SYNTEC OPTICS HOLDINGS, INC.

Note 1 Nature of Business and Significant Accounting Policies

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 hasone reporting segment as its operating segments meet the requirements for aggregation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC).

Principles of Consolidation

The consolidated financial statements include the accounts of Syntec Optics Holdings, Inc. and its wholly owned subsidiary, Syntec Optics.

The consolidated financial statements also include the accounts of ELR Associates, LLC (“ELR”), a variable interest entity (VIE) wherein the Company is the primary beneficiary. Syntec Optic’s variable interest in ELR is the result of providing a guaranty of payment for ELR’s mortgage on the manufacturing facility used exclusively by Syntec Optics.

The consolidated financial statements include the financial position and result of operations of ELR, consisting principally of cash and cash equivalents, other assets and property and equipment of $2.5 million and $2.3 million and total liabilities consisting of current liabilities and long-term debt of $1.4 million and $1.8 million as of December 31, 2025 and 2024, respectively. ELR had net income of $0.2 million and $0.2 million for the years ended December 31, 2025 and 2024. As of December 31, 2025 and 2024, there are no VIE assets to settle, only the VIE’s obligations, and no liabilities with recourse to VIE’s creditors.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ from those estimates.

Cash

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and accounts receivable. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes that they are not exposed to any significant credit risk on cash. The Company also routinely assesses the financial strength of their customers and, consequently, believes that its accounts receivable credit risk exposure is limited. On December 31, 2025 and 2024 there were amounts due from three customers that totaled approximately 59% and 54% respectively, of accounts receivable. The outstanding accounts receivable due from these customers at December 31, 2025 and 2024 were approximately $3.7 million and $3.2 million respectively.

Accounts Receivable

The Company grants credit to substantially all customers and carries its accounts receivable at original invoice, net of an allowance for expected credit losses. On a periodic basis, management evaluates accounts receivable and adjusts the allowance for expected credit losses. The allowance at December 31, 2025 and 2024 amounted to approximately $133 thousand and $117 thousand, respectively. The Company had no significant write offs in the current or prior year. The Company evaluates the receivables by portfolio segment including the general receivables and those identified for separate treatment. Losses on general receivables are estimated at historical losses amounting to 0.03% for under 30 days, 0.05% for 30-60 days, 1.03% for 60-90 days, and 3.0% for over 90 days aged. Balances identified for special treatment are evaluated individually.

Customer balances are written off when amounts are deemed uncollectible, or credits are issued. The Company generally does not accrue interest on past due balances.

Inventory

Inventory consists of raw materials, work-in-process, finished goods and allocated manufacturing labor and overhead. Inventory is stated at the lower of cost using the first-in, first-out basis or net realizable value. The Company provides inventory reserves for excess, obsolete, or slow-moving inventory, based on changes in customer demand, technology developments or other economic factors.

Property and Equipment Net of Accumulated Deprecation

Property and equipment is stated at cost and is depreciated over the estimated useful lives of the respective assets. The cost of normal maintenance and repairs is charged to expense as incurred, whereas expenditures, which materially extend useful lives, are capitalized. When depreciable property is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other income.

Depreciation is provided for on the straight-line method over the following estimated useful lives:

Long-Lived Assets

Long-lived assets, including property and equipment, are stated at cost. The Company reviews its long-lived assets, including right of use assets, for possible impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. If such events or changes in circumstances are present, the carrying value of the asset is compared to the undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. If the carrying amount exceeds the undiscounted cash flows, an impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the years ended December 31, 2025 and 2024, no impairment charges were recorded.

Leases

The Company determines if an arrangement is or contains a lease at inception. The Company records right-of-use (ROU) assets and lease obligations for its finance and operating leases, which are initially based on the discounted future minimum lease payments over the term of the lease.

The lease term is defined as the non-cancellable period of the lease plus any options to extend the lease when it is reasonably certain that it will be exercised. Leases may also include options to terminate the arrangement or options to purchase the underlying asset. For leases with an initial term of 12 months or less, no right of use (“ROU”) assets or lease liabilities are recorded on the balance sheet and the Company recognizes short-term lease expense for these leases on a straight-line basis over the lease term.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. None of the Company’s lease agreements include variable rental payments. The Company has elected to separate lease from non-lease components for all leases.

