What changed in this filing

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Item 1. Business

2024-12-19 compared with 2023-12-18 · 352 added, 453 removed, 455 unchanged (64% of the section changed)

Lines of Business

manufacture optical sighting systems and assemblies for the U.S.

Department of Defense, foreign military applications and commercial

We manufacture optical sighting systems and assemblies for the U.S.

of Defense, foreign military applications, commercial markets, and consumer markets with the recent acquisition of the Speedtracker Mach

product line.

Our 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.

military land vehicles, such as the Abrams and Bradley fighting vehicles,

light armored and advanced security vehicles and the Stryker family of vehicles.

We also manufacture and deliver numerous periscope configurations,

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these requirements.

May 9, 2023, the Board of Directors approved a grant of 40,000 shares of restricted stock to independent board member Dayton Judd.

shares vest 50% on each of January 1, 2024 and January 1, 2025.

As of the grant date, the fair value of the shares was $124 thousand,

to be amortized on a straight-line basis through December 31, 2024.

May 3, 2023, the Board of Directors approved a grant of 100,000 and 35,000 performance shares to Danny Schoening, CEO, and Karen Hawkins,

CFO, respectively.

Each performance share represents a contingent right to receive one share of common stock.

The performance shares

vest in five equal increments if, in each case and during a five-year performance period beginning on October 2, 2023, the average VWAP

per share of common stock over a 30 consecutive trading day period equals or exceeds $3.70, $4.45, $5.35, $6.40, or $7.70.

The fair value

of the shares as of the grant date was $320 thousand and will be amortized through December 31, 2025 based on the derived service periods

using a Monte Carlo simulation valuation model.

On October 2, 2023, 20,000 of Mr.

Schoening’s performance shares and 7,000 of Ms.

Hawkins’ performance shares vested, resulting in the net issuance of 15,600 and 5,460 shares of common stock, respectively.

May 1, 2023, the Company granted an aggregate of 39,000 restricted stock units to eleven employees under its 2023 Equity Incentive

The restricted stock units will vest at a rate of 33.33% annually beginning on the anniversary date of the grant and any

unvested restricted stock units will be forfeited if employment terminates prior to the relevant vesting date.

As of the grant date,

assuming a 23.1% forfeiture rate based on expected turnover across the three years, the aggregate value of the restricted stock

units is $90 thousand which will be amortized across the three-year period on a straight-line basis.

On August 14, 2023, the Company

granted an additional 3,000 restricted stock units to one new employee under the 2023 Equity Incentive Plan.

The restricted stock

units will vest at a rate of 33.33% annually beginning on the anniversary date of the grant and any unvested restricted stock units

will be forfeited if employment terminates prior to the relevant vesting date.

The fair value of the 3,000 restricted stock units at

grant date was $11 thousand.

During the twelve months ended October 1, 2023, there were 3,000 restricted stock units

Loan Agreement

March 22, 2023, the Company and its subsidiary, Optex Systems, Inc.

(collectively with the Company, the “Borrowers”), entered

into a Business Loan Agreement (the “Loan Agreement”) with Texas Capital Bank (the “Lender”), pursuant to which

the Lender will make available to the Borrowers a revolving line of credit in the principal amount of $3 million (the “Texas Capital

The Texas Capital Facility replaced the Borrowers’ previous line of credit facility with PNC Bank, National Association,

successor to BBVA USA, which had been increased from $1.125 million to $2 million on November 21, 2022.

commitment period for advances under the Texas Capital Facility is twenty-six months expiring on May 22, 2025.

We refer to the expiration

of that time period as the “Maturity Date.” Outstanding advances under the Texas Capital Facility will accrue interest at

a rate equal to the secured overnight financing rate (SOFR) plus a specified margin, subject to a specified floor interest rate.

October 1, 2023 the interest rate was 8.07% per annum and is currently 8.08% per annum.

Loan Agreement contains customary events of default (including a 25% change in ownership) and negative covenants, including but not limited

to those governing indebtedness, liens, fundamental changes (including changes in management), investments, and restricted payments (including

cash dividends).

The Loan Agreement also requires the Borrowers to maintain a fixed charge coverage ratio of at least 1.25:1 and a total

leverage ratio of 3.00:1.

The Texas Capital Facility is secured by substantially all of the operating assets of the Borrowers as collateral.

The Borrowers’ obligations under the Texas Capital Facility are subject to acceleration upon the occurrence of an event of default

as defined in the Loan Agreement.

The Loan Agreement further provides for a $125,000 Letter of Credit sublimit.

outstanding balance under the Texas Capital Facility was $1.0 million as of October 1, 2023.

March 14, 2023, the Company’s shares of common stock were listed on the NASDAQ Capital Market under the ticker symbol “OPXS.”

Equity Incentive Plan

February 16, 2023, the Company’s shareholders approved the Company’s 2023 Equity Incentive Plan (the “2023 Plan”),

under which 600,000 shares of common stock are reserved for issuance.

The 2023 Plan permits the grant of stock options, performance shares,

performance units, restricted stock, restricted stock units and stock appreciation rights to officers, other employees, individuals engaged

to become officers or employees, consultants, advisors and non-executive directors of the Company.

In connection with the approval of

the 2023 Plan, the Company’s 2016 Restricted Stock Unit Plan and 2009 Stock Option Plan were both canceled.

2024 Asset Acquisition

January 18, 2024, we entered into an asset purchase agreement and a contract

manufacturing agreement with RUB Aluminium s.r.o.

Under the agreements, the Company acquired certain intellectual

property and technical and marketing information relating to the Speedtracker Mach product line, which is primarily used for firearm projectile

speed detection, measuring and tracking.

The Company acquired the assets using $1 million cash on hand, with potential additional future

cash payments based on successful completion of defined milestones.

