OPTEX SYSTEMS HOLDING INC (OPXS-$1.75) | MILITARY SPENDING FOR FISCAL 2017-$680 BILLION FOR NATIONAL DEFENSE

OPTEX SYSTEMS HOLDING INC (OPXS-$1.75)

MILITARY SPENDING FOR FISCAL 2017-$680 BILLION FOR NATIONAL DEFENSE

June 28, 2016

GROWING BY 30+% AS A SPECIALTY PROVIDER OF CUTTING EDGE TECHNOLOGY FOR OPTICAL SIGHTING SYSTEMS AND ASSEMBLIES

VEHICLES THAT USE OPXS PRODUCTS: STRYKER, ABRAMS & BRADLEY FIGHTING VEHICLES,LIGHT ARMORED VEHICLES (LAV) & AMPV (ARMORMED MULTIPURPOSE VEHICLES.

Optex manufactures and sells optical sighting systems and assemblies for the US DOD, foreign military applications and commercial markets in the US. Optex offers electronic sighting systems, mechanical sighting systems; laser and non-laser protected plastic and glass periscopes; howitzer sighting systems, thermal day/night periscopes; ship Binoculars; replacement optics; and optical assemblies and laser filters. The company also provides various periscope configurations, rifle and surveillance sights and night vision optical assemblies; and precision optical assemblies utilizing thin film coating capabilities for optical systems and components primarily used for military purposes. Optex products are installed on various types of Military land vehicles, such as Abrams, Bradley and Stryker family of 10 types of fighting vehicles. The company also provides product for (LAV) Light Armored Vehicle and (AMPV) Armored Multipurpose Vehicle. OPXS offers its products directly to the Federal Government, Prime Contractors and Foreign Governments.

Stryker Vehicle - http://www.army-technology.com/projects/stryker/

Abrams tank M1/M2- http://www.fprado.com/armorsite/abrams.htm

http://www.youtube.com/watch?v=t1oXoHUqlNg

Bradley Vehicle-- http://www.army-technology.com/projects/bradley/

LAV (light armored vehicle) http://www.marines.com/operating-forces/equipment/vehicles/lav

AMPV (armored-multipurpose-vehicle) http://www.baesystems.com/en/product/armored-multipurpose-vehicle-ampv

Optex serves the US DOD industry fully ITAR- compliant.

The company designs, builds and ships thousands of units/month as either a Prime Contractor to the US Government or as a sub-contractor to OEM, like General Dynamics Land Systems, BAE Systems and L3 Communications. Optex has established itself as a critical supplier on multiple armored vehicle platforms. Recent Presentation: COMPANY PRODUCTS--

Products- Description-% of http://ir.stockpr.com/optexsys/sec-filings/content/0001615774-16-005019/0001615774-16-005019.pdf Rev fiscal 15

Periscopes M-series-laser & non-laser protected Acrylic and Glass Periscopes--35%

Sighting systems CSS MRS BIG EYE Digital Day and Night Muzzle Reference Systems, Ship Binoculars and Collimator --19%

AOC-Optical cell eyepiece & Objective lens set Optically aligned metal glass & lens set--12%

AOC- Laser interference filters--Optical Coatings--25%

Other components- repair parts Howitzer- 9%

OPTEX SYSTEMS HOLDINGS(divisions)

1. OPTEX SYSTEMS

Military optical sighting systems. Weapon Systems, Optical sub-assemblies. High Def Imaging Systems. Thermal and Night Vision Systems. Video Display Systems.

2.APPLIED OPTIC CENTER

Premier Thin Film Coatings. Precision Optical Assembly Processes. Stabilized Monoculars and Binoculars.

Prime Contractor for TACOM, US ARMY, NAVY & MARINES

Subcontractor for

BAE, General Dynamics , Northrop Grumman & Raytheon.