Operating lease expense is recognized on a straight-line basis over the lease term and is included in general and administrative expense. Amortization expense for finance leases is recognized on a straight-line basis over the lease term and is included in cost of goods sold or general and administrative expense. Interest expense for finance leases is recognized using the effective interest method. Short-term rentals and payments associated with non-lease components are expensed as incurred.

Debt Issuance Costs

The Company defers certain costs incurred in connection with obtaining financing. Costs related to line of credit agreements are recorded as a contra liability and are amortized to interest expense over the term of the agreement. Costs related to long-term debt financing are presented as a direct deduction from the carrying amount of the related debt and amortized over the term of the related debt as additional interest.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to the customer are recorded in net sales and the related costs incurred for shipping and handling are included in costs of goods sold.

Research and Development

The Company expenses research and development costs as incurred in accordance with ASC 730. Research and development costs are primarily comprised of engineering labor, prototype materials, and third-party consulting and testing services, and are included within selling, general and administrative expenses in the accompanying consolidated statements of operations.

Research and development expense totaled approximately $0.6 M and $1.0 M for the years ended December 31, 2025 and 2024, respectively.

Advertising

Advertising costs are charged to operations when incurred. Advertising expense for the years ended December 31, 2025 and 2024 were approximately $148 thousand and $229 thousand, respectively.

Income Taxes

The Company accounts for income taxes with the recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry forwards. Measurement of deferred income items is based on enacted tax laws, including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized in the immediate future. A valuation allowance is established when it is necessary to reduce deferred income tax assets to amounts for which realization is likely. In assessing the need for a valuation allowance, management estimates future taxable income, considering the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards following tax law ordering rules.

The Company reviews tax positions taken to determine if it is more likely than not that the position would be sustained upon examination resulting in an uncertain tax position. The Company does not have any material unrecognized tax benefit as of December 31, 2025 or 2024. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2025 and 2024, the Company recognizedno interest and penalties. The Company files U.S. federal tax returns and tax returns in various states.

Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. The Company did not have any dilutive shares for the years ended December 31, 2025 and 2024.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for equity awards, such as restricted stock units, in accordance with ASC 718. Equity-classified awards are measured at grant-date fair value and expensed over the service period.

Fair Value of Financial Instruments

The Company follows the fair value measurement guidance required by accounting principles generally accepted in the United States of America for financial and nonfinancial assets and liabilities. This guidance defines fair value and establishes a framework for measuring fair value and related disclosure requirements. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The carrying amounts of financial instruments, including cash, accounts receivable, accounts payable, accrued expenses and borrowings approximate fair value, based on their terms or due to the short maturity of these instruments.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09,Income Taxes (Topic 740):Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU is effective for the annual period ended December 31, 2025 and should be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. On January 1, 2025, the Company adopted the provisions of ASU 2023-09 on a prospective basis, and the required disclosures have been included in this Annual Report on Form 10-K for the year ended December 31, 2025. The adoption of ASU 2023-09 did not have a material impact on the Company’s financial statements included in this Annual Report on Form 10-K but did result in additional disclosures in the income tax footnote.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures(Subtopic 220-40):Disaggregation of Income Statement Expenses(“ASU 2024-03”). ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact of adopting this guidance on the Company’s current financial position, results of operations or financial statement disclosures.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326). The amendments in this ASU provide that in developing reasonable and supportable forecasts as part of estimating expected credit losses, all entities may elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments in this ASU are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods with updates to be applied on a prospective basis. The Company is currently evaluating the impact of ASU 2025-05 on its consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the scope of interim reporting and improves the structure of required interim disclosures. The ASU specifies the form and content of interim financial statements, provides a comprehensive list of required interim disclosures, and introduces a disclosure principle requiring entities to describe material events occurring after the most recent annual reporting period. The ASU does not change the fundamental nature or extent of current interim reporting requirements.

