Note 12 - Leases

6 Months Ended

Dec. 31, 2025

12. Leases

Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Plano, Texas; Hudson, New Hampshire; Riga, Latvia; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms ending at various times through 2034. We typically include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise such options. We currently have fourteen finance lease agreements entered into during fiscal years 2023, 2024 and 2025 with terms ranging from three to five years. The finance leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. One of our operating leases includes renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. The lease on the premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”) was amended in April 2021, and again in September 2021, to expand the space. The lease term was extended and will expire on March 31, 2034.

Our wholly-owned subsidiary, G5 Infrared, has a lease agreement for a manufacturing and office facility in Hudson, New Hampshire, which expires November 30, 2026. The Company’s wholly-owned subsidiary, Visimid, has a lease agreement for a manufacturing and office facility in Plano, Texas, which expires October 31, 2026. On July 7, 2025, Visimid entered into a lease agreement for another manufacturing and office facility in Plano, Texas, which commenced September 1, 2025 for a five-year term. The existing facility will be relocated to this larger facility.

Our wholly-owned subsidiary, LPOIZ, has a lease agreement for a manufacturing and office facility in Zhenjiang, China, which expires December 31, 2027. ISP’s wholly-owned subsidiary, ISP Latvia, has two lease agreements for a manufacturing and office facility in Riga, Latvia, which leases expire December 31, 2030.

The components of lease expense for the three and six months ended December 31, 2025 and 2024 were as follows:

	*Three Months Ended*				*Six Months Ended*
	*December 31,*				*December 31,*
	*2025*		*2024*		*2025*		*2024*
Operating lease cost	$	310,794	$	269,985	$	564,112	$	538,480
Finance lease cost:
Depreciation of lease assets		44,776		42,916		90,256		80,732
Interest on lease liabilities		17,800		17,027		34,830		31,089
Total finance lease cost		62,576		59,943		125,086		111,821
Total lease cost	$	373,370	$	329,928	$	689,198	$	650,301

Supplemental balance sheet information related to the leases as of December 31, 2025 and June 30, 2025 was as follows:

		*December 31,*		*June 30,*
	*Classification*	*2025*		*2025*
Assets:
Operating lease assets	Operating lease assets	$	7,430,787	$	7,429,378
Finance lease assets	Property and equipment, net⁽¹⁾		874,398		920,569
Total lease assets		$	8,305,185	$	8,349,947

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	1,349,820	$	1,254,062
Finance leases	Finance lease liabilities, current		216,191		206,518

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		8,102,873		8,326,250
Finance leases	Finance lease liabilities, less current portion		346,400		421,363
Total lease liabilities		$	10,015,284	$	10,208,193

⁽¹⁾

Finance lease assets were recorded net of accumulated depreciation of approximately $0.4 million and $0.3 million as of December 31, 2025 and June 30, 2025, respectively.

Lease term and discount rate information related to leases was as follows:

	*December 31,*
Lease Term and Discount Rate	*2025*
Weighted Average Remaining Lease Term (in years)
Operating leases		7.5
Finance leases		2.7

Weighted Average Discount Rate
Operating leases		3.3	%
Finance leases		9.0	%

Supplemental cash flow information was as follows for the six months ended December 31, 2025 and 2024:

	*Six Months Ended*
	*December 31,*
	*2025*		*2024*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	685,008	$	590,037
Operating cash used for finance leases	$	34,830	$	31,089
Financing cash used for finance leases	$	107,712	$	89,705

Future maturities of lease liabilities were as follows as of December 31, 2025:

	*Finance*			*Operating*
Fiscal year ending:	*Leases*			*Leases*
June 30, 2026 (remaining six months)	$	192,006		$	813,075
June 30, 2027		243,172			1,495,966
June 30, 2028		199,055			1,331,825
June 30, 2029		61,931			1,321,975
June 30, 2030		—			1,356,543
Thereafter		—			4,379,934
Total future minimum payments		696,164			10,699,318
Less imputed interest		(133,573	)		(1,246,625	)
Present value of lease liabilities	$	562,591		$	9,452,693