SYNTEC OPTICS HOLDINGS, INC.

SYNTEC OPTICS HOLDINGS, INC.

Note 1 —Description of Organization and Business Operations

Nature of Business

Syntec Optics Holdings, Inc. (the “Company” or “Syntec Optics”) is a vertically integrated manufacturer of optics and photonics components and sub-systems – from opto-mechanicals to optical elements of various geometries, diamond turned optics – both prototype and production, and optical systems including optics assembly, electro-optics assembly, design, and coating. Sales are made to customers in the United States and Europe in defense, medical, and consumer end-markets. The Company has one reporting segment as its operating segments meet the requirements for aggregation.

Note 2 —Summary of Significant Accounting Policies

The Company has provided a discussion of significant accounting policies, estimates and judgements in its 2024 Annual Report. There have been no changes to the Company’s significant accounting policies since December 31, 2024.

Basis of Presentation

The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company in United States (“U.S.”) dollars and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”), the instructions to Form 10-Q and the provisions of Regulation S-X pertaining to interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted. The interim unaudited condensed consolidated financial statements and notes included in this report should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. In the opinion of management, these interim unaudited condensed consolidated financial statements include all adjustments and accruals of a normal and recurring nature necessary to fairly state the results of the interim periods presented. The results for interim periods are not necessarily indicative of results to be expected for the full year or for any future periods.

Note 3 —Disaggregated Revenues

The following table disaggregates revenue by revenue recognition methodologies for the three and nine months ended September 30:

Syntec Optics’ management periodically reviews its revenues by its consumer, communication, medical, and defense end-markets. The purpose of this analysis is to determine its end market mix and identify trends. The following table disaggregates revenue as outlined above for the three and nine months ended September 30:

Note 4 —Inventory

Inventory consists of the following at September 30, 2025 and December 31, 2024:

Note 5 —Property and Equipment

Property and equipment consists of the following at September 30, 2025 and December 31, 2024:

Depreciation expenses were $646,506 and $722,393 for the three months ended September 30, 2025 and 2024, respectively, and $2,033,935 and $2,077,999 for the nine months ended September 30, 2025 and 2024, respectively.

Note 6 —Line of Credit

The Company has a line of credit available in the amount of $8,000,000 with M&T Bank (the “Credit Agreement”). Borrowings may be made against the line of credit as Secured Overnight Financing Rate (“SOFR”) Loans. The weighted average rate on outstanding borrowings as of September 30, 2025 was 7.31%. As of September 30, 2025 and December 31, 2024, the Company had $6,763,863 and $6,263,863, respectively, outstanding under the line of credit facility.

The Credit Agreement contains customary covenants and restrictions on the Company’s ability to engage in certain activities and financial covenants requiring the Company to maintain certain financial ratios. As of September 30, 2025, the Company was not in compliance with certain financial covenants under its Amended and Restated Credit Agreement with M&T Bank, including the minimum fixed charge coverage ratio of 1.10:1.00 and the maximum total leverage ratio of 4.75:1.00.

On November 12, 2025, the Company received a written waiver from M&T Bank for these covenant defaults. The waiver requires the Company to (i) repay approximately $1.3 million of outstanding term and equipment debt, which is included as part of the long-term debt, by November 14, 2025; (ii) execute subordination agreements on shareholder loans prohibiting repayment without lender consent; and (iii) reduce the revolving credit line commitment from $8.0 million to $7.5 million. The impact to the unamortized debt issuance cost in Note 7 was immaterial.

The Company remains in good standing under the Credit Agreement and continues to classify the debt as a liability under ASC 470. Management expects to comply with all modified terms and covenants on a go-forward basis.

Note 7 —Long-Term Debt

Long-term debt consists of the following at September 30, 2025 and December 31, 2024:

At September 30, 2025, the future debt maturities are as follows:

Note 8 —Retirement Plan

The Company maintains a 401(k) retirement plan covering eligible employees of the Company and its affiliate. Under the plan, participants may defer a percentage of their annual compensation, with Syntec Optics matching 50% of employee contributions not to exceed 6% of annual compensation. Total contributions for the Company for the three months ended September 30, 2025 and 2024 amounted to $47,000 and $52,000, respectively, and for the nine months ended September 30, 2025 and 2024 were approximately $140,000 and $147,000, respectively.