After the acquisition, the Company determined it would be more economical

to move the manufacturing operations in house and is no longer ordering assembled units under the original contract manufacturing agreement.

RUB will continue to provide the Company with purchased kit parts for the manufacture of the Speedtracker Mach products.

acquisition included transaction costs of $30 thousand for legal fees and a contingent liability for payment against an earnout

based on meeting certain revenue milestones.

As of September 29, 2024, the fair value of the contingent liability was zero.

to the asset purchase agreement, the total earnout payment will be $238 thousand only if the earnout revenue milestone is achieved

during the earnout period, otherwise the earnout will be zero.

As of September 29, 2024, the Company determined the likelihood of

achieving the revenue milestone during the earnout period was highly unlikely.

The intangible asset will be amortized on a

straight-line basis over a seven-year period.

December 11, 2024, the Company announced it had been awarded a three-year, Indefinite Delivery Indefinite Quantity (IDIQ) contract

for Optically Improved Periscopes from DLA Land and Marine with a maximum potential value of $6.5 million and two additional option

Production will be completed at our Optex Division of Optex Systems, Inc.

in Richardson.

December 10, 2024, the Company announced it had been awarded a new contract for Laser Filter Units and Window Assemblies supporting

Night Vision devices utilized by the U.S.

Armed Forces.

The order value is $2.0 million with deliveries covering March

2025 through February 2026.

Production will be completed at the Applied Optics Center Division of Optex Systems, Inc.

September 23, 2024, the Company announced it had been awarded contracts from two domestic customers for laser protected periscopes

in support of ongoing armored vehicle production.

The total value is $2.1 million with expected deliveries covering May 2025 through

Production will be completed at our Optex Division of Optex Systems, Inc.

in Richardson.

July 8, 2024, the Company announced an award for a new contract for laser filter units supporting the XM-157 NGWS Scope.

value is $2.5 million with deliveries covering August 2024 through July 2025.

The products for this contract will be manufactured

at the Applied Optics Center Division of Optex Systems, Inc.

May 6, 2024, the Company announced it had been awarded a new contract from a U.S.

government prime contractor, for laser protected

periscopes in support of the Armored Multi-Purpose Vehicle (AMPV).

The order value is $3.8 million with deliveries covering November 2024 through March 2026.

Production will be completed at our Optex Division of Optex Systems, Inc.

in Richardson.

May 1, 2024, the Company announced a new contract from a U.S.

government prime contractor, in support of a Night Vision Goggle

Binocular program.

The order value is $1.5 million with deliveries covering most of fiscal 2025.

The products for this contract will be

manufactured at the Applied Optics Center Division of Optex Systems, Inc.

April 16, 2024, the Company announced it had received an initial purchase order of $0.2 million for Laser Filter Assemblies

supporting the new U.S.

Military IVAS Program.

The products for this contract will be manufactured at the Applied Optics Center Division of Optex Systems, Inc.

with deliveries from April through October of 2024.

February 5, 2024, the Company announced a new five-year Indefinite Delivery Indefinite Quantity (IDIQ) contract from the United States

Defense Logistics Agency Land and Maritime for Sighting Systems for laser protected periscopes and vision blocks.

The maximum value

for the five-year IDIQ is estimated at $2.8 million.

The award includes three base year, and two option years and will be completed

at our Optex Division of Optex Systems, Inc.

in Richardson.

November 14, 2023, the Company announced the award of a new contract from a U.S.

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The order value is $1.3 million and the products for this contract will be manufactured

at the Applied Optics Center (AOC) Division of Optex Systems, Inc.

October 18, 2023, the Company announced it was awarded a new laser filter unit contract from a U.S.

Government Prime Contractor,

in support of a visible sighting system.

The order value is $1.1M and the products for this contract will be manufactured at the

Applied Optics Center (AOC) Division of Optex Systems, Inc.

September 18, 2023, the Company announced it was awarded a 5 year Indefinite Delivery Indefinite Quantity (IDIQ) contract from the

Government, for M22 (7 x 50) Binoculars with an estimated value of $2.12 million.

The products for this contract will be manufactured

at the Applied Optics Center (AOC) Division of Optex Systems, Inc.

August 21, 2023, the Company announced the award of a $1.25 million delivery order for Laser Interference Filter (LIF) and Sacrificial

Window assemblies.

Both are critical in protecting Night Vision Goggle systems fielded by the U.S.

The products for this

contract will be manufactured at the Applied Optics Center (AOC) Division of Optex Systems, Inc.

August 14, 2023, the Company announced an awarded delivery order from a new domestic customer for $1.4 million of Laser Protected

The Periscopes are critical in protecting armored vehicles fielded by the U.S.

The products will be manufactured

at the Optex Division of Optex Systems, Inc.

July 5, 2023, the Company announced it was awarded a delivery order from the U.S.

Government for Laser Interference Filter (LIF)

assemblies for $3 million.

The LIF is critical in protecting Night Vision Goggle systems fielded by the U.S.

will be manufactured at the Applied Optics Center (AOC) Division of Optex Systems, Inc.

June 27, 2023, the Company announced the award of an Indefinite Delivery Indefinite Quantity (IDIQ) from Defense Logistics Agency

(DLA) for five different Optical Assemblies with a maximum value of $5.3 million.

The majority of this work will be performed in

the Richardson facility.

November 2 ,2022, the Company announced it was awarded a maximum order value of $7.5 million for spare Light Interference Filters

associated with various Night Vision Goggle systems.

The expected average annual revenue over the five-year period covered by the

order is $1.0 million to $1.5 million.

The products will be manufactured at the Applied Optics Center (AOC) Division of Optex Systems,

November 1, 2022, the Company announced the award of a $3.4 million order to repair and refurbish night vision equipment for the

Government of Israel.

