OPXS Optex Systems Holdings Inc (QB)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended July 2, 2023

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to______.

 

OPTEX SYSTEMS HOLDINGS, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware		001-41644		90-0609531
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Identification No.)

 

1420 Presidential Drive, Richardson, TX		75081-2439
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (972) 764-5700

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value		OPXS		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large Accelerated Filer ☐

Accelerated Filer ☐

Non-Accelerated Filer ☒

Smaller Reporting Company ☒

 

☐	Emerging growth company
☐	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 16, 2023: 6,763,070 shares of common stock.

 

 

 

OPTEX SYSTEMS HOLDINGS, INC.

FORM 10-Q

 

For the period ended July 2, 2023

 

INDEX

 

PART I— FINANCIAL INFORMATION		F-1
Item 1.	Unaudited Condensed Consolidated Financial Statements	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15
Item 4.	Controls and Procedures	15
PART II— OTHER INFORMATION		15
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Mine Safety Disclosures	16
Item 6.	Exhibits	16
SIGNATURE		17

 

 

Part 1. Financial Information

 

Item 1. Unaudited Condensed Consolidated Financial Statements

 

OPTEX SYSTEMS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JULY 2, 2023 (UNAUDITED) AND OCTOBER 2, 2022	F-2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JULY 2, 2023 (UNAUDITED) AND THE THREE AND NINE MONTHS ENDED JULY 3, 2022 (UNAUDITED)	F-3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED JULY 2, 2023 (UNAUDITED) AND THE NINE MONTHS ENDED JULY 3, 2022 (UNAUDITED)	F-4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE THREE AND NINE MONTHS ENDED JULY 2, 2023 (UNAUDITED) AND FOR THE THREE AND NINE MONTHS ENDED JULY 3, 2022 (UNAUDITED)	F-5
CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOOTNOTES (UNAUDITED)	F-6

 

 

Optex Systems Holdings, Inc.

Condensed Consolidated Balance Sheets

 

		July 2, 2023				October 2, 2022
		(Thousands, except share and per share data)
		July 2, 2023				October 2, 2022
		(Unaudited)
ASSETS
Cash and Cash Equivalents		$	314			$	934
Accounts Receivable, Net			2,870				2,908
Inventory, Net			12,282				9,212
Contract Asset			336				-
Prepaid Expenses			431				328
Current Assets			16,233				13,382
Property and Equipment, Net			1,083				968
Other Assets
Deferred Tax Asset			762				942
Right-of-use Asset			2,863				3,222
Security Deposits			23				23
Other Assets			3,648				4,187
Total Assets		$	20,964			$	18,537
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable		$	1,609			$	706
Operating Lease Liability			616				604
Federal Income Taxes Payable			-				331
Accrued Expenses			969				958
Accrued Selling Expenses			336				-
Accrued Warranty Costs			241				169
Accrued Loss Reserves			133				289
Customer Advance Deposits			131				311
Current Liabilities			4,035				3,368
Other Liabilities
Credit Facility			1,207				-
Operating Lease Liability, net of current portion			2,406				2,761
Total Other Liabilities			3,613				2,761
Total Liabilities			7,648				6,129
Commitments and Contingencies
Stockholders’ Equity
Common Stock – ($0.001 par, 2,000,000,000 shares authorized, 6,763,070 and 6,716,638 shares issued and outstanding, respectively)			7				7
Additional Paid in Capital			21,172				21,096
Accumulated Deficit			(7,863	)			(8,695	)
Stockholders’ Equity			13,316				12,408
Total Liabilities and Stockholders’ Equity		$	20,964			$	18,537

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

 Optex Systems Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
		(Thousands, except share and per share data)
		Three months ended								Nine months ended
		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Revenue		$	7,172			$	6,170			$	17,582			$	15,645
Cost of Sales			5,460				4,902				13,599				12,838
Gross Profit			1,712				1,268				3,983				2,807
General and Administrative Expense			960				758				2,897				2,473
Operating Income			752				510				1,086				334
Interest Expense			22				-				31				-
Income Before Taxes			730				510				1,055				334
Income Tax Expense			154				82				223				28
Net Income		$	576			$	428			$	832			$	306
Basic income per share		$	0.09			$	0.05			$	0.13			$	0.04
Weighted Average Common Shares Outstanding - basic			6,643,070				8,187,318				6,607,593				8,223,492
Diluted income per share		$	0.09			$	0.05			$	0.13			$	0.04
Weighted Average Common Shares Outstanding – diluted		$	6,686,211			$	8,285,996			$	6,642,604			$	8,297,341

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

Optex Systems Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		July 2, 2023				July 3, 2022
		(Thousands) Nine months ended
		July 2, 2023				July 3, 2022
Cash Flows from Operating Activities:
Net Income		$	832			$	306
Adjustments to Reconcile Net Income to Net Cash (used in) provided by Operating Activities:
Depreciation and Amortization			252				221
Stock Compensation Expense			134				127
Deferred Tax			180				340
Accounts Receivable			38				1,264
Inventory			(3,070	)			(976	)
Contract Asset			(336	)			-
Prepaid Expenses			(103	)			(62	)
Leases			17				73
Accounts Payable and Accrued Expenses			914				223
Federal Income Taxes Payable			(331	)			-
Accrued Warranty Costs			72				118
Accrued Selling Expense			336				-
Customer Advance Deposits			(180	)			256
Accrued Loss Reserves			(156	)			-
Total Adjustments			(2,233	)			1,584
Net Cash (used in) provided by Operating Activities			(1,401	)			1,890
Cash Flows used in Investing Activities
Purchases of Property and Equipment			(368	)			(236	)
Net Cash used in Investing Activities			(368	)			(236	)
Cash Flows provided by (used in) Financing Activities
Borrowing from Credit Facility			1,507				-
Payments to Credit Facility			(300	)			-
Cash Paid for Taxes Withheld on Net Settled Restricted Stock Unit Shares Issued			(58	)			(19	)
Stock Repurchase			-				(366	)
Net Cash provided by (used in) Financing Activities			1,149				(385	)
Net (Decrease) Increase in Cash and Cash Equivalents			(620	)			1,269
Cash and Cash Equivalents at Beginning of Period			934				3,900
Cash and Cash Equivalents at End of Period		$	314			$	5,169
Supplemental Cash Flow Information:
Non-Cash Transactions:
Right-of-Use Asset		$	-			$	51
Operating Lease Liabilities			-				(51	)
Treasury Stock Retired			-				435
Cash Transactions:
Cash Paid for Taxes			553				-
Cash Paid for Interest			28				-

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

Optex Systems Holdings, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Thousands, except share data)

 

		Issued				Shares				Stock				Stock				Capital				Deficit				Equity
		Three months ended July 2, 2023
		Common																Additional								Total
		Shares				Treasury				Common				Treasury				Paid in				Accumulated				Stockholders
		Issued				Shares				Stock				Stock				Capital				Deficit				Equity
Balance at April 2, 2023			6,723,070				-			$	7			$	-			$	21,091			$	(8,439	)		$	12,659
Stock Compensation Expense			-				-				-				-				81				-				81
Restricted/Unvested Shares Issued (3)			40,000				-				-				-				-				-				-
Net Income			-				-				-				-				-				576				576
Balance at July 2, 2023			6,763,070				-			$	7			$	-			$	21,172			$	(7,863	)		$	13,316

 

		Three months ended July 3, 2022
		Common																Additional								Total
		Shares				Treasury				Common				Treasury				Paid in				Accumulated				Stockholders
		Issued				Shares				Stock				Stock				Capital				Deficit				Equity
Balance at April 3, 2022			8,395,394				-			$	8			$	-			$	25,534			$	(10,100	)		$	15,442
Stock Compensation Expense			-				-				-				-				36				-				36
Common Stock Repurchase (2)			-				72,443				-				(144	)			-				-				(144	)
Cancellation of Treasury Shares (2)			(72,443	)			(72,443	)			-				144				(144	)			-				-
Net Income			-				-				-				-				-				428				428
Balance at July 3, 2022			8,322,951				-			$	8			$	-			$	25,426			$	(9,672	)		$	15,762

 

		Nine months ended July 2, 2023
		Common																Additional								Total
		Shares				Treasury				Common				Treasury				Paid in				Accumulated				Stockholders
		Issued				Shares				Stock				Stock				Capital				Deficit				Equity
Balance at October 2, 2022			6,716,638				-			$	7			$	-			$	21,096			$	(8,695	)		$	12,408
Stock Compensation Expense			-				-				-				-				134				-				134
Taxes on Shares Issued for Vested Restricted Stock Units			46,432				-				-				-				(58	)			-				(58	)
Unvested Shares Forfeited (1)			(40,000	)			-				-				-				-				-				-
Restricted/Unvested Shares Issued (3)			40,000				-				-				-				-				-				-
Net Income			-				-				-				-				-				832				832
Balance at July 2, 2023			6,763,070				-			$	7			$	-			$	21,172			$	(7,863	)		$	13,316

 

		Nine months ended July 3, 2022
		Common																Additional								Total
		Shares				Treasury				Common				Treasury				Paid in				Accumulated				Stockholders
		Issued				Shares				Stock				Stock				Capital				Deficit				Equity
Balance at October 3, 2021			8,523,704				35,555			$	9			$	(69	)		$	25,752			$	(9,978	)		$	15,714
Balance			8,523,704				35,555			$	9			$	(69	)		$	25,752			$	(9,978	)		$	15,714
Stock Compensation Expense			-				-				-				-				127				-				127
Vested Restricted Stock Units Issued Net of Tax Withholding			23,216				-				-				-				(19	)			-				(19	)
Common Stock Repurchase (2)			-				188,414				-				(366	)			-				-				(366	)
Cancellation of Treasury Shares (2)			(223,969	)			(223,969	)			(1	)			435				(434	)			-				-
Net Income			-				-				-				-				-				306				306
Net Income (Loss)			-				-				-								-				306				306
Balance at July 3, 2022			8,322,951				-			$	8			$	-			$	25,426			$	(9,672	)		$	15,762

 

(1)	Unvested common restricted shares which were forfeited and cancelled in February 2023.
(2)	Common shares repurchased in the open market through July 3, 2022 were held as treasury stock using the cost method and cancelled prior to July 3, 2022.
(3)	Restricted and unvested shares issued to board member on May 9, 2023.  Shares vest on 50% January 1, 2024 and 50% January 1, 2025.

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

Note 1 - Organization and Operations

 

Optex 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. 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 nine months ended July 2, 2023 were derived from the U.S. government (20%), three major U.S. defense contractors (17%, 6%, and 5%, respectively), one major commercial customer (29%) and all other customers (23%). Approximately 95% of the total company revenue is generated from domestic customers and 5% is derived from foreign customers, primarily in Canada. Optex Systems Holdings’ operations are based in Dallas and Richardson, Texas in leased facilities comprising 93,967 square feet. As of July 2, 2023, Optex Systems Holdings operated with 101 full-time equivalent employees.

 

Note 2 - Accounting Policies

 

Basis of Presentation

 

Principles of Consolidation: The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Optex Systems, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

 

The condensed consolidated financial statements of Optex Systems Holdings included herein have been prepared by Optex Systems Holdings, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

 

These condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and the notes thereto included in the Optex Systems Holdings’ Form 10-K for the year ended October 2, 2022 and other reports filed with the SEC.

 

The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of Optex Systems Holdings for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.

 

Inventory: As of July 2, 2023 and October 2, 2022, inventory included:

 

Schedule of Inventory

		July 2, 2023				October 2, 2022
		(Thousands)
		July 2, 2023				October 2, 2022
Raw Material		$	7,428			$	6,953
Work in Process			5,050				2,722
Finished Goods			615				348
Gross Inventory		$	13,093			$	10,023
Less: Inventory Reserves			(811	)			(811	)
Net Inventory		$	12,282			$	9,212

 

Concentration of Credit Risk: Optex Systems Holdings’ accounts receivables as of July 2, 2023 consisted of U.S. government agencies (18%), seven major U.S. defense contractors (12%, 12%, 9%, 6%, 6%, 6%, and 5%, respectively), one commercial customer (16%) and all other customers (10%). The Company does not believe that this concentration results in undue credit risk because of the financial strength of the customers and the Company’s long history with these customers.

 

F-6

 

 

Accrued Warranties: Optex Systems Holdings accrues product warranty liabilities based on the historical return rate against period shipments as they occur and reviews and adjusts these accruals quarterly for any significant changes in estimated costs or return rates. The accrued warranty liability includes estimated costs to repair or replace returned warranty backlog units currently in-house plus estimated costs for future warranty returns that may be incurred against warranty covered products previously shipped as of the period end date. As of July 2, 2023, and October 2, 2022, the Company had warranty reserve balances of $241 and $169 thousand, respectively.

 

Schedule of Warranty Reserves

		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
		Three months ended								Nine months ended
		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Beginning balance		$	266			$	155			$	169			$	78
Incurred costs for warranties satisfied during the period			(82	)			(1	)			(99	)			(3	)
Warranty Expenses:
Warranties reserved for new product shipped during the period(1)			57				52				177				131
Change in estimate for pre-existing warranty liabilities(2)			-				(10	)			(6	)			(10	)
Warranty Expense			57				42				171				122
Ending balance		$	241			$	196			$	241			$	196

 

(1)	Warranty expenses accrued to cost of sales (based on current period shipments and historical warranty return rate.)
(2)	Changes in estimated warranty liabilities recognized in cost of sales associated with: the period end customer returned warranty backlog, or the actual costs of repaired/replaced warranty units which were shipped to the customer during the current period.

 

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.

 

Fair Value of Financial Instruments: Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of the financial statement presentation date.

 

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are carried at, or approximate, fair value as of the reporting date because of their short-term nature. The credit facility is reported at fair value as it bears market rates of interest.

 

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

 

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.

 

The accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and minimize the use of unobservable inputs. An asset or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Fair value estimates are reviewed at the origination date and again at each applicable measurement date and interim or annual financial reporting dates, as applicable for the financial instrument, and are based upon certain market assumptions and pertinent information available to management at those times.

 

Revenue Recognition: The majority of the Company’s contracts and customer orders originate with fixed determinable unit prices for each deliverable quantity of goods defined by the customer order line item (performance obligation) and include the specific due date for the transfer of control and title of each of those deliverables to the customer at pre-established payment terms, which are generally within thirty to sixty days from the transfer of title and control. We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods. In addition, the Company has one ongoing service contract which relates to optimized weapon system support (OWSS) and includes ongoing program maintenance, repairs and spare inventory support for the customer’s existing fleet units in service during the duration of the contract. Revenue recognition for this program has been recorded by the Company, and compensated by the customer, at fixed monthly increments over time, consistent with the defined contract maintenance period. During the three and nine months ended July 2, 2023 and July 3, 2022, there was $115 thousand and $340 thousand in 2023 and $120 thousand and $352 thousand in 2022 in service contract revenue recognized over time.

 

F-7

 

 

During the three- and nine-month periods ended July 2, 2023, there was zero and $223 thousand of revenue recognized from customer deposit liabilities (deferred contract revenue). During the three- and nine-month periods ended July 3, 2022, there were no revenues recognized from customer deposit liabilities (deferred contract revenue). As of July 2, 2023, customer deposit liabilities were $131 thousand.

 

As of October 2, 2022 and July 2, 2023, there was zero and $336 thousand in accrued selling expenses and zero and $336 thousand in contract assets related to a new $3.4 million contract booked in November 2022. The costs will be amortized against the revenue for the contract deliveries expected to begin in first quarter of fiscal year 2024 and extend through fiscal year 2025.

 

Contract Loss Reserves: The Company records loss provisions in the event that the current estimated total revenue against a contract and the total estimated cost remaining to fulfill the contract indicate a loss upon completion. When the estimated costs indicate a loss, we record the entire value of the loss against the contract loss reserve in the period the determination is made. The Company has several long-term fixed price contracts that are currently indicative of a loss condition due to recent inflationary pressures on material and labor, combined with increased manufacturing overhead costs. Some of these long-term contracts have option year ordering periods ending in February 2025 with deliveries that may extend into February 2026. As of July 2, 2023 and October 2, 2022, the accrued contract loss reserves were $133 thousand and $289 thousand, respectively. During the three and nine months ended July 2, 2023, the Company recognized $20 thousand and $72 thousand in loss reserves on new contract awards, made shipments resulting in reductions of zero and $171 thousand against existing loss reserves, and recognized a gain on changes in accrued loss estimates of zero and $57 thousand. During the three and nine months ended July 3, 2022, the Company recognized $15 thousand and $61 thousand in loss reserves on new contract awards, made shipments resulting in reductions of $26 thousand and $79 thousand against existing loss reserves. There were no changes in loss estimates during the three and nine months ended July 3, 2022.

 

Income Tax/Deferred Tax: As of July 2, 2023 and October 2, 2022, Optex Systems, Inc. has a deferred tax asset valuation allowance of ($0.8) million against deferred tax assets of $1.6 million and $1.8 million, respectively, for a net deferred tax asset of $0.8 million and $1.0 million. The valuation allowance has been established due to historical losses resulting in a Net Operating Loss Carryforward for each of the fiscal years 2011 through 2016 which may not be fully recognized due to an IRS Section 382 limitation related to a change in control. During the nine months ended July 2, 2023, our deferred tax assets decreased by $0.2 million related to temporary tax adjustments.

 

Earnings per Share: Basic earnings per share is computed by dividing income available for common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

 

The Company has potentially dilutive securities outstanding, which include unvested restricted stock units and unvested shares of restricted stock. The Company uses the Treasury Stock Method to compute the dilutive effect of any dilutive shares. Unvested restricted stock units and shares of restricted stock that are anti-dilutive are excluded from the calculation of diluted earnings per common share.

 

For the three months ended July 2, 2023, 120,000 shares of unvested restricted stock and 36,000 unvested restricted stock units (which convert to an aggregate of 43,141 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price.

 

For the three months ended July 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 98,678 incremental shares) were included in the diluted earnings per share calculation.

 

For the nine months ended July 2, 2023, 120,000 unvested restricted stock units and 36,000 shares of unvested restricted stock (which convert to an aggregate of 35,011 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price. For the nine months ended June 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 73,849 incremental shares) were included in the diluted earnings per share calculation.

 

F-8

 

 

Note 3 - Segment Reporting

 

The Company’s two reportable segments, Applied Optics Center and Optex Systems – Richardson (“Optex Systems”), are strategic businesses offering similar products to similar markets and customers; however, they are operated and managed separately due to differences in manufacturing technology, equipment, geographic location, and specific product mix. Applied Optics Center was acquired as a unit, and management at the time of the acquisition was retained.

 

The Applied Optics Center segment also serves as the key supplier of laser coated filters used in the production of periscope assemblies for the Optex Systems segment. Intersegment sales and transfers are accounted for at annually agreed to pricing rates based on estimated segment product cost, which includes segment direct manufacturing and general and administrative costs, but exclude profits that would apply to third party external customers.

 

Optex Systems (OPX) – Richardson, Texas

 

Optex Systems revenues are primarily in support of prime and subcontracted military customers. Military sales to prime and subcontracted customers represented approximately 96% and sales to commercial customers represented approximately 4% of the external segment revenue for the nine months ended July 2, 2023. The Optex Systems segment revenue is comprised of approximately 85% domestic military customers and 11% foreign military customers. For the nine months ended July 2, 2023, Optex Systems – Richardson represented 44% of the Company’s total consolidated revenue and consisted of revenue from the U.S. government (17%), two major U.S. defense contractors (14% and 6%), and all other customers (7%).

 

Optex Systems is located in Richardson Texas, with leased premises consisting of approximately 49,100 square feet. As of July 2, 2023, the Richardson facility operated with 56 full time equivalent employees in a single shift operation which includes 8 home office support employees. The facilities at Optex Systems, Richardson serve as the home office for both the Optex Systems and Applied Optics Center segments.

 

Applied Optics Center (AOC) – Dallas, Texas

 

The Applied Optics Center serves primarily domestic U.S. customers. Sales to commercial customers represented approximately 50% and military sales to prime and subcontracted customers represented approximately 50% of the external segment revenue for the nine months ended July 2, 2023. Approximately 95% of the AOC revenue was derived from external customers and approximately 5% was related to intersegment sales to Optex Systems in support of military contracts. For the nine months ended July 2, 2023, AOC represented 56% of the Company’s total consolidated revenue and consisted of revenue from one major defense contractor (5%), one commercial customer (27%), and all other customers (24%).

 

The Applied Optics Center is located in Dallas, Texas with leased premises consisting of approximately 44,867 square feet of space. As of July 2, 2023, AOC operated with 45 full time equivalent employees in a single shift operation.

 

F-9

 

 

The financial tables below present information on the reportable segments’ profit or loss for each period, as well as segment assets as of each period end. The Company does not allocate interest expense, income taxes or unusual items to segments.