ASU 2025-11 is effective for public business entities for interim periods within fiscal years beginning after December 15, 2027, and for all other entities after December 15, 2028, with early adoption permitted. The amendments in this update are to be applied prospectively. The Company is currently evaluating the impact of this guidance on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements**.**

JOBS Act Accounting Election

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, Syntec Optics can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Syntec Optics has elected to avail itself of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Syntec Optics intends to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. As a result, Syntec Optics’ financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Syntec Optics will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of OmniLit’s initial public offering, (ii) the last day of the fiscal year in which Syntec Optics has total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which Syntec Optics is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of Syntec Optics’ common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which Syntec Optics has issued more than $1.0 billion in non- convertible debt securities during the prior three-year period.

Note 2 Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standard Codification 606, Revenue from Contracts with Customers (ASC 606), which provides a five-step model for recognizing revenue from contracts with customers as follows:

The Company’s revenue is primarily derived from three categories of products and services, (i) the production and assembly of molded plastic optics parts including polymer and glass parts, opto-mechanicals, thin film coating, diamond turned optics and optical systems including electro-optics assembly, (“Products”) (ii) the manufacture of custom tooling used to manufacture molded products, (“Custom Tooling”) and (iii) non-recurring engineering services (“Non-Recurring Engineering”). The Company’s products are marketed and sold primarily to end-user commercial customers throughout the United States and Europe. Sales of products and services are subject to economic conditions and may fluctuate based on changes in the industry, trade policies and financial markets.

The Company assesses the contract term as the period in which the parties to the contract have presently enforceable rights and obligations. Certain customer contracts may provide for either party to terminate the contract upon written notice.

Nature of Products and Services

Revenue from the sale of molded plastic, polymer and glass parts, opto-mechanicals, thin film coating, diamond turned optic and optical systems is recognized upon transfer of control to the customer, which is typically upon shipment. These sales do not meet the criteria for revenue to be recognized over time. The Company has elected to treat shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated equipment and parts and not as a separate performance obligation.

In general, the Company recognizes revenue from tooling contracts upon delivery and acceptance by the customer, which signifies successful completion of the contract.

Revenue from non-recurring engineering services is recognized upon completion of the negotiated services. These sales do not meet the criteria for revenue to be recognized over time. Non-recurring engineering services are one-off items that are unique to programs such as expedite fees or set-up fees which are billed upon completion of the task with payment terms of 30 - 60 days from date of invoice.

Note 2 Revenue Recognition – Continued

Transaction Price

The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods and services to the customer. Revenue is recorded based on the transaction price, which includes fixed consideration. The Company’s contracts do not include variable consideration.

Contract Balances

The timing of revenue recognition generally aligns with the right to invoice the customer. The Company records accounts receivable when it has the unconditional right to issue an invoice and receive payment, regardless of whether revenue has been recognized. The balance in accounts receivable at December 31, 2025 and 2024 was $6.2 million and $5.7 million respectively. Deferred revenue is recognized on the consolidated balance sheets when cash payments are received in advance of the Company satisfying its performance obligation. Deferred revenue is recognized as revenue on the consolidated statements of operations when the Company satisfies its performance obligation to the customer. Balances in deferred revenue at December 31, 2025 and 2024 were $0.07 million - and $0.04 million , respectively.

Costs to Obtain a Contract

The Company did not incur costs of obtaining contracts expected to benefit longer than one year. As a result, there areno capitalized contract acquisition costs as of December 31, 2025 or 2024.

Warranties

The buyer shall have thirty (30) days from the date of shipment to inspect and either accept or reject. If goods are rejected, written notice of rejection and the specific reasons therefore must be sent to the Company within such thirty (30) day period after receipt. Failure to reject goods or to notify the Company of errors, shortages, or other non-compliance with the agreement within such thirty (30) day period shall constitute irrevocable acceptance of goods and admission that they fully comply with the agreement.

Disaggregated Revenues

The following table disaggregates revenue by revenue recognition methodologies as outlined above for the years ended December 31:

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 years ended December 31:

The Company has one significant customer located in the UK (outside of the US). Sales for this UK customer amounted to $5.6 million in 2025 and $4.9 million in 2024. No other significant sales were outside of the US.

Note 3 –Warrants and Earnout

Warrants

As part of the reverse capitalization transaction related to the merger, the Company issued public warrants. Refer to Note 12 for a further description of the warrants.