The majority of this work will be performed in the Richardson facility.

October 24, 2022, the Company announced it was awarded a $720 thousand order from a major US Prime Contractor in support of the US

Army’s M10 Booker (Mobile Protected Firepower) tank program.

The majority of this work will be performed in the Richardson

October 4, 2022, the Company announced it was awarded a $1.75 million order as part of their continuing support to the M1 Abrams

Tank Program.

The products will be manufactured at the Applied Optics Center (AOC) Division of Optex Systems, Inc.

at the Applied Optics Center Division of Optex Systems, Inc.

October 18, 2023, the Company announced it was awarded a new laser filter unit contract from

Government Prime Contractor, in support of a visible sighting system.

The order value

is $1.1 million and the products for this contract will be manufactured at the Applied Optics Center Division of Optex Systems, Inc.

products are installed on various types of U.S.

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applications in both the military and commercial markets.

These coatings are manufactured at the Applied Optics Center (AOC)

Division of the Company in Dallas, Texas.

These coatings are manufactured at the Applied Optics Center (“AOC”) Division

of the Company in Dallas, Texas.

deliver high volume products, under multi-year contracts, to large defense contractors and government customers.

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Up Sights, Digital Day and Night Sighting Systems (“DDAN”), M36 Thermal Periscope, Unity Mirrors, Optical Weapon System Support and

Maintenance, Commander Weapon Station Sight (CWSS), Sight Assembly Refurbishment (GOI MOD/Aquila)

Maintenance (“OWSS”), Commander Weapon Station Sight (“CWSS”), Sight Assembly Refurbishment (“GOI MOD/Aquila”)

Telescope, M187 Mount, M119 Aiming Device, XM10 Aiming Circle

Reference Systems (MRS), Binoculars, Collimators, Optical Lenses & Elements, Windows

Reference Systems (“MRS”), Binoculars, Collimators, Speedtracker, Optical Lenses & Elements, Windows

Optics Center

Interference Filter, Optical Assemblies, Laser Filter Units, Day Windows, Binoculars, Specialty Thin Film Coatings.

of our contracts may allow for government contract financing in the form of contract progress payments pursuant to Federal Acquisition

Regulation 52.232-16, “Progress Payments”.

Subject to certain limitations, this clause provides for government payment of

up to 90% of incurred program costs prior to product delivery for small businesses like us.

To the extent any contracts allow for progress

payments and the respective contracts would result in significant preproduction cash requirements for design, process development, tooling,

material or other resources which could exceed our current working capital or line of credit availability, we intend to utilize this

benefit to minimize any potential negative impact on working capital prior to receipt of payment for the associated contract deliveries.

government contracts allow for Federal Acquisition Regulation 52.243-1 which entitles the contractor to an “equitable adjustment”

for contract or statement of work changes eaffecting cost or time of performance.

Interference Filter (“LIF”), Optical Assemblies, Laser Filter Units (“LFU”), Reticles, Day Windows, Binoculars, Specialty Thin

Film Coatings.

of our contracts may allow for government contract financing in the form of contract progress payments pursuant to Federal

Acquisition Regulation (“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.

the extent any contracts allow for progress payments and the respective contracts would result in significant preproduction cash

requirements for design, process development, tooling, material or other resources which could exceed our current working capital or

line of credit availability, we intend to utilize this benefit to minimize any potential negative impact on working capital prior to

receipt of payment for the associated contract deliveries.

government contracts allow for FAR 52.243-1 which entitles the contractor to an “equitable adjustment”

for contract or statement of work changes affecting cost or time of performance.

In essence, an equitable price adjustment request is

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Single-sourced component requirements span across all of our major product lines.

Of these single-sourced components, we have material contracts (purchase orders) with firm pricing and delivery schedules in place with each of the suppliers

Of these single-sourced

components, we have material contracts (purchase orders) with firm pricing and delivery schedules in place with each of the suppliers

to supply the parts necessary to satisfy our current contractual needs.

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some cases, contract awards may be issued that are subject to renegotiation at a date (up to 180 days) subsequent to the initial award

Generally, these subsequent negotiations have had an immaterial impact (zero to 5%) on the contract price of the affected contracts.

Generally, these subsequent negotiations have had an immaterial impact (0% to 5%) on the contract price of the affected contracts.

Currently, none of our awarded contracts are subject to renegotiation.

are subject to, and must comply with, various governmental regulations that impact, among other things, our revenue, operating costs,

profit margins and the internal organization and operation of our business.

The material regulations affecting our U.S.

government business

are summarized in the table below.

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.

The material laws and regulations affecting our U.S.

government business are summarized in the table below.

Law/Regulation

Acquisition Regulation (FAR)

principal set of rules in the Federal Acquisition Regulation System.

principal set of rules is the Federal Acquisition Regulation System.

This system consists of sets of regulations issued by agencies

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Article Acceptance and Testing requirements consist of specific steps which could be comprehensive and time consuming.

dimensions and material specifications of each piece of the assembly must be verified, and some products may have in excess of 100

assembled parts.

Once the individual piece parts are verified to be compliant to the specification, the assembly processes are

documented and verified.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

are also subject to laws, regulations and executive orders restricting the use and dissemination of information deemed classified for

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Regulation (ITAR).

In order to import or export items listed on the U.S.

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.

We currently have an approved and current registration on file with the Directorate

of Defense Trade Controls office.

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.

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.

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.

process for the license can vary from several weeks to six months or more.