 

Schedule of Segment Reporting Information

		Reportable Segment Financial Information (thousands)
		As of and for the three months ended July 2, 2023
		Optex Systems Richardson				Applied Optics Center Dallas				Other (non-allocated costs and intersegment eliminations)				Consolidated Total
Revenues from external customers		$	3,069			$	4,103			$	-			$	7,172
Intersegment revenues			-				265				(265	)			-
Total revenue		$	3,069			$	4,368			$	(265	)		$	7,172
Interest expense		$	-			$	-			$	22			$	22
Depreciation and amortization		$	14			$	72			$	-			$	86
Income (loss) before taxes		$	(60	)		$	893			$	(103	)		$	730
Other significant noncash items:
Allocated home office expense		$	(386	)		$	386			$	-			$	-
Stock compensation expense		$	-			$	-			$	81			$	81
Warranty expense		$	-			$	57			$	-			$	57
Segment assets		$	11,671			$	9,293			$	-			$	20,964
Expenditures for segment assets		$	-			$	222			$	-			$	222

  

		Reportable Segment Financial Information (thousands)
		As of and for the three months ended July 3, 2022
		Optex Systems Richardson				Applied Optics Center Dallas				Other (non-allocated costs and intersegment eliminations)				Consolidated Total
Revenues from external customers		$	2,653			$	3,517			$	-			$	6,170
Intersegment revenues			-				258				(258	)			-
Total revenue		$	2,653			$	3,775			$	(258	)		$	6,170
Interest expense		$	-			$	-			$	-			$	-
Depreciation and amortization		$	8			$	66			$	-			$	74
Income (loss) before taxes		$	185			$	361			$	(36	)		$	510
Other significant noncash items:
Allocated home office expense		$	(268	)		$	268			$	-			$	-
Stock compensation expense		$	-			$	-			$	36			$	36
Warranty expense		$	-				42				-				42
						$				$	-			$
Segment assets		$	14,676			$	6,637			$	-			$	21,313
Expenditures for segment assets		$	49			$	69			$	-			$	118

 

F-10

 

 

		Reportable Segment Financial Information (thousands)
		As of and for the nine months ended July 2, 2023
		Optex Systems Richardson				Applied Optics Center Dallas				Other (non-allocated costs and intersegment eliminations)				Consolidated Total
Revenues from external customers		$	7,742			$	9,840			$	-			$	17,582
Intersegment revenues			-				511				(511	)			-
Total revenue		$	7,742			$	10,351			$	(511	)		$	17,582
Interest expense		$	-			$	-			$	31			$	31
Depreciation and amortization		$	38			$	214			$	-			$	252
Income (loss) before taxes		$	(527	)		$	1,747			$	(165	)		$	1,055
Other significant noncash items:
Allocated home office expense		$	(978	)		$	978			$	-			$	-
Stock compensation expense		$	-			$	-			$	134			$	134
Warranty expense		$	-			$	171			$	-			$	171
Segment assets		$	11,671			$	9,293			$	-			$	20,964
Expenditures for segment assets		$	25			$	343			$	-			$	368

 

		Reportable Segment Financial Information (thousands)
		As of and for the nine months ended July 3, 2022
		Optex Systems Richardson				Applied Optics Center Dallas				Other (non-allocated costs and intersegment eliminations)				Consolidated Total
Revenues from external customers		$	6,588			$	9,057			$	-			$	15,645
Intersegment revenues			-				693				(693	)			-
Total revenue		$	6,588			$	9,750			$	(693	)		$	15,645
Interest expense		$	-			$	-			$	-			$	-
Depreciation and amortization		$	28			$	193			$	-			$	221
Income (loss) before taxes		$	(276	)		$	737			$	(127	)		$	334
Other significant noncash items:
Allocated home office expense		$	(802	)		$	802			$	-			$	-
Stock compensation expense		$	-			$	-			$	127			$	127
Warranty expense		$	-				122				-				122
						$				$				$
Segment assets		$	14,676			$	6,637			$	-			$	21,313
Expenditures for segment assets		$	55			$	181			$	-			$	236

 

F-11

 

 

Note 4 - Commitments and Contingencies

 

Non-cancellable Operating Leases

 

Optex Systems Holdings leases its office and manufacturing facilities for the Optex Systems, Inc., Richardson location and the Applied Optics Center Dallas location. The Company also leases certain office equipment under non-cancellable operating leases.

 

The facility leased by Optex Systems Inc. located at 1420 Presidential Drive, Richardson, Texas consists of 49,100 square feet of space at the premises. The previous lease term for this location expired March 31, 2021 and the monthly base rent was $24.6 thousand through March 31, 2021. On January 11, 2021 the Company executed a sixth amendment extending the terms of the lease for eighty-six (86) months, commencing on April 1, 2021 and ending on May 31, 2028. The initial base rent is set at $25.3 thousand and escalates 3% on April 1 each year thereafter. The initial term included 2 months of rent abatement for April and May of 2021. The monthly rent includes approximately $11.9 thousand for additional Common Area Maintenance fees and taxes (“CAM”), to be adjusted annually based on actual expenses incurred by the landlord.

 

The facility leased by Applied Optics Center located at 9839 and 9827 Chartwell Drive, Dallas, Texas, consists of 44,867 square feet of space at the premises. The previous lease term for this location expired on October 31, 2021 and the monthly base rent was $21.9 thousand through the end of the lease. On January 11, 2021 the Company executed a first amendment extending the terms of the lease for eighty-six (86) months, commencing on November 1, 2021 and ending on December 31, 2028. The initial base rent is set at $23.6 thousand as of January 1, 2022 and escalates 2.75% on January 1 each year thereafter. The initial term included 2 months of rent abatement for November and December of 2021. The 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 rental rate. Our obligations to make payments under the lease are secured by a $125,000 standby letter of credit. The monthly rent includes approximately $7.9 thousand for additional CAM, to be adjusted annually based on actual expenses incurred by the landlord.

 

The Company had one non-cancellable office equipment lease with a commencement date of October 1, 2018 and a term of 39 months. The lease cost for the equipment was $1.5 thousand per month from October 1, 2018 through December 31, 2021. The lease was renewed on November 18, 2021 for an additional 48 months at a cost of $1.2 thousand per month. The start of the lease was delayed until April 2022 due to temporary equipment shortages. The lease renewal resulted in the recognition of an additional right of use asset and a lease liability of $51 thousand, respectively during the nine months ended July 2, 2022.

 

As of July 2, 2023, the remaining minimum lease and estimated CAM payments under the non-cancelable facility space leases are as follows:

 

Schedule of Non-cancellable Operating Leases Minimum Payments

Non-cancellable Operating Leases Minimum Payments

 

Fiscal Year		Facility Lease Payments				Facility Lease Payments				Lease Payments				Total Lease Payments				Total Variable CAM Estimate
		(Thousands)
		Optex Richardson				Applied Optics Center				Office Equipment				Consolidated
Fiscal Year		Facility Lease Payments				Facility Lease Payments				Lease Payments				Total Lease Payments				Total Variable CAM Estimate
2023 Base year lease		$	80			$	73			$	4			$	157			$	63
2024 Base year lease			327				296				15				638				256
2025 Base year lease			336				305				15				656				261
2026 Base year lease			346				313				3				662				266
2027 Base year lease			357				322				-				679				272
2028 Base year lease			242				330				-				572				198
2029 Base year lease			-				83				-				83				30
Total base lease payments		$	1,688			$	1,722			$	37			$	3,447			$	1,346
Imputed interest on lease payments (1)			(198	)			(225	)			(2	)			(425	)
Total Operating Lease Liability(2)		$	1,490			$	1,497			$	35			$	3,022
Right-of-use Asset(3)		$	1,403			$	1,425			$	35			$	2,863

 

(1)	Assumes a discount borrowing rate of 5.0% on the new lease amendments effective as of January 11, 2021.

 

F-12

 

 

(2)	Includes $159 thousand of unamortized deferred rent.
(3)	Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively.

 

Total expense under both facility lease agreements for the three months ended July 2, 2023 and July 3, 2022 was $206 and $215 thousand, respectively. Total office equipment rentals included in operating expenses was $9 and $7 thousand for the three months ended July 2, 2023 and July 3, 2022, respectively.

 

Total expense under both facility lease agreements for the nine months ended July 2, 2023 and July 3, 2022 was $644 and $635 thousand, respectively. Total office equipment rentals included in operating expenses was $18 thousand and $19 thousand for the nine months ended July 2, 2023 and July 3, 2022, respectively.

 

Note 5 - Debt Financing

 

Credit Facility — PNC Bank (formerly BBVA, USA)

 

On April 16, 2020, Optex Systems Holdings, Inc. and its subsidiary, Optex Systems, Inc. (collectively, the “Borrowers”), entered into a line of credit facility (the “PNC Facility”) with BBVA, USA. In June 2021, PNC Bank completed its acquisition of BBVA, USA and the bank name changed to PNC Bank (“PNC”). The substantive terms were as follows:

 

	●	The principal amount of the PNC Facility was $2.25 million. The PNC Facility matured on April 15, 2022. The interest rate was variable based on PNC’s prime rate minus 0.25%, initially set at 3% at loan origination, and all accrued and unpaid interest was payable monthly in arrears starting on May 15, 2020; and the principal amount was due in full with all accrued and unpaid interest and any other fees on April 15, 2022.
	●	There were commercially standard covenants including, but not limited to, covenants regarding maintenance of corporate existence, not incurring other indebtedness except trade debt, not changing more than 25% stock ownership of Borrowers, and a Fixed Charge Coverage Ratio of 1.25:1, with the Fixed Charge Coverage Ratio defined as (earnings before taxes, amortization, depreciation, amortization and rent expense less cash taxes, distribution, dividends and fair value of warrants) divided by (current maturities on long term debt plus interest expense plus rent expense).
	●	The PNC Facility contained commercially standard events of default including, but not limited to, not making payments when due; incurring a judgment of $10,000 or more not covered by insurance; not maintaining collateral and others.
	●	The PNC Facility was secured by a first lien on all of the assets of Borrowers.

 

F-13

 

 

On April 12, 2022, the Borrowers entered into an Amended and Restated Loan Agreement (the “PNC Loan Agreement”) with PNC, pursuant to which the PNC Facility was decreased from $2.25 million to $1.125 million, and the maturity date was extended from April 15, 2022 to April 15, 2023.

 

On November 21, 2022, the Borrowers issued an Amended and Restated Revolving Line of Credit Note (the “PNC Line of Credit Note”) to PNC in connection with an increase of the PNC Facility from $1.125 million to $2.0 million. Obligations outstanding under the PNC Facility accrued interest at a rate equal to PNC’s prime rate minus 0.25%.

 

The PNC Line of Credit Note and PNC Loan Agreement contained customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, and restricted payments. The PNC Facility was secured by substantially all of the operating assets of the Borrowers as collateral. The Borrowers’ obligations under the PNC Facility were subject to acceleration upon the occurrence of an event of default as defined in the PNC Line of Credit Note and PNC Loan Agreement.

 

As of October 2, 2022 the outstanding balance under the PNC facility was zero. The PNC facility was replaced by the Texas Capital Facility on March 22, 2023.

 

Credit Facility — Texas Capital Bank

 

On March 22, 2023, 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 Facility”). The Texas Capital Facility replaced the $2 million PNC Facility.

 

The 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. As of July 2, 2023 the interest rate was 7.827% per annum.

 

The 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.

 

The outstanding balance under the Texas Capital Facility was $1.2 million as of July 2, 2023.

 

For the three months and nine months ended July 2, 2023, the total interest expense under the above facilities was $22 thousand and $31 thousand.

 

F-14

 

 

Note 6 - Stock Based Compensation

 

Restricted Stock, Performance Shares and Restricted Stock Units issued to Directors, Officers and Employees

 

The following table summarizes the status of Optex Systems Holdings’ aggregate non-vested restricted stock and restricted stock units, and performance shares:

 

Schedule of Aggregate Non-vested Restricted Stock and Restricted Stock Units Granted and Performance Shares

		Restricted Stock Units				Weighted Average Grant Date Fair Value				Restricted Shares				Weighted Average Grant Date Fair Value				Performance Shares				Weighted Average Grant Date Fair Value
Outstanding at October 3, 2021			99,000			$	1.59				240,000			$	1.75				—				—
Granted			—				—				—				—				—				—
Vested			(33,000	)			1.73				(60,000	)			1.75				—				—
Forfeited			—				—				—				—				—				—
Outstanding at October 2, 2022			66,000			$	1.52				180,000			$	1.75				—				—
Granted			39,000				3.00				40,000				3.09				135,000				2.37
Vested			(66,000	)			1.52				(60,000	)			1.75				—				—
Forfeited			(3,000	)			3.00				(40,000	)			1.75				—				—
Outstanding at July 2, 2023			36,000			$	3.00				120,000			$	2.20				135,000			$	2.37

 

On January 2, 2019, the Company granted 150,000 and 50,000 restricted stock units with a January 2, 2019 grant date to Danny Schoening and Karen Hawkins, respectively, vesting as of January 1 each year subsequent to the grant date over a three-year period at a rate of 34% in year one, and 33% each year thereafter. The stock price at grant date was $1.32 per share. Effective December 1, 2021, the vesting terms of Danny Schoening’s Restricted Stock Unit (RSU) grant from January 2019 were revised as described below. The Company amortizes the grant date fair value of $264 thousand to stock compensation expense on a straight-line basis across the three-year vesting period beginning on January 2, 2019. As of January 1, 2023, there was no unrecognized compensation cost relating to this award.

 

On February 17, 2020, the Company granted 50,000 restricted stock units to Bill Bates, General Manager of the Applied Optics Center. The restricted stock units vest as of January 1 each year subsequent to the grant date over a three-year period at a rate of 34% in year one, and 33% each year thereafter. The stock price at grant date was $2.13 per share. The Company amortized the grant date fair value of $107 thousand to stock compensation expense on a straight-line basis across the three-year vesting period beginning on February 17, 2020.

 

On April 30, 2020, the Board of Directors held a meeting and voted to increase the annual board compensation for the three independent directors from $22,000 to $36,000 with an effective date of January 1, 2020, in addition to granting 100,000 shares of restricted stock to each independent director which vest at a rate of 20% per year (20,000 shares) each January 1^st through January 1, 2025. The total fair value for the 300,000 shares was $525 thousand based on the stock price of $1.75 as of April 30, 2020. The Company amortizes the grant date fair value to stock compensation expense on a straight-line basis across the five-year vesting period beginning on April 30, 2020. On each of January 1, 2021, January 1, 2022, and January 1, 2023, 60,000 of the restricted director shares vested. On February 16, 2022, 40,000 of the unvested restricted shares were forfeited and cancelled when one of the independent directors departed the Board. As of July 2, 2023, there were 80,000 unvested restricted shares outstanding.

 

The Company entered into an amended and restated employment agreement with Danny Schoening dated December 1, 2021. The updated employment agreement also served to amend Mr. Schoening’s RSU Agreement, dated January 2, 2019, by changing the third and final vesting date for the restricted stock units granted under such agreement from January 1, 2022 to the “change of control date,” that being the first of the following to occur with respect to the Company: (i) any “Person,” as that term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with certain exclusions, is or becomes the “Beneficial Owner” (as that term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or (ii) the Company is merged or consolidated with any other corporation or other entity, other than: (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (B) the Company engages in a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “Person” (as defined above) acquires fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities. The amended RSU Agreement contains certain exceptions to the definition of change of control.

 

F-15

 

 

As of the December 1, 2021 modification date related to the third and final vesting date of the 49,500 unvested restricted stock units held by Danny Schoening, there was no change in the fair value of the modified award as compared to the original award immediately prior to the modification date. The restricted stock units initially were certain to vest on January 1, 2022, but due to the modification, they were less certain to vest, contingent on a “change in control” occurring, which change in control, in case Mr. Schoening was terminated by the Company without cause or he resigns with good reason prior to such change in control, was required to occur prior to March 13, 2023. As of the modification date, there was $5 thousand of unrecognized compensation cost associated with the original award. As a matter of expediency, the unrecognized compensation expense as of the modification date was fully expensed through January 1, 2022. There is no additional compensation expense associated with the modification of the restricted stock unit agreement.

 

On January 4, 2022, the Company issued 23,216 common shares to Karen Hawkins, CFO, and Bill Bates (AOC GM), net of tax withholding of $19 thousand, in settlement of 33,000 restricted stock units which vested on January 1, 2022.

 

On November 28, 2022, the Company entered into a new employment agreement with Danny Schoening which amended Mr. Schoening’s RSU Agreement, dated January 2, 2019, which had been previously amended as of December 1, 2021, by changing the third and final vesting date for the restricted stock units granted under such agreement from the “change of control date” to January 1, 2023.

 

On January 4, 2023, the Company issued 46,432 common shares to Danny Schoening, CEO, and Bill Bates (AOC GM), net of tax withholding of $58 thousand, in settlement of 66,000 restricted stock units which vested on January 1, 2023. As of July 2, 2023, there are zero unvested restricted stock units outstanding.

 

On May 1, 2023, the Company granted an aggregate of 39,000 restricted stock units to eleven employees under its 2023 Equity Incentive Plan. The restricted stock units will vest at a rate of 33.33% annually 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. During the three months ended July 2, 2023, there were 3,000 restricted stock units forfeited.

 

On 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, is $320 thousand and will be amortized through December 31, 2025 based on the derived service periods using a Monte Carlo simulation valuation model.

 

The assumptions and results for the Monte Carlo simulation are as follows:

 

Schedule of Assumptions and Results for the Monte Carlo Simulation

		Assumptions
Performance Period Start			10/2/2023
Performance Period End			10/1/2028
Term of simulation (1)			5.42 years
Time steps in simulation			1,365
Time steps per year			252
Common share price at valuation date (2)		$	3.04
Volatility (annual) (4)			50.0	%
Risk-free rate (annual) (5)			3.37	%
Cost of equity (6)			11.5	%
Dividend yield (3)			0.0	%

 

F-16

 

 

		Tranche 1				Tranche 2				Tranche 3				Tranche 4				Tranche 5
Number of performance shares in the Tranche (1)			27,000				27,000				27,000				27,000				27,000
Fair Value of One Performance share (7)		$	2.75			$	2.58			$	2.39			$	2.18			$	1.93
Total Fair Value of Tranche		$	74,345			$	69,742			$	64,446			$	58,819			$	52,238
Derived Service Period (Years) (7)			0.71				1.13				1.60				2.06				2.48

 

(1)

Based on the terms of the Performance Shares agreement issued by the Company on May 3, 2023.

(2)

Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ.

(3)

Expected dividends provided by management.

(4)

Based on historical volatility of OPXS and comparable public companies.

(5)

Interest rate for US Treasury commensurate with the Performance Shares holding period, as of the Valuation Date, as obtained via S&P Capital IQ.

(6)

Estimated cost of equity for OPXS as of the Valuation Date.

(7)

Based on Monte Carlo simulation.

 

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

 

Stock Based Compensation Expense

 

Equity compensation is amortized based on a straight-line basis across the vesting or service period as applicable. The recorded compensation costs for restricted shares granted and restricted stock units and performance shares awarded as well as the unrecognized compensation costs are summarized in the table below:

 

Schedule of Unrecognized Compensation Costs

		Stock Compensation
		(thousands)
		Recognized Compensation Expense																Unrecognized Compensation Expense
		Three months ended								Nine months ended								As of period ended
		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022				July 2, 2023				October 2, 2022
Restricted Shares		$	33			$	27			$	78			$	79			$	213			$	236
Performance Shares			43				-				43				-				277				-
Restricted Stock Units			5				9				13				48				85				9
Total Stock Compensation		$	81			$	36			$	134			$	127			$	575			$	245

 

Note 7 - Stockholders’ Equity

 

Dividends

 

No dividends were declared or paid during the three and nine months ended July 2, 2023 or the twelve months ended October 2, 2022.

 

Common stock

 

On September 22, 2021, the Company announced authorization of a $1 million stock repurchase program. The shares authorized to be repurchased under the repurchase program may be purchased from time to time at prevailing market prices, through open market transactions or in negotiated transactions, depending upon market conditions and subject to Rule 10b-18 as promulgated by the SEC.