Earnout

The former holders of shares of Legacy Syntec common stock are entitled to receive their pro rata share of up to 26,000,000 additional shares of common stock (the “Contingent Earnout”). The Company will issue 26,000,000 additional shares of Common Stock (the “Contingent Earnout”) to the Company’s existing stockholders at the Closing, which Contingent Earnout shares will vest upon Syntec Common Stock achieving the following stock trading price thresholds (the “Contingent Earnout Trigger Price”) following the Closing: one-third (1/3 rd) at $12.50 per share, one-third (1/3 rd) at $14.00 per share, and one-third (1/3 rd) at $15.50 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like). The Contingent Earnout shares which remain unvested as of the date five (5) years from the Closing (the “Earnout Period”) will be deemed cancelled and no longer subject to vesting.

Note 3 – Warrants and Earnout – Continued

The Company accounts for the Contingent Earnout Shares as either equity-classified or liability-classified instruments based on an assessment of the Contingent Earnout Shares specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”) as defined below. The Company has determined that the Contingent Earnout Shares are indexed to the Company’s common stock and are therefore not precluded from equity classification. If the Contingent Earnout Shares are later determined to be liability-classified instruments, the Company would recognize subsequent changes in the fair value of such Contingent Earnout Shares within earnings at each reporting period during the earnout period. The pro forma value of the Contingent Earnout Consideration was estimated utilizing a Monte Carlo simulation model. The significant assumptions utilized in estimating the fair value of Contingent Earnout Consideration include the following: (1) our Common Stock price of $8.73-$15.76; (2) normal distribution; (3) values assessed after the Earnout Period of five (5) years and; (4) discount rates ranging from 15.5%-19.5%.

The accounting treatment of the Contingent Earnout Shares have been recognized at fair value upon the closing of the merger and classified in stockholders’ equity.

Note 4 Inventory

Inventory consists of the following at December 31:

The Company experienced a significant increase in the Reserve for Obsolescence due to incremental risk in one particular customer which was assessed at a higher rate because of market instability.

Note 5 Property and Equipment

Property and equipment consists of the following at December 31:

Depreciation expenses were approximately $2,766,000 and $2,769,000 for the years ended December 31, 2025 and 2024, respectively.

Note 6 Revolving Credit Facility – M&T Bank

On November 8, 2023, Syntec Optics Holdings, Inc. (the “Company”) entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with M&T Bank to refinance prior indebtedness. The Credit Agreement provides for a revolving credit facility (the “Revolving Facility”) and previously provided for term and equipment loan facilities.

As of December 31, 2025 and 2024, the Revolving Facility has a maximum commitment of $7.5 million and $8.0 million, respectively, and matures in November 2026. Borrowings bear interest at a rate equal to one-month Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.00%, for both periods. Interest is payable monthly.

As of December 31, 2025 and December 31, 2024, outstanding borrowings under the Revolving Facility were $6,763,863 and $6,263,863, respectively. The weighted average interest rate on outstanding borrowings at December 31, 2025 was approximately consistent with market SOFR plus the contractual margin.

The Credit Agreement contains customary representations and warranties and affirmative and negative covenants, including financial covenants requiring the Company to maintain a minimum fixed charge coverage ratio and a maximum total leverage ratio.

During 2024 and 2025, the Company obtained certain amendments and waivers related to financial covenant compliance. On November 12, 2025, the Company received a written waiver from M&T Bank with respect to certain covenant defaults as of September 30, 2025. In connection with the waiver, the Company agreed to:

The Company paid a prepayment premium of $63,416 in connection with the repayment of term and equipment debt. No amendment fees were paid to the lender in November or December 2025. See further discussion of this debt in Note 7.

Effective December 31, 2025, the Company entered into a Second Amendment to the Credit Agreement and executed a replacement revolving note reflecting the reduced commitment. The amendment did not modify the November 2026 maturity date or the applicable covenant thresholds for 2026.

As of December 31, 2025, and through the date of this filing, the Company was in compliance with all financial covenants under the Credit Agreement.

The Revolving Facility is classified as a current liability as of December 31, 2025 due to its November 2026 contractual maturity.