The licenses we currently use are the Department of State

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

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:

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A summary of our active ITAR licenses is presented below

(updated as of December 1, 2023):

Total Contract

Active ITAR Licenses

of Expiration

(updated as of November 15, 2024):

ITAR Licenses

Issued 2023 (none issued)

Total DSP-5 Licenses

DSP-5 Licenses

DSP-6 (no active licenses)

DSP-73 (no active licenses)

Total BIS-711 Licenses

Total All Licenses

Issued 2020 (expires December 31, 2024)

BIS-711 Licenses

licenses are subject to termination if a licensee is found to be in violation of the Arms Export Control Act or the ITAR requirements.

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as a result of noncompliance.

terms of our significant contracts as of December 6, 2023, are as follows:

Award Value (millions)

Value (millions)

terms of our significant contracts with a total award value of more than $1.0 million as of December 9, 2024, are as follows:

Prime Contractor (1)

with Option years

2017- Mar 2026

Land and Maritime (2)

SPE7LX-18-D-0108

2020 - Jun 2024

Land and Maritime (3)

SPE7LX-19-D-0089

2021 - Jul 2026

Land and Maritime (4)

Sighting Systems

Dec 2024 - Mar 2027

DLA Land and Maritime (2)

SPE7LX19D0089

2021 – Jan 2024

Land and Maritime (5)

SPE7MX-20-D-0028

task awards as of current date

Land and Maritime (6)

SPE7MX-20-D-0032

task awards as of current date

Dec 2024 - Nov 2025

Prime Contractor (3)

Aiming Circles

Schedule Pending

Land and Maritime (8)

XM10 Aiming Circles

Estimated 2026

DLA Land and Maritime (4)

SPE7LX21D0057

2021 – May 2024

Dec 2024 - Jun 2025

Government of Israel MOD (5)

Refurbish Night Vision Equipment

DLA Land and Maritime (6)

SPE7LX23D0092

Dec 2024 - Oct 2025

Prime Contractor (7)

Filter Units (AOC)

2021 - July 2024

Dec 2024 - Nov 2025

Prime Contractor (8)

PO 40389248,40389250

2022 - Jan 2024

Jul 2025 - Mar 2027

Prime Contractor (9)

Filter Unit (AOC)

2022 - Dec 2023

Customer (12)

Assemblies (AOC)

2023 - Apr 2024

Customer (13)

Assemblies (AOC)

2023 - May 2024

Dec 2024 - Mar 2026

Prime Contractor (10)

Windows (AOC)

2022 - Sep 2025

Prime Contractor (11)

2023 - Aug 2024

of Israel MOD (16)

Night Vision Equip

Military Sales

PO 4441236828

Revision (Jan 2024 - 2025)

Land at Aberdeen (17)

Interference Filters (AOC)

Dec 2024 - Nov 2025

DLA Land at Aberdeen (12)

SPRBL123D0001

2023-May 2025

Land and Maritime (18)

SPE7LX-23-D-0092

2024 – Jun 2024

Land and Maritime (19)

SPE7LX-23-D-0093

2024 – Jun 2024

Prime Contractor (20)

2024 – Dec 2024

Prime Contractor (21)

Interface Filters (AOC)

2023 - Dec 2024

Binoculars (AOC)

W56HZV-23-D-0071

Prime Contractor (23)

Filter Units (AOC)

2024 - Jun 2025

Light Interference Filters

Dec 2024 - Dec 2025

Prime Contractor (13)

Filter Units (AOC)

PO 4500045346

2024 - Aug 2025

Laser Filter Units

Dec 2024 - June 2025

Prime Contractor (14)

2024 - May 2025

Light Interference Filters

Dec 2024 - Sept 2025

Prime Contractor (15)

2025 - Dec 2026

original three-year contract was awarded on September 11, 2017 to provide LAV 6.0 optimized weapon system support for Optex’s

Commander Sighting System.

Laser Filter Units

Dec 2024 - Jul 2025

The original three-year

subcontract was awarded on September 11, 2017 to provide LAV 6.0 optimized weapon system support for Optex’s Commander Sighting

The contract includes option years to extend the period of performance through 2035 if awarded.

contract option extends the in-service support through March 2026 for their existing fleet of Light Armored Vehicles.

awarded September 5, 2018.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for

the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years.

On June 23, 2022 the customer exercised the option for the final option year 2.

The ordering period for option year 2 expired

as of September 10, 2023.

awarded March 4, 2019.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the

duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years.

On February 27, 2023, the customer exercised the second of two option years extending the ordering period of the contract through

The current contract option

extends the in-service support through March 2027 for their existing fleet of Light Armored Vehicles.

Prime contract awarded

March 4, 2019.

awarded on November 12, 2019.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing

for the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five

years for periscopes valued up to $2.3 million.

The ordering period for the base award expired on November 11, 2022 with no option

The current remaining value of $0.3 million is pending cancellation as the orders were executed in error by the customer.

awarded on January 24, 2020.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing

for the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five

years for periscopes valued up to $3.6 million.

As of October 1, 2023, there have been no task orders released against the base contract

On January 24, 2023, the customer exercised the first of two option years extending the ordering period of the contract through

January 23, 2024.

awarded on February 12, 2020.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing

for the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five

years for periscopes valued up to $9.2 million.

As of October 1, 2023, there have been no task orders released against the base contract

On February 6, 2023, the customer exercised the first of two option years extending the ordering period of the contract through

February 12, 2024.

Order by a U.S.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the duration

of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years.

27, 2023, the customer exercised the second of two option years extending the ordering period of the contract through March 3, 2024.

Subcontract purchase order

prime contractor in support of government contract W15QKN-16-D-0055 for Aiming Circle optical subassemblies.

purchase order was awarded on July 30, 2020 for $2 million and amended to $2.3 million on September 14, 2020 and includes non-recurring

engineering, first article testing and production deliveries.

Contract has been delayed pending receipt of customer furnished material

and is pending changes to the contract delivery schedule.

awarded on January 6, 2021.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing

for the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five

years for periscopes valued up to $14.4 million.