 

F-17

 

 

During the three and nine months ended July 2, 2023, there were zero common shares repurchased under the program. A summary of the purchases under the program through October 2, 2022 follows (all shares purchased have been cancelled):

 

Summary of Purchases Under Plan

Fiscal Period			Total number of shares purchased				Total purchase cost (thousands)				Average price paid per share (with commission)				Maximum dollar value that may yet be purchased under the plan (thousands)
October 4, 2021 through October 31, 2021				18,265			$	37				2.01			$	894
November 1, 2021 through November 28, 2021				4,415				9				2.04				885
November 29, 2021 through January 2, 2022				14,558				28				1.93				857
January 3, 2022 through January 30, 2022				15,585				29				1.89				828
January 31, 2022 through February 27, 2022				27,618				49				1.75				779
February 28, 2022 through April 3, 2022				35,530				70				1.98				709
April 4, 2022 through May 1, 2022				12,304				27				2.22				682
May 2, 2022 through May 29, 2022				10,482				22				2.11				660
May 30, 2022 through July 3, 2022				49,657				95				1.90				565
July 4, 2022 through July 25,2022				610				1				2.10				564
July 26, 2022 through August 13, 2022				1,930				4				2.09				560
Total shares repurchased period ended October 2, 2022				190,954			$	371			$	1.94			$	560

 

Furthermore, on August 18, 2022, the Company announced the commencement of a tender offer to purchase up to $4.25 million in value of shares of its common stock. On September 15, 2022, the Company’s “modified Dutch auction” tender offer expired. In accordance with the terms and conditions of the tender offer, the Company accepted for purchase 1,603,773 shares of common stock at a price of $2.65 per share, for an aggregate cost of approximately $4.25 million, excluding fees and expenses relating to the tender offer. The transaction cost associated with the tender offer was $0.1 million. The shares were immediately cancelled upon completion of the transaction.

 

As of July 2, 2023 and October 2, 2022, total outstanding common shares were 6,763,070 and 6,716,638, respectively.

 

Note 8 - Subsequent Events

 

None

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to supplement and complement our audited consolidated financial statements and notes thereto for the fiscal year ended October 2, 2022 and our unaudited condensed consolidated financial statements and notes thereto for the quarter ended July 2, 2023, prepared in accordance with U.S. generally accepted accounting principles (GAAP). You are encouraged to review our consolidated financial statements in conjunction with your review of this MD&A. The financial information in this MD&A has been prepared in accordance with GAAP, unless otherwise indicated. In addition, we use non-GAAP financial measures as supplemental indicators of our operating performance and financial position. We use these non-GAAP financial measures internally for comparing actual results from one period to another, as well as for planning purposes. We will also report non-GAAP financial results as supplemental information, as we believe their use provides more insight into our performance. When a non-GAAP measure is used in this MD&A, it is clearly identified as a non-GAAP measure and reconciled to the most closely corresponding GAAP measure.

 

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. The operating results for the periods presented were not significantly affected by inflation.

 

Cautionary Note Regarding Forward-Looking Information

 

This Quarterly Report on Form 10-Q, in particular the MD&A, contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. When used in this Quarterly Report on Form 10-Q and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, presentations to securities analysts or investors, or in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements.

 

These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding growth strategy; product and development programs; financial performance and financial condition (including revenue, net income, profit margins and working capital); orders and backlog; expected timing of contract deliveries to customers and corresponding revenue recognition; increases in the cost of materials and labor; costs remaining to fulfill contracts; contract loss reserves; labor shortages; follow-on orders; the impact of the COVID-19 pandemic; supply chain challenges; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; and the economy in general or the future of the defense industry.

 

We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. Such risks and uncertainties include, but are not limited to, continued funding of defense programs and military spending, the timing of such funding, general economic and business conditions, including unforeseen weakness in the Company’s markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, delays in completing engineering and manufacturing programs, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, changes in the U.S. Government’s interpretation of federal procurement rules and regulations, changes in spending due to policy changes in any new federal presidential administration, market acceptance of the Company’s products, shortages in components, production delays due to performance quality issues with outsourced components, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, increases in tax rates, changes to generally accepted accounting principles, difficulties in retaining key employees and customers, unanticipated costs under fixed-price service and system integration engagements, changes in the market for microcap stocks regardless of growth and value and various other factors beyond our control. Some of these risks and uncertainties are identified in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the section “Risk Factors” in our Annual Report on Form 10-K and you are urged to review those sections. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.

 

We do not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

 

Background

 

Optex Systems, Inc. (Delaware) manufactures optical sighting systems and assemblies, primarily for Department of Defense applications. Its products are installed on various types of U.S. military land vehicles, such as the Abrams and Bradley fighting vehicles, light armored and armored security vehicles and have been selected for installation on the Stryker family of vehicles. Optex Systems, Inc. (Delaware) also manufactures and delivers numerous periscope configurations, rifle and surveillance sights and night vision optical assemblies. Optex Systems, Inc. (Delaware) products consist primarily of build-to-customer print products that are delivered both directly to the armed services and to other defense prime contractors. Less than 1% of today’s revenue is related to the resale of products substantially manufactured by others. In this case, the product would likely be a simple replacement part of a larger system previously produced by Optex Systems, Inc. (Delaware).

 

We are both a prime and sub-prime contractor to the Department of Defense. Sub-prime contracts are typically issued through major defense contractors such as General Dynamics Land Systems, Raytheon Corp., BAE, ADS Inc. and others. We are also a military supplier to foreign governments such as Israel, Australia and South American countries and as a subcontractor for several large U.S. defense companies serving foreign governments.

 

 

The Federal Acquisition Regulation is the principal set of regulations that govern the acquisition process of government agencies and contracts with the U.S. government. In general, parts of the Federal Acquisition Regulation are incorporated into government solicitations and contracts by reference as terms and conditions effecting contract awards and pricing solicitations.

 

Many of our contracts are prime or subcontracted directly with the Federal government and, as such, are subject to Federal Acquisition Regulation Subpart 49.5, “Contract Termination Clauses” and more specifically Federal Acquisition Regulation clauses 52.249-2 “Termination for Convenience of the Government (Fixed-Price)”, and 49.504 “Termination of fixed-price contracts for default”. These clauses are standard clauses on our prime military contracts and generally apply to us as subcontractors. It has been our experience that the termination for convenience is rarely invoked, except where it is mutually beneficial for both parties. We are currently not aware of any pending terminations for convenience or for default on our existing contracts.

 

In the event a termination for convenience were to occur, Federal Acquisition Regulation 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. In the event a termination for default were to occur, we could be liable for any excess cost incurred by the government to acquire supplies from another supplier similar to those terminated from us. We would not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Company as defined by Federal Acquisition Regulation clause 52.249-8.

 

In addition, some of our contracts allow for government contract financing in the form of contract progress payments pursuant to Federal Acquisition Regulation 52.232-16, “Progress Payments”. As a small business, and subject to certain limitations, this clause provides for government payment of up to 90% of incurred program costs prior to product delivery. 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.

 

Recent Events

 

May 2023 Grants

 

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

 

On 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 May 1, 2023, the Company granted an aggregate of 39,000 restricted stock units to eleven employees under its 2023 Equity Incentive Plan. The restricted stock units will vest at a rate of 33.33% annually 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. During the three months ended July 2, 2023, there were 3,000 restricted stock units forfeited.

 

 

Texas Capital Credit Facility

 

On March 22, 2023, the Company and its subsidiary, Optex Systems, Inc. (“Optex”, and 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 “Credit Facility”). The commitment period for advances under the Credit 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 Credit 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. The interest rate is currently at 7.501% per annum.

 

The 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 Credit Facility is secured by substantially all of the operating assets of the Borrowers as collateral. The Borrowers’ obligations under the Credit 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 thousand Letter of Credit sublimit.

 

The Credit Facility replaced the prior $2 million line of credit with PNC Bank, National Association.

 

NASDAQ Listing

 

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

 

2023 Equity Incentive Plan

 

On 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.

 

Material Trends

 

Recent supply chain disruptions have strained our suppliers and extended supplier delivery lead times, affecting their ability to sustain operations. We anticipate market wide material shortages for paint and resin products as well as critical epoxies and chemicals used in our manufacturing process. In addition, we are seeing substantial increases in the costs of aluminum, steel and acrylic commodities, which has affected our net income in the first nine months of fiscal year 2023 and is expected to continue to have a negative effect on the margins expected to be generated under our long-term fixed contracts over the next three years.

 

We have experienced significant material shortages during the three months ended October 2, 2022 and extending into the first nine months of fiscal year 2023 from two significant suppliers of our periscope covers and housings. 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 nine months of fiscal year 2023, have negatively impacted our production levels and have pushed expected customer delivery dates into the first half of fiscal year 2024. We are aggressively seeking alternative sources and actively expediting our current suppliers for these components as well as increasing employee recruitment initiatives and overtime to attempt to mitigate any continuing risks to the periscope line. In addition, one of our major customers for the Applied Optics Center requested a significant schedule delay pushing their laser filter unit deliveries from the first half into the second half of fiscal year 2023. We are encouraged by recent improvements in supplier performance for the Optex Richardson segment periscope line which yielded increased revenue performance during the second and third quarters. However, we cannot give any assurances that expected customer delivery dates for our periscope products will not need to be delayed further.

 

In March 2023, we moved our line of credit from PNC Bank to Texas Capital Bank and increased our available line of credit to $3.0 million from the previous $2.0 million line with PNC. The increase in credit limit helps us meet our working capital requirements in light of the increased backlog and delay of revenues from the first nine months of fiscal year 2023. As supplier issues and labor shortages continue to abate, we anticipate increased revenue and working capital in the fourth quarter of fiscal year 2023 and continuing into fiscal year 2024. Based on our current backlog, we anticipate an overall increase for fiscal year 2023 revenues as compared to the 2022 levels.

 

 

We refer also to “Item 1. Business – Market Opportunity: U.S. Military” in our annual report on Form 10-K for the year ended October 2, 2022 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.

 

Results of Operations

 

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 valuation gains and losses on warrant liabilities, noncash compensation expenses related to equity stock issues, as well as depreciation, amortization, interest expenses and federal income taxes. We believe that Adjusted EBITDA is a meaningful indicator of our operating performance because it permits period-over-period comparisons of our ongoing core operations before the excluded items, which we do not consider relevant to our operations. Adjusted EBITDA is a financial measure not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”).

 

Adjusted EBITDA has limitations and should not be considered in isolation or a substitute for performance measures calculated under GAAP. This non-GAAP measure excludes certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate Adjusted EBITDA differently than we do or may not calculate it at all, which limits the usefulness of Adjusted EBITDA as a comparative measure.

 

The table below summarizes our three-and six-month operating results for the periods ended July 2, 2023 and July 3, 2022, in terms of both the GAAP net income measure and the non-GAAP Adjusted EBITDA measure. We believe that including both measures allows the reader better to evaluate our overall performance.

 

		(Thousands)
		Three months ended								Nine months ended
		July 2, 2023				July 3, 2022				July 2, 2023				July 3, 2022
Net Income (GAAP)		$	576			$	428			$	832			$	306
Add:
Federal Income Tax Expense			154				82				223				28
Depreciation			86				74				252				221
Stock Compensation			81				36				134				127
Interest Expense			22				-				31				-
Adjusted EBITDA - Non GAAP		$	919			$	620			$	1,472			$	682

 

Our net income increased by $0.2 million to $0.6 million for the three months ended July 2, 2023, as compared to net income of $0.4 million for the prior year period. Our adjusted EBITDA increased by $0.3 million to $0.9 million for the three months ended July 2, 2023, as compared to $0.6 million for the prior year period.

 

Our net income increased by $0.5 million to $0.8 million for the nine months ended July 2, 2023, as compared to a net income of $0.3 million for the prior year period. Our adjusted EBITDA increased by $0.8 million to $1.5 million for the nine months ended July 2, 2023, as compared to $0.7 million for the prior year period.

 

 

The increase in the most recent three and nine-month period net income and adjusted EBITDA is primarily driven by higher revenue across both operating segments and significantly improved gross profit performance in the Applied Optics Center segment, which was only partially offset by poorer performance in the Optex segment. Operating segment performance is discussed in greater detail throughout the following sections.

 

		Results of Operations Selective Financial Information (Thousands)
		Three months ended
		July 2, 2023																July 3, 2022
		Optex Richardson				Applied Optics Center Dallas				Other (non-allocated costs and eliminations)				Consolidated				Optex Richardson				Applied Optics Center Dallas				Other (non-allocated costs and eliminations)				Consolidated
Revenue from External Customers		$	3,069				4,103				-				7,172			$	2,653			$	3,517			$	-			$	6,170
Intersegment Revenues			-				265				(265	)			-				-				258				(258	)			-
Total Segment Revenue			3,069				4,368				(265	)			7,172				2,653				3,775				(258	)			6,170
Total Cost of Sales			2,757				2,968				(265	)			5,460				2,125				3,035				(258	)			4,902
Gross Profit			312				1,400				-				1,712				528				740				-				1,268
Gross Margin %			10.2	%			32.1	%			-				23.9	%			19.9	%			19.6	%			-				20.6	%
General and Administrative Expense			758				121				81				960				611				111				36				758
Segment Allocated G&A Expense			(386	)			386				-				-				(268	)			268				-				-
Net General & Administrative Expense			372				507				81				960				343				379				36				758
Operating Income (Loss)			(60	)			893				(81	)			752				185				361				(36	)			510
Operating Income (Loss) %			(2.0	)%			20.4	%			-				10.5	%			7.0	%			9.6	%			-				8.3	%
Interest Expense			-				-				22				22				-				-				-				-
Net Income (Loss) before taxes		$	(60	)			893				(103	)			730			$	185			$	361			$	(36	)		$	510
Net Income (Loss) %			(2.0	)%			20.4	%			-				10.2	%			7.0	%			9.6	%			-				8.3	%

 

 

		Results of Operations Selected Financial Info by Segment (Thousands)
		Nine months ended
		July 2, 2023																July 3, 2022
		Optex Richardson				Applied Optics Center Dallas				Other (non-allocated costs and eliminations)				Consolidated				Optex Richardson				Applied Optics Center Dallas				Other (non-allocated costs and eliminations)				Consolidated
Revenue from External Customers		$	7,742				9,840				-				17,582			$	6,588			$	9,057			$	-			$	15,645
Intersegment Revenues			-				511				(511	)			-				-				693				(693	)			-
Total Segment Revenue			7,742				10,351				(511	)			17,582				6,588				9,750				(693	)			15,645
Total Cost of Sales			6,830				7,280				(511	)			13,599				5,695				7,836				(693	)			12,838
Gross Profit			912				3,071				-				3,983				893				1,914				-				2,807
Gross Margin %			11.8	%			29.7	%			-				22.7	%			13.6	%			19.6	%			-				17.9	%
General and Administrative Expense			2,417				346				134				2,897				1,971				375				127				2,473
Segment Allocated G&A Expense			(978	)			978				-				-				(802	)			802				-				-
Net General & Administrative Expense			1,439				1,324				134				2,897				1,169				1,177				127				2,473
Operating Income (Loss)			(527	)			1,747				(134	)			1,086				(276	)			737				(127	)			334
Operating Income (Loss) %			(6.8	)%			16.9	%			-				6.2	%			(4.2	)%			7.6	%			-				2.1	%
Interest Expense			-				-				31				31				-				-				-				-
Income (Loss) before taxes		$	(527	)			1,747				(165	)			(1,055	)		$	(276	)		$	737			$	(127	)		$	334
Income (loss) before taxes %			(6.8	)%			16.9	%			-				6.0	%			(4.2	)%			7.6	%			-				2.1	%

 

For the three months ended July 2, 2023, our total revenues increased by $1.0 million, or 16.2%, compared to the prior year period. For the nine months ended July 2, 2023, our total revenues increased by $1.9 million, or 12.4%, compared to the prior year period. The increase in revenue for the three and nine-month periods were driven by increased sales across both segments as compared to the prior year.

 

Consolidated gross profit for the three months ended July 2, 2023 increased by $0.4 million, or 35.0%, compared to the prior year period. Consolidated gross profit for the nine months ended July 2, 2023 increased by $1.2 million, or 41.9%, compared to the prior year period. The increase in the most recent three and nine-month period gross profit was primarily attributable to (1) higher revenue spread across a fixed manufacturing cost base combined with changes in product mix and improved pricing and operating performance in our Applied Optics optical assembly line, (2) partially offset by lower profit margins on our Optex segment driven by inflationary pressures on our long-term fixed price contracts.

 

 

Our operating income for the three months ended July 2, 2023 increased by $0.2 million, or 47.5%, compared to the prior year period. Our operating income for the nine months ended July 2, 2023 increased by $0.8 million, or 225.1%, compared to the prior year period. The increase in operating income for the three and nine-month periods was primarily driven by higher revenue and increased gross profit in the Applied Optics Center segment.

  

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. 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. 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 nine months ended July 2, 2023, the Company booked $26.3 million in new orders, representing a 43.7% increase over the prior year period. The orders for the most recently completed nine months consist of $18.6 million for our Optex Richardson segment and $7.7 million attributable to the Applied Optics Center segment.

 

The following table depicts the new customer orders for the nine months ending July 2, 2023 as compared to the prior year period in millions of dollars:

 

		(Millions)
Product Line		Nine months ended July 2, 2023				Nine months ended July 3, 2022				Variance				% Chg
Periscopes		$	11.6			$	6.8			$	4.8				70.6	%
Sighting Systems			4.0				0.6				3.4				566.7	%
Howitzer			-				-				-				-	%
Other			3.0				2.4				0.6				25.0	%
Optex Systems – Richardson			18.6				9.8				8.8				89.8	%
Optical Assemblies			1.2				3.8				(2.6	)			(68.4	)%
Laser Filters			5.5				3.2				2.3				71.9	%
Day Windows			0.1				0.6				(0.5	)			(83.3	)%
Other			0.9				0.9				-				-	%
Applied Optics Center – Dallas			7.7				8.5				(0.8	)			(9.4	)%
Total Customer Orders		$	26.3			$	18.3			$	8.0				43.7	%

 

The Company has seen significant increases in orders for many of its defense products during the first nine months of fiscal year 2023 inclusive of two new customers for our sighting systems and filter programs. On November 1, 2022, the Company announced it has been awarded a $3.4 million order to repair and refurbish night vision equipment for the Government of Israel. The order represents a significant increase in our Optex Richardson sighting systems business base for a new customer and includes an additional potential award value with a 100% optional award quantity clause. Deliveries under this contract are expected to begin in the first quarter of fiscal year 2024. On June 30, 2023, we booked a $3.0 million delivery order at our Applied Optics segment for the delivery of laser interface filters against a five-year IDIQ contract. Our periscope orders for the Optex segment have increased significantly over the prior year period including $7.2 million in task delivery awards against our long term IDIQ contracts during the nine-month period.

 

 

Backlog as of July 2, 2023, was $41.6 million as compared to a backlog of $30.0 million as of July 3, 2022, representing an increase of $11.6 million or 38.7%. The following table depicts the current expected delivery by period of all contracts awarded as of July 2, 2023 in millions of dollars, as well as the July 2, 2023 backlog as compared to the backlog on July 3, 2022:

 

		(Millions)
Product Line		Q4 2023 Delivery				2024 Delivery				2025+ Delivery				Total Backlog 7/2/2023				Total Backlog 7/3/2022				Variance				% Chg
Periscopes		$	2.5			$	9.0			$	1.6			$	13.1			$	7.6			$	5.5				72.4	%
Sighting Systems			0.5				2.6				2.1				5.2				1.8				3.4				188.9	%
Howitzer			-				1.1				1.2				2.3				2.3				-				-	%
Other			0.7				4.0				0.8				5.5				2.5				3.0				120.0	%
Optex Systems - Richardson			3.7				16.7				5.7				26.1				14.2				11.9				83.8	%
Optical Assemblies			1.1				2.2				-				3.3				5.5				(2.2	)			(40.0	)%
Laser Filters			2.3				5.9				1.6				9.8				8.9				0.9				10.1	%
Day Windows			0.3				0.9				0.6				1.8				0.8				1.0				125.0	%
Other			0.1				0.3				0.2				0.6				0.6				-				-	%
Applied Optics Center - Dallas			3.8				9.3				2.4				15.5				15.8				(0.3	)			(1.9	)%
Total Backlog		$	7.5			$	26.0			$	8.1			$	41.6				30.0				11.6				38.7	%

 

Optex Systems Richardson backlog as of July 2, 2023, was $26.1 million as compared to a backlog of $14.2 million as of July 3, 2022, representing an increase of $11.9 million or 83.8%.

 

Applied Optics Center backlog as of July 3, 2022, was $15.5 million as compared to a backlog of $15.8 million as of July 3, 2022, representing a decrease of ($0.3) million or (1.9%).

  

Please refer to “—Recent Events” and “Material Trends” 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.

 

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, which could be manufactured using our current production facilities in order to capitalize on our existing excess capacity.

 

Three Months Ended July 2, 2023 Compared to the Three Months Ended July 3, 2022

 

Revenue. For the three months ended July 2, 2023, revenue increased by $1.0 million or 16.2% compared to the prior year period as set forth in the table below:

 

		Three months ended
		(Thousands)
Product Line		July 2, 2023				July 3, 2022				Variance				% Chg
Periscopes		$	2,623			$	2,296			$	327				14.2
Sighting Systems			137				192				(55	)			(28.6	)
Howitzers			-				-				-				-
Other			309				165				144				87.3
Optex Systems - Richardson			3,069				2,653				416				15.7
Optical Assemblies			1,452				1,310				142				10.8
Laser Filters			2,286				1,693				593				35.0
Day Windows			120				169				(49	)			(29.0	)
Other			245				345				(100	)			(29.0	)
Applied Optics Center - Dallas			4,103				3,517				586				16.7
Total Revenue		$	7,172			$	6,170			$	1,002				16.2

 

 

Optex Systems Richardson revenue increased by $0.4 million or 15.7% for the three months ended July 2, 2023 as compared to the prior year period on increased revenue volume from periscopes and other, partially offset by a reduction in sighting systems volume. 

