What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-12-17 compared with 2024-12-19 · 547 added, 500 removed, 557 unchanged (65% of the section changed)

6 unchanged sentences

and subsidiaries (the “Company”)

as of September 29, 2024 and October 1, 2023, and the related consolidated statements of income, stockholders’ equity, and cash

as of September 28, 2025 and September 29, 2024, and the related consolidated statements of income, stockholders’ equity, and cash

flows for the twelve months then ended, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September

29, 2024 and October 1, 2023, and the results of their operations and their cash flows for the twelve months then ended, in conformity

28, 2025 and September 29, 2024, and the results of their operations and their cash flows for the twelve months then ended, in conformity

with accounting principles generally accepted in the United States of America.

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We determined that there are no critical audit matters.

/s/ Whitley Penn LLP

Whitley Penn LLP

have served as the Company’s auditor since 2017.

2 unchanged sentences

September 28,

October 1, 2023

September 29,

(Thousands, except share and per share data)

September 28,

October 1, 2023

September 29,

Cash and Cash Equivalents

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Other Liabilities

Credit Facility-Long Term

Operating Lease Liability, net of current portion

Other Liabilities

Total Liabilities

1 unchanged sentence

Stockholders’ Equity

Common Stock – ($ 0.001 par, 2,000,000,000 authorized, 6,873,938 and 6,763,070 shares issued and outstanding, respectively)

Common Stock – ($ 0.001

par, 2,000,000,000

authorized, 6,920,658

and 6,873,938

shares issued and outstanding, respectively)

Additional Paid in Capital

Accumulated Deficit

Retained Earnings (Accumulated Deficit)

Stockholders’ Equity

4 unchanged sentences

September 28, 2025

October 1, 2023

September 29, 2024

(Thousands, except share and per share data)

1 unchanged sentence

September 28,

October 1, 2023

September 29,

Cost of Sales

1 unchanged sentence

Operating Income

Interest Expense

Other Expenses

Asset Impairment

Interest (Income) Expense, net

Other Expenses

Income Before Taxes

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September 28, 2025

October 1, 2023

September 29, 2024

Twelve months ended

September 28,

October 1, 2023

September 29,

Cash Flows from Operating Activities:

Adjustments to Reconcile Net Income to Net Cash provided by (used in) Operating Activities:

Adjustments to Reconcile Net Income to Net Cash provided by Operating Activities:

Depreciation and Amortization

Asset Impairment

Stock Compensation Expense

Change in Deferred Tax Asset

Accounts Receivable

Change in Accounts Receivable

Bad Debt Expense

Contract Asset

Prepaid Expenses

Accounts Payable and Accrued Expenses

Federal Income Taxes Payable

Accrued Warranty Costs

Accrued Selling Expense

Customer Advance Deposits

Increase (Decrease) In Accrued Estimated Loss On Contracts

Change in Inventory

Change in Contract Asset

Change in Prepaid Expenses

Change in Leases

Change in Accounts Payable and Accrued Expenses

Change in Federal Income Taxes Payable

Change in Accrued Warranty Costs

Change in Accrued Selling Expense

Change in Customer Advance Deposits

Change in Accrued Estimated Loss on Contracts

Total Adjustments

Net Cash provided by (used in) Operating Activities

Net Cash provided by Operating Activities

Cash Flows used in Investing Activities

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Net Cash used in Investing Activities

Cash Flows (used in) provided by Financing Activities

Cash Flows used in Financing Activities

Cash Paid for Taxes Withheld On Net Settled Restricted Stock Unit Share Issue

1 unchanged sentence

Payments to Credit Facility

Net Cash (used in) provided by Financing Activities

Net (Decrease) Increase in Cash and Cash Equivalents

Net Cash used in Financing Activities

Net Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

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Cash Paid for Taxes

Cash Received from Interest

Cash Paid for Interest

2 unchanged sentences

Statement of Stockholders’ Equity

(except share data)

at October 2, 2022

Stock Compensation Expense

Vested restricted stock units issued net of

tax withholding

Restricted Shares Issued (1)

Forfeited Unvested Shares (2)

Thousands (except share data)

Balance at October 1, 2023

Stock Compensation Expense

Vested restricted stock units issued net of

tax withholding

Vested restricted stock units issued net of tax withholding

Balance at September 29, 2024

and unvested shares issued to board member on May 9, 2023.