On November 29, 2023 Optex Systems Inc.

received formal letter notification of the

DLA’s intent to exercise the first of two option years extending the ordering period from January 6, 2024 through January

The contract modification for the option exercise is pending as of December 6, 2023.

Order awarded August 3, 2021 by a U.S.

prime contractor in support of U.S.

government contracts.

Award includes first article inspection

in August 2021 and production deliveries commencing in September 2021 through July 2024.

Orders awarded September 24, 2021 by a U.S.

prime contractor in support of U.S.

government contracts.

Orders awarded June 28, 2022 from a U.S.

defense contractor in support of laser filter units.

Orders awarded August 26, 2022 from a commercial customer in support of optical assemblies.

Orders awarded August 31, 2022 from a commercial customer in support of optical assemblies.

Orders awarded August 29, 2021 and modified with a significant quantity increase on September 28, 2022 by a U.S.

prime contractor

in support of U.S.

government contracts.

Orders awarded September 16, 2022 by a U.S.

order was awarded on July 30, 2020 for $2 million and amended to $2.3 million on September 14, 2020 and includes non-recurring engineering,

first article testing and production deliveries.

Contract has been delayed pending receipt of customer furnished material and is pending

changes to the contract delivery schedule.

Prime contract awarded

on January 6, 2021.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the duration

of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years for periscopes

valued up to $14.4 million.

On October 7, 2024, option two was exercised by DLA, extending the ordering period from January 6,

2025 through January 5, 2026.

Foreign Military Sales

purchase orders awarded October 27, 2022 to repair and refurbish night vision equipment for the Government of Israel which includes

an option for an additional quantity up to 100%.

Deliveries began December 2023 and are expected to continue through 2026 pending receipt

of customer units for refurbishment.

Prime contract awarded

on June 27, 2023.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the duration

of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years for periscopes.

The award has a maximum order value of $2.1 million.

Subcontract purchase order

awarded on November 10, 2023 by a U.S.

prime contractor in support of U.S.

government contracts.

Orders awarded October 27, 2022 to repair and refurbish night vision equipment for the Government of Israel which includes an option

for an additional quantity up to 100%.

The Contract is pending a firm delivery schedule pending receipt of the export license.

Deliveries are expected to begin in January 2024.

awarded on November 2, 2022 for spare Light Interference Filters associated with various Night Vision Goggle systems.

This is a five

year Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the duration of the contract.

The award has

a maximum order value of $7.5 million with an expected average annual revenue over the following five year period of $1.0 million

to $1.5 million.

awarded on June 27, 2023.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for

the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years

for periscopes.

The award has a maximum order value of $2.1 million.

awarded on June 28, 2023.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for

the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five years

for periscopes.

The award has a maximum order value of $1.8 million.

Order awarded on August 2, 2023 by a U.S.

Subcontract purchase order

awarded on November 6, 2023 by a U.S.

prime contractor in support of U.S.

government contracts.

Order awarded on August 17, 2023 by a U.S.

Subcontract purchase order

awarded on April 24, 2024 by a U.S.

prime contractor in support of U.S.

government contracts.

awarded on September 15, 2023.

This is a long-term, Indefinite Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing

for the duration of a base period of three (3) years plus two (2) firm fixed priced option years for a potential total of (5) five

years for binoculars and includes first article testing and production deliveries.

The award has an estimated value of $2.1 million

across the five-year period.

Order awarded on October 16, 2023 by a U.S.

Subcontract purchase order

awarded on September 20, 2024 by a U.S.

prime contractor in support of U.S.

government contracts.

Order awarded on November 9, 2023 by a U.S.

Subcontract purchase order

originally awarded August 29, 2021 with multiple revisions and additions through November 15, 2024.

Prime contract awarded

on November 2, 2022 for spare Light Interference Filters associated with various Night Vision Goggle systems.

This is a five-year Indefinite

Delivery Indefinite Quantity (IDIQ) Contract with firm fixed pricing for the duration of the contract.

The award has a maximum order

value of $7.5 million.

Subcontract purchase order

awarded on October 16, 2023 by a U.S.

prime contractor in support of U.S.

government contracts.

Order awarded on November 10, 2023 by a U.S.

Subcontract purchase order

awarded on April 30, 2024 by a U.S.

prime contractor in support of U.S.

government contracts.

Order awarded on November 6, 2023 by a U.S.

Subcontract purchase order

awarded on July 8, 2024 by a U.S.

prime contractor in support of U.S.

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Opportunity — U.S.

the twelve months ended October 1, 2023, approximately 74% of our business was in support of U.S.

the twelve months ended September 29, 2024, approximately 84% of our business was in support of U.S.

military products.

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and procurement spending over time.

For fiscal year 2024, the total projected military spending is estimated at $863 billion, an overall

increase of 11.9% over estimated 2023 spending.

The chart below also depicts increased spending through 2028 of 6.1% from the 2024 plan

level, reflecting an average increase of 1.5% per year for years 2025 through 2028.

Military procurement spending, a subset of total

military spending, depicts an overall increase of $15.3 billion, or 10.8%, in fiscal year 2024 as compared to the estimated spending

in fiscal year 2023.

National Defense Authorization Act (NDAA) for Fiscal Year 2024 was enacted by Congress in December 2023 for $886 billion, an increase

of $28 billion, or 3% over the prior year NDAA.

The 2024 NDAA includes DOD military procurement of $169 billion, 8% above the Department

of Defense procurement budget request of $156.4 billion.

However, the Company cannot provide any assurances that the historical trend data is predictive of

future spending.

fiscal year 2025, the Government Publishing Office (GPO) projects total military spending at $878.5 billion, an overall increase of 2.2%

over estimated 2024 spending.