 

Applied Optics Center revenue increased by $0.6 million or 16.7% for the three months ended July 2, 2023 as compared to the prior year period. The revenue increase is primarily attributable to increased delivery volume of laser filters and optical assemblies.

 

Gross Margin. The gross margin during the three-month period ended July 2, 2023 was 23.9% of revenue as compared to a gross margin of 20.6% of revenue for the prior year period. The increase in gross profit is primarily attributable to higher revenue, changes in product mix between segments, and increased absorption of fixed overhead across a higher revenue mix (on a consolidated company basis) . Cost of sales increased to $5.5 million for the current period as compared to the prior year period of $4.9 million on higher revenue.

 

G&A Expenses. During the three months ended July 2, 2023 and July 3, 2022, we recorded operating expenses of $1.0 million and $0.8 million, respectively. Operating expenses increased by 26.6% between the respective periods primarily due to increased labor, office, legal, accounting and banking, stock compensation and travel expenses.

 

Operating Income. During the three months ended July 2, 2023, we recorded operating income of $0.8 million, as compared to operating income of $0.5 million during the three months ended July 3, 2022. The $0.3 million increase in operating income for the current year period from the prior year period is primarily due to increased revenue and gross profit, offset by higher spending in general and administrative expenses.

 

Nine months Ended July 2, 2023 Compared to the Nine months Ended July 3, 2022

 

Revenues. For the nine months ended July 2, 2023, revenues increased by $1.9 million or 12.4% compared to the prior year period as set forth in the table below:

 

		Nine months ended
		(Thousands)
Product Line		July 2, 2023				July 3, 2022				Variance				% Chg
Periscopes		$	6,085			$	4,924			$	1,161				23.6
Sighting Systems			464				642				(178	)			(27.7	)
Howitzers			-				-				-				-
Other			1,193				1,022				171				16.7
Optex Systems - Richardson			7,742				6,588				1,154				17.5
Optical Assemblies			4,438				3,285				1,153				35.1
Laser Filters			4,404				4,154				250				6.0
Day Windows			350				809				(459	)			(56.7	)
Other			648				809				(161	)			(19.9	)
Applied Optics Center - Dallas			9,840				9,057				783				8.6
Total Revenue		$	17,582			$	15,645			$	1,937				12.4

 

Optex Systems Richardson revenue increased by $1.1 million or 17.5% for the nine months ended July 2, 2023 as compared to the prior year period on increased periscope delivery volume.

 

Applied Optics Center revenue increased by $0.8 million or 8.6% for the nine months ended July 2, 2023 as compared to the prior year period. The revenue increase is primarily attributable to higher shipment volume on optical assemblies.

 

Gross Margin. The gross margin during the nine-month period ended July 2, 2023 was 22.7% as compared to a gross margin of 17.9% for the prior year period. The increase in gross profit is primarily attributable to higher revenue, changes in product mix between segments and increased fixed cost absorption across a higher revenue base (on a consolidated company basis). Cost of sales increased to $13.6 million for the nine months ended July 2, 2023 as compared to the prior year period of $12.8 million on higher revenue.

 

 

G&A Expenses. During the nine months ended July 2, 2023 and July 3, 2022, we recorded operating expenses of $2.9 million and $2.5 million, respectively. Operating expenses increased by 17.1% between the respective periods primarily due to increased labor, office, legal, accounting and banking and travel expenses.

 

Operating Income. During the nine months ended July 2, 2023, we recorded operating income of $1.1 million, as compared to an operating income of $0.3 million during the nine months ended July 3, 2022. The $0.8 million increase in operating income is primarily due to increased revenue and gross profit, offset by higher spending in general and administrative expenses.

 

Liquidity and Capital Resources

 

As of July 2, 2023, the Company had working capital of $12.2 million, as compared to $10.0 million as of October 2, 2022.

 

During the nine months ended July 2, 2023, we used operating cash of ($1.4) million, borrowed a net $1.2 million against our line of credit and spent $0.4 million on acquisitions of property and equipment. During the period, our inventory increased $3.1 million in support of new program awards and increasing revenues anticipated over the next twelve months.

 

The Company has capital commitments of $9 thousand for the purchase of property and equipment consisting of engineering services related to an automated acrylic buffing system.

 

Backlog as of July 2, 2023 was $41.6 million as compared to backlog of $30.0 million as of July 3, 2022 and $32.9 million as of October 2, 2022, representing an increase of 38.7% and 26.4%, respectively. For further details, see “Results of Operations – New Orders and Backlog” above.

 

The Company has historically funded its operations through cash from operations, convertible notes, common and preferred stock offerings and bank debt. The Company’s ability to generate positive cash flows depends on a variety of factors, including the continued development and successful marketing of the Company’s products.

 

At July 2, 2023, the Company had $0.3 million in cash and an outstanding payable balance of $1.2 million against its line of credit. At July 2, 2023, our outstanding accounts receivable balance was $2.9 million. We expect the accounts to be collected during the fourth quarter of fiscal 2023.

 

We have experienced significant material shortages during the three months ended October 2, 2022 and extending into the first nine months of fiscal year 2023 from two significant suppliers of our periscope covers and housings. 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 nine months of fiscal year 2023, have negatively impacted our production levels and have pushed expected customer delivery dates into the first half of fiscal year 2024. We are aggressively seeking alternative sources and actively expediting our current suppliers for these components as well as increasing employee recruitment initiatives and overtime to attempt to mitigate any continuing risks to the periscope line. In addition, one of our major customers for the Applied Optics Center requested a significant schedule delay pushing their laser filter unit deliveries from the first half into the second half of fiscal year 2023. As described in more detail below, in March 2023, we entered into a new line of credit, effectively increasing our credit limit from $2.0 million to $3.0 million to facilitate our working capital requirements due to the delays and increased backlog. We are encouraged by recent improvements in supplier performance for the Optex Richardson segment periscope line which yielded increased revenue performance during the second and third quarters. However, we cannot give any assurances that expected customer delivery dates for our periscope products will not need to be delayed further.

 

In the short term, the Company plans to utilize its current cash, available line of credit and operating cash flow to fund inventory purchases in support of the backlog growth and higher anticipated revenue during the next twelve months. Short term cash in excess of our working capital needs may be also be used to fund the purchase of product lines and other assets, including property and equipment required to maintain or meet our growing backlog, in addition to repurchasing common stock against our current stock repurchase plan. Longer term, excess cash beyond our operating needs may be used to fund new product development, company or product line acquisitions, or additional stock purchases as attractive opportunities present themselves.

 

 

In some instances, new government contract awards may allow for contract financing in the form of 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. Currently none of our existing contracts allow for progress payments.

 

We refer to “Note 4 – Commitments and Contingencies – Non-cancellable Operating Leases” for a tabular depiction of our remaining minimum lease and estimated CAM payments under such leases as of July 2, 2023, which disclosure is incorporated herein by reference.

 

The Company expects to generate net income and positive cash flow from operating activities over the next twelve months. To achieve and retain profitability, we need to maintain a level of revenue adequate to support our cost structure. Management intends to manage operations commensurate with its level of working capital and line of credit during the next twelve months and beyond; however, uneven revenue levels driven by changes in customer delivery demands, first article inspection requirements or other program delays associated with the pandemic, labor shortages and supply chain issues could create a working capital shortfall. In the event the Company does not successfully implement its ultimate business plan, certain assets may not be recoverable.

 

On March 22, 2023, the Company and its subsidiary, Optex Systems, Inc. (“Optex”, and 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 “Credit Facility”). The commitment period for advances under the Credit 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 Credit 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. The interest rate is currently at 7.827% per annum.

 

The 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 Credit Facility is secured by substantially all of the operating assets of the Borrowers as collateral. The Borrowers’ obligations under the Credit Facility are subject to acceleration upon the occurrence of an event of default as defined in the Loan Agreement. The Loan Agreement further provides for a $125,000 Letter of Credit sublimit. As of July 2, 2023, there was $1.2 million borrowed under the Credit Facility. As of July 2, 2023, the Company is in compliance with all covenants under the Credit Facility.

 

The Credit Facility replaced the prior $2 million line of credit with PNC Bank, National Association.

 

On September 22, 2021 the Company announced authorization for an additional $1 million stock repurchase program. As of July 2, 2023, there was an authorized balance of $560 thousand remaining to be spent against the repurchase program. During the nine months ended July 2, 2023, there were no stock repurchases against the plan.

 

Critical Accounting Estimates

 

A critical accounting estimate is an estimate that:

 

●

is made in accordance with generally accepted accounting principles,

 

●

involves a significant level of estimation uncertainty, and

 

●

has had or is reasonably likely to have a material impact on the company’s financial condition or results of operation.

 

 

Our significant accounting policies are fundamental to understanding our results of operations and financial condition. Some accounting policies require that we use estimates and assumptions that may affect the value of our assets or liabilities and financial results. These policies are described in “Critical Policies and Accounting Pronouncements” and Note 2 (Accounting Policies) to consolidated financial statements in our Annual Report on Form 10-K for the year ended October 2, 2022.

 

Our critical accounting estimates include warranty costs, contract losses and the deferred tax asset valuation. Future warranty costs are based on the estimated cost of replacement for expected returns based upon our most recent experience rate of defects as a percentage of warranty covered sales. Our warranty covered sales primarily include the Applied Optics Center optical assemblies. While our warranty period is 12 months, our reserve balances assume a general 90-day return period for optical assemblies previously delivered plus any returned backlog in-house that has not yet been repaired or replaced to our customer. If our actual warranty returns should significantly exceed our historical rates on new customer products, significant production changes, or substantial customer changes to the 90-day turn-around times on returned goods, the impact could be material to our operating profit. We have not experienced any significant changes to our warranty trends in the preceding three years and do not anticipate any significant impacts in the near term. We monitor the actual warranty costs incurred to the expected values on a quarterly basis and adjust our estimates accordingly. As of July 2, 2023, the Company had accrued warranty costs of $241 thousand, as compared to $169 thousand as of October 2, 2022. The primary reason for the $72 thousand increase in reserve balances relates to higher revenue on warrantied product being sold during the nine months ended July 2, 2023 as compared to the prior year resulting in increased backlog on returned products.

 

As of July 2, 2023 and October 2, 2022, we had $133 thousand, and $289 thousand, respectively, of contract loss reserves included in our balance sheet accrued expenses. These loss contracts are related to some of our older legacy periscope IDIQ contracts which were priced in 2018 through early 2020, prior to Covid-19 and the significant downturn in defense spending on ground system vehicles. Due to inflationary price increases on component parts and higher internal manufacturing costs (as a result of escalating labor costs and higher burden rates on reduced volume), some of these contracts are in a loss condition, or at marginal profit rates. These contracts are typically three-year IDIQ contracts with two optional award years, and as such, we are obligated to accept new task awards against these contracts until the contract expiration. Should contract costs continue to increase above the negotiated selling price, or in the event the customer should release substantial quantities against these existing loss contracts, the losses could be material. For contracts currently in a loss status based on the estimated per unit contract costs, losses are booked immediately on new task order awards. During the nine months ended July 2, 2023, accrued contract losses decreased $156 thousand due to shipments against contract backlog and improvements in the total estimated contract costs associated with higher revenue and improved manufacturing overhead rates on increased production levels. There is no way to reasonably estimate future inflationary impacts, or customer awards on the existing loss contracts.

 

As of July 2, 2023 and October 2, 2022, Optex Systems, Inc. has a deferred tax asset valuation allowance of ($0.8) million against deferred tax assets of $1.6 million and $1.8 million, respectively, for a net deferred tax asset of $0.8 million and $1.0 million. During the nine months ended July 2, 2023, our deferred tax assets decreased by $0.2 million related to temporary tax adjustments. The valuation allowance covers certain deferred tax assets where we believe we will be unlikely to recover those tax assets through future operations. The valuation reserve includes assumptions related to future taxable income which would be available to cover net operating loss carryforward amounts. Because of the uncertainties of future income forecasts combined with the complexity of some of the deferred assets, these forecasts are subject to change over time. While we believe our current estimate to be reasonable, changing market conditions and profitability, changes in equity structure and changes in tax regulations may impact our estimated reserves in future periods.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by our Quarterly Report on Form 10-Q for the quarter ended July 2, 2023, management performed, with the participation of our Principal Executive Officer and Principal Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management including our Principal Executive Officer and our Principal Financial Officer, to allow timely decisions regarding required disclosures. Based upon the evaluation described above, our Principal Executive Officer and our Principal Financial Officer concluded that, as of July 2, 2023, our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting

 

During the three months ended July 2, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not aware of any material litigation pending or threatened against us.

 

Item 1A. Risk Factors

 

We have added the following risk factor due to recent events impacting regional banks. There have been no other material changes in the risk factors set forth in the Form 10-K filed for the year ended October 2, 2022.

 

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, results of operations or financial condition.

 

Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver; on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership; and on May 1, 2023, First Republic Bank failed and regulators sold substantially all of its assets to JPMorgan Chase & Co.  The failure of First Republic Bank occurred despite a previous attempt by some of the nation’s largest banks to shore up First Republic’s capital. Although we assess our banking and customer relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impacted.

 

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or other obligations, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our business, results of operations or financial condition.

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Unregistered Sales

 

On May 9, 2023, the Board of Directors approved a grant of 40,000 shares of restricted stock to an independent board member Dayton Judd. The 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 January 1, 2025. The grant was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) of such act and Rule 506 thereunder.

 

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 July 2, 2023.

 

Item 3. Defaults upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 6. Exhibits

 

Exhibit No.		Description
31.1 and 31.2		Certifications pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1 and 32.2		Certifications pursuant to Section 906 of Sarbanes Oxley Act of 2002
EX-101.INS		Inline XBRL Instance Document
EX-101.SCH		Inline XBRL Taxonomy Extension Schema Document
EX-101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
EX-101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
EX-101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
EX-101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	OPTEX SYSTEMS HOLDINGS, INC.
Date: August 16, 2023	By:	/s/ Danny Schoening
		Danny Schoening
		Principal Executive Officer
	OPTEX SYSTEMS HOLDINGS, INC.
Date: August 16, 2023	By:	/s/ Karen Hawkins
		Karen Hawkins
		Principal Financial Officer and
		Principal Accounting Officer

 

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Danny Schoening, certify that:

 

1. I have reviewed this Form 10-Q of Optex Systems Holdings, Inc.:

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a– 15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

By:	/s/ Danny Schoening
	Danny Schoening
	Principal Executive Officer
Dated: August 16, 2023

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Karen Hawkins, certify that:

 

1. I have reviewed this Form 10-Q of Optex Systems Holdings, Inc.:

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a– 15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

By:	/s/ Karen Hawkins
	Karen Hawkins
	Principal Financial Officer and Principal Accounting Officer
Dated: August 16, 2023

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of Optex Systems Holdings, Inc. (the “Company”) on this Form 10-Q for the quarter ended July 2, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Danny Schoening, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

By:	/s/ Danny Schoening
	Danny Schoening
	Principal Executive Officer
Dated: August 16, 2023

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of Optex Systems Holdings, Inc. (the “Company”) on this Form 10-Q for the quarter ended July 2, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karen Hawkins, Principal Financial Officer and Principal Accounting Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

By:	/s/ Karen Hawkins
	Karen Hawkins
	Principal Financial Officer and Principal Accounting Officer
Dated: August 16, 2023

 

v3.23.2

Cover - shares	9 Months Ended
	Jul. 02, 2023	Aug. 16, 2023
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jul. 02, 2023
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--10-01
Entity File Number	001-41644
Entity Registrant Name	OPTEX SYSTEMS HOLDINGS, INC.
Entity Central Index Key	0001397016
Entity Tax Identification Number	90-0609531
Entity Incorporation, State or Country Code	DE
Entity Address, Address Line One	1420 Presidential Drive
Entity Address, City or Town	Richardson
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75081-2439
City Area Code	(972)
Local Phone Number	764-5700
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	OPXS
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,763,070

v3.23.2

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jul. 02, 2023		Oct. 02, 2022
ASSETS
Cash and Cash Equivalents	$ 314		$ 934
Accounts Receivable, Net	2,870		2,908
Inventory, Net	12,282		9,212
Contract Asset	336
Prepaid Expenses	431		328
Current Assets	16,233		13,382
Property and Equipment, Net	1,083		968
Other Assets
Deferred Tax Asset	762		942
Right-of-use Asset	2,863	[1]	3,222
Security Deposits	23		23
Other Assets	3,648		4,187
Total Assets	20,964		18,537
Current Liabilities
Accounts Payable	1,609		706
Operating Lease Liability	616		604
Federal Income Taxes Payable			331
Accrued Expenses	969		958
Accrued Selling Expenses	336
Accrued Warranty Costs	241		169
Accrued Loss Reserves	133		289
Customer Advance Deposits	131		311
Current Liabilities	4,035		3,368
Other Liabilities
Credit Facility	1,207
Operating Lease Liability, net of current portion	2,406		2,761
Total Other Liabilities	3,613		2,761
Total Liabilities	7,648		6,129
Stockholders’ Equity
Common Stock – ($0.001 par, 2,000,000,000 shares authorized, 6,763,070 and 6,716,638 shares issued and outstanding, respectively)	7		7
Additional Paid in Capital	21,172		21,096
Accumulated Deficit	(7,863)		(8,695)
Stockholders’ Equity	13,316		12,408
Total Liabilities and Stockholders’ Equity	$ 20,964		$ 18,537
[1] Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively.

v3.23.2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jul. 02, 2023	Oct. 02, 2022
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	6,763,070	6,716,638
Common stock, shares outstanding	6,763,070	6,716,638

v3.23.2

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Income Statement [Abstract]
Revenue	$ 7,172	$ 6,170	$ 17,582	$ 15,645
Cost of Sales	5,460	4,902	13,599	12,838
Gross Profit	1,712	1,268	3,983	2,807
General and Administrative Expense	960	758	2,897	2,473
Operating Income	752	510	1,086	334
Interest Expense	22		31
Income Before Taxes	730	510	1,055	334
Income Tax Expense	154	82	223	28
Net Income	$ 576	$ 428	$ 832	$ 306
Basic income per share	$ 0.09	$ 0.05	$ 0.13	$ 0.04
Weighted Average Common Shares Outstanding - basic	6,643,070	8,187,318	6,607,593	8,223,492
Diluted income per share	$ 0.09	$ 0.05	$ 0.13	$ 0.04
Weighted Average Common Shares Outstanding – diluted	6,686,211	8,285,996	6,642,604	8,297,341

v3.23.2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended		12 Months Ended
	Jul. 02, 2023	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Cash Flows from Operating Activities:
Net Income	$ 576	$ 576	$ 428	$ 832	$ 306
Adjustments to Reconcile Net Income to Net Cash (used in) provided by Operating Activities:
Depreciation and Amortization	86		74	252	221
Stock Compensation Expense				134	127
Deferred Tax				180	340
Accounts Receivable				38	1,264
Inventory				(3,070)	(976)
Contract Asset				(336)		$ 0
Prepaid Expenses				(103)	(62)
Leases				17	73
Accounts Payable and Accrued Expenses				914	223
Federal Income Taxes Payable				(331)
Accrued Warranty Costs				72	118
Accrued Selling Expense				336		0
Customer Advance Deposits				(180)	256
Accrued Loss Reserves				(156)
Total Adjustments				(2,233)	1,584
Net Cash (used in) provided by Operating Activities				(1,401)	1,890
Cash Flows used in Investing Activities
Purchases of Property and Equipment	(222)		(118)	(368)	(236)
Net Cash used in Investing Activities				(368)	(236)
Cash Flows provided by (used in) Financing Activities
Borrowing from Credit Facility				1,507
Payments to Credit Facility				(300)
Cash Paid for Taxes Withheld on Net Settled Restricted Stock Unit Shares Issued				(58)	(19)
Stock Repurchase					(366)
Net Cash provided by (used in) Financing Activities				1,149	(385)
Net (Decrease) Increase in Cash and Cash Equivalents				(620)	1,269
Cash and Cash Equivalents at Beginning of Period				934	3,900	3,900
Cash and Cash Equivalents at End of Period	$ 314	$ 314	$ 5,169	314	5,169	$ 934
Non-Cash Transactions:
Right-of-Use Asset					51
Operating Lease Liabilities					(51)
Treasury Stock Retired					435
Cash Transactions:
Cash Paid for Taxes				553
Cash Paid for Interest				$ 28

v3.23.2

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands		Common Stock [Member]	Treasury Stock, Common [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Oct. 03, 2021		$ 9	$ (69)	$ 25,752	$ (9,978)	$ 15,714
Balance, Shares at Oct. 03, 2021		8,523,704	35,555
Stock Compensation Expense				127		127
Net Income (Loss)					306	306
Common Stock Repurchase	[1]		$ (366)			(366)
Common Stock Repurchase, shares	[1]		188,414
Cancellation of Treasury Shares	[1]	$ (1)	$ 435	(434)
Cancellation of Treasury Shares, shares	[1]	(223,969)	(223,969)
Vested Restricted Stock Units Issued Net of Tax Withholding				(19)		(19)
Vested Restricted Stock Units Issued Net of Tax Withholding, shares		23,216
Ending balance, value at Jul. 03, 2022		$ 8		25,426	(9,672)	15,762
Balance, Shares at Jul. 03, 2022		8,322,951
Balance at Apr. 03, 2022		$ 8		25,534	(10,100)	15,442
Balance, Shares at Apr. 03, 2022		8,395,394
Stock Compensation Expense				36		36
Net Income (Loss)					428	428
Common Stock Repurchase	[1]		$ (144)			(144)
Common Stock Repurchase, shares	[1]		72,443
Cancellation of Treasury Shares	[1]		$ 144	(144)
Cancellation of Treasury Shares, shares	[1]	(72,443)	(72,443)
Ending balance, value at Jul. 03, 2022		$ 8		25,426	(9,672)	15,762
Balance, Shares at Jul. 03, 2022		8,322,951
Balance at Oct. 02, 2022		$ 7		21,096	(8,695)	12,408
Balance, Shares at Oct. 02, 2022		6,716,638
Stock Compensation Expense				134		134
Restricted/Unvested Shares Issued	[2]
Restricted/Unvested Shares Issued, shares	[2]	40,000
Net Income (Loss)					832	832
Taxes on Shares Issued for Vested Restricted Stock Units				(58)		(58)
Taxes on Shares Issued for Vested Restricted Stock Units, shares		46,432
Unvested Shares Forfeited	[3]
Unvested Shares Forfeited, shares	[3]	(40,000)
Ending balance, value at Jul. 02, 2023		$ 7		21,172	(7,863)	13,316
Balance, Shares at Jul. 02, 2023		6,763,070
Balance at Apr. 01, 2023		$ 7		21,091	(8,439)	12,659
Balance, Shares at Apr. 01, 2023		6,723,070
Stock Compensation Expense				81		81
Restricted/Unvested Shares Issued	[2]
Restricted/Unvested Shares Issued, shares	[2]	40,000
Net Income (Loss)					576	576
Ending balance, value at Jul. 02, 2023		$ 7		$ 21,172	$ (7,863)	$ 13,316
Balance, Shares at Jul. 02, 2023		6,763,070
[1] Common shares repurchased in the open market through July 3, 2022 were held as treasury stock using the cost method and cancelled prior to July 3, 2022. [2] Restricted and unvested shares issued to board member on May 9, 2023.  Shares vest on 50% January 1, 2024 and 50% January 1, 2025. [3] Unvested common restricted shares which were forfeited and cancelled in February 2023.