Shares vest on 50 % January 1, 2024 and 50% January 1, 2025 .

common restricted shares which were forfeited and cancelled in February 2023.

Stock Compensation Expense

Vested restricted stock units issued net of tax withholding

Restricted Board Shares issued 1

Restricted Board Shares issued

Restricted Officer Shares issued, net of tax shares withheld 2

Restricted Officer Shares issued, net of tax shares withheld

Balance at September 28, 2025

stock award made on November 5, 2024 which consisted of 7,600 shares each of restricted stock for the three independent directors.

stock award made on August 11, 2025 to Chad George, President.

The award was for 10,000 shares which was issued net of

tax shares withheld of 2,935 shares.

accompanying notes are an integral part of these financial statements.

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Systems Holdings, Inc.

(“the Company”) manufactures optical sighting systems and assemblies for the U.S.

Department of Defense,

foreign military applications and commercial markets.

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 have been selected for installation on the

Stryker family of vehicles.

Optex Systems Holdings also manufactures and delivers numerous periscope configurations, rifle and surveillance

sights and night vision optical assemblies.

Optex Systems Holdings’ products consist primarily of build to customer print products

that are delivered both directly to the military and to other defense prime contractors or commercial customers.

Optex Systems Holdings’

operations are based in Dallas and Richardson, Texas in leased facilities comprising 93,967 square feet.

As of September 29, 2024, the

Company operated with 128 full-time equivalent employees.

(together with its subsidiaries, the “Company,” “Optex Systems Holdings,” “we,”

“us,” and “our”) manufactures optical sighting systems and assemblies for the U.S.

Department of Defense, foreign

military applications and commercial markets.

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 have been selected for installation on the Stryker family

The Company also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision

optical assemblies.

Optex Systems Holdings’ products consist primarily of build to customer print products that are delivered both

directly to the military and to other defense prime contractors or commercial customers.

The Company’s

consolidated revenues for the twelve months ended September 28, 2025 were derived from military sales to the U.S.

government ( 28 %),

prime military contractors ( 61 %),

foreign military contractors ( 6 %),

and commercial customers ( 5 %).

Approximately 94 %

of the total company revenue is generated from domestic customers and 6 %

is derived from foreign customers, primarily in Canada and Israel.

Systems Holdings’ operations are based in Dallas and Richardson, Texas in leased facilities comprising 93,967

As of September 28, 2025, Optex Systems Holdings

operated with 132 full-time

equivalent employees.

2 — Summary of Significant Accounting Policies

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Optex Systems, Inc.

All significant inter-company balances and transactions have been eliminated in consolidation.

All significant intercompany balances and transactions have been eliminated in consolidation.

of Estimates :

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amounts in the enterprise’s general-purpose financial statements.

The Chief Operating Decision Maker (CODM), which is

our CEO, uses the segment revenue, cost of sales and net operating income to assess the Company’s performance and allocation of

The CODM assesses the performance of our segments and decides how to allocate resources based on each segment’s revenue

growth, gross profit and operating profit.

The CODM utilizes these metrics by comparing budget versus actual results as well as benchmarking

to our competitors.

For the twelve months ended September 28, 2025 and September 29, 2024, the Company’s CODM was Danny Schoening,

See also Note 14 “Subsequent Events” regarding changes to the CODM and CEO effective on December 20, 2025.

Optex System Holdings’ fiscal year ends on the Sunday nearest September 30.

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2025 and included 52 weeks.

Fiscal year 2023 ended on October 1, 2023 and included 52 weeks.

Fiscal year 2024 ended on September 29, 2024 and included 52 weeks.

Value of Financial Instruments :

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in cash on deposit with our banks.

Only a portion of the cash, currently $ 250 thousand, would be covered by federal deposit insurance

and the uninsured balances are substantially greater than the insured amounts.

As of September 28, 2025, $ 4.0 million of our cash balance was carried in a money market account with

an annual interest rate of 3.84 %.

For the twelve months ended September 28, 2025, the total interest income under the money market account

was $ 35 thousand.

Only a portion of the cash, currently $ 250 thousand, would be covered by federal deposit insurance and the uninsured

balances are substantially greater than the insured amounts.