The chart below also depicts the GPO’s projection of increased spending through 2029 of 6.4% from

the 2025 plan level, reflecting an average increase of 1.6% per year for years 2026 through 2029.

For military procurement spending,

a subset of total military spending, the GPO projects an overall increase of $18.6 billion, or 12.6%, in fiscal year 2025 as compared

to the estimated spending in fiscal year 2024.

National Defense Authorization Act (“NDAA”) for Fiscal Year 2025 current request of $895 billion has not yet been enacted by Congress

The 2025 fiscal year request represents an increase of $11.3 billion, or 1.3% over the prior year NDAA of $883.7 billion.

The chart below depicts the original estimated funding levels from the U.S.

Department of Defense based on the FY2024 budget request.

Department of Defense based on the Fiscal Year 2025

budget request.

Government Publishing Office, U.S.

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table below depicts the U.S.

Department of Defense budget request for fiscal year 2024 for major ground system programs.

The last five

years have experienced a significant reduction in spending for U.S ground system military programs, and more specifically on the Abrams

Tank Modifications/Upgrades, which has a direct impact on the Optex Systems Richardson segment revenue.

The total fiscal year 2024 budget

request for major ground system programs decreased by 2.3% from the fiscal year 2023 levels and by 10.8% from the fiscal year 2020 levels.

Although it is difficult to directly tie the budget request to specific components provided by Optex Systems, we provide periscopes,

collimator assemblies, vision blocks and laser interface filters to the U.S.

armed forces on almost all of the ground system platforms

categorized below.

Department of Defense (“DoD”) budget request for fiscal year 2025 for major ground system

The last five years have experienced a significant reduction in spending for U.S ground system military programs, and more

specifically on the Abrams Tank Modifications/Upgrades, which has a direct impact on the Optex Systems Richardson segment revenue.

The total fiscal year 2025 budget request for major ground system programs decreased by 4.7% from the fiscal year 2024 levels and by

27.2% from the fiscal year 2023 levels.

Although it is difficult to directly tie the budget request to specific components provided

by Optex Systems, we provide periscopes, collimator assemblies, vision blocks and laser interface filters to the U.S.

on almost all of the ground system platforms categorized below.

($ in Millions)

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Next Generation Squad Weapon

Ground Mobility Vehicle

XM30 Combat Vehicle

M10 Booker (Mobile Protected Firepower)

Amphibious Combat Vehicle

Total Ground Systems Vehicles (millions)

Ground Systems Vehicles (millions)

Office of the Under Secretary of Defense (Comptroller)/Chief Financial Officer, “Program Acquisition Cost by Weapon System, United

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2025 Department of Defense Budget indicates an overall decrease in ground system vehicle program spending in the fiscal year 2024 and

2024 appropriation budget years.

2025 appropriation budget years from fiscal year 2023.

There is generally a six- to eighteen-month delay between U.S.

defense budget requests and program delivery

orders related to our products from government agencies and our prime defense customers.

In addition, DoD budget requests are often changed

throughout the congressional NDAA Budgeting and Budget appropriations process.

The DoD budget requests exclude any foreign military sales

as they are funded separately from the annual NDAA budgets.

We are carefully watching the projected trends in both DoD military spending

and FMS as defense allocation priorities change, as well as challenges which are presented from the global recession and changes in political

climate to ascertain any potential impact to the Company’s future revenue.

defense budget

requests and program delivery orders related to our products from government agencies and our prime defense customers.

In addition, DoD

budget requests are often changed throughout the congressional NDAA Budgeting and Budget appropriations process.

The DoD budget requests

exclude any foreign military sales as they are funded separately from the annual NDAA budgets.

We are carefully watching the projected

trends in both DoD military spending and FMS as defense allocation priorities change, as well as challenges which are presented from

the global recession and changes in political climate to ascertain any potential impact to the Company’s future revenue.

Applied Optics Center supports numerous other military platforms outside of the ground system vehicles budget, such as infantry rifle

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were successful with the Israeli Ministry of Defense (“IMOD”) in refurbishing a small quantity of their Night Vision Rifle Scopes.

this success, in November 2022, the IMOD awarded us a $3.4 million follow on contract to continue this activity.

We anticipate deliveries

against the contract to begin during the second quarter of fiscal year 2024.

If we successfully execute this contract, we would expect

another contract award of similar size and duration.

Given this success, in November 2022, the IMOD awarded us a $3.4 million follow on contract to continue this activity through 2026.

deliveries against the contract during the first quarter of fiscal year 2024.

If we successfully execute this contract, we would

expect another contract award of similar size and duration.

are also exploring possibilities to adapt some of our products for commercial use in those markets that demonstrate potential for solid

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products we presently manufacture to address other markets.

Our initial focus will be directed in three product areas.

Our initial focus will be directed in four product areas.

Eye Binoculars — While the military application we produce is based on mature military designs, we own all castings, tooling

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law enforcement.

Film Coatings — The acquisition of the Applied Optics Center (AOC) also creates a new sector of opportunity for commercial

products for us.

Globally, commercial optical products use thin film coatings to create product differentiation.

These coatings can

be used for redirecting light (mirrors), blocking light (laser protection), absorbing select light (desired wavelengths), and many

other combinations.

They are used in telescopes, rifle scopes, binoculars, microscopes, range finders, protective eyewear, photography,

Given this broad potential, the commercial applications are a key opportunity going forward.

Assemblies – Through the Applied Optics Center, we are utilizing our experience in military sighting systems to pursue commercial

opportunities associated with products that incorporate multi-lens optical cell assemblies, bonded optical elements and mechanical

There are a wide variety of products in the medical, machine vision, automotive and outdoor recreation fields that can

benefit from our capabilities.