v3.23.2

Condensed Consolidated Statements of Stockholders' Equity (Parenthetical)	3 Months Ended	9 Months Ended
	Jul. 02, 2023	Jul. 02, 2023
Statement of Stockholders' Equity [Abstract]
Shares vesting, description	Shares vest on 50% January 1, 2024 and 50% January 1, 2025	Shares vest on 50% January 1, 2024 and 50% January 1, 2025
Shares vesting percentage	50.00%	50.00%

v3.23.2

Organization and Operations	9 Months Ended
	Jul. 02, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Operations	Note 1 - Organization and Operations   Optex 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. 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 nine months ended July 2, 2023 were derived from the U.S. government (20%), three major U.S. defense contractors (17%, 6%, and 5%, respectively), one major commercial customer (29%) and all other customers (23%). Approximately 95% of the total company revenue is generated from domestic customers and 5% is derived from foreign customers, primarily in Canada. Optex Systems Holdings’ operations are based in Dallas and Richardson, Texas in leased facilities comprising 93,967 square feet. As of July 2, 2023, Optex Systems Holdings operated with 101 full-time equivalent employees.

v3.23.2

Accounting Policies	9 Months Ended
	Jul. 02, 2023
Accounting Policies [Abstract]
Accounting Policies	Note 2 - Accounting Policies   Basis of Presentation   Principles of Consolidation: The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Optex Systems, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.   The condensed consolidated financial statements of Optex Systems Holdings included herein have been prepared by Optex Systems Holdings, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.   These condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and the notes thereto included in the Optex Systems Holdings’ Form 10-K for the year ended October 2, 2022 and other reports filed with the SEC.   The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of Optex Systems Holdings for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.   Inventory: As of July 2, 2023 and October 2, 2022, inventory included:   Schedule of Inventory     July 2, 2023     October 2, 2022       (Thousands)       July 2, 2023     October 2, 2022   Raw Material   $ 7,428     $ 6,953   Work in Process     5,050       2,722   Finished Goods     615       348   Gross Inventory   $ 13,093     $ 10,023   Less: Inventory Reserves     (811 )     (811 ) Net Inventory   $ 12,282     $ 9,212     Concentration of Credit Risk: Optex Systems Holdings’ accounts receivables as of July 2, 2023 consisted of U.S. government agencies (18%), seven major U.S. defense contractors (12%, 12%, 9%, 6%, 6%, 6%, and 5%, respectively), one commercial customer (16%) and all other customers (10%). The Company does not believe that this concentration results in undue credit risk because of the financial strength of the customers and the Company’s long history with these customers.     Accrued Warranties: Optex Systems Holdings accrues product warranty liabilities based on the historical return rate against period shipments as they occur and reviews and adjusts these accruals quarterly for any significant changes in estimated costs or return rates. The accrued warranty liability includes estimated costs to repair or replace returned warranty backlog units currently in-house plus estimated costs for future warranty returns that may be incurred against warranty covered products previously shipped as of the period end date. As of July 2, 2023, and October 2, 2022, the Company had warranty reserve balances of $241 and $169 thousand, respectively.   Schedule of Warranty Reserves     July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022       Three months ended     Nine months ended       July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022   Beginning balance   $ 266     $ 155     $ 169     $ 78                                     Incurred costs for warranties satisfied during the period     (82 )     (1 )     (99 )     (3 )                                   Warranty Expenses:                                 Warranties reserved for new product shipped during the period(1)     57       52       177       131   Change in estimate for pre-existing warranty liabilities(2)     -       (10 )     (6 )     (10 ) Warranty Expense     57       42       171       122                                     Ending balance   $ 241     $ 196     $ 241     $ 196     (1) Warranty expenses accrued to cost of sales (based on current period shipments and historical warranty return rate.)     (2) Changes in estimated warranty liabilities recognized in cost of sales associated with: the period end customer returned warranty backlog, or the actual costs of repaired/replaced warranty units which were shipped to the customer during the current period.   Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.   Fair Value of Financial Instruments: Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of the financial statement presentation date.   The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are carried at, or approximate, fair value as of the reporting date because of their short-term nature. The credit facility is reported at fair value as it bears market rates of interest.   The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:   Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.   The accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and minimize the use of unobservable inputs. An asset or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Fair value estimates are reviewed at the origination date and again at each applicable measurement date and interim or annual financial reporting dates, as applicable for the financial instrument, and are based upon certain market assumptions and pertinent information available to management at those times.   Revenue Recognition: The majority of the Company’s contracts and customer orders originate with fixed determinable unit prices for each deliverable quantity of goods defined by the customer order line item (performance obligation) and include the specific due date for the transfer of control and title of each of those deliverables to the customer at pre-established payment terms, which are generally within thirty to sixty days from the transfer of title and control. We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods. In addition, the Company has one ongoing service contract which relates to optimized weapon system support (OWSS) and includes ongoing program maintenance, repairs and spare inventory support for the customer’s existing fleet units in service during the duration of the contract. Revenue recognition for this program has been recorded by the Company, and compensated by the customer, at fixed monthly increments over time, consistent with the defined contract maintenance period. During the three and nine months ended July 2, 2023 and July 3, 2022, there was $115 thousand and $340 thousand in 2023 and $120 thousand and $352 thousand in 2022 in service contract revenue recognized over time.     During the three- and nine-month periods ended July 2, 2023, there was zero and $223 thousand of revenue recognized from customer deposit liabilities (deferred contract revenue). During the three- and nine-month periods ended July 3, 2022, there were no revenues recognized from customer deposit liabilities (deferred contract revenue). As of July 2, 2023, customer deposit liabilities were $131 thousand.   As of October 2, 2022 and July 2, 2023, there was zero and $336 thousand in accrued selling expenses and zero and $336 thousand in contract assets related to a new $3.4 million contract booked in November 2022. The costs will be amortized against the revenue for the contract deliveries expected to begin in first quarter of fiscal year 2024 and extend through fiscal year 2025.   Contract Loss Reserves: The Company records loss provisions in the event that the current estimated total revenue against a contract and the total estimated cost remaining to fulfill the contract indicate a loss upon completion. When the estimated costs indicate a loss, we record the entire value of the loss against the contract loss reserve in the period the determination is made. The Company has several long-term fixed price contracts that are currently indicative of a loss condition due to recent inflationary pressures on material and labor, combined with increased manufacturing overhead costs. Some of these long-term contracts have option year ordering periods ending in February 2025 with deliveries that may extend into February 2026. As of July 2, 2023 and October 2, 2022, the accrued contract loss reserves were $133 thousand and $289 thousand, respectively. During the three and nine months ended July 2, 2023, the Company recognized $20 thousand and $72 thousand in loss reserves on new contract awards, made shipments resulting in reductions of zero and $171 thousand against existing loss reserves, and recognized a gain on changes in accrued loss estimates of zero and $57 thousand. During the three and nine months ended July 3, 2022, the Company recognized $15 thousand and $61 thousand in loss reserves on new contract awards, made shipments resulting in reductions of $26 thousand and $79 thousand against existing loss reserves. There were no changes in loss estimates during the three and nine months ended July 3, 2022.   Income Tax/Deferred Tax: As of July 2, 2023 and October 2, 2022, Optex Systems, Inc. has a deferred tax asset valuation allowance of ($0.8) million against deferred tax assets of $1.6 million and $1.8 million, respectively, for a net deferred tax asset of $0.8 million and $1.0 million. The valuation allowance has been established due to historical losses resulting in a Net Operating Loss Carryforward for each of the fiscal years 2011 through 2016 which may not be fully recognized due to an IRS Section 382 limitation related to a change in control. During the nine months ended July 2, 2023, our deferred tax assets decreased by $0.2 million related to temporary tax adjustments.   Earnings per Share: Basic earnings per share is computed by dividing income available for common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.   The Company has potentially dilutive securities outstanding, which include unvested restricted stock units and unvested shares of restricted stock. The Company uses the Treasury Stock Method to compute the dilutive effect of any dilutive shares. Unvested restricted stock units and shares of restricted stock that are anti-dilutive are excluded from the calculation of diluted earnings per common share.   For the three months ended July 2, 2023, 120,000 shares of unvested restricted stock and 36,000 unvested restricted stock units (which convert to an aggregate of 43,141 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price.   For the three months ended July 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 98,678 incremental shares) were included in the diluted earnings per share calculation.   For the nine months ended July 2, 2023, 120,000 unvested restricted stock units and 36,000 shares of unvested restricted stock (which convert to an aggregate of 35,011 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price. For the nine months ended June 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 73,849 incremental shares) were included in the diluted earnings per share calculation.

v3.23.2

Segment Reporting	9 Months Ended
	Jul. 02, 2023
Segment Reporting [Abstract]
Segment Reporting	Note 3 - Segment Reporting   The Company’s two reportable segments, Applied Optics Center and Optex Systems – Richardson (“Optex Systems”), are strategic businesses offering similar products to similar markets and customers; however, they are operated and managed separately due to differences in manufacturing technology, equipment, geographic location, and specific product mix. Applied Optics Center was acquired as a unit, and management at the time of the acquisition was retained.   The Applied Optics Center segment also serves as the key supplier of laser coated filters used in the production of periscope assemblies for the Optex Systems segment. Intersegment sales and transfers are accounted for at annually agreed to pricing rates based on estimated segment product cost, which includes segment direct manufacturing and general and administrative costs, but exclude profits that would apply to third party external customers.   Optex Systems (OPX) – Richardson, Texas   Optex Systems revenues are primarily in support of prime and subcontracted military customers. Military sales to prime and subcontracted customers represented approximately 96% and sales to commercial customers represented approximately 4% of the external segment revenue for the nine months ended July 2, 2023. The Optex Systems segment revenue is comprised of approximately 85% domestic military customers and 11% foreign military customers. For the nine months ended July 2, 2023, Optex Systems – Richardson represented 44% of the Company’s total consolidated revenue and consisted of revenue from the U.S. government (17%), two major U.S. defense contractors (14% and 6%), and all other customers (7%).   Optex Systems is located in Richardson Texas, with leased premises consisting of approximately 49,100 square feet. As of July 2, 2023, the Richardson facility operated with 56 full time equivalent employees in a single shift operation which includes 8 home office support employees. The facilities at Optex Systems, Richardson serve as the home office for both the Optex Systems and Applied Optics Center segments.   Applied Optics Center (AOC) – Dallas, Texas   The Applied Optics Center serves primarily domestic U.S. customers. Sales to commercial customers represented approximately 50% and military sales to prime and subcontracted customers represented approximately 50% of the external segment revenue for the nine months ended July 2, 2023. Approximately 95% of the AOC revenue was derived from external customers and approximately 5% was related to intersegment sales to Optex Systems in support of military contracts. For the nine months ended July 2, 2023, AOC represented 56% of the Company’s total consolidated revenue and consisted of revenue from one major defense contractor (5%), one commercial customer (27%), and all other customers (24%).   The Applied Optics Center is located in Dallas, Texas with leased premises consisting of approximately 44,867 square feet of space. As of July 2, 2023, AOC operated with 45 full time equivalent employees in a single shift operation.     The financial tables below present information on the reportable segments’ profit or loss for each period, as well as segment assets as of each period end. The Company does not allocate interest expense, income taxes or unusual items to segments.   Schedule of Segment Reporting Information     Reportable Segment Financial Information (thousands)       As of and for the three months ended July 2, 2023       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                                     Revenues from external customers   $ 3,069     $ 4,103     $ -     $ 7,172   Intersegment revenues     -       265       (265 )     -   Total revenue   $ 3,069     $ 4,368     $ (265 )   $ 7,172                                     Interest expense   $ -     $ -     $ 22     $ 22                                     Depreciation and amortization   $ 14     $ 72     $ -     $ 86                                     Income (loss) before taxes   $ (60 )   $ 893     $ (103 )   $ 730                                     Other significant noncash items:                                 Allocated home office expense   $ (386 )   $ 386     $ -     $ -   Stock compensation expense   $ -     $ -     $ 81     $ 81   Warranty expense   $ -     $ 57     $ -     $ 57                                     Segment assets   $ 11,671     $ 9,293     $ -     $ 20,964   Expenditures for segment assets   $ -     $ 222     $ -     $ 222          Reportable Segment Financial Information (thousands)       As of and for the three months ended July 3, 2022       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 2,653     $ 3,517     $ -     $ 6,170   Intersegment revenues     -       258       (258 )     -   Total revenue   $ 2,653     $ 3,775     $ (258 )   $ 6,170                                     Interest expense   $ -     $ -     $ -     $ -                                     Depreciation and amortization   $ 8     $ 66     $ -     $ 74                                     Income (loss) before taxes   $ 185     $ 361     $ (36 )   $ 510                                     Other significant noncash items:                                 Allocated home office expense   $ (268 )   $ 268     $ -     $ -   Stock compensation expense   $ -     $ -     $ 36     $ 36   Warranty expense   $ -        42        -        42                $       $ -     $     Segment assets   $ 14,676     $ 6,637     $ -     $ 21,313   Expenditures for segment assets   $ 49     $ 69     $ -     $ 118           Reportable Segment Financial Information (thousands)       As of and for the nine months ended July 2, 2023       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 7,742     $ 9,840     $ -     $ 17,582   Intersegment revenues     -       511       (511 )     -   Total revenue   $ 7,742     $ 10,351     $ (511 )   $ 17,582                                     Interest expense   $ -     $ -     $ 31     $ 31                                     Depreciation and amortization   $ 38     $ 214     $ -     $ 252                                     Income (loss) before taxes   $ (527 )   $ 1,747     $ (165 )   $ 1,055                                     Other significant noncash items:                                 Allocated home office expense   $ (978 )   $ 978     $ -     $ -   Stock compensation expense   $ -     $ -     $ 134     $ 134   Warranty expense   $ -     $ 171     $ -     $ 171                                     Segment assets   $ 11,671     $ 9,293     $ -     $ 20,964   Expenditures for segment assets   $ 25     $ 343     $ -     $ 368         Reportable Segment Financial Information (thousands)       As of and for the nine months ended July 3, 2022       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 6,588     $ 9,057     $ -     $ 15,645   Intersegment revenues     -       693       (693 )     -   Total revenue   $ 6,588     $ 9,750     $ (693 )   $ 15,645                                     Interest expense   $ -     $ -     $ -     $ -                                     Depreciation and amortization   $ 28     $ 193     $ -     $ 221                                     Income (loss) before taxes   $ (276 )   $ 737     $ (127 )   $ 334                                     Other significant noncash items:                                 Allocated home office expense   $ (802 )   $ 802     $ -     $ -   Stock compensation expense   $ -     $ -     $ 127     $ 127   Warranty expense   $ -       122       -       122               $       $       $     Segment assets   $ 14,676     $ 6,637     $ -     $ 21,313   Expenditures for segment assets   $ 55     $ 181     $ -     $ 236

v3.23.2

Commitments and Contingencies	9 Months Ended
	Jul. 02, 2023
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Note 4 - Commitments and Contingencies   Non-cancellable Operating Leases   Optex Systems Holdings leases its office and manufacturing facilities for the Optex Systems, Inc., Richardson location and the Applied Optics Center Dallas location. The Company also leases certain office equipment under non-cancellable operating leases.   The facility leased by Optex Systems Inc. located at 1420 Presidential Drive, Richardson, Texas consists of 49,100 square feet of space at the premises. The previous lease term for this location expired March 31, 2021 and the monthly base rent was $24.6 thousand through March 31, 2021. On January 11, 2021 the Company executed a sixth amendment extending the terms of the lease for eighty-six (86) months, commencing on April 1, 2021 and ending on May 31, 2028. The initial base rent is set at $25.3 thousand and escalates 3% on April 1 each year thereafter. The initial term included 2 months of rent abatement for April and May of 2021. The monthly rent includes approximately $11.9 thousand for additional Common Area Maintenance fees and taxes (“CAM”), to be adjusted annually based on actual expenses incurred by the landlord.   The facility leased by Applied Optics Center located at 9839 and 9827 Chartwell Drive, Dallas, Texas, consists of 44,867 square feet of space at the premises. The previous lease term for this location expired on October 31, 2021 and the monthly base rent was $21.9 thousand through the end of the lease. On January 11, 2021 the Company executed a first amendment extending the terms of the lease for eighty-six (86) months, commencing on November 1, 2021 and ending on December 31, 2028. The initial base rent is set at $23.6 thousand as of January 1, 2022 and escalates 2.75% on January 1 each year thereafter. The initial term included 2 months of rent abatement for November and December of 2021. The 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 rental rate. Our obligations to make payments under the lease are secured by a $125,000 standby letter of credit. The monthly rent includes approximately $7.9 thousand for additional CAM, to be adjusted annually based on actual expenses incurred by the landlord.   The Company had one non-cancellable office equipment lease with a commencement date of October 1, 2018 and a term of 39 months. The lease cost for the equipment was $1.5 thousand per month from October 1, 2018 through December 31, 2021. The lease was renewed on November 18, 2021 for an additional 48 months at a cost of $1.2 thousand per month. The start of the lease was delayed until April 2022 due to temporary equipment shortages. The lease renewal resulted in the recognition of an additional right of use asset and a lease liability of $51 thousand, respectively during the nine months ended July 2, 2022.   As of July 2, 2023, the remaining minimum lease and estimated CAM payments under the non-cancelable facility space leases are as follows:   Schedule of Non-cancellable Operating Leases Minimum Payments Non-cancellable Operating Leases Minimum Payments   Fiscal Year   Facility Lease Payments     Facility Lease Payments     Lease Payments     Total Lease Payments     Total Variable CAM Estimate       (Thousands)                   Optex Richardson     Applied Optics Center     Office Equipment     Consolidated   Fiscal Year   Facility Lease Payments     Facility Lease Payments     Lease Payments     Total Lease Payments     Total Variable CAM Estimate   2023 Base year lease    $ 80     $ 73     $ 4     $ 157     $ 63   2024 Base year lease     327       296       15       638       256   2025 Base year lease     336       305       15       656       261   2026 Base year lease     346       313       3       662       266   2027 Base year lease     357       322       -       679       272   2028 Base year lease     242       330       -       572       198   2029 Base year lease     -       83       -       83       30   Total base lease payments   $ 1,688     $ 1,722     $ 37     $ 3,447     $ 1,346   Imputed interest on lease payments (1)     (198 )     (225 )     (2 )     (425 )         Total Operating Lease Liability(2)   $ 1,490     $ 1,497     $ 35     $ 3,022                                                     Right-of-use Asset(3)   $ 1,403     $ 1,425     $ 35     $ 2,863             (1) Assumes a discount borrowing rate of 5.0% on the new lease amendments effective as of January 11, 2021.     (2) Includes $159 thousand of unamortized deferred rent.     (3) Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively.   Total expense under both facility lease agreements for the three months ended July 2, 2023 and July 3, 2022 was $206 and $215 thousand, respectively. Total office equipment rentals included in operating expenses was $9 and $7 thousand for the three months ended July 2, 2023 and July 3, 2022, respectively.   Total expense under both facility lease agreements for the nine months ended July 2, 2023 and July 3, 2022 was $644 and $635 thousand, respectively. Total office equipment rentals included in operating expenses was $18 thousand and $19 thousand for the nine months ended July 2, 2023 and July 3, 2022, respectively.