Concentration

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agencies ( 29 %), four major U.S.

defense contractors ( 25 %, 7 %, 6 % and 6 %), one major commercial customer ( 13 %) and all other customers

The Company’s revenues for fiscal year ended October 1, 2023 were derived from sales to U.S.

government agencies ( 22 %),

defense contractors ( 14 %, 7 %, and 6 %), one major commercial customer ( 23 %) and all other customers ( 28 %).

Optex Systems Holdings

does not believe that this concentration results in undue credit risk because of the financial strength of the obligees.

Optex Systems Holdings records its accounts receivable at the original sales invoice amount less

liquidations for previously collected advance/progress bills and an allowance for expected credit losses.

As of the fiscal year

beginning October 2, 2023, the Company adopted Accounting Standards Update (ASU) 2016-13, “ Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” Under the new standard, the current

expected credit loss (“CECL”) model is used for estimating an allowance for credit losses and an allowance is set up

when the receivable is initially recorded, even if the probability of loss is remote.

The Company utilizes a CECL model based on the

aging schedule method.

As the customer base is primarily U.S.

government and government prime contractors, Optex Systems Holdings

allowance for credit losses is minimal.

On a quarterly basis, Optex Systems Holdings evaluates its accounts receivable and

establishes an allowance for credit losses, using a CECL model based on a rolling aging schedule method.

An account receivable is considered to be past due if any portion of the receivable balance is outstanding beyond

its scheduled due date.

defense contractors ( 19 %, 10 %, 6 % and 6 %), and all other customers ( 30 %).

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 %).

Optex Systems Holdings does not believe that

this concentration results in undue credit risk because of the financial strength of the obligees.

Optex Systems Holdings records its accounts receivable at the original sales invoice amount less liquidations for

previously collected advance/progress bills and an allowance for expected credit losses.

As of the fiscal year beginning October 2, 2023,

the Company adopted Accounting Standards Update (ASU) 2016-13, “ Financial Instruments – Credit Losses (Topic 326):

of Credit Losses on Financial Instruments.” Under the new standard, the current expected credit loss (“CECL”) model

is used for estimating an allowance for credit losses and an allowance is set up when the receivable is initially recorded, even if the

probability of loss is remote.

The Company utilizes a CECL model based on the aging schedule method.

As the customer base is primarily

government and government prime contractors, Optex Systems Holdings allowance for credit losses is minimal.

On a quarterly basis,

Optex Systems Holdings evaluates its accounts receivable and establishes an allowance for credit losses, using a CECL model based on

a rolling aging schedule method.

An account receivable is considered to be past due if any portion of the receivable balance is outstanding

beyond its scheduled due date.

No interest is accrued on past due accounts receivable.

As of September

29, 2024, and October 1, 2023, Optex Systems Holdings had an allowance for credit losses of $ 15

thousand and $ 5

thousand, respectively, for non U.S.

government account balances.

Optex Systems

Holdings charges uncollectible accounts to credit loss expense in the period in which they are first deemed uncollectible.

fiscal year 2024 we recognized $ 10

thousand in credit loss expenses associated with uncollectible accounts.

In the fiscal year 2023 we recognized zero

in credit loss expenses associated with uncollectible accounts.

of September 29, 2024, 79 % of the accounts receivable balance was comprised of seven customers:

government, 15 %, five major

defense contractors, 26 %, 10 %, 9 %, 7 % and 7 %, and a foreign military customer, 5 %.

As of October 1, 2023, 79 % of the accounts receivable

balance was comprised of six customers:

government, 17 %, four major defense contractors, 21 %, 9 %, 8 % and 6 %, and a commercial

customer, 18 %.

As of September 28, 2025, and September 29, 2024,

Optex Systems Holdings had an allowance for credit losses of $ 5 thousand and $ 15 thousand, respectively, for non U.S.

government account

Optex Systems Holdings charges uncollectible accounts to credit loss expense in the period in which they are first deemed uncollectible.

In the fiscal year 2025 we recognized $ 4 thousand in credit loss expenses associated with uncollectible accounts.