Support to domestic customers for these type products has driven significant increases in Applied

Optics Segment sales during the last five years.

Film Coatings — The acquisition of the Applied Optics Center also creates a new

sector of opportunity for commercial products for us.

Globally, commercial optical products

use thin film coatings to create product differentiation.

These coatings can be used for

redirecting light (mirrors), blocking light (laser protection), absorbing select light (desired

wavelengths), and many other combinations.

They are used in telescopes, rifle scopes, binoculars,

microscopes, range finders, protective eyewear, photography, etc.

Given this broad potential,

the commercial applications are a key opportunity going forward.

Assemblies – Through the Applied Optics Center, we are utilizing our experience in

military sighting systems to pursue commercial opportunities associated with products that

incorporate multi-lens optical cell assemblies, bonded optical elements and mechanical assemblies.

There are a wide variety of products in the medical, machine vision, automotive and outdoor

recreation fields that can benefit from our capabilities.

Support to domestic customers for

these type products has driven significant increases in Applied Optics Segment sales during

the last five years.

Outdoors – This launch brings military-grade optical technology directly to civilian

marksmen and extreme long-range competitors, expanding Optex’s reach beyond its

traditional military market.

The Optex Outdoors webstore offers a curated selection of advanced

optical products, including riflescope prisms, chronographs, and stabilized viewing products—designed

specifically for the needs of elite shooters and outdoor enthusiasts.

Each product is engineered

and built in Richardson, Texas.

serve customers in four primary categories:

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Sig Sauer, Enterprise Cabling and Vortex Optics), as a military supplier to foreign governments (Israel, Australia, South America and

Canada) and also as a commercial optical assembly supplier (Nightforce Optics, Gables Engineering, Amazon).

During the twelve months

ended October 1, 2023, we derived approximately 72% of our gross business revenue from five major customers:

Canada) and as a commercial optical assembly supplier (Nightforce Optics, Gables Engineering).

During the twelve months ended

September 29, 2024, we derived approximately 77% of our gross business revenue from six major customers:

government agencies (20%),

(22%), three U.S.

defense contractors (25%, 7%, 6% and 6%) and one major commercial customer (13%).

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therefore must issue the contracts to existing suppliers.

Given the expense of development and qualification testing, the barrier to

entry is high for new competitors.

Given the expense and time commitment of development and qualification testing,

the barrier to entry is high for new competitors.

— Medium Risk to us.

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and the Stryker Combat Vehicle in 2001.

Under current Army modernization plans, the Army envisions all three

vehicles in service with Active and National Guard forces beyond FY2028.

Optex Systems provides periscopes and optical sighting systems

in support of all three vehicle platforms.

Since it was first fielded in 1980, the Abrams tank has undergone near-continuous upgrades

and improvements;

however, as illustrated above, spending on modifications and upgrades of the Abrams tank by the U.S.

military has significantly

decreased in the past five years and we expect this trend to continue.

The Abrams is the principal battle tank of the United States Army

and Marine Corps, and the armies of Egypt, Kuwait, Saudi Arabia, Iraq, and since 2007, Australia.

On average, there has been a new improvement

package every seven years.

The Army is currently upgrading the Abrams with a System Enhancement Package Version 3 (SEPv3), with additional

upgrades in development.

Additionally, the US Army has announced contracts to produce 742 Stryker DVH vehicles, redesigned (dual v-hulled

vehicles) to be more resistant to land mines, as retrofits and as new production vehicles.

The Abrams, Bradley and Striker vehicles are

the only production tanks currently in production by the government.

We believe that this, in conjunction with the 30-year life span,

supports our expectation that they will continue to be used through approximately 2040.

Since it was first fielded in 1980, the Abrams tank has undergone near-continuous

upgrades and improvements and is the principal battle tank of the United States Army and Marine Corps, and the armies of Egypt, Kuwait,

Saudi Arabia, Iraq and Australia.

On average, there has been a new improvement package every seven years.

The XM30 Mechanized Infantry

Combat Vehicle, formerly known as the Optionally Manned Combat Vehicle, is the U.S.

Army’s sixth attempt to replace

the Bradley fighting vehicle.

The latest Army “light tank” is the M10 Booker Combat Vehicle, formerly known as the Mobile

Protected Firepower System, and is much smaller than the Abrams main battle tank.

The Abrams, XM30, M10 Booker and Stryker vehicles are

the only tanks currently in production by the government.

Optex Systems provides periscopes and optical sighting systems in support of

all four vehicle platforms.

We expect that these tanks will

continue to be used through approximately 2040.

— Low to Medium Risk to Optex Systems Holdings.

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following matrix reflects the current focus of our four basic approaches for sales and development:

existing products to existing customers.

existing products to new customers.

new products to meet the needs of our existing customers.

new products to meet the needs of new customers.

M17 Day/Thermal

M17 Day/Thermal, OWSS

Sell existing products to

existing customers.

Sell existing products to

new customers.

Develop new products to meet

the needs of our existing customers.

Develop new products to meet

the needs of new customers.

Army Central Command - Binoculars

- GOI MOD/Aquila

Prime Contractor - XM10 Aiming Circle

- Optical Lens

- Optical Lens, Spotting Scopes, Monocular Lens, Chronographs, Optical Wedges

Army Central Command - Periscopes, Back Up Sights,

- Optical Lens, Spotting Scopes Monocular Lens

Periscopes, Back Up Sights,

Sighting Systems

Vision Blocks,

Optical Lens, Spotting

Prime Contractor – Laser Filter Units

- Periscopes, Collimators

Monocular Lens

- Laser Interface Filters

Prime Contractor – Laser Filter Units

- Optical Elements

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largest portion of our costs is materials.