v3.23.2

Debt Financing	9 Months Ended
	Jul. 02, 2023
Debt Disclosure [Abstract]
Debt Financing	Note 5 - Debt Financing   Credit Facility — PNC Bank (formerly BBVA, USA)   On April 16, 2020, Optex Systems Holdings, Inc. and its subsidiary, Optex Systems, Inc. (collectively, the “Borrowers”), entered into a line of credit facility (the “PNC Facility”) with BBVA, USA. In June 2021, PNC Bank completed its acquisition of BBVA, USA and the bank name changed to PNC Bank (“PNC”). The substantive terms were as follows:     ● The principal amount of the PNC Facility was $2.25 million. The PNC Facility matured on April 15, 2022. The interest rate was variable based on PNC’s prime rate minus 0.25%, initially set at 3% at loan origination, and all accrued and unpaid interest was payable monthly in arrears starting on May 15, 2020; and the principal amount was due in full with all accrued and unpaid interest and any other fees on April 15, 2022.         ● There were commercially standard covenants including, but not limited to, covenants regarding maintenance of corporate existence, not incurring other indebtedness except trade debt, not changing more than 25% stock ownership of Borrowers, and a Fixed Charge Coverage Ratio of 1.25:1, with the Fixed Charge Coverage Ratio defined as (earnings before taxes, amortization, depreciation, amortization and rent expense less cash taxes, distribution, dividends and fair value of warrants) divided by (current maturities on long term debt plus interest expense plus rent expense).         ● The PNC Facility contained commercially standard events of default including, but not limited to, not making payments when due; incurring a judgment of $10,000 or more not covered by insurance; not maintaining collateral and others.         ● The PNC Facility was secured by a first lien on all of the assets of Borrowers.     On April 12, 2022, the Borrowers entered into an Amended and Restated Loan Agreement (the “PNC Loan Agreement”) with PNC, pursuant to which the PNC Facility was decreased from $2.25 million to $1.125 million, and the maturity date was extended from April 15, 2022 to April 15, 2023.   On November 21, 2022, the Borrowers issued an Amended and Restated Revolving Line of Credit Note (the “PNC Line of Credit Note”) to PNC in connection with an increase of the PNC Facility from $1.125 million to $2.0 million. Obligations outstanding under the PNC Facility accrued interest at a rate equal to PNC’s prime rate minus 0.25%.   The PNC Line of Credit Note and PNC Loan Agreement contained customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, investments, and restricted payments. The PNC Facility was secured by substantially all of the operating assets of the Borrowers as collateral. The Borrowers’ obligations under the PNC Facility were subject to acceleration upon the occurrence of an event of default as defined in the PNC Line of Credit Note and PNC Loan Agreement.   As of October 2, 2022 the outstanding balance under the PNC facility was zero. The PNC facility was replaced by the Texas Capital Facility on March 22, 2023.   Credit Facility — Texas Capital Bank   On March 22, 2023, 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 Facility”). The Texas Capital Facility replaced the $2 million PNC Facility.   The 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. As of July 2, 2023 the interest rate was 7.827% per annum.   The 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.   The outstanding balance under the Texas Capital Facility was $1.2 million as of July 2, 2023.   For the three months and nine months ended July 2, 2023, the total interest expense under the above facilities was $22 thousand and $31 thousand.

v3.23.2

Stock Based Compensation	9 Months Ended
	Jul. 02, 2023
Share-Based Payment Arrangement [Abstract]
Stock Based Compensation	Note 6 - Stock Based Compensation   Restricted Stock, Performance Shares and Restricted Stock Units issued to Directors, Officers and Employees   The following table summarizes the status of Optex Systems Holdings’ aggregate non-vested restricted stock and restricted stock units, and performance shares:   Schedule of Aggregate Non-vested Restricted Stock and Restricted Stock Units Granted and Performance Shares     Restricted Stock Units     Weighted Average Grant Date Fair Value     Restricted Shares     Weighted Average Grant Date Fair Value     Performance Shares     Weighted Average Grant Date Fair Value   Outstanding at October 3, 2021     99,000     $ 1.59       240,000     $ 1.75       —       —   Granted     —       —       —       —       —       —   Vested     (33,000 )     1.73       (60,000 )     1.75       —       —   Forfeited     —       —       —       —       —       —   Outstanding at October 2, 2022     66,000     $ 1.52       180,000     $ 1.75       —       —   Granted     39,000       3.00       40,000       3.09       135,000       2.37   Vested     (66,000 )     1.52       (60,000 )     1.75       —       —   Forfeited     (3,000 )     3.00       (40,000 )     1.75       —       —   Outstanding at July 2, 2023     36,000     $ 3.00       120,000     $ 2.20       135,000     $ 2.37     On January 2, 2019, the Company granted 150,000 and 50,000 restricted stock units with a January 2, 2019 grant date to Danny Schoening and Karen Hawkins, respectively, vesting as of January 1 each year subsequent to the grant date over a three-year period at a rate of 34% in year one, and 33% each year thereafter. The stock price at grant date was $1.32 per share. Effective December 1, 2021, the vesting terms of Danny Schoening’s Restricted Stock Unit (RSU) grant from January 2019 were revised as described below. The Company amortizes the grant date fair value of $264 thousand to stock compensation expense on a straight-line basis across the three-year vesting period beginning on January 2, 2019. As of January 1, 2023, there was no unrecognized compensation cost relating to this award.   On February 17, 2020, the Company granted 50,000 restricted stock units to Bill Bates, General Manager of the Applied Optics Center. The restricted stock units vest as of January 1 each year subsequent to the grant date over a three-year period at a rate of 34% in year one, and 33% each year thereafter. The stock price at grant date was $2.13 per share. The Company amortized the grant date fair value of $107 thousand to stock compensation expense on a straight-line basis across the three-year vesting period beginning on February 17, 2020.   On April 30, 2020, the Board of Directors held a meeting and voted to increase the annual board compensation for the three independent directors from $22,000 to $36,000 with an effective date of January 1, 2020, in addition to granting 100,000 shares of restricted stock to each independent director which vest at a rate of 20% per year (20,000 shares) each January 1st through January 1, 2025. The total fair value for the 300,000 shares was $525 thousand based on the stock price of $1.75 as of April 30, 2020. The Company amortizes the grant date fair value to stock compensation expense on a straight-line basis across the five-year vesting period beginning on April 30, 2020. On each of January 1, 2021, January 1, 2022, and January 1, 2023, 60,000 of the restricted director shares vested. On February 16, 2022, 40,000 of the unvested restricted shares were forfeited and cancelled when one of the independent directors departed the Board. As of July 2, 2023, there were 80,000 unvested restricted shares outstanding.   The Company entered into an amended and restated employment agreement with Danny Schoening dated December 1, 2021. The updated employment agreement also served to amend Mr. Schoening’s RSU Agreement, dated January 2, 2019, by changing the third and final vesting date for the restricted stock units granted under such agreement from January 1, 2022 to the “change of control date,” that being the first of the following to occur with respect to the Company: (i) any “Person,” as that term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with certain exclusions, is or becomes the “Beneficial Owner” (as that term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or (ii) the Company is merged or consolidated with any other corporation or other entity, other than: (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (B) the Company engages in a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “Person” (as defined above) acquires fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities. The amended RSU Agreement contains certain exceptions to the definition of change of control.     As of the December 1, 2021 modification date related to the third and final vesting date of the 49,500 unvested restricted stock units held by Danny Schoening, there was no change in the fair value of the modified award as compared to the original award immediately prior to the modification date. The restricted stock units initially were certain to vest on January 1, 2022, but due to the modification, they were less certain to vest, contingent on a “change in control” occurring, which change in control, in case Mr. Schoening was terminated by the Company without cause or he resigns with good reason prior to such change in control, was required to occur prior to March 13, 2023. As of the modification date, there was $5 thousand of unrecognized compensation cost associated with the original award. As a matter of expediency, the unrecognized compensation expense as of the modification date was fully expensed through January 1, 2022. There is no additional compensation expense associated with the modification of the restricted stock unit agreement.   On January 4, 2022, the Company issued 23,216 common shares to Karen Hawkins, CFO, and Bill Bates (AOC GM), net of tax withholding of $19 thousand, in settlement of 33,000 restricted stock units which vested on January 1, 2022.   On November 28, 2022, the Company entered into a new employment agreement with Danny Schoening which amended Mr. Schoening’s RSU Agreement, dated January 2, 2019, which had been previously amended as of December 1, 2021, by changing the third and final vesting date for the restricted stock units granted under such agreement from the “change of control date” to January 1, 2023.   On January 4, 2023, the Company issued 46,432 common shares to Danny Schoening, CEO, and Bill Bates (AOC GM), net of tax withholding of $58 thousand, in settlement of 66,000 restricted stock units which vested on January 1, 2023. As of July 2, 2023, there are zero unvested restricted stock units outstanding.   On May 1, 2023, the Company granted an aggregate of 39,000 restricted stock units to eleven employees under its 2023 Equity Incentive Plan. The restricted stock units will vest at a rate of 33.33% annually 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. During the three months ended July 2, 2023, there were 3,000 restricted stock units forfeited.   On 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, is $320 thousand and will be amortized through December 31, 2025 based on the derived service periods using a Monte Carlo simulation valuation model.   The assumptions and results for the Monte Carlo simulation are as follows:   Schedule of Assumptions and Results for the Monte Carlo Simulation     Assumptions   Performance Period Start     10/2/2023   Performance Period End     10/1/2028   Term of simulation (1)     5.42 years   Time steps in simulation     1,365   Time steps per year     252   Common share price at valuation date (2)   $ 3.04   Volatility (annual) (4)     50.0 % Risk-free rate (annual) (5)     3.37 % Cost of equity (6)     11.5 % Dividend yield (3)     0.0 %         Tranche 1     Tranche 2     Tranche 3     Tranche 4     Tranche 5   Number of performance shares in the Tranche (1)     27,000       27,000       27,000       27,000       27,000   Fair Value of One Performance share (7)   $ 2.75     $ 2.58     $ 2.39     $ 2.18     $ 1.93   Total Fair Value of Tranche   $ 74,345     $ 69,742     $ 64,446     $ 58,819     $ 52,238   Derived Service Period (Years) (7)     0.71       1.13       1.60       2.06       2.48     (1) Based on the terms of the Performance Shares agreement issued by the Company on May 3, 2023. (2) Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ. (3) Expected dividends provided by management. (4) Based on historical volatility of OPXS and comparable public companies. (5) Interest rate for US Treasury commensurate with the Performance Shares holding period, as of the Valuation Date, as obtained via S&P Capital IQ. (6) Estimated cost of equity for OPXS as of the Valuation Date. (7) Based on Monte Carlo simulation.   On May 9, 2023, the Board of Directors approved a grant of 40,000 shares of restricted stock to independent board member Dayton Judd. The 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.   Stock Based Compensation Expense   Equity compensation is amortized based on a straight-line basis across the vesting or service period as applicable. The recorded compensation costs for restricted shares granted and restricted stock units and performance shares awarded as well as the unrecognized compensation costs are summarized in the table below:   Schedule of Unrecognized Compensation Costs     Stock Compensation       (thousands)       Recognized Compensation Expense     Unrecognized Compensation Expense       Three months ended     Nine months ended     As of period ended       July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022     July 2, 2023     October 2, 2022                                         Restricted Shares   $ 33     $ 27     $ 78     $ 79     $ 213     $ 236   Performance Shares     43       -       43       -       277       -   Restricted Stock Units     5       9       13       48       85       9   Total Stock Compensation   $ 81     $ 36     $ 134     $ 127     $ 575     $ 245

v3.23.2

Stockholders’ Equity	9 Months Ended
	Jul. 02, 2023
Equity [Abstract]
Stockholders’ Equity	Note 7 - Stockholders’ Equity   Dividends   No dividends were declared or paid during the three and nine months ended July 2, 2023 or the twelve months ended October 2, 2022.   Common stock   On September 22, 2021, the Company announced authorization of a $1 million stock repurchase program. The shares authorized to be repurchased under the repurchase program may be purchased from time to time at prevailing market prices, through open market transactions or in negotiated transactions, depending upon market conditions and subject to Rule 10b-18 as promulgated by the SEC.     During the three and nine months ended July 2, 2023, there were zero common shares repurchased under the program. A summary of the purchases under the program through October 2, 2022 follows (all shares purchased have been cancelled):   Summary of Purchases Under Plan Fiscal Period     Total number of shares purchased     Total purchase cost (thousands)     Average price paid per share (with commission)     Maximum dollar value that may yet be purchased under the plan (thousands)   October 4, 2021 through October 31, 2021       18,265     $ 37       2.01     $ 894   November 1, 2021 through November 28, 2021       4,415       9       2.04       885   November 29, 2021 through January 2, 2022       14,558       28       1.93       857   January 3, 2022 through January 30, 2022       15,585       29       1.89       828   January 31, 2022 through February 27, 2022       27,618       49       1.75       779   February 28, 2022 through April 3, 2022       35,530       70       1.98       709   April 4, 2022 through May 1, 2022       12,304       27       2.22       682   May 2, 2022 through May 29, 2022       10,482       22       2.11       660   May 30, 2022 through July 3, 2022       49,657       95       1.90       565   July 4, 2022 through July 25,2022       610       1       2.10       564   July 26, 2022 through August 13, 2022       1,930       4       2.09       560                                       Total shares repurchased period ended October 2, 2022       190,954     $ 371     $ 1.94     $ 560     Furthermore, on August 18, 2022, the Company announced the commencement of a tender offer to purchase up to $4.25 million in value of shares of its common stock. On September 15, 2022, the Company’s “modified Dutch auction” tender offer expired. In accordance with the terms and conditions of the tender offer, the Company accepted for purchase 1,603,773 shares of common stock at a price of $2.65 per share, for an aggregate cost of approximately $4.25 million, excluding fees and expenses relating to the tender offer. The transaction cost associated with the tender offer was $0.1 million. The shares were immediately cancelled upon completion of the transaction.   As of July 2, 2023 and October 2, 2022, total outstanding common shares were 6,763,070 and 6,716,638, respectively.

v3.23.2

Subsequent Events	9 Months Ended
	Jul. 02, 2023
Subsequent Events [Abstract]
Subsequent Events	Note 8 - Subsequent Events   None

v3.23.2

Accounting Policies (Policies)	9 Months Ended
	Jul. 02, 2023
Accounting Policies [Abstract]
Principles of Consolidation	Principles of Consolidation: The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Optex Systems, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.   The condensed consolidated financial statements of Optex Systems Holdings included herein have been prepared by Optex Systems Holdings, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.   These condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and the notes thereto included in the Optex Systems Holdings’ Form 10-K for the year ended October 2, 2022 and other reports filed with the SEC.   The accompanying unaudited interim condensed consolidated financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of Optex Systems Holdings for the interim periods presented. The results of operations for these periods are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year taken as a whole. Certain information that is not required for interim financial reporting purposes has been omitted.
Inventory	Inventory: As of July 2, 2023 and October 2, 2022, inventory included:   Schedule of Inventory     July 2, 2023     October 2, 2022       (Thousands)       July 2, 2023     October 2, 2022   Raw Material   $ 7,428     $ 6,953   Work in Process     5,050       2,722   Finished Goods     615       348   Gross Inventory   $ 13,093     $ 10,023   Less: Inventory Reserves     (811 )     (811 ) Net Inventory   $ 12,282     $ 9,212
Concentration of Credit Risk	Concentration of Credit Risk: Optex Systems Holdings’ accounts receivables as of July 2, 2023 consisted of U.S. government agencies (18%), seven major U.S. defense contractors (12%, 12%, 9%, 6%, 6%, 6%, and 5%, respectively), one commercial customer (16%) and all other customers (10%). The Company does not believe that this concentration results in undue credit risk because of the financial strength of the customers and the Company’s long history with these customers.
Accrued Warranties	Accrued Warranties: Optex Systems Holdings accrues product warranty liabilities based on the historical return rate against period shipments as they occur and reviews and adjusts these accruals quarterly for any significant changes in estimated costs or return rates. The accrued warranty liability includes estimated costs to repair or replace returned warranty backlog units currently in-house plus estimated costs for future warranty returns that may be incurred against warranty covered products previously shipped as of the period end date. As of July 2, 2023, and October 2, 2022, the Company had warranty reserve balances of $241 and $169 thousand, respectively.   Schedule of Warranty Reserves     July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022       Three months ended     Nine months ended       July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022   Beginning balance   $ 266     $ 155     $ 169     $ 78                                     Incurred costs for warranties satisfied during the period     (82 )     (1 )     (99 )     (3 )                                   Warranty Expenses:                                 Warranties reserved for new product shipped during the period(1)     57       52       177       131   Change in estimate for pre-existing warranty liabilities(2)     -       (10 )     (6 )     (10 ) Warranty Expense     57       42       171       122                                     Ending balance   $ 241     $ 196     $ 241     $ 196     (1) Warranty expenses accrued to cost of sales (based on current period shipments and historical warranty return rate.)     (2) Changes in estimated warranty liabilities recognized in cost of sales associated with: the period end customer returned warranty backlog, or the actual costs of repaired/replaced warranty units which were shipped to the customer during the current period.
Use of Estimates	Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Fair Value of Financial Instruments	Fair Value of Financial Instruments: Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of the financial statement presentation date.   The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, are carried at, or approximate, fair value as of the reporting date because of their short-term nature. The credit facility is reported at fair value as it bears market rates of interest.   The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:   Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.   The accounting guidance establishes a hierarchy which requires an entity to maximize the use of quoted market prices and minimize the use of unobservable inputs. An asset or liability’s level is based on the lowest level of input that is significant to the fair value measurement. Fair value estimates are reviewed at the origination date and again at each applicable measurement date and interim or annual financial reporting dates, as applicable for the financial instrument, and are based upon certain market assumptions and pertinent information available to management at those times.
Revenue Recognition	Revenue Recognition: The majority of the Company’s contracts and customer orders originate with fixed determinable unit prices for each deliverable quantity of goods defined by the customer order line item (performance obligation) and include the specific due date for the transfer of control and title of each of those deliverables to the customer at pre-established payment terms, which are generally within thirty to sixty days from the transfer of title and control. We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods. In addition, the Company has one ongoing service contract which relates to optimized weapon system support (OWSS) and includes ongoing program maintenance, repairs and spare inventory support for the customer’s existing fleet units in service during the duration of the contract. Revenue recognition for this program has been recorded by the Company, and compensated by the customer, at fixed monthly increments over time, consistent with the defined contract maintenance period. During the three and nine months ended July 2, 2023 and July 3, 2022, there was $115 thousand and $340 thousand in 2023 and $120 thousand and $352 thousand in 2022 in service contract revenue recognized over time.     During the three- and nine-month periods ended July 2, 2023, there was zero and $223 thousand of revenue recognized from customer deposit liabilities (deferred contract revenue). During the three- and nine-month periods ended July 3, 2022, there were no revenues recognized from customer deposit liabilities (deferred contract revenue). As of July 2, 2023, customer deposit liabilities were $131 thousand.   As of October 2, 2022 and July 2, 2023, there was zero and $336 thousand in accrued selling expenses and zero and $336 thousand in contract assets related to a new $3.4 million contract booked in November 2022. The costs will be amortized against the revenue for the contract deliveries expected to begin in first quarter of fiscal year 2024 and extend through fiscal year 2025.
Contract Loss Reserves	Contract Loss Reserves: The Company records loss provisions in the event that the current estimated total revenue against a contract and the total estimated cost remaining to fulfill the contract indicate a loss upon completion. When the estimated costs indicate a loss, we record the entire value of the loss against the contract loss reserve in the period the determination is made. The Company has several long-term fixed price contracts that are currently indicative of a loss condition due to recent inflationary pressures on material and labor, combined with increased manufacturing overhead costs. Some of these long-term contracts have option year ordering periods ending in February 2025 with deliveries that may extend into February 2026. As of July 2, 2023 and October 2, 2022, the accrued contract loss reserves were $133 thousand and $289 thousand, respectively. During the three and nine months ended July 2, 2023, the Company recognized $20 thousand and $72 thousand in loss reserves on new contract awards, made shipments resulting in reductions of zero and $171 thousand against existing loss reserves, and recognized a gain on changes in accrued loss estimates of zero and $57 thousand. During the three and nine months ended July 3, 2022, the Company recognized $15 thousand and $61 thousand in loss reserves on new contract awards, made shipments resulting in reductions of $26 thousand and $79 thousand against existing loss reserves. There were no changes in loss estimates during the three and nine months ended July 3, 2022.
Income Tax/Deferred Tax	Income Tax/Deferred Tax: As of July 2, 2023 and October 2, 2022, Optex Systems, Inc. has a deferred tax asset valuation allowance of ($0.8) million against deferred tax assets of $1.6 million and $1.8 million, respectively, for a net deferred tax asset of $0.8 million and $1.0 million. The valuation allowance has been established due to historical losses resulting in a Net Operating Loss Carryforward for each of the fiscal years 2011 through 2016 which may not be fully recognized due to an IRS Section 382 limitation related to a change in control. During the nine months ended July 2, 2023, our deferred tax assets decreased by $0.2 million related to temporary tax adjustments.
Earnings per Share	Earnings per Share: Basic earnings per share is computed by dividing income available for common shareholders (the numerator) by the weighted average number of common shares outstanding (the denominator) for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.   The Company has potentially dilutive securities outstanding, which include unvested restricted stock units and unvested shares of restricted stock. The Company uses the Treasury Stock Method to compute the dilutive effect of any dilutive shares. Unvested restricted stock units and shares of restricted stock that are anti-dilutive are excluded from the calculation of diluted earnings per common share.   For the three months ended July 2, 2023, 120,000 shares of unvested restricted stock and 36,000 unvested restricted stock units (which convert to an aggregate of 43,141 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price.   For the three months ended July 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 98,678 incremental shares) were included in the diluted earnings per share calculation.   For the nine months ended July 2, 2023, 120,000 unvested restricted stock units and 36,000 shares of unvested restricted stock (which convert to an aggregate of 35,011 incremental shares) were included in the diluted earnings per share calculation and 135,000 performance shares were excluded from diluted earnings per share as they were below the target share price. For the nine months ended June 3, 2022, 66,000 unvested restricted stock units and 180,000 shares of unvested restricted stock (which convert to an aggregate of 73,849 incremental shares) were included in the diluted earnings per share calculation.