In the fiscal year

2024 we recognized $ 10 thousand in credit loss expenses associated with uncollectible accounts.

of September 28, 2025, 91 % of the accounts receivable balance was comprised of eight customers:

government, 12 %, seven major

defense contractors, 27 %, 22 %, 8 %, 6 %, 6 %, 5 % and 5 %.

As of September 29, 2024, 79 % of the accounts receivable balance was comprised

of seven customers:

government, 15 %, five major defense contractors, 26 %, 10 %, 9 %, 7 % and 7 %, and a foreign military customer,

Inventory is recorded at the lower of cost or net realizable value and adjusted as appropriate for decreases in valuation and

4 unchanged sentences

first-out method.

As of September 29, 2024, and October 1, 2023 inventory included:

As of September 28, 2025, and September 29, 2024 inventory included:

Schedule of Inventory

September 28, 2025

October 1, 2023

September 29, 2024

October 1, 2023

September 28,

September 29,

Raw Materials

4 unchanged sentences

Net Inventory

the twelve months ended September 29, 2024 Optex Systems recorded $ 0.1 million of obsolete and excess inventory reserves.

Net Inventory

increased by $ 2.7 million in support of higher revenues and customer orders.

the twelve months ended September 28, 2025 Optex Systems Holdings recorded $ 0.8 million of excess and obsolete inventory reserves.

increased our reserves on old and slow-moving sighting systems inventories by $ 0.7 million due to the expected phase out of LAV and LAV-25

tanks by the U.S.

government using the DDAN sighting system platform, combined with the modernization of the Abrams Commander Weapon

Station with more advanced sighting systems.

We set aside additional reserves of $ 0.1 million for other product inventories that were

either slow moving, obsolete, or showed zero requirements over the prior five years.

Net inventory decreased by $ 0.5 million

primarily as a result of the increased reserves.

Some of Optex Systems Holdings’ customers require that the Company warrant the quality of its products to meet customer

6 unchanged sentences

future returns on previous deliveries.

As of September 29, 2024 and October 1, 2023, the existing warranty reserve balances of $ 52 thousand

and $ 75 thousand, respectively, were reviewed and determined to be adequate to satisfy any future warranty claims that may have existed

as of the end of each fiscal year for shipments occurring in the prior 12 months.

As of September 28, 2025 and September 29, 2024, the existing warranty reserve balances of $ 162

thousand and $ 52 thousand, respectively, were reviewed and determined to be adequate to satisfy any future warranty claims that may have

existed as of the end of each fiscal year for shipments occurring in the prior 12 months.

We have made numerous improvements to our supplier

2 unchanged sentences

warranty backlog and process future warranty returns.

table below summarizes the warranty expenses and incurred warranty costs for the twelve months ended September 29, 2024 and October 1,

table below summarizes the warranty expenses and incurred warranty costs for the twelve months ended September 28, 2025 and September

Schedule of Warranty Reserves

6 unchanged sentences

Ending balance

expenses accrued to cost of sales (based on current year shipments and historical warranty return rate).

expenses accrued to cost of sales for shipped optical assemblies of $ 9 thousand (based on prior three months shipments of optical

assemblies and the optical assembly historical warranty return rate) in addition to an expected warranty repair cost of $ 143 thousand

for shipped day windows due to a glass cracking issue.

in estimated warranty liabilities recognized in cost of sales associated with:

2 unchanged sentences

During the twelve months

ended September 29, 2024, the warranty return rate was significantly below historical levels resulting in a favorable change in estimate

during the period.

ended September 28, 2025, the warranty return rate was below historical levels resulting in a favorable change in estimate during

and Equipment :

6 unchanged sentences

is reflected in the operating results in the period the event takes place.

In February 2016, FASB issued ASU 2016-02— Leases (Topic 842).

The update is intended to increase transparency and

comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information

about leasing arrangements.

The amendments in this update are effective for fiscal years beginning after December 15, 2018, including

interim periods within those fiscal years.

As such, Optex Systems Holdings adopted these provisions as of the fiscal year beginning on

September 30, 2019.

Optex Systems Holdings has two significant operating facilities leases which extend beyond twelve months and fall

under the guidance of ASC Topic 842.

Optex Systems Holdings has two significant operating

facilities leases which extend beyond twelve months and fall under the guidance of ASC Topic 842.

What changed 10-K

Item 8. Financial Statements and Supplementary Data