COMPANY INFORMATION

website: http://www.optexsys.com

phone: 972 764 5700

Oct 7, 2015 - 1000 to 1 reverse split

May 10, 2016 shares outstanding 1,621,145

The current Q indicates only 311k shares outstanding, but Preferred was converted into common shares & as of May 10, 2016 this conversion resulted in issuance of 1.2 million shares to Sileas. Sileas currently still owns 969 B Preferred and 546 A Preferred. Management assumes that the remaining Preferred will be converted in another 2 million shares. This conversion will result in a total of 3.7 million fully diluted shares. Sileas has a note due to Longview for $18 million due 2024. The converted Preferred (some 3.2 million will be transferred to Longview to satisfy this current note outstanding.)

On June 17, 2016 (8k issue) Management declared that 1 million shares could be used for payment to management for performance during the next couple of years.

Fiscal year ends Sept 2016

Note: In all our calculations we will be using the 3.7 million fully diluted share for all our assumptions

52 week range $1.75-$11.00( according to Yahoo)

Backlog: April 2016--$17 million

Employees --95 full time

facilities- The company leases 94,000ft between Dallas and Richardson TX. The combined capacity of AOC and Optex is over $54 million.

Interview with President of OPXS- http://ceolive.tv/opxs-optex-systems-receives-major-order-from-u-s-army/

Total contracts awarded during the last 12 months is over $24 million. At present there are Military Order Expansion orders: There is $8.3 million with Saudi Arabia, $8.3 million with Chile & Brazil and $3-$6 million with Israel~ these are all working. There is a $4 million Australian order that has not been accepted.

OPXS bids on 100's of contracts at any one time. The value is 10's of millions of dollars.

OPXS operates under Small business SET-ASIDE FEDERAL GOVERNMENT PROGRAM that offers small business ability to compete for and win contracts. If you would like to read the regulation~ http://www.sba.gov/contracting/government-contracting-programs/what-small-business-set-aside

Huge growth potential because of DOD spending on upgrades, replacement and modifications of the Abrams1,Abrams M1AsepV2,Bradley,Stryker and new vehicle AMPV. The US land Vehicle forecasts 2016-2024 equals over $6.7 billion for the Stryker, $6 billion for the Abrams M1 and M1V2 and $6.2 billion for the Bradley. There will be some $1.4 billion for LAV upgrades The DOD's new vehicle AMPV will initially produce 100 out of 25,000.

The overall spending for top military group vehicles~90% of FY 17 will be used for modifications to existing platforms.

Management has every intention to apply for NASDAQ listing before the end of Dec 2016

Management is also planning on doing 1 acquisition/year during next few years. It was indicated to us that they still have 6 months to target and complete an acquisition. The company is looking for a company with revenue of between $5-$10 million.

Management also has the intention to conduct an IPO within the next six months and raise high single digits to low double digits. Of course the stock will need to trade higher than current level because of the extreme dilution . We assume that management is looking to raise money between the $5-$10/share level. The 2nd half of their fiscal year has always been dramatically stronger than the 1st half. In addition since it is also the end of the fiscal year for the DOD there is always a rush for the Government to spend left over money so contracts pending are filled and companies like OPXS will surely benefit.

It should be noted that since the Sequester -the Military has suffered dramatically. Fiscal 2017 will be the first year in 6+ years that we will see an increase in much needed funding. Again, OPXS is well positioned to benefit because many of their competitors have either defaulted or gone out of business.

MARKET OPPORTUNITY

Periscopes and Vision Block and Sighting systems combine for an estimate of $1 Billion!

OPXS~ states that they have 75%(vision block) market share in the US & 20-30% worldwide of $40-$50 million. OPXS has 5% market share in the US ($100 million) for Sighting Systems, but only 1% in the worldwide market ($500M-$1 Billion).

Historically, the Company's growth and financial performance has been affected by DOD spending. We are entering a "new" acceleration period because of serious depletion. Foreign military sales for US built products has remained strong due to escalating geopolitical threats. FINANCIAL OVERVIEW

Note: Year End Sept 30th-We are assuming all preferred have been converted and are using 3.7 million fully diluted shares outstanding for analysis.

Below we will feature revenue for 2nd Q ending March 27, 2016. The total shareholders' equity is $7.7 million and cash @ the end of 6 month Q was $600k. Company has in place a $2 million revolver.