Note 7 Long-Term Debt

On November 12, 2025, the Company repaid in full two term and equipment notes with M&T Bank in the aggregate amount of $1,368,732. Following repayment, no balances remained outstanding under these facilities at December 31, 2025.

Subordinated Shareholder Note

On November 12, 2025, in connection with the repayment of term and equipment debt, the Company entered into a subordinated term note (the “Shareholder Note”) with its majority stockholder in the principal amount of $1,268,732.

The Shareholder Note:

Pursuant to a subordination agreement executed with M&T Bank, prepayments of the Shareholder Note are prohibited and payments are limited to interest only, subject to prior written approval by M&T Bank. The lender retains sole discretion regarding approval of such payments.

There are no cross-default provisions between the Shareholder Note and the Credit Agreement.

The Shareholder Note is classified as long-term debt at December 31, 2025, except for the portion contractually due within twelve months, if any.

At December 31, 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 up to 84% of their annual compensation, with Syntec matching 50% of employee contributions not to exceed 6% of annual compensation. Total contributions for the Company for the years ended December 31, 2025 and 2024 amounted to $187,159 and $196,198, respectively.

Note 9 Income Taxes

Following is a summary of cash paid for income taxes, net of refunds:

Following is a summary of Loss before provision for (benefit) income taxes

Following is a summary of the components giving rise to the income tax benefit for the years ended December 31:

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financing reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows as of December 31:****

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows for the year ended December 31:

The Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, effective January 1, 2025 on a prospective basis. Accordingly, prior period disclosures have not been adjusted.

The tax returns of the Company are open for three years from the date of filing. At the report date, the statute of limitations for federal and state tax returns are open for the Company for 2024, 2023, and 2022.

The Company has federal and state net operating loss carryforwards totaling approximately $2.765 million at December 31, 2025. Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has evaluated and concluded that section 382 was not triggered.

Note 9 Income Taxes - Continued

The Company has significant deferred tax assets as a result of temporary differences between the taxable income on its tax return and U.S. GAAP income, federal and state R&D tax credit carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in the consolidated financial statements become deductible for income tax purposes, or when tax credit carry forwards are utilized on the Company tax returns. The Company assesses the realizability of its deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards.

Significant judgment is required in determining the realizability of the Company’s deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, the Company’s experience with loss carry forwards not expiring unused and tax planning alternatives. In analyzing the need for valuation allowances, the Company first considered its history of cumulative operating results for income tax purposes over the past several years in each of the tax jurisdictions which it operates, its recent financial performance, statutory carry forward periods and tax planning alternatives. In addition, the Company considered both its near-term and long-term financial outlook. After considering all available evidence (both positive and negative), the Company concluded that recognition of a valuation allowance was required in the amount of$3,188,611 and $2,250,405 at December 31, 2025 and 2024, respectively.

New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufacturers in New York State to 0% beginning in 2014 for Syntec. At December 31, 2025, the Company has $1,572,262 of New York State investment tax credit carryforwards, expiring in various years through 2037. The credits cannot be utilized unless the New York state tax rate is no longer 0%, and as such, the Company has recorded a valuation allowance against the full amount of these credit carryforwards (net of the federal benefit). In addition, the Company has approximately $740,871 of Massachusetts State Research and Development credit carryforwards, expiring in various years through 2037 that the Company has recorded a valuation allowance against.

Evaluation of Remaining Deferred Tax Assets

After consideration of valuation allowances recorded against certain state tax credits, the Company had a net deferred tax asset of approximately $0.9 million as of December 31, 2025. Management evaluated the realizability of these remaining deferred tax assets by assessing all available positive and negative evidence in accordance with ASC 740.

The Company’s assessment included analysis of recent operating results and projections of future taxable income. Results in 2024 and 2025 were adversely affected by management restructuring, severance, experimental R&D, and other onetime costs. Recent trends show that operating performance has stabilized and profitability is projected to improve beginning in 2026. However, the 2024 and 2025 performance remains as strong negative evidence due to the measurable nature of the results. Forecasted future earnings are expected to generate sufficient taxable income to utilize the remaining deferred tax assets.

