October 1, 2023 as we continue to ship against the long-term IDIQ contract for these units. We anticipate revenues to continue at this, or a slightly increased, level through 2025.
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Applied Optics Center revenue for other product lines increased by $0.6 million, or 60.0%, during the twelve months ended September 29, 2024 as compared to the prior twelve-month period on increased deliveries in products for Infrared (IR) Signature Reduction Coatings used on aircraft.
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We anticipate these delivery levels to continue into 2025 combined with additional increases for shipments against our current binocular contract. Gross Margin . The gross margin for the year ended September 29, 2024 was 28.0% of revenue as compared to a gross margin of 25.8% of revenue for the year ended October 1, 2023.
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Cost of sales increased by $5.4 million to $24.5 million for 2024 compared to $19.0 million for 2023. The gross profit increased by $2.9 million to $9.5 million in 2024 as compared to $6.6 million in 2023. The increase is primarily due to increased revenue, and higher absorption of fixed cost and changes in product mix between the segments.
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G&A Expenses . For the years ended September 29, 2024 and October 1, 2023, we recorded operating expenses of $4.7 million and $3.8 million, respectively.
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General and administrative cost increased $0.9 million, or 22.9%, for fiscal year 2024 as compared to the prior year due to increased royalties and selling expenses of $0.4 million, increased stock compensation expenses of $0.2 million, increased labor and fringe costs of $0.2 million and increased information technology costs of $0.1 million.
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The selling 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) Signature Reduction Coatings product. Operating Income .
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For the year ended September 29, 2024, we recorded operating income of $4.8 million as compared to operating income of $2.8 million during the year ended October 1, 2023. The $2.0 million increase in operating income is primarily due to increased revenue and gross profit, offset by higher general and administrative costs. Net income applicable to common shareholders .
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During the year ended September 29, 2024, we recorded net income applicable to common shareholders of $3.8 million as compared to net income applicable to common shareholders of $2.3 million during the year ended October 1, 2023.
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The increase of net income of $1.5 million is primarily attributable to increased revenue and gross profit, offset by higher general and administrative costs and increased federal income taxes of $0.5 million. 33 Non GAAP Adjusted EBITDA We use adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) as an additional measure for evaluating the performance of our business as “net income” includes the significant impact of noncash compensation expenses related to equity stock issues, as well as depreciation, amortization, interest expenses and federal income taxes.

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