v3.23.2

Accounting Policies (Tables)	9 Months Ended
	Jul. 02, 2023
Accounting Policies [Abstract]
Schedule of Inventory	Schedule of Inventory     July 2, 2023     October 2, 2022       (Thousands)       July 2, 2023     October 2, 2022   Raw Material   $ 7,428     $ 6,953   Work in Process     5,050       2,722   Finished Goods     615       348   Gross Inventory   $ 13,093     $ 10,023   Less: Inventory Reserves     (811 )     (811 ) Net Inventory   $ 12,282     $ 9,212
Schedule of Warranty Reserves	Schedule of Warranty Reserves     July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022       Three months ended     Nine months ended       July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022   Beginning balance   $ 266     $ 155     $ 169     $ 78                                     Incurred costs for warranties satisfied during the period     (82 )     (1 )     (99 )     (3 )                                   Warranty Expenses:                                 Warranties reserved for new product shipped during the period(1)     57       52       177       131   Change in estimate for pre-existing warranty liabilities(2)     -       (10 )     (6 )     (10 ) Warranty Expense     57       42       171       122                                     Ending balance   $ 241     $ 196     $ 241     $ 196     (1) Warranty expenses accrued to cost of sales (based on current period shipments and historical warranty return rate.)     (2) Changes in estimated warranty liabilities recognized in cost of sales associated with: the period end customer returned warranty backlog, or the actual costs of repaired/replaced warranty units which were shipped to the customer during the current period.

v3.23.2

Segment Reporting (Tables)	9 Months Ended
	Jul. 02, 2023
Segment Reporting [Abstract]
Schedule of Segment Reporting Information	Schedule of Segment Reporting Information     Reportable Segment Financial Information (thousands)       As of and for the three months ended July 2, 2023       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                                     Revenues from external customers   $ 3,069     $ 4,103     $ -     $ 7,172   Intersegment revenues     -       265       (265 )     -   Total revenue   $ 3,069     $ 4,368     $ (265 )   $ 7,172                                     Interest expense   $ -     $ -     $ 22     $ 22                                     Depreciation and amortization   $ 14     $ 72     $ -     $ 86                                     Income (loss) before taxes   $ (60 )   $ 893     $ (103 )   $ 730                                     Other significant noncash items:                                 Allocated home office expense   $ (386 )   $ 386     $ -     $ -   Stock compensation expense   $ -     $ -     $ 81     $ 81   Warranty expense   $ -     $ 57     $ -     $ 57                                     Segment assets   $ 11,671     $ 9,293     $ -     $ 20,964   Expenditures for segment assets   $ -     $ 222     $ -     $ 222          Reportable Segment Financial Information (thousands)       As of and for the three months ended July 3, 2022       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 2,653     $ 3,517     $ -     $ 6,170   Intersegment revenues     -       258       (258 )     -   Total revenue   $ 2,653     $ 3,775     $ (258 )   $ 6,170                                     Interest expense   $ -     $ -     $ -     $ -                                     Depreciation and amortization   $ 8     $ 66     $ -     $ 74                                     Income (loss) before taxes   $ 185     $ 361     $ (36 )   $ 510                                     Other significant noncash items:                                 Allocated home office expense   $ (268 )   $ 268     $ -     $ -   Stock compensation expense   $ -     $ -     $ 36     $ 36   Warranty expense   $ -        42        -        42                $       $ -     $     Segment assets   $ 14,676     $ 6,637     $ -     $ 21,313   Expenditures for segment assets   $ 49     $ 69     $ -     $ 118           Reportable Segment Financial Information (thousands)       As of and for the nine months ended July 2, 2023       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 7,742     $ 9,840     $ -     $ 17,582   Intersegment revenues     -       511       (511 )     -   Total revenue   $ 7,742     $ 10,351     $ (511 )   $ 17,582                                     Interest expense   $ -     $ -     $ 31     $ 31                                     Depreciation and amortization   $ 38     $ 214     $ -     $ 252                                     Income (loss) before taxes   $ (527 )   $ 1,747     $ (165 )   $ 1,055                                     Other significant noncash items:                                 Allocated home office expense   $ (978 )   $ 978     $ -     $ -   Stock compensation expense   $ -     $ -     $ 134     $ 134   Warranty expense   $ -     $ 171     $ -     $ 171                                     Segment assets   $ 11,671     $ 9,293     $ -     $ 20,964   Expenditures for segment assets   $ 25     $ 343     $ -     $ 368         Reportable Segment Financial Information (thousands)       As of and for the nine months ended July 3, 2022       Optex Systems Richardson     Applied Optics Center Dallas     Other (non-allocated costs and intersegment eliminations)     Consolidated Total                             Revenues from external customers   $ 6,588     $ 9,057     $ -     $ 15,645   Intersegment revenues     -       693       (693 )     -   Total revenue   $ 6,588     $ 9,750     $ (693 )   $ 15,645                                     Interest expense   $ -     $ -     $ -     $ -                                     Depreciation and amortization   $ 28     $ 193     $ -     $ 221                                     Income (loss) before taxes   $ (276 )   $ 737     $ (127 )   $ 334                                     Other significant noncash items:                                 Allocated home office expense   $ (802 )   $ 802     $ -     $ -   Stock compensation expense   $ -     $ -     $ 127     $ 127   Warranty expense   $ -       122       -       122               $       $       $     Segment assets   $ 14,676     $ 6,637     $ -     $ 21,313   Expenditures for segment assets   $ 55     $ 181     $ -     $ 236

v3.23.2

Commitments and Contingencies (Tables)	9 Months Ended
	Jul. 02, 2023
Commitments and Contingencies Disclosure [Abstract]
Schedule of Non-cancellable Operating Leases Minimum Payments	As of July 2, 2023, the remaining minimum lease and estimated CAM payments under the non-cancelable facility space leases are as follows:   Schedule of Non-cancellable Operating Leases Minimum Payments Non-cancellable Operating Leases Minimum Payments   Fiscal Year   Facility Lease Payments     Facility Lease Payments     Lease Payments     Total Lease Payments     Total Variable CAM Estimate       (Thousands)                   Optex Richardson     Applied Optics Center     Office Equipment     Consolidated   Fiscal Year   Facility Lease Payments     Facility Lease Payments     Lease Payments     Total Lease Payments     Total Variable CAM Estimate   2023 Base year lease    $ 80     $ 73     $ 4     $ 157     $ 63   2024 Base year lease     327       296       15       638       256   2025 Base year lease     336       305       15       656       261   2026 Base year lease     346       313       3       662       266   2027 Base year lease     357       322       -       679       272   2028 Base year lease     242       330       -       572       198   2029 Base year lease     -       83       -       83       30   Total base lease payments   $ 1,688     $ 1,722     $ 37     $ 3,447     $ 1,346   Imputed interest on lease payments (1)     (198 )     (225 )     (2 )     (425 )         Total Operating Lease Liability(2)   $ 1,490     $ 1,497     $ 35     $ 3,022                                                     Right-of-use Asset(3)   $ 1,403     $ 1,425     $ 35     $ 2,863             (1) Assumes a discount borrowing rate of 5.0% on the new lease amendments effective as of January 11, 2021.     (2) Includes $159 thousand of unamortized deferred rent.     (3) Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively.

v3.23.2

Stock Based Compensation (Tables)	9 Months Ended
	Jul. 02, 2023
Share-Based Payment Arrangement [Abstract]
Schedule of Aggregate Non-vested Restricted Stock and Restricted Stock Units Granted and Performance Shares	The following table summarizes the status of Optex Systems Holdings’ aggregate non-vested restricted stock and restricted stock units, and performance shares:   Schedule of Aggregate Non-vested Restricted Stock and Restricted Stock Units Granted and Performance Shares     Restricted Stock Units     Weighted Average Grant Date Fair Value     Restricted Shares     Weighted Average Grant Date Fair Value     Performance Shares     Weighted Average Grant Date Fair Value   Outstanding at October 3, 2021     99,000     $ 1.59       240,000     $ 1.75       —       —   Granted     —       —       —       —       —       —   Vested     (33,000 )     1.73       (60,000 )     1.75       —       —   Forfeited     —       —       —       —       —       —   Outstanding at October 2, 2022     66,000     $ 1.52       180,000     $ 1.75       —       —   Granted     39,000       3.00       40,000       3.09       135,000       2.37   Vested     (66,000 )     1.52       (60,000 )     1.75       —       —   Forfeited     (3,000 )     3.00       (40,000 )     1.75       —       —   Outstanding at July 2, 2023     36,000     $ 3.00       120,000     $ 2.20       135,000     $ 2.37
Schedule of Assumptions and Results for the Monte Carlo Simulation	The assumptions and results for the Monte Carlo simulation are as follows:   Schedule of Assumptions and Results for the Monte Carlo Simulation     Assumptions   Performance Period Start     10/2/2023   Performance Period End     10/1/2028   Term of simulation (1)     5.42 years   Time steps in simulation     1,365   Time steps per year     252   Common share price at valuation date (2)   $ 3.04   Volatility (annual) (4)     50.0 % Risk-free rate (annual) (5)     3.37 % Cost of equity (6)     11.5 % Dividend yield (3)     0.0 %         Tranche 1     Tranche 2     Tranche 3     Tranche 4     Tranche 5   Number of performance shares in the Tranche (1)     27,000       27,000       27,000       27,000       27,000   Fair Value of One Performance share (7)   $ 2.75     $ 2.58     $ 2.39     $ 2.18     $ 1.93   Total Fair Value of Tranche   $ 74,345     $ 69,742     $ 64,446     $ 58,819     $ 52,238   Derived Service Period (Years) (7)     0.71       1.13       1.60       2.06       2.48     (1) Based on the terms of the Performance Shares agreement issued by the Company on May 3, 2023. (2) Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ. (3) Expected dividends provided by management. (4) Based on historical volatility of OPXS and comparable public companies. (5) Interest rate for US Treasury commensurate with the Performance Shares holding period, as of the Valuation Date, as obtained via S&P Capital IQ. (6) Estimated cost of equity for OPXS as of the Valuation Date. (7) Based on Monte Carlo simulation.
Schedule of Unrecognized Compensation Costs	Schedule of Unrecognized Compensation Costs     Stock Compensation       (thousands)       Recognized Compensation Expense     Unrecognized Compensation Expense       Three months ended     Nine months ended     As of period ended       July 2, 2023     July 3, 2022     July 2, 2023     July 3, 2022     July 2, 2023     October 2, 2022                                         Restricted Shares   $ 33     $ 27     $ 78     $ 79     $ 213     $ 236   Performance Shares     43       -       43       -       277       -   Restricted Stock Units     5       9       13       48       85       9   Total Stock Compensation   $ 81     $ 36     $ 134     $ 127     $ 575     $ 245

v3.23.2

Stockholders’ Equity (Tables)	9 Months Ended
	Jul. 02, 2023
Equity [Abstract]
Summary of Purchases Under Plan	Summary of Purchases Under Plan Fiscal Period     Total number of shares purchased     Total purchase cost (thousands)     Average price paid per share (with commission)     Maximum dollar value that may yet be purchased under the plan (thousands)   October 4, 2021 through October 31, 2021       18,265     $ 37       2.01     $ 894   November 1, 2021 through November 28, 2021       4,415       9       2.04       885   November 29, 2021 through January 2, 2022       14,558       28       1.93       857   January 3, 2022 through January 30, 2022       15,585       29       1.89       828   January 31, 2022 through February 27, 2022       27,618       49       1.75       779   February 28, 2022 through April 3, 2022       35,530       70       1.98       709   April 4, 2022 through May 1, 2022       12,304       27       2.22       682   May 2, 2022 through May 29, 2022       10,482       22       2.11       660   May 30, 2022 through July 3, 2022       49,657       95       1.90       565   July 4, 2022 through July 25,2022       610       1       2.10       564   July 26, 2022 through August 13, 2022       1,930       4       2.09       560                                       Total shares repurchased period ended October 2, 2022       190,954     $ 371     $ 1.94     $ 560

v3.23.2

Organization and Operations (Details Narrative)	9 Months Ended
	Jul. 02, 2023 ft² Integer
Product Information [Line Items]
Area of land | ft²	93,967
Number of employees | Integer	101
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | UNITED STATES
Product Information [Line Items]
Concentration risk, percentage	95.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Foreign Customers [Member]
Product Information [Line Items]
Concentration risk, percentage	5.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | One Major Commercial Customer [Member]
Product Information [Line Items]
Concentration risk, percentage	29.00%
U.S. Government [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	20.00%
U.S. Defense Contractor One [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	17.00%
U S Defense Contractor Two [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	6.00%
US Defense Contractor Three [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	5.00%
All Other Customers [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk, percentage	23.00%

v3.23.2

Schedule of Inventory (Details) - USD ($) $ in Thousands	Jul. 02, 2023	Oct. 02, 2022
Accounting Policies [Abstract]
Raw Material	$ 7,428	$ 6,953
Work in Process	5,050	2,722
Finished Goods	615	348
Gross Inventory	13,093	10,023
Less: Inventory Reserves	(811)	(811)
Net Inventory	$ 12,282	$ 9,212

v3.23.2

Schedule of Warranty Reserves (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Accounting Policies [Abstract]
Beginning balance		$ 266	$ 155	$ 169	$ 78
Incurred costs for warranties satisfied during the period		(82)	(1)	(99)	(3)
Warranties reserved for new product shipped during the period	[1]	57	52	177	131
Change in estimate for pre-existing warranty liabilities	[2]		(10)	(6)	(10)
Warranty Expense		57	42	171	122
Ending balance		$ 241	$ 196	$ 241	$ 196
[1] Warranty expenses accrued to cost of sales (based on current period shipments and historical warranty return rate.) [2] Changes in estimated warranty liabilities recognized in cost of sales associated with: the period end customer returned warranty backlog, or the actual costs of repaired/replaced warranty units which were shipped to the customer during the current period.

v3.23.2

Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022	Apr. 02, 2023	Nov. 30, 2022	Apr. 03, 2022	Oct. 03, 2021
Product Information [Line Items]
Warranty reserve	$ 241	$ 196	$ 241	$ 196	$ 169	$ 266		$ 155	$ 78
Revenue from customer deposit liabilities	0	0	223	0
Customer deposit liabilities	131		131
Accrued selling expenses			336		0
Contract assets			336		0
Contract value							$ 3,400
Contract loss reserves current	133		133		289
Loss reserves on new contract awards	20	15	72	61
Amount shipped against existing loss reserves	0	$ 26	171	$ 79
Gain loss on estimates for contract loss reserves	0		57
Deferred tax assets, valuation allowance	800		800		800
Deferred tax assets, gross	1,600		1,600		1,800
Deferred tax assets, net	$ 800		800		$ 1,000
Increase deferred tax assets related to temporary tax adjustment			$ 200
Unvested Rectricted Stock [Member]
Product Information [Line Items]
Dilutive securities included in calculation of earning per share	120,000	180,000	36,000	180,000
Number of incremental shares	43,141	98,678	35,011	73,849
Unvested Rectricted Stock Units [Member]
Product Information [Line Items]
Dilutive securities included in calculation of earning per share	36,000	66,000	120,000	66,000
Performance Shares [Member]
Product Information [Line Items]
Antidilutive shares				135,000
Service [Member]
Product Information [Line Items]
Service contract revenue	$ 115	$ 120	$ 340	$ 352
U.S. Government Agencies [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			18.00%
Major U.S. Defense Contractor One [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			12.00%
Major U.S. Defense Contractor Two [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			12.00%
Major U S Defense Contractor Three [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			9.00%
Major U S Defense Contractor Four [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			6.00%
Major U.S. Defense Contractor Five [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			6.00%
Major US Defense Contractor Six [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			6.00%
Major US Defense Contractor Seven [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			5.00%
One Commercial Customer [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			16.00%
All Other Customers [Member] | Accounts Receivable [Member] | Customer Concentration Risk [Member]
Product Information [Line Items]
Concentration risk percentage			10.00%

v3.23.2

Schedule of Segment Reporting Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Segment Reporting Information [Line Items]
Total revenue	$ 7,172	$ 6,170	$ 17,582	$ 15,645
Interest expense	22		31
Depreciation and amortization	86	74	252	221
Income (loss) before taxes	730	510	1,055	334
Allocated home office expense
Stock compensation expense	81	36	134	127
Warranty expense	57	42	171	122
Segment assets	20,964	21,313	20,964	21,313
Expenditures for segment assets	222	118	368	236
Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	7,172	6,170	17,582	15,645
Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Total revenue	(265)	(258)	(511)	(693)
Interest expense	22		31
Depreciation and amortization
Income (loss) before taxes	(103)	(36)	(165)	(127)
Allocated home office expense
Stock compensation expense	81	36	134	127
Warranty expense
Segment assets
Expenditures for segment assets
Optex Systems (OPX) - Richardson, Texas [Member]
Segment Reporting Information [Line Items]
Interest expense
Depreciation and amortization	14	8	38	28
Allocated home office expense	(386)	(268)	(978)	(802)
Stock compensation expense
Warranty expense
Segment assets	11,671	14,676	11,671	14,676
Expenditures for segment assets		49	25	55
Optex Systems (OPX) - Richardson, Texas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	3,069	2,653	7,742	6,588
Income (loss) before taxes	(60)	185	(527)	(276)
Applied Optics Center (AOC) - Dallas [Member]
Segment Reporting Information [Line Items]
Interest expense
Depreciation and amortization	72	66	214	193
Allocated home office expense	386	268	978	802
Stock compensation expense
Warranty expense	57	42	171	122
Segment assets	9,293	6,637	9,293	6,637
Expenditures for segment assets	222	69	343	181
Applied Optics Center (AOC) - Dallas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	4,368	3,775	10,351	9,750
Income (loss) before taxes	893	361	1,747	737
Revenues from External Customers [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	7,172	6,170	17,582	15,645
Revenues from External Customers [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Total revenue
Revenues from External Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	3,069	2,653	7,742	6,588
Revenues from External Customers [Member] | Applied Optics Center (AOC) - Dallas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	4,103	3,517	9,840	9,057
Intersegment Revenues [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue
Intersegment Revenues [Member] | Intersegment Eliminations [Member]
Segment Reporting Information [Line Items]
Total revenue	(265)	(258)	(511)	(693)
Intersegment Revenues [Member] | Optex Systems (OPX) - Richardson, Texas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue
Intersegment Revenues [Member] | Applied Optics Center (AOC) - Dallas [Member] | Operating Segments [Member]
Segment Reporting Information [Line Items]
Total revenue	$ 265	$ 258	$ 511	$ 693