Additional positive evidence considered in management’s evaluation included sustained improvement in the Company’s market capitalization, strong customer backlog providing revenue visibility, new major defense related customer engagements, and favorable industry conditions supporting future growth. Such additional factors are largely forward-looking in nature and do not rise to the level of objectively verifiable evidence required to overcome the significant negative evidence present.

Legislative and Regulatory Considerations

During 2025, the U.S. government enacted Public Law 119-21 (sometimes referred to as One Big Beautiful Bill) which includes changes to the treatment of research and development expenditures. Due to operating losses incurred in 2024 and 2025, the Company was not able to fully utilize its available research and development deductions or related tax credits, and such unutilized amounts have been reflected in the Company’s income tax provision and deferred tax balances. The Company has incorporated the effects of enacted tax law into its assessment in accordance with ASC 740 and will continue to evaluate the impact of this legislation as further guidance becomes available.

The enactment of Public Law 119-21 does not alter management’s conclusion regarding the realizability of deferred tax assets, as the Company’s recent cumulative losses continue to represent significant negative evidence under ASC 740 that outweighs any potential future benefits associated with such legislation.

While the Company has concluded that a full valuation allowance is required under ASC 740 based on the weight of objectively verifiable negative evidence, this conclusion is driven by the accounting framework’s emphasis on recent cumulative losses and does not reflect management’s expectations regarding the Company’s future operating performance or long-term prospects. Management believes that the actions taken to improve operational efficiency, combined with strong customer demand, backlog visibility, and strategic growth initiatives, position the Company for improved profitability in future periods. Accordingly, the valuation allowance reflects the timing and evidentiary requirements of ASC 740 rather than any deterioration in the underlying fundamentals of the business.

Accordingly, management has determined that it is more-likely-than-not that the Company will not realize its deferred tax assets. As a result, a full valuation allowance has been recorded against the net deferred tax asset as of the reporting date.

This conclusion reflects management’s best estimate based on all available evidence and is based upon the requirements of ASC 740. The analysis and resulting valuation allowance are intended to support audit review under PCAOB standards related to accounting estimates, including the evaluation of significant judgments and the weighting of evidence.

Note 10 Leases

During 2024, the Company entered into lease agreements for equipment utilized in its manufacturing facility. The Company has determined that the lease agreements are finance leases. There is a $1 buyout option at the end of the lease term which makes it reasonably certain that the Company will exercise this option and purchase the machinery and the details of the purchase option are in line with the criteria of a finance lease.

The ROU asset is grouped with property and equipment. The asset is amortized on a straight-line basis over the life of the underlying asset rather than the lease term due to the purchase options in the lease. The amortization expense is grouped with the depreciation expense of the Company’s other property and equipment. The initial recognition of the finance lease liability was recorded based on the present value of future payments. The interest expense is calculated using the incremental borrowing rate of the Company, and is grouped in the interest expense line on the statement of operations.

The components of operating and finance lease costs are as follows for the years ended December 31:

There wereno variable payments or material short-term rentals for the years ended December 31, 2025 and 2024.

Supplemental cash flow information related to leases are as follows for the years ended December 31:

Note 10 Leases – Continued

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

Future maturities of our lease liabilities are as follows as of December 31:

Note 11 Related Party Transactions

SWI DISC, Inc. (the “DISC”) is owned by the majority stockholder of the Company. During 2014, the Company entered into a commission agreement with the DISC related to the Company’s foreign sales. Total commissions under the terms of this agreement amounted to $-0- for the years ended December 31, 2025 and 2024.

On November 12, 2025, in connection with the repayment of term and equipment debt, the Company entered into a subordinated term note (the “Shareholder Note”) with its majority stockholder in the principal amount of $1,268,732. See Note 7 above for details of the Shareholder Note.

Note 12 Warrants

In connection with the merger discussed in Note 3, the Company assumed the outstanding public warrants of OLIT.

Each warrant entitles the holder to the right to purchaseone share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the warrants. The Company may elect to redeem the warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 14,107,989 warrants issued and outstanding. The warrants are not precluded from equity classification and are accounted for as such on the date of issuance, and each balance sheet date thereafter. There was no activity of public warrants from the closing date through December 31, 2025.