Note 9 —Income Taxes

The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made.

The effective income tax rate was 20.3% and 29.2% for the nine months ended September 30, 2025 and 2024, respectively.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as expensing of U.S. research expenditures and eligible capital expenditures, the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The impacts of the OBBBA are reflected in our results for the quarter ended September 30, 2025, and there was no impact to the Company’s income tax expense or effective income tax rate.

Note 10 —Leases

During 2024, the Company entered into finance lease agreements for equipment utilized in its manufacturing facility.

The components of operating and finance lease costs are as follows for the three and nine months ended September 30:

Supplemental cash flow information related to leases are as follows for the three and nine months ended September 30:

The following table summarizes weighted average remaining lease term and discount rates as of September 30, 2025, and December 31, 2024:

Future maturities of our lease liabilities are as follows as of September 30, 2025:

Note 11 —Warrants

The following tables presents a roll-forward of the Company’s warrants from December 31, 2024 to September 30, 2025:

Note 12 —Loss Per Share

The following table sets forth the information needed to compute basic and diluted loss per share for the three and nine months ended September 30, 2025 and 2024:

Note that there wereno potentially dilutive shares that were excluded from the weighted-average share calculation as of September 30, 2025 and 2024.

Note 13 —Significant Customers

For the three months ended September 30, 2025, the Company generated 48% of revenues from three customers. For the nine months ended September 30, 2025, the Company generated 42% of revenues from three customers. These three customers are in different end-markets utilizing diverse manufacturing capabilities from the Company. The outstanding accounts receivable due from these customers were approximately $3.0 million as of September 30, 2025.

For the three and nine months ended September 30, 2024, the Company generated 53% of revenues from three customers. The outstanding accounts receivable due from these customers were approximately $3.6 million as of September 30, 2024.

Note 14 Segment reporting

The Company operates asone operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews the financial statements on a consolidated basis. The CODM uses the Company’s long-range plan to allocate resources. The CODM makes decisions on resource allocation, assessments of performance, and monitors budget versus actual results using consolidated loss from operations.

Significant expenses within loss from operations, as well as within net loss, include general and administrative expenses, and other expenses which are each separately presented on the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Note 15 Subsequent Events

On October 10, 2025, the Company received a letter from The Nasdaq Stock Market, confirming that the Company is now in compliance with Listing Rule 5250(c)(1), and the matter of the delinquent filings, which was previously disclosed in an 8-K filing dated April 23, 2025, is now considered closed.

On November 12, 2025, the Company received a waiver letter from its senior lender, M&T Bank, related to the Company’s noncompliance with (i) the minimum Fixed Charge Coverage Ratio of 1.10:1.00 and (ii) the maximum Total Leverage Ratio of 4.75:1.00 as of September 30, 2025 (each as defined in the Amended and Restated Credit Agreement dated November 30, 2024, as amended). The lender waived the identified defaults, subject to (among other conditions) (a) repayment of certain term and equipment loans and (b) execution of documentation satisfactory to the lender, including subordination of any shareholder loans, and (c) a reduction of the revolving credit availability from $8.0 million to $7.5 million. As a result, the Company reclassified $964,993 of the term and equipment loans, from long term debt to current debt.

On November 12, 2025, the Company repaid $1.3 million on two loans to M&T Bank as required by the waiver letter using both internally provided funds and $1.1 million obtained from a stockholder loan. The final terms of that stockholder loan, as well as the subordination agreement with M&T Bank, will be approved and finalized before December 28, 2025 as outlined in the bank’s waiver letter. The stockholder loan is from the Company’s majority stockholder and Chief Executive Officer. The terms of the stockholder agreement are expected to include an interest rate similar to the loans that were paid off. The amortization period will be 35 months, similar to the remaining number of payments on the loans that were paid off.

Pursuant to the waiver letter, the revolving line of credit availability has been reduced to $7.5 million.