v3.23.2

Segment Reporting (Details Narrative)	9 Months Ended
	Jul. 02, 2023 ft² Integer
Revenue, Major Customer [Line Items]
Leased facilities | ft²	93,967
Number of employees | Integer	101
Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Leased facilities | ft²	49,100
Number of employees | Integer	56
Applied Optics Center (AOC) - Dallas [Member]
Revenue, Major Customer [Line Items]
Leased facilities | ft²	44,867
Number of employees | Integer	45
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Revenues from External Customers [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	95.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	44.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	56.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member] | Commercial Customers [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	50.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member] | Major U.S. Defense Contractor One [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	5.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member] | One Commercial Customers [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	27.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member] | All Other Customers [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	24.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Subcontracted Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	96.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Subcontracted Customers [Member] | Applied Optics Center (AOC) - Dallas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	50.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Commercial Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	4.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Domestic Military Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	85.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Foreign Military Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	11.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U.S. Government [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	20.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U.S. Government [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	17.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U.S. Defense Contractor One [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	17.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U.S. Defense Contractor One [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	14.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U S Defense Contractor Two [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	6.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | U S Defense Contractor Two [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	6.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | All Other Customers [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	23.00%
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | All Other Customers [Member] | Optex Systems (OPX) - Richardson, Texas [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	7.00%
Intersegment Sales Revenue Net [Member] | Customer Concentration Risk [Member] | Applied Optics Center (AOC) - Dallas [Member] | Military Contracts [Member]
Revenue, Major Customer [Line Items]
Concentration risk percentage	5.00%

v3.23.2

Schedule of Non-cancellable Operating Leases Minimum Payments (Details) - USD ($) $ in Thousands		Jul. 02, 2023		Oct. 02, 2022	Jul. 02, 2022
Loss Contingencies [Line Items]
2023 Base year lease		$ 157
2024 Base year lease		638
2025 Base year lease		656
2026 Base year lease		662
2027 Base year lease		679
2028 Base year lease		572
2029 Base year lease		83
Total base lease payments		3,447
Imputed interest on lease payments	[1]	(425)
Total Operating Lease Liability		3,022	[2]		$ 51
Right-of-use Asset		2,863	[3]	$ 3,222	$ 51
Common Area Maintenance Estimate [Member]
Loss Contingencies [Line Items]
2023 Base year lease		63
2024 Base year lease		256
2025 Base year lease		261
2026 Base year lease		266
2027 Base year lease		272
2028 Base year lease		198
2029 Base year lease		30
Total base lease payments		1,346
Optex Systems (OPX) - Richardson, Texas [Member]
Loss Contingencies [Line Items]
2023 Base year lease		80
2024 Base year lease		327
2025 Base year lease		336
2026 Base year lease		346
2027 Base year lease		357
2028 Base year lease		242
2029 Base year lease
Total base lease payments		1,688
Imputed interest on lease payments	[1]	(198)
Total Operating Lease Liability	[2]	1,490
Right-of-use Asset	[3]	1,403
Applied Optics Center (AOC) - Dallas [Member]
Loss Contingencies [Line Items]
2023 Base year lease		73
2024 Base year lease		296
2025 Base year lease		305
2026 Base year lease		313
2027 Base year lease		322
2028 Base year lease		330
2029 Base year lease		83
Total base lease payments		1,722
Imputed interest on lease payments	[1]	(225)
Total Operating Lease Liability	[2]	1,497
Right-of-use Asset	[3]	1,425
Office Equipment Lease [Member]
Loss Contingencies [Line Items]
2023 Base year lease		4
2024 Base year lease		15
2025 Base year lease		15
2026 Base year lease		3
2027 Base year lease
2028 Base year lease
2029 Base year lease
Total base lease payments		37
Imputed interest on lease payments	[1]	(2)
Total Operating Lease Liability	[2]	35
Right-of-use Asset	[3]	$ 35
[1] Assumes a discount borrowing rate of 5.0% on the new lease amendments effective as of January 11, 2021. [2] Includes $159 thousand of unamortized deferred rent. [3] Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively.

v3.23.2

Schedule of Non-cancellable Operating Leases Minimum Payments (Details) (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Jul. 02, 2023	Oct. 02, 2022
Commitments and Contingencies Disclosure [Abstract]
Borrowing discount rate	5.00%
Lease effective date	Jan. 11, 2021
Deferred Rent	$ 159
Short-term operating lease	616	$ 604
Long-term operating lease	$ 2,406	$ 2,761

v3.23.2

Commitments and Contingencies (Details Narrative)		3 Months Ended			9 Months Ended
		Jul. 02, 2023 USD ($) ft²		Jul. 03, 2022 USD ($)	Jul. 02, 2023 USD ($) ft²		Jul. 03, 2022 USD ($)	Oct. 02, 2022 USD ($)	Jul. 02, 2022 USD ($)
Area of land | ft²		93,967			93,967
Right use of assets		$ 2,863,000	[1]		$ 2,863,000	[1]		$ 3,222,000	$ 51,000
Operating lease liability		3,022,000	[2]		3,022,000	[2]			$ 51,000
Facility Lease Agreement [Member]
Operating lease cost		206,000		$ 215,000	644,000		$ 635,000
Rent expenses		$ 9,000		$ 7,000	$ 18,000		$ 19,000
One Non-cancellable Office Equipment Lease [Member]
Lessee operating lease description					The Company had one non-cancellable office equipment lease with a commencement date of October 1, 2018 and a term of 39 months. The lease cost for the equipment was $1.5 thousand per month from October 1, 2018 through December 31, 2021. The lease was renewed on November 18, 2021 for an additional 48 months at a cost of $1.2 thousand per month. The start of the lease was delayed until April 2022 due to temporary equipment shortages. The lease renewal resulted in the recognition of an additional right of use asset and a lease liability of $51 thousand, respectively during the nine months ended July 2, 2022
Lease term		39 months			39 months
Optex Systems (OPX) - Richardson, Texas [Member]
Area of land | ft²		49,100			49,100
Lessee operating lease description					the monthly base rent was $24.6 thousand through March 31, 2021. On January 11, 2021 the Company executed a sixth amendment extending the terms of the lease for eighty-six (86) months, commencing on April 1, 2021 and ending on May 31, 2028. The initial base rent is set at $25.3 thousand and escalates 3% on April 1 each year thereafter.
Expiration date					May 31, 2028
Maintenance fee					$ 11,900
Right use of assets	[1]	$ 1,403,000			1,403,000
Operating lease liability	[2]	$ 1,490,000			$ 1,490,000
Applied Optics Center (AOC) - Dallas [Member]
Area of land | ft²		44,867			44,867
Lessee operating lease description					the monthly base rent was $21.9 thousand through the end of the lease. On January 11, 2021 the Company executed a first amendment extending the terms of the lease for eighty-six (86) months, commencing on November 1, 2021 and ending on December 31, 2028. The initial base rent is set at $23.6 thousand as of January 1, 2022 and escalates 2.75% on January 1 each year thereafter. The initial term included 2 months of rent abatement for November and December of 2021. The 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 rental rate. Our obligations to make payments under the lease are secured by a $125,000 standby letter of credit.
Expiration date					Dec. 31, 2028
Maintenance fee					$ 125,000
Maintenance fee					7,900
Right use of assets	[1]	$ 1,425,000			1,425,000
Operating lease liability	[2]	$ 1,497,000			$ 1,497,000
[1] Short-term and Long-term portion of Operating Lease Liability is $616 thousand and $2,406 thousand, respectively. [2] Includes $159 thousand of unamortized deferred rent.

v3.23.2

Debt Financing (Details Narrative) - USD ($)							3 Months Ended		9 Months Ended
	Mar. 22, 2023	Nov. 21, 2022	Nov. 20, 2022	Oct. 02, 2022	Apr. 12, 2022	Apr. 16, 2020	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022
Line of Credit Facility [Line Items]
Interest Expense							$ 22,000		$ 31,000
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of credit principal amount		$ 2,000,000.0	$ 1,125,000
Line of credit facility replace	$ 2,000,000
Debt change in ownership percentage	25.00%
Revolving Credit Facility [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Debt instrument, interest rate		0.25%
Revolving Credit Facility [Member] | BBVA [Member]
Line of Credit Facility [Line Items]
Line of credit principal amount				$ 0	$ 2,250,000	$ 2,250,000
Maturity date						Apr. 15, 2022
Line of credit origination fee percentage						3.00%
Description of term period						There were commercially standard covenants including, but not limited to, covenants regarding maintenance of corporate existence, not incurring other indebtedness except trade debt, not changing more than 25% stock ownership of Borrowers, and a Fixed Charge Coverage Ratio of 1.25:1, with the Fixed Charge Coverage Ratio defined as (earnings before taxes, amortization, depreciation, amortization and rent expense less cash taxes, distribution, dividends and fair value of warrants) divided by (current maturities on long term debt plus interest expense plus rent expense).
Litigation fee						$ 10,000
Line of credit decrease amount					$ 1,125,000
Maturity date description					the maturity date was extended from April 15, 2022 to April 15, 2023
Revolving Credit Facility [Member] | BBVA [Member] | Prime Rate [Member]
Line of Credit Facility [Line Items]
Debt instrument, interest rate						0.25%
Revolving Credit Facility [Member] | Texas Capital Bank [Member]
Line of Credit Facility [Line Items]
Line of credit principal amount	$ 3,000,000
Maturity date	May 22, 2025
Debt instrument, interest rate									7.827%
Description of term period	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
Letter of credit	$ 125,000
Revolving Credit Facility [Member] | Texas Capital Facility [Member]
Line of Credit Facility [Line Items]
Line of credit facility, Fair value of amount outstanding							1,200,000		$ 1,200,000
Interest Expense							$ 22,000		$ 31,000

v3.23.2

Schedule of Aggregate Non-vested Restricted Stock and Restricted Stock Units Granted and Performance Shares (Details) - $ / shares	9 Months Ended	12 Months Ended
	Jul. 02, 2023	Oct. 02, 2022
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares, outstanding	66,000	99,000
Weighted average grant date fair value, outstanding	$ 1.52	$ 1.59
Shares, granted	39,000
Weighted average grant date fair value, granted	$ 3.00
Shares, vested	(66,000)	(33,000)
Weighted average grant date fair value, vested	$ 1.52	$ 1.73
Shares, vested	66,000	33,000
Shares, forfeited	(3,000)
Weighted average grant date fair value, forfeited	$ 3.00
Shares, forfeited	3,000
Shares, ending balance	36,000	66,000
Weighted average grant date fair value, outstanding	$ 3.00	$ 1.52
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares, outstanding	180,000	240,000
Weighted average grant date fair value, outstanding	$ 1.75	$ 1.75
Shares, granted	40,000
Weighted average grant date fair value, granted	$ 3.09
Shares, vested	(60,000)	(60,000)
Weighted average grant date fair value, vested	$ 1.75	$ 1.75
Shares, vested	60,000	60,000
Shares, forfeited	(40,000)
Weighted average grant date fair value, forfeited	$ 1.75
Shares, forfeited	40,000
Shares, ending balance	120,000	180,000
Weighted average grant date fair value, outstanding	$ 2.20	$ 1.75
Performance Shares [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares, outstanding
Weighted average grant date fair value, outstanding
Shares, granted	135,000
Weighted average grant date fair value, granted	$ 2.37
Shares, vested
Weighted average grant date fair value, vested
Shares, vested
Shares, forfeited
Weighted average grant date fair value, forfeited
Shares, forfeited
Shares, ending balance	135,000
Weighted average grant date fair value, outstanding	$ 2.37

v3.23.2

Schedule of Assumptions and Results for the Monte Carlo Simulation (Details) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Jul. 02, 2023 USD ($) $ / shares		Jul. 02, 2023 USD ($) $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Performance period start			Oct. 02, 2023
Performance period end			Oct. 01, 2028
Term of simulation			5 years 5 months 1 day	[1]
Time steps in simulation			1,365
Time steps per year			252
Common share price at valuation date	$ 3.04	[2]	$ 3.04	[2]
Volatility (annual)			50.00%	[3]
Risk-free rate (annual)	3.37%	[4]
Cost of equity			11.50%	[5]
Dividend yield			0.00%	[6]
Share-Based Payment Arrangement, Tranche One [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of performance shares in the tranch | shares			27,000	[1]
Fair value of one performance share	$ 2.75	[7]	$ 2.75	[7]
Total fair value of tranch | $	$ 74,345		$ 74,345
Derived service period			8 months 15 days	[7]
Share-Based Payment Arrangement, Tranche Two [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of performance shares in the tranch | shares			27,000	[1]
Fair value of one performance share	$ 2.58	[7]	$ 2.58	[7]
Total fair value of tranch | $	$ 69,742		$ 69,742
Derived service period			1 year 1 month 17 days	[7]
Share-Based Payment Arrangement, Tranche Three [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of performance shares in the tranch | shares			27,000	[1]
Fair value of one performance share	$ 2.39	[7]	$ 2.39	[7]
Total fair value of tranch | $	$ 64,446		$ 64,446
Derived service period			1 year 7 months 6 days	[7]
Share Based Compensation Award Tranche Four [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of performance shares in the tranch | shares			27,000	[1]
Fair value of one performance share	$ 2.18	[7]	$ 2.18	[7]
Total fair value of tranch | $	$ 58,819		$ 58,819
Derived service period			2 years 21 days	[7]
Share Based Compensation Award Tranche Five [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Number of performance shares in the tranch | shares			27,000	[1]
Fair value of one performance share	$ 1.93	[7]	$ 1.93	[7]
Total fair value of tranch | $	$ 52,238		$ 52,238
Derived service period			2 years 5 months 23 days	[7]
[1] Based on the terms of the Performance Shares agreement issued by the Company on May 3, 2023. [2] Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ. [3] Based on historical volatility of OPXS and comparable public companies. [4] Interest rate for US Treasury commensurate with the Performance Shares holding period, as of the Valuation Date, as obtained via S&P Capital IQ. [5] Estimated cost of equity for OPXS as of the Valuation Date. [6] Expected dividends provided by management. [7] Based on Monte Carlo simulation.

v3.23.2

Schedule of Unrecognized Compensation Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Jul. 02, 2023	Jul. 03, 2022	Jul. 02, 2023	Jul. 03, 2022	Oct. 02, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Recognized Compensation Expense	$ 81	$ 36	$ 134	$ 127
Unrecognized Compensation Expense	575		575		$ 245
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Recognized Compensation Expense	33	27	78	79
Unrecognized Compensation Expense	213		213		236
Performance Shares [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Recognized Compensation Expense	43		43
Unrecognized Compensation Expense	277		277
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Recognized Compensation Expense	5	$ 9	13	$ 48
Unrecognized Compensation Expense	$ 85		$ 85		$ 9

v3.23.2

Stock Based Compensation (Details Narrative) - USD ($)														3 Months Ended	9 Months Ended	12 Months Ended
		Jan. 01, 2025	May 09, 2023	May 09, 2023	May 03, 2023	May 01, 2023	Jan. 04, 2023	Jan. 04, 2022	Jan. 01, 2022	Dec. 01, 2021	Apr. 30, 2020	Feb. 17, 2020	Jan. 02, 2019	Jul. 02, 2023	Jul. 02, 2023	Oct. 02, 2022	Sep. 15, 2022	Feb. 16, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share price	[1]													$ 3.04	$ 3.04
Amortization of grant date fair market value				$ 124,000	$ 320,000
Unvested restricted stock units														80,000	80,000			40,000
Unrecognized compensation cost														$ 575,000	$ 575,000	$ 245,000
Forfeiture rate						23.10%
Restricted stock, vesting rate														50.00%	50.00%
Common Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share price																	$ 2.65
Performance share, description					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.
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant															39,000
Share based compensation payment vested in period															66,000	33,000
Unrecognized compensation cost														$ 85,000	$ 85,000	$ 9,000
Dilutive securities included in calculation of earning per share															0
Number of shares forfeited														3,000
Employment Agreement [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Employment agreement description										The updated employment agreement also served to amend Mr. Schoening’s RSU Agreement, dated January 2, 2019, by changing the third and final vesting date for the restricted stock units granted under such agreement from January 1, 2022 to the “change of control date,” that being the first of the following to occur with respect to the Company: (i) any “Person,” as that term is defined in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with certain exclusions, is or becomes the “Beneficial Owner” (as that term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities; or (ii) the Company is merged or consolidated with any other corporation or other entity, other than: (A) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (B) the Company engages in a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “Person” (as defined above) acquires fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities. The amended RSU Agreement contains certain exceptions to the definition of change of control.
Chief Executive Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant					100,000
Issuance of shares							46,432
Restricted stock value shares issued net							$ 58,000
Vested restricted stock units							66,000
Chief Financial Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant					35,000
Issuance of shares								23,216
Restricted stock value shares issued net								$ 19,000
Vested restricted stock units								33,000
Three Independent Directors [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted shares description											an effective date of January 1, 2020, in addition to granting 100,000 shares of restricted stock to each independent director which vest at a rate of 20% per year (20,000 shares) each January 1st through January 1, 2025.
Shares issued payment arrangement, before forfeiture											300,000
Shares issued, value payment arrangement, before forfeiture											$ 525,000
Stock price per share											$ 1.75
Vesting period of shares											5 years
Three Independent Directors [Member] | Minimum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Employee benefits and share based compensation											$ 22,000
Three Independent Directors [Member] | Maximum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Employee benefits and share based compensation											$ 36,000
Director [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share based compensation payment vested in period									60,000
Independent Board Member [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant			40,000
Restricted stock, vesting rate		50.00%
2016 Restricted Stock Unit Plan [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Unvested restricted stock units										49,500
Unrecognized compensation cost										$ 5,000
2016 Restricted Stock Unit Plan [Member] | Chief Executive Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant													150,000
Amortization of grant date fair market value													$ 264,000
2016 Restricted Stock Unit Plan [Member] | Chief Financial Officer [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant													50,000
2016 Restricted Stock Unit Plan [Member] | Bill Bates [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant												50,000
Vesting percentage, next twelve months												34.00%	34.00%
Share price													$ 2.13
2016 Restricted Stock Unit Plan [Member] | Bill Gates [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage, thereafter												33.00%	33.00%
Share price													$ 1.32
Amortization of grant date fair market value												$ 107,000
2023 Equity Incentive Plan [Member] | Eleven Employees [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock, grant						39,000
Restricted stock vest rate percentage						33.33%
Restricted stock units value						$ 90,000
[1] Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ.

v3.23.2

Summary of Purchases Under Plan (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended											12 Months Ended
	Aug. 13, 2022	Jul. 25, 2022	Jul. 03, 2022	May 29, 2022	May 01, 2022	Apr. 03, 2022	Feb. 27, 2022	Jan. 30, 2022	Jan. 02, 2022	Nov. 28, 2021	Oct. 31, 2021	Oct. 02, 2022
Equity [Abstract]
Total number of shares purchased	1,930	610	49,657	10,482	12,304	35,530	27,618	15,585	14,558	4,415	18,265	190,954
Total purchase cost	$ 4	$ 1	$ 95	$ 22	$ 27	$ 70	$ 49	$ 29	$ 28	$ 9	$ 37	$ 371
Average price paid per share	$ 2.09	$ 2.10	$ 1.90	$ 2.11	$ 2.22	$ 1.98	$ 1.75	$ 1.89	$ 1.93	$ 2.04	$ 2.01	$ 1.94
Maximum dollar value	$ 560	$ 564	$ 565	$ 660	$ 682	$ 709	$ 779	$ 828	$ 857	$ 885	$ 894	$ 560

v3.23.2

Stockholders’ Equity (Details Narrative) - USD ($)				3 Months Ended	9 Months Ended	12 Months Ended
		Sep. 15, 2022	Aug. 18, 2022	Jul. 02, 2023	Jul. 02, 2023	Oct. 02, 2022	Sep. 22, 2021
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tender shares repurchased price per share	[1]			$ 3.04	$ 3.04
Common shares outstanding				6,763,070	6,763,070	6,716,638
Common Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Tender shares repurchased, value		$ 4,250,000	$ 4,250,000
Tender shares repurchased, shares		1,603,773
Tender shares repurchased price per share		$ 2.65
Transaction costs		$ 100,000
Stock Repurchase Plan [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stock repurchase program authorized amount							$ 1,000,000
Dividend Paid [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Dividends				$ 0	$ 0	$ 0
[1] Closing price of OPXS shares on the Valuation Date, as obtained via S&P Capital IQ.

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