The measurements of the warrants after the detachment of the warrants from the Units are classified as Level 1 due to the use of an observable market quote in an active market under the ticker OPTXW. For periods subsequent to the detachment of the warrants from the Units, the close price of the warrant price was used as the fair value of the warrants as of each relevant date.

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

The following tables presents a roll-forward of the Company’s warrants from December 31, 2023 to December 31, 2024:

Note 13 Common Stock

The Company is authorized to issue up to 121,000,000 shares of common stock with $0.0001 par value. Common stockholders are entitled to dividends if and when declared by the Board of Directors. As of December 31, 2025 and 2024, there were 36,920,226 and 36,688,266 shares issued and outstanding. No dividends on common stock had been declared by the Company.

As of December 31, 2025 and 2024, the Company had reserved shares of common stock for issuance as follows:

Note 14 Stock-based Compensation

In connection with the merger, shareholders and board members approved the 2023 Equity Incentive Plan (the “2023 Incentive Plan”). Up to 2,773,971 shares of the Syntec Optics common stock (“Common Stock”) will initially be reserved for issuance under the 2023 Incentive Plan, and additional shares could become available for issuance under the 2023 Incentive Plan.

The Company was obligated to issue up to 2,000,000 shares of common stock (the “Performance-based-Earnout”) to members of the management team of the Company from time to time, to the extent determined by the Board of Directors in its sole discretion, to be issued as restricted stock units or incentive equity grants pursuant to the Incentive Plan. The Performance-based Earnout shares shall be awarded by the Board of Directors based on achieving the following performance thresholds following the Closing: one-half (1/2) at achieving revenue of $75 million and adjusted EBITDA of $22.6 million based on 2024 financial audited statements, and one-half (1/2) at achieving revenue of $196 million and adjusted EBITDA of $50.6 million based on the 2025 financial audit statements. No such awards have been made as of December 31, 2025.

As of December 31, 2025, there were 2,468,073 shares of unissued authorized and available for future awards under the plans. As of December 31, 2024, there were 4,542,011 shares of unissued authorized and available for future awards under the plans.

On January 20, 2026, at the Company’s annual stockholders meeting, the stockholders approved authorizing the grant of restricted stock units (“RSUs”) to the Company’s non-employee directors. As a result, the three non-employee directors were granted a total of $300,000 in RSUs. These RSUs were fully vested upon grant and amounted to a total of 73,938 shares based on a grant date fair value of $4.0575 per share, calculated using the closing price of the preceding four trading days.

In accordance with ASC 718, Compensation—Stock Compensation, the Company determined that the grant date for these awards was January 20, 2026, the date of stockholder approval. The total stock-based compensation expense of $300,000 was recognized in selling, general, and administrative expenses in the Company’s consolidated statement of operations for the year ended December 31, 2025, with a corresponding credit to additional paid-in capital – stock compensation. The impact on cash flows is reflected in the operating section of our cash flow statement. For 2024, the stock-based compensation expense was $450,000, and was recognized in selling, general, and administrative expenses.

Note 15 Loss Per Common Share

The following table sets forth the information needed to compute basic and diluted loss per common share for the years ended December 31, 2025 and 2024:

For the years ended December 31, 2025 and 2024, the following warrants, contingent earnout shares, performance based management earnout shares, were excluded from the computation of diluted net loss per common share, as the inclusion would have been anti-dilutive.

Note 16 Commitments and Contingencies

The Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

Note 17 Significant Customers

For the years ended December 31, 2025 and 2024, the Company generated 42% and 48%, respectively, of revenues from the same three customers in each year. 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 $3,723,079 and $3,188,832, for December 31, 2025 and 2024, respectively.

Note 18 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 19 Director Departure and Related Compensation Arrangement

On March 21, 2025, a member of the Board of Directors of Syntec Optics Holdings, Inc. (the “Company”) submitted his resignation from the Board. The Board accepted the resignation on March 25, 2025. In connection with the resignation, the Company entered into a mutual release agreement with the former director. The cost associated with this agreement was accrued in the Company’s financial statements for the year ended December 31, 2024 in the amount of approximately $0.2 million.