***2Q***6months***fiscal 16E***fiscal 17E

rev $3.2 mil **$6.4mil** $17 mil** $24mil**

(loss) (.08)**** (.15)***** .07*** .25*****

Note; Year-end numbers do not take into account an acquisition and shares outstanding could also increase if management decides to raise additional working capital via IPO.

During the past few years OPXS has been growing by a solid 30-35% and we believe we could accelerate due to DOD spending,new products and acquisitions. When we review other defense related public companies such as GD($136), LMT($239) and RTN($136) it is easy to see in this present environment that Defense related issue have remained extremely strong and are all trading near their 52 week highs. There very few industrial groups that are on such a firm footing. The geopolitical meltdown around the world indicates that the near term risk on the downside is very low! Even with the Brexit vote that destroyed world markets($1 trillion+ in evaporated wealth) most defense issues trended flat to higher for the day.

If we compare GD(P/B 4X, PE 15X, PSR 1.37 & PEG 1.66) ,LMT (P/B 23X, PE 17X, PSR1.53 & PEG 2) and RTN (P/B 4X,PE 17X, PSR1.68 &PEG 2) and value using calculated values and assign OPXS with these fundamental variables you will see how cheap and undervalued OPXS really is in comparison .

For fiscal 2017 it is estimated that rev will grow by 35%. Based upon the earnings est. for fiscal 17 and the current share price of $1.75~ the resulting PE estimate is 7X 2017 earnings of .25. The PEG value is a tiny .2 (The lower the PEG ratio, the more the stock maybe undervalued given its earnings performance.) The PSR value based upon the share price of $1.75 times the fully diluted share count of 3.7 million and rev est. of $24 million results is a .26 valuation. ( A value of 1 is considered cheap and undervalued.) The P/B of OPXS is trading 12% below stated book.

If we assigned a PSR of 1 to OPXS the share price would be $7.00. If we assigned a PE of 1/2 the est. growth rate(35%) for fiscal 17(.25)~ that is a PE of 18, then our share price would equal $4.50~if we developed a PEG valuation of 1 then our share price would be $8.75~if we assign a price to book of 3X then our share price would equal $$6.24!

Bottom-line: Anyway that you assign these strong fundamental variables to OPXS the share price should be much higher than $1.75.

Extremely undervalued and rated with a Strong Buy Rating

Recent contracts:

November 10th 2015~ Retail Sales Relationship with Cabela's. Will offer Red tail Digital Spotting Scope and Stabilized Monocular.

Feb 8 2016~ $1.2 million award for periscopes from General Dynamics Land System.

April 21, 2016 $841k for Advanced Laser Protected Periscopes from US Army~installed in the Abrams, main Battle Tank.

May 24, 2016 ~ $1.1 million critical optical assemblies~ part of a $6 million multi-year supply agreement that is anticipated to exceed $6 million.

June 2, 2016 $518K shipment of patented M17DAY/Thermal Periscope to Brazil. OVERVIEW:

The more you dig into OPXS you begin to realize that this is a gem lost in the low price stock market that has been harmed because of over regulation, lack of easy funding and actually the lack of investor's investing because of the Media that creates a mind-set that Capitalism is evil and Wall Street is Evil!

If you are able to shake off the empty skull mentality and look at the facts~ You will see that OPXS is a winner that has been hiding!

OPXS is a winner and should be purchased at current levels for long term extra ordinary gains.

10 Reasons to purchase OPXS

1. Recession Proof

2. Increase in Military spend worldwide because of geopolitical/global terrorism.

3. Severely undervalued because estimates and current fundamentals.

4.NASDAQ LISTING COMING SOON! Only factor is the share price.

5. Acquisition oriented for additional growth.

6. Very seasoned management.

7.Strong Set-Aside opportunities with DOD because of Federal Policy.

8. Limited Competition because most went Bk or are in default.

9. Perfect Timing because trading near 52 week low and has never been in a better position for stock appreciation because of all the above reasons.

10. When you consider the small float and market cap and growth in revenue and opportunities within an industry that is ready to explode we cannot see why you would not want to invest in OPXS today!

WE MAY BUY, SELL AND OR HOLD AT OUR OWN DISCRETION .We current own shares.

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