Note 13 - Leases

3 Months Ended

Sep. 30, 2026

13. 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 eighteen finance lease agreements entered into during fiscal years 2024 thru 2027 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 Orlando Facility lease 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 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.

Our wholly-owned subsidiary, LPOIZ, the sale of which occurred as of October 30, 2026, 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 months ended September 30, 2026 and 2025 were as follows:

	*Three Months Ended*
	*September 30,*
	*2026*		*2025*
Operating lease cost	$	348,291	$	253,318
Finance lease cost:
Depreciation of lease assets		60,228		45,480
Interest on lease liabilities		20,748		17,030
Total finance lease cost		80,976		62,510
Total lease cost	$	429,267	$	315,828

Supplemental balance sheet information related to the leases as of September 30, 2026 and June 30, 2026 was as follows:

		*September 30,*		*June 30,*
	*Classification*	*2026*		*2026*
Assets:
Operating lease assets	Operating lease assets	$	7,828,475	$	8,115,887
Finance lease assets	Property and equipment, net⁽¹⁾		1,505,481		981,003
Total lease assets		$	9,333,956	$	9,096,890

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	1,202,483	$	1,189,908
Finance leases	Finance lease liabilities, current		365,923		269,414

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		8,569,553		8,888,227
Finance leases	Finance lease liabilities, less current portion		803,150		392,796
Total lease liabilities		$	10,941,109	$	10,740,345

⁽¹⁾

Finance lease assets were recorded net of accumulated depreciation of approximately $0.7 million and $0.5 million as of September 30, 2026 and June 30, 2026, respectively.

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

	*September 30,*
Lease Term and Discount Rate	*2026*
Weighted Average Remaining Lease Term (in years)
Operating leases		6.7
Finance leases		3.6

Weighted Average Discount Rate
Operating leases		3.0	%
Finance leases		7.0	%

Supplemental cash flow information was as follows for the three months ended September 30, 2026 and 2025:

	*Three Months Ended*
	*September 30,*
	*2026*		*2025*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	366,978	$	313,766
Operating cash used for finance leases	$	20,748	$	17,030
Financing cash used for finance leases	$	77,258	$	55,398

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

	*Finance*			*Operating*
Fiscal year ending:	*Leases*			*Leases*
June 30, 2027 (remaining nine months)	$	335,339		$	1,190,892
June 30, 2028		407,573			1,660,858
June 30, 2029		251,264			1,658,764
June 30, 2030		158,091			1,703,719
June 30, 2031		152,581			1,560,567
Thereafter		11,184			3,364,686
Total future minimum payments		1,316,032			11,139,486
Less imputed interest		(146,959	)		(1,367,450	)
Present value of lease liabilities	$	1,169,073		$	9,772,036