We have completed the following activities in order to demonstrate continuous improvement:

Our continuous improvements to effectively manage material costs include the following activities:

completion of annual surveillance audit for ISO 9001:2008 certificate, with no major nonconformance issues

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of material reviews prior to work order release

continuous improvement opportunities include installation and training of shop floor control module within the ERP system and organizational

efficiencies of common procurement techniques among buyers.

management and notification tools for on time delivery and quality tracking

continuous improvement opportunities include the full implementation and training of the shop floor control module within our ERP system.

We have begun testing and implementation within selected process.

Manufacturing

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manufacturing process is driven by the use of six sigma techniques and process standardization.

Initial activities in this area have

been the successful six sigma projects in several production areas which have led to improved output and customer approval on the aesthetics

of the work environment.

In addition, we use many tools including 5S programs and six sigma processes, and define, measure, analyze,

improve, control (DMAIC) problem solving techniques to identify bottlenecks within the process flow, reduce cost and improve product

Our activities in this area have included

the use of six sigma projects in several production areas which has led to improved output and customer approval on the aesthetics of

the work environment.

In addition, we use many tools including 5S programs, six sigma processes, and define, measure, analyze, improve,

control (DMAIC) problem solving techniques, to identify bottlenecks within the process flow, reduce cost and improve product yields.

Successful results can then be replicated across the production floor and drive operational improvements.

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Long running, less complex programs (e.g., periscopes) do not experience as significant of an impact on labor costs as

production volumes change, as the associated workforce is generally less skilled and can be ramped quickly as headcounts shift.

production volumes change, as the associated workforce is generally less specialized and can be ramped quickly as headcounts shift.

complex thin laser filter coatings, Howitzer and thermal day/night programs are more significantly impacted by volume changes as they

require a more highly-skilled workforce and ramp time is longer as the training is more complex.

require a highly specialized workforce and ramp time is longer as the training is more complex.

We continually monitor customer demand

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impact on our business.”

Secrets and Know-How

utilize several highly specialized and unique processes in the manufacture of our products.

While we believe that these trade

secrets have value, it is probable that our future success will depend primarily on the innovation, technical expertise,

manufacturing and marketing abilities of our personnel.

We cannot assure you that we will be able to maintain the confidentiality of

our trade secrets or that our non-disclosure agreements will provide meaningful protection of our trade secrets, know-how or other

proprietary information in the event of any unauthorized use, misappropriation or other disclosure.

The confidentiality agreements

that are designed to protect our trade secrets could be breached, and we might not have adequate remedies for the breach.

Additionally, our trade secrets and proprietary know-how might otherwise become known or be independently discovered by others.

While we believe that these trade secrets

have value, it is probable that our future success will depend primarily on the innovation, technical expertise, manufacturing and marketing

abilities of our personnel.

We cannot assure you that we will be able to maintain the confidentiality of our trade secrets or that our

non-disclosure agreements will provide meaningful protection of our trade secrets, know-how or other proprietary information in the event

of any unauthorized use, misappropriation or other disclosure.

The confidentiality agreements that are designed to protect our trade

secrets could be breached, and we might not have adequate remedies for the breach.

Additionally, our trade secrets and proprietary know-how

might otherwise become known or be independently discovered by others.

possess three utility patents and three design patents.

competitors, many of which have substantially greater resources, may have applied for or obtained, or may in the future apply for and

obtain, patents that will prevent, limit or interfere with our ability to make and sell some of our products.

Although we believe that

our products do not infringe on the patents or other proprietary rights of third parties, we cannot assure you that third parties will

not assert infringement claims against us or that such claims will not be successful.

We have filed two new patent applications which are currently under review at

Patent and Trademark Office.

These are for an Improved Next Shot Compensation System for Weapons (patent application number

18651580) and a Laser Filter Antenna (patent application number 18809740).

following patents generally expire 20 years after issuance.

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Light Armored Vehicles, the Armored Security Vehicle, the Amphibious Assault Vehicle, and the M60 Main Battle Tank.

Digital Day and Night

technology has advanced the capabilities of these installed weapon systems and is the first in a series of patents we have applied for

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We continue to prototype these products and demonstrate them to potential customers.

competitors, many of which have substantially greater resources, may have applied for or obtained, or may in the future apply for and

obtain, patents that will prevent, limit or interfere with our ability to make and sell some of our products.

Although we believe that

our products do not infringe on the patents or other proprietary rights of third parties, we cannot assure you that third parties will

not assert infringement claims against us or that such claims will not be successful.

markets for our products are competitive.

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are a limited number of competitors in each of the markets for the various types of products that we design, manufacture and sell.

this time, we consider our primary competitors for the Optex, Richardson site to be Kent Periscopes and Synergy International Optronics,

The Applied Optics Center thin film and laser coatings products compete primarily with Materion-Barr, Artemis and Alluxa.

this time, we consider our primary competitors for the Optex Systems Richardson site to be Gus Periscopes.

The Applied Optics Center

thin film and laser coatings products compete primarily with Materion-Barr, Artemis and Alluxa.

competitors are often well entrenched, particularly in the defense markets.

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and Human Capital

had 106 full time equivalent employees as of October 1, 2023 and 102 employees as of December 6, 2023, which include a small temporary

work force to handle peak loads as needed.

We are in compliance with local prevailing wage, contractor licensing and insurance regulations,

and have good relations with our employees, who are not currently unionized.

had 128 full time equivalent employees as of September 29, 2024, which include a small temporary work force to handle peak loads as needed.

We are in compliance with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees,

who are not currently unionized.

We use outside consultants for various services.

not experienced any work stoppages and are not a party to a collective bargaining agreement.

Management considers labor relations to

We have not experienced any work stoppages and are

not a party to a collective bargaining agreement.

Management considers labor relations to be good.

are dedicated to preserving operational excellence and remaining an employer of choice.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business