Note 13 - Leases

12 Months Ended

Jun. 30, 2026

13. Leases

The Company has operating leases for its manufacturing and office space. The Company has a lease agreement for its corporate headquarters and manufacturing facility in Orlando, Florida (the “Orlando Lease”). The Orlando Lease expires on March 31, 2034. Minimum rental rates for the extension term were established based on annual increases of approximately three percent (3%). Additionally, there is one five-year extension option exercisable by the Company. The minimum rental rates for such additional extension option will be determined at the time an option is exercised and will be based on a “fair market rental rate,” as determined in accordance with the Orlando Lease, as amended.

As of June 30, 2026, the Company, through its wholly-owned subsidiary, G5 Infrared, has a lease agreement for a manufacturing and office facility in Hudson, New Hampshire, which expires December 31, 2031. The Company’s wholly-owned subsidiary, Visimid, has a lease agreement for a manufacturing and office facility in Plano, Texas, which commenced September 1, 2025 for a five-year term. The prior facility was relocated to this larger facility, and the lease of the prior facility, which was set to expire October 31, 2026, was terminated in March 2026 pursuant to a mutual agreement with the lessor.

The Company’s wholly-owned subsidiary, LPOIZ, has a lease agreement for a manufacturing and office facility in Zhenjiang, China, which expires December 31, 2027. The Company, through 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 Company’s facility leases are classified as operating leases. The operating leases for facilities are non-cancelable, expiring in 2026 to 2034. The Company includes options to renew (or terminate) in the lease term, and as part of the ROU assets and lease liabilities, when it is reasonably certain that the Company will exercise that option.

At June 30, 2026, the Company also has obligations under eighteen finance lease agreements, entered into during fiscal years 2023 through 2026, with terms ranging from three to five years. The finance leases are for computer and manufacturing equipment. The finance leases for equipment in Riga, Latvia include financial covenants specific to ISP Latvia.

The Company’s operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. As most of the Company’s leases do not provide an implicit rate, the Company used its collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently, none of the Company’s leases include variable lease payments that are dependent on an index or rate. The Company is responsible for payment of certain real estate taxes, insurance and other expenses on certain of its leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. The Company generally accounts for non-lease components, such as maintenance, separately from lease components. The Company’s lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The components of lease expense were as follows:

	*Year Ended June 30,*
	*2026*		*2025*
Operating lease cost	$	1,230,379	$	1,051,861
Finance lease cost:
Depreciation of lease assets		202,758		171,664
Interest on lease liabilities		76,303		66,608
Total finance lease cost		279,061		238,272
Total lease cost	$	1,509,440	$	1,290,133

Supplemental balance sheet information related to leases was as follows:

	*Classification*	*June 30, 2026*		*June 30, 2025*
Assets:
Operating lease assets	Operating lease assets	$	8,115,887	$	7,429,378
Finance lease assets	Property and equipment, net⁽¹⁾		981,003		920,569
Total lease assets		$	9,096,890	$	8,349,947

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	1,189,908	$	1,254,062
Finance leases	Finance lease liabilities, current		269,414		206,518

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		8,888,227		8,326,250
Finance leases	Finance lease liabilities, less current portion		392,796		421,363
Total lease liabilities		$	10,740,345	$	10,208,193

⁽¹⁾

Finance lease assets are recorded net of accumulated depreciation of approximately $0.5 million and $0.3 million as of June 30, 2026 and 2025, respectively.

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

Lease Term and Discount Rate	*June 30, 2026*
Weighted Average Remaining Lease Term (in years)
Operating leases		7.0
Finance leases		2.7

Weighted Average Discount Rate
Operating leases		3.1	%
Finance leases		9.3	%

Supplemental cash flow information:

	*Year Ended June 30,*
	*2026*		*2025*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	1,420,068	$	1,189,231
Operating cash used for finance leases	$	76,304	$	66,608
Financing cash used for finance leases	$	236,240	$	187,626

Future maturities of lease liabilities were as follows as of June 30, 2026:


	*Finance*			*Operating*
Fiscal year ending:	*Leases*			*Leases*
June 30, 2027	$	317,879		$	1,592,796
June 30, 2028		273,762			1,661,093
June 30, 2029		117,056			1,659,508
June 30, 2030		23,883			1,704,464
June 30, 2031		18,373			1,560,939
Thereafter		—			3,364,686
Total future minimum payments		750,953			11,543,486
Less imputed interest		(88,743	)		(1,465,351	)
Present value of lease liabilities	$	662,210		$